SG&A cuts look impressive but often evaporate in year one. Explore this five-step framework to separate good costs from bad, sequence the right reduction levers and reinvest the savings in growth.
Key Takeaways
- Rapid SG&A cost take-outs can deliver 15%–35% savings in year one, but benefits often evaporate when cuts are made indiscriminately, in silos and without controls or aligned incentives.
- Sustainable reduction starts with a single integrated cost baseline across silos, then leadership alignment on which costs add business value and which "bad" costs don't.
- Cost owners at every level, incentives that reinvest savings into growth rather than shrink budgets, and disciplined controls keep extracted costs from creeping back over time.
Executive Summary
Cutting SG&A is easy. Keeping it cut is not.
With better cost data and leadership focus, organizations can forensically examine their cost base and deliver impressive year-one reductions — anywhere from 15% to 35% of SG&A. Yet those benefits often evaporate. Costs creep back, momentum stalls, and businesses struggle to balance optimization with continued investment in growth.
The white paper identifies why: not all costs are equal, yet organizations tackle "good" costs that fuel growth alongside "bad" costs that don't add value. Targets get delivered in silos, roadmaps are fragmented, controls are missing, and incentives are misaligned. The reward for success is a smaller budget and a new stretch target.
This paper sets out a five-step framework for sustainable cost reduction. It starts with a single, integrated cost baseline that maps spend and people to activities across organizational silos. It then aligns leadership on which costs add business value and which don't. The paper also sequences the right levers, from demand management and process improvement to automation, centralization and strategic sourcing, and assigns senior leadership accountability, and embeds the controls to extract "bad" costs and keep them out.
The goal isn't just a leaner cost base. It's a roadmap for extracting non-working dollars and rapidly reinvesting them in growth, with the rigor and aligned incentives to sustain the benefits over time.
Frequently asked questions
Sequencing starts after building a cost baseline and aligning on "bad" costs: cross-functional teams then evaluate levers — demand management, process improvement, automation, centralization and strategic sourcing — against each cost driver, prioritize by benefit and ease of implementation, and bundle opportunities into a phased roadmap.
A baseline mapping costs and people to their true activities, and not where they sit organizationally, exposes duplication across silos and aligns leadership on where to cut. One version of the truth then enables forward-looking visibility of commitments against budgets, stopping costs from creeping back.
Three lenses stand out: spans and layers analysis to reveal organizational shape and duplicated services across regions; function- and category-level benchmarking to flag areas where spend per FTE significantly exceeds competitors; and the breakdown of FTE versus automation across the value chain.
Assign cost owners at every management level with senior accountability for delivery, tie performance to targets, share the rewards and reinvest savings into growth, rather than rewarding success with smaller budgets and new stretch targets. Visible leadership buy-in, transparency and celebrating wins sustain the change.