Market volatility and recession fears dominate financial news. But investors still expect desired returns.
You can’t control the market or even your customers. What you can control are your costs.
Between the three major cash costs – CAPEX, OPEX, and G&A – G&A is the most immediately addressable and therefore a good place to start your review.
To ensure your organization is positioned to overcome business disruptions and uncertainty while generating sustainable future growth, consider these five steps to healthy G&A.
1. Be Empathetic and Find the Right Partner
The majority of G&A is people-based. Reviewing G&A for optimization opportunities inherently comes with an emotional cost – a process that can be difficult and create fear.
Find a trusted, compassionate partner who will put your people first.
Additionally, focus first on the roles required, not the people in the boxes in the organization. Creating unnecessary positions for individual people ultimately hurts their career development in the long run.
2. Start With a Strategic Vision
At the beginning of the G&A optimization process, it’s important for leadership to be absolutely clear on the vision of the company’s future and to ensure that vision is appropriately communicated and reinforced. Certain services, roles, and values are critical to the future viability and potential of the business – these are the areas in which the business needs to be great.
Next, build a cost structure that aligns to that company vision. The cost structure should enable high-value capabilities.
3. Take a Blank Sheet, Bottoms-Up Approach
Instead of “What can we cut?” ask “What do we need to run our business if we started a new company today?”
Framing the question in this way creates an optimal mindset shift, one that can help leaders make objective decisions.
When looking at the company from a distance – as if from scratch – it becomes clearer that certain capability areas are the primary drivers of competitive advantage. It’s these functions that require greater investment.
Other functions don’t need the same types of changes or investment. Non-essential capability areas are prime targets for cost optimization instead.
4. After Optimizing the Org. Structure, Optimize Processes and Technology
Many organizations opt to move quickly. In doing so, they optimize their organizational structure and then get back to the normal course of business.
Halting optimization at the org level, though, leaves dollars on the table.
The processes and technology that underpin the business and are responsible for driving ROI must also be part of the G&A review process. When all levers in the business are examined during an optimization, it maximizes the durability and utility of the G&A process. In other words, the firm won’t have to go through another major G&A cost improvement exercise every few years. It will be done right the first time.
Throughout this reset, it’s important to have cross-functional representation. Executing in siloes robs the process and the business of the intended value of G&A optimization.
5. Make It a Continuous Process
Cost improvement today is always preferable to tomorrow. Don’t wait for the next market correction or poor quarter to jump into action.
Instead, embed cost improvement into the annual review process. Ensure the cost structure is always in alignment with the strategic vision – if not, make appropriate calibrations. Rather than being forced into the process as a last resort, make it a proactive, diagnostic tool for a clearer, more focused future.
During these review periods, evaluate G&A metrics for patterns, progress, and new possibilities.
For transformative, technology-enabled solutions and expert support in optimizing costs across the enterprise, contact CrossCountry Consulting today.