Part 4: Cost resilience: ‘Sustain the cost position’ phase
What is ‘sustaining the cost position’ phase?
To complete the cost resilience cycle, an organisation must go through the ‘sustaining the cost position’ phase, which is often the most overlooked element of the capability. It sees an organisation cementing the savings they have identified and delivered in the ‘find the money’ and ‘get the money’ phases, then challenging themselves to find where the next set of savings could come from. Cost resilient organisations distinguish themselves by prioritising and excelling in this phase, setting them apart from competitors.
In simple terms, ‘sustaining the cost position’ means having the people, processes and technology to do three things:
- Maintain savings and not allowing cost creep
- Scan the profit & losses (P&L) to pinpoint further future opportunities
- Convince business stakeholders how and where they should start the next ‘find the money’ phase.
Common barriers to success
In our Deloitte 2024 MarginPLUS 360 Survey 83 per cent of clients said they were looking to change how they ran their margin improvement efforts. This is a common theme we are seeing among clients who are looking for new, innovative ways to identify and deliver the next big saving. However, when we look at the most common barriers to success, the same problems crop up:
- challenges with technology infrastructure (61% increase YoY)
- inability to rapidly adjust cost structure to meet demand (50% increase YoY)
- struggle to attract and retain key talent (consistent with the previous year).
Although relevant to all elements of the cost resilience cycle, these are exaggerated in ‘sustaining the cost position’. Multiple times we have seen organisations save millions in the ‘get the money’ phase only to chronically underinvest in the ‘sustain’ phase. Very quickly the hard-fought savings leak away and costs become opaque again1.
Locking in savings: Common pitfalls
- Have the right people in place
One of the critical questions we often get asked is what size and capability of the team an organisation should put around this is. Simply, ‘sustain’ must have an organisation’s best talent dedicated to it, and not on a part time basis - with senior roles in this team being seen as a positive career move. This team must have the skills to be able to see a cost opportunity and build the business case for it, but above all they must have the gravitas to convince the C-suite of the next wave of cost reduction plans and how they will be executed. - Create the right environment for them
From an employee point of view, the benefits of these roles need to be painted clearly from a career trajectory. This includes gaining detailed knowledge of P&L and then digging down into multiple areas of the business, with the high visibility and high stakes of these programmes being useful for enhancing careers. Highflyers should be attracted to these programmes and encouraged to take roles for a 2-3 year cycle. Importantly, people taking on these roles should be offered career protection. Cost delivery is hard and doing it often means making unpopular decisions and upsetting a few folks. In many cases this is why organisations bring in consultants as then personal careers are not impacted and consultants leave the building. - Deploy the right tools
The backbone of the team is the associated tools and technology used to understand and analyse the costs, budgets, actuals and opportunities. Internal benchmarking provides a useful and undisputed way to seek out comparative opportunities. However, external benchmarks, as we have shown in Find the Money are becoming increasingly limited in value as the pace of change increases and the cost profiles of organisations become more complex. At the top level, benchmarks give some scale as to the opportunity but less so at a detailed cost category level. - Make cost part of your ongoing strategy
The most successful organisations prioritise cost resilience as a strategic change programme – not merely numbers and savings, but winning hearts and minds. For example, a client ran a decade long cost programme and invested heavily in the accompanying change programme. By making it a good news story at a corporate level and getting personal commitments from the C-suite, they were able to maintain engagement for the duration of the programme and keep cost top of the agenda. Additionally, they ensured the programme was always prominent internally and externally; regularly re-branding it to reflect the company's strategic changes and engaging with market analysts on achievements and future ambitions. Finally, they built a culture of celebrating success, regularly highlighting functional or market wins. This invigorated teams to deliver more while facilitating the sharing of best practice. - Monitor your position
To sustain the position, you must have clear sight of where you are. Many organisations start to scale back monitoring and tracking once they have got the money, however, there is an argument that this should actually go in the opposite direction. By creating strong, relevant KPIs you build an early warning system that protects the organisation from costs creeping up over time. In recent years we have seen a blend of proven KPIs along with new KPIs which provide deeper insights into cost resilience. You must then underpin these KPIs with the right tools and technology, so they are accurate, reliable and not onerous to produce and manage.
Locking in savings: Understanding the gaps in your capability
Locking in savings might sound simple, but at its heart is a leadership issue requiring commitment. At Deloitte, we use our 15-point cost maturity assessment to assess client’s capabilities across several key dimensions. By doing this we can identify if the client has the sufficient capabilities in place to deliver their value creation plan and stay ahead of their competition.
The 15-point cost maturity assessment tool has been used on numerous cost programmes to de-risk savings realisation and sustain cost maturity. For example, it assesses whether the leadership team are clear on what matters most and therefore do they consistently eliminate or reduce the spend on things that are less important. It looks at whether leadership has a detailed knowledge of the wider budgets and the understanding of what they get for that budget. Not just the individual area that they are responsible for - the Price x Quantity make-up of all budgets. The maturity assessment also assesses a leadership team’s personal commitment to being cost conscious and the change programme.
Conclusion
‘Sustaining the cost position’ is an ongoing strategy that requires a fundamental shift in mindset and a commitment to continuous improvement. Top tier organisations succeed in embedding cost resilience by treating it as a strategic imperative. Even once savings have been captured, they continue to invest in the right people, processes and technology to foster a culture of cost consciousness at all levels. By avoiding common pitfalls and leveraging proven methodologies like Deloitte's 15-point maturity assessment tool, businesses can move beyond short-term cost-cutting measures and unlock sustainable cost resilience for long-term success.
If you are interested in learning more about how we can help you with your Strategic Cost Transformation programme, please get in touch with one of our experts.
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