Part 3: Cost resilience: ‘Get the money’ phase

What is ‘get the money’?

Moving beyond simply ‘finding the money’, a successful cost optimisation programme hinges on finding a way to ‘get the money’ – translating identified savings into tangible bottom-line impact. While the initial diagnostic phase is crucial, many organisations stumble by underestimating the effort required for successful implementation, or simply grow tired or are distracted by the second year of implementation.

This is all the more important when reflecting how successful organisations are at delivering their cost programmes, as shown in Deloitte’s MarginPLUS Survey where 80 per cent of cost reduction programs fail to meet their targets and a third achieve less than 50 percent of their intended savings.¹ This high failure rate can be linked to challenges from legacy technology infrastructure and rigid operating cost structures in addition to an inability to enable digital infrastructures to adapt to changing market conditions.

Accountability and data: The cornerstones of success

The most impactful cost optimisation programmes share a common thread, focussing on broad-based accountability and data-driven decision making. This encompasses:

• data-driven insight empowering stakeholders with the data and insights needed to effectively challenge spending patterns and identify and deliver opportunities
• end-to-end ownership establishing clear ownership across the entire cost reduction lifecycle – from identifying savings to realising value and ensuring sustainability
• consistent follow-through maintaining consistent accountability mechanisms over time to prevent costs increasing.

We have seen that a heightened level of accountability can unlock an additional overall saving. Let's say a company identifies potential savings in their selling, general and administrative (SG&A) expenses of 15-25 per cent. A strong accountability framework helps them achieve savings closer to the higher end of that range.

From savings identification to realised value: Key pillars of a cost optimisation programme

1. Prioritisation and simplification:

• Focus on impact: Prioritise initiatives that deliver tangible benefits within the desired timeframe, avoiding the temptation to tackle everything at once. Be ready to pivot where there is diminishing returns on value delivered by initiatives
• Break down complexity: deconstruct complex initiatives into manageable phases, especially those requiring cross-functional collaboration. Don’t let complex, yet insignificant, issues distract from the bigger picture

2. Alignment and accountability:

• Shared objectives: Ensure alignment between Chief Financial Officer and Chief Operating Officer perspectives on cost resilience priorities to keep the programme on track
• Crystal-clear ownership: Establish clear accountability for identifying and delivering savings at all levels – central, functional, and local. Empower individuals to own and champion cost optimisation efforts

3. Transparent performance measurement:

• Financial KPIs: Establish clear, concise financial KPIs that track budget vs. actuals, savings realisation, reinvestment decisions and impact on the bottom line. Avoid merely shifting costs around the business and focus on delivering real savings
• Operational KPIs: Link cost savings to operational improvements by defining leading and lagging KPIs that demonstrate tangible business impact

4. Robust tracking and communication:

• Clear baseline: Establish a clear, agreed multi-year baseline for measuring progress and track initiatives against it. Keep milestones and dependencies straightforward
• Effective tracking: Simple and effective tracking methods need to be in place to measure progress. 46 per cent of executives rated “design a solid tracking and reporting process” as their top lesson learned from initiatives this year²

5. Leading the organisation forward:

• Compelling narrative: Articulate a clear and compelling narrative that explains the rationale behind the programme, the intended use of savings (bottom-line impact vs. reinvestment) and the expected benefits
• Avoid seclusion: Too often cost programmes are directed by executives who are reluctant to leave the boardroom. Engaging and leading from the front can inspire teams to deliver

6. Leadership commitment and cultural shift:

• Executive buy-in: Secure unwavering commitment from the Chief Executive Officer and C-suite to drive a cost-conscious culture and overcome resistance to cross-functional savings initiatives
• Empowered decision-making: Foster a culture where cost awareness is embedded into all decision-making, enabled by clear reporting and dashboards

7. Thorough planning and execution:

• Clear planning: Delivery plans need to be drawn up at the end of the ’find the money’ phase and these must be realistic enough to not overburden the organisation with change, yet detailed enough to hold leaders and teams to account
• Precision execution: A programme team needs to govern effective delivery however, a sensible level of pragmatism must be employed to ensure the programme isn’t derailed by any small bumps along the way.

Being bolder: How to get more money

We are increasingly seeing clients look for ways to be bolder in their cost programmes and drive savings over and above their initial targets. Based on our experience we see four key elements that help programmes to do this; partnering, ambition, coaching and innovation.

Figure 1. Key considerations for how to get the most of out of a cost programme

Source: Deloitte LLP, 2024.

While ambition, coaching and innovation are all crucial elements for success, partnering with an advisor is paramount. A skilled advisor acts as a catalyst, amplifying the value of these other elements by providing a robust toolkit and fostering a deep understanding of your organisation's unique challenges. This collaboration unlocks enhanced cost optimisation and accelerates your speed to value, delivering results that surpass your organisation's existing capabilities.

Furthermore, when executed with a genuinely collaborative approach, fuelled by shared commitment and aligned incentives, partnerships deliver compelling returns on investment. Mid-sized projects typically achieve a weighty 10-12x return, showcasing the power of focused expertise and external perspectives in driving significant cost savings. Large-scale, multi billion global initiatives present even greater potential, with returns reaching 50-60x return. These transformations benefit from economies of scale and the ability to catalyse systemic change across complex organisations.

When it comes to being bold and getting the money, there is no one size fits all rule. For example, we recently partnered with two clients who took very different approaches:

• An energy retailer’s leadership team took the ambitious step to commit to 20 per cent reduction targets before beginning execution. Each leader was accountable for their target and empowered to deliver the savings as they saw fit. This meant over a period of seven years, a culture of innovation and cost resilience was fostered which has now become embedded into the organisational culture
• In contrast, an oil and gas organisation wanted to drive rapid cost reduction and deliver $200m of savings over 18 months. They used data and insights to design a structured programme that was underpinned by a robust and central tracking mechanism. It was delivered by operational employees, along with specialist cost resources who could enhance their capabilities and coach the rest of the organisation to act in a more cost resilient manner.  

In today's dynamic business environment, where agility and efficiency reign supreme, embracing strategic partnerships can be the decisive factor that propels organisations towards sustainable cost leadership and unlocks their full potential.

Conclusion 

Effectively ‘getting the money’ goes beyond mere identification of savings. It demands a cultural shift to a transparent delivery model that has accountability and data-driven decision-making at its heart. Leaders need to be prepared to lead from the front and ensure the programme is not derailed before enough momentum is built to deliver benefits. By embracing these principles, organisations can transform ‘getting the money’ from a reactive measure to a strategic lever for sustainable growth and enhanced profitability. Furthermore, organisations are now looking at ways to be bolder, and progressing forward with a trusted partner. A partner who brings not just tools, but also deep industry expertise and a shared commitment to unlocking an organisation's full potential.

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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References:

1. 2024 MarginPLUS study: Refocusing amidst uncertainty, Deloitte, 2024.
2. 2024 MarginPLUS study: Refocusing amidst uncertainty, Deloitte, 2024.