It's hard to look at the current economic and political outlook and not talk about cost optimization. From major corporations to governmental agencies, it seems to be on everyone's mind.
A recent BCG survey (1) found that minimum one-third of global executives list cost as their most critical focus for 2025. Another McKinsey survey (2) for public organizations across multiple countries revealed that 43% of public-sector transformation efforts had cost reduction as a core goal.
Although it is sometimes impossible not to reduce the workforce, we strongly believe that people are a crucial part of an organization, at the foundation of its resilience and innovation. Therefore, we decided to study an important question: How can you optimize costs without cutting people?
What is cost optimization?
Cost optimization focuses on maximizing value relative to costs by enhancing efficiency, optimizing workload and building operational resilience in the long run, whereas cost cutting typically reduces expenses through short-term measures, often involving workforce reductions.
We believe it is possible to optimize costs, workload and productivity, while keeping your valuable team intact, strong and motivated. This approach helps preserve key skills, sustain motivation, and maintain continuity, while avoiding the hidden costs of layoffs such as loss of expertise, rehiring, and disengagement. It also enables internal mobility to align talent with evolving priorities or staffing needs.
As a matter of fact, an US Conference Board survey (3) found that 30% of companies that implemented layoffs saw costs rise, and 22% lost key talent by letting go of the wrong people. The survey also points out that 75% of companies that laid off employees to cut cost rehired for the same roles within a year. These figures reflect a concerning reality: layoffs may seem like a quick fix but fail to address deeper operational issues with more significant impacts on business costs, such as inefficient processes and hidden waste. In the end, they may generate more unnecessary costs.
Taking a step back… why are costs and inefficiencies increasing?
Leadership behavior and cultural mindsets: managers tend to avoid difficult cost-reduction decisions, focus on expansion rather than optimization, and have a lack of cost/value-oriented thinking culture and cost-discipline.
Rising operational complexity: as organizations expand, they create layers of complexity, building redundancies and inefficiencies into their processes, organizational structures (including spans and layers), and systems.
External pressures—from regulations to employee or customer demands—drive up structural costs: increasing regulatory requirements, evolving customer expectations, rising HR costs, war of talent, booming technology costs, inflation, or global disruptions such as pandemics or geopolitical events impacting supply chains.
Why do organizations typically undertake cost optimization initiatives?
- They acknowledge that operating costs are rising faster than revenue, leading to shrinking profit margins despite stable or even growing revenues.
- They suffer from a lack of visibility or control over their direct or indirect spend
- They receive clear signs of inefficiency – slow or inefficient processes, redundancies, complexities, duplicate or shadow activities and systems
- They face external pressure from regulators, investors, boards, or markets to improve financial performance
- They desire to become leaner in uncertain times
What levers can be used to optimize costs without cutting people?
Non-exhaustive options to save time & money …
Review of ambition, priorities and level of standard
- Reassess initiatives and focus only on what delivers the highest value in the current context
- Reduce the scope, postpone or cancel non-essential projects, activities or expenditures
- Review the level of ambition and reframe service or quality levels to align with realistic cost constraints
- Avoid overengineering and ensure that ambitions remain proportional to available resources and market needs
- Review and optimize service or product portfolio
Process and Organizational Efficiency
- Simplify workflows and eliminate waste or unnecessary steps to save time and money
- Standardize practices across teams or locations to reduce variation, inefficiencies
- Increase automation opportunities
- Identify and remove redundancies or duplicated efforts
Digitization and automation
- Digitize paper-based or disconnected processes to improve speed and accuracy.
- Automate repetitive or manual tasks
- Implement collaborative tools to improve team productivity and reduce delays
Procurement and Supply Chain Efficiency
- Centralize purchasing to negotiate better rates, reduce fragmentation, reduce the number of suppliers and renegotiate existing contracts
- Adjust product/service specifications to lower unit costs
- Reduce demand, standardize needs and control future purchases
- Optimize and reassess the use of external partners (contract reviews, make or buy analysis, owning versus leasing, etc.)
- Improve inventory management to avoid overstocking or shortages
Smarter use of resources and assets
- Optimize costs by reducing, eliminating, consolidating or having better use of resources and assets (physical, facilities or IT such as licenses, infrastructure, cloud costs, etc.)
- Reduce usage or use cheaper substitutes
- Encourage the pooling and sharing of assets
- Systematically review usage data to align costs with actual needs and avoid paying for unused capacity
Internal flexibility and workforce mobility
- Redistribute workload internally, upskill or cross-train employees to optimize staffing and reduce the need for external contractors or consultants
- Anticipate retirements or departures and avoid automatic replacements where possible
Financial & Tax Efficiency
- Optimize financial costs (debt financing, banking fees, transaction costs, penalties) and cash flow management (treasury management)
- Improve tax efficiency: review tax structures and obligations to identify opportunities for optimization
- Enhance cost visibility and reporting
Cost discipline and culture
- Embed cost awareness into day-to-day decision-making by training teams to evaluate value vs. expense
- Encourage a mindset of frugality without compromising impact and make cost-efficiency a shared responsibility across departments
- Regularly monitor spending habits, challenge unnecessary expenses, and align incentives with financial performance
- Foster transparency and accountability around budgets to ensure teams take ownership of their costs
Other efficiency levers
On
top of these previously mentioned levers, organizations can also benefit from
additional levers, decisions or initiatives, which may arise from staff,
management, or even external consultants or partners, depending on the
situation and the specific challenges observed.
What are our learnings from previous cost optimization projects at ngage?
1. Cost optimization is not just about reduction — it’s about reallocating resources to what truly drives value and supports strategic priorities
2. Lack of top management vision and commitment is a blocker — without clear sponsorship and alignment at the highest level, cost initiatives risk fragmentation, lack of follow-through, and limited impact. A McKinsey survey (4) shows that top-management support and clear targets represent the two most responsible factors for companies meeting cost targets.
3. People engagement is key — securing buy-in from leadership and operational teams ensures smoother implementation (bottom-up insights, trust, and ownership)
4. Data-driven decisions outperform assumptions — robust data analysis helps identify real opportunities and avoid blind spots.
5. One-size-fits-all approaches don't work — cost levers must be tailored to business context, maturity, and culture.
6. The courage to stop or prioritize is essential — meaningful optimization often requires difficult decisions: pausing low-impact projects, focusing resources, and accepting trade-offs.
7. Quick wins build momentum — starting with visible & achievable gains fosters trust and supports long-term transformation.
8. Cost discipline must become cultural — embedding a cost-conscious mindset across teams helps avoid future inefficiencies.
9. Integration with PMO is a success factor — embedding cost initiatives into the existing project governance enables consistent tracking and decision-making.
10. Monitor, measure, and adapt — establishing KPIs and regular steering helps course-correct and maintain momentum over time.
How can ngage support you in this cost optimization journey?
Using ngage’s Cost Optimization Frameworks (a set of proven frameworks, tools, accelerators, templates & deliverables useful in the context of cost optimization projects), we support you to :
Feel free to reach out to us to discuss your cost optimization journey — we’ll help you activate it with confidence, whether you want to challenge ideas or simply explore solutions over a coffee.
Who knows… that cup might be the start of a fruitful collaboration that delivers real value!
*(1) https://www.bcg.com/publications/2025/cost-efficiencies-remain-an-executive-priority-in-2025
*(2) https://www.mckinsey.com/industries/public-sector/our-insights/a-smarter-approach-to-cost-reduction-in-the-public-sector
*(3) https://myabcm.com/layoffs-the-cost-cutting-measure-that-could-sink-your-company/
*(4) https://www.mckinsey.com/capabilities/operations/our-insights/what-worked-in-cost-cutting-and--and-whats-next-mckinsey-global-survey-results/