When it comes to cutting costs, adopting an alternative mindset could lead to different results.
If we asked ourselves: What would I do if I were the owner of the company? we would surely come up with all sorts of possible answers, ideas, and projects—not just for ourselves, but for every manager and executive in the company. A general approach to implementing this mindset could involve considering two strategies:
1. Adopt the “Business Owner Mindset”
2. Establish a “Central Expense Control Tower”
1. Adopt the Business Owner Mindset
Employees across the entire organization can adopt the Business Owner Mindset to control spending and generate an immediate, effective impact.
This mindset involves constantly evaluating the total savings potential behind each expense category and continually asking: “Why do we always do what we do?” “What would I do if I were the owner or investor in this business?”
To instill the Business Owner mindset, the CEO must be seen as the company’s change leader, responsible for triggering a radical rethinking of the operating model, leading by both action and word, and executing a series of operational actions that demonstrate their commitment to transforming the entire organization.
Examples:
– Actively participate in team review meetings on cost reduction and help accelerate decision-making.
– Instill the principle that every contract must be evaluated through the lens of an investor-owner.
– Define and agree on objectives with executives and stakeholders and be incentivized to meet them.
– Reassess needs and re-forecast demand.
– Review open purchase orders and reopen negotiations on all existing contracts.
– Communicate the progress of the transformation and frequently reiterate a personal commitment to the program to the organization.
2. Establish a “Cost Control Tower”
A “Cost Control Tower” is a centralized way to manage indirect or “non-core” expenses. This is where the mindset should shift from “I will spend every dollar in my budget” to “I have no budget and will only spend when it is critical.”
Company executives could, for example, use the Expense Control Tower to monitor the progress of their initiatives as follows:
– Streamline the supplier database and ask, “Why do historical suppliers exist?” and focus on those who can be viewed as “partners” in the current environment.
– Halt all “just in case” spending and “nice-to-have” expenses, such as the acquisition of new technology, promotional and participation travel, marketing and sponsorship costs, and the purchase of insurance policies with higher coverage, etc.
– Streamline expenses that “we’ve always had,” such as employee and executive entertainment expenses, company-paid cell phones, or company-owned vehicles.
– Analyze to eliminate, renegotiate, or assess whether all contractors considered “necessary”—such as professional services, subscriptions, consultants, coaches, etc.—are actually useful.
– Make cost optimization a priority for the entire administrative team.
In our experience, implementing an Expense Control Tower typically yields savings of 15 to 30% in indirect expenses during the first few months of implementation.
A practical example
We worked with JCDecaux, a company in the advertising sector, which has a fleet of hundreds of company vehicles for personal use that employees utilize to travel and maintain the numerous well-known bus shelters in shopping centers and other public spaces. By optimizing policies, renegotiating contracts with suppliers, and assessing specific needs, the vehicle rationalization initiative resulted in a sustained annual cost reduction of 16% and the implementation of KPIs to help monitor and sustain these improvements.
