The success of any cost transformation depends on the leaders’ ability and experience to lead their people through change.

Traditional cost transformation programmes focus on reducing costs through reducing headcount, process improvements and operating model efficiencies, but in many cases overlook the most important driver of any transformation: the people. For a transformation programme to succeed, the sponsor(s) and leaders must take a human-centred approach, placing people at the heart of the programme’s objectives, approach and outcomes.

This can only be done when the leaders are willing and able to be the face of transformation and treat the cost transformation primarily as a change initiative. Yet the importance of good change management is often realised in the absence of it. Organisations often view change management as a tick-the-box activity, underestimating the impact of change, failing to secure the budget for it and relying on inexperienced change practitioners. This approach fails to recognise that effective change management is the glue that makes transformation programmes stick and deliver the benefits of the business case. When leaders are ill-equipped to lead their people through change, people become disengaged and the business case is put at risk.

So, what behaviours must leaders adopt to drive sustainable success from cost transformations?

1. Securing buy-in and driving ownership of changes across leadership and management teams

Strong leaders advocate for and drive a cost-conscious mindset by crowd-sourcing cost-saving ideas. To instil a cost-conscious mindset, they look for people with relevant experience and interests to join the transformation team to ensure the success of the programme. They also provide the right level of autonomy to management teams to make cost reduction decisions in their areas.

2. Balancing business critical requirements with the effort and focus needed to drive transformation

Empowering their teams to make decisions is a key activity for leaders to help identify critical events throughout the programme lifecycle, plan for addressing these effectively and reinforce the organisational vision and values. Leaders need to re-prioritise their calendars to make time for leading the transformation, whilst working with the programme team, who are closer to the day-to-day performance, bottlenecks and achievements, to drive initiatives forward.

3. Navigating through tough decisions without creating panic, stress or fear 

Leaders who successfully lead change are courageous, authentic and personable. They are champions for change, advocates for the new vision and ambassadors of organisational values. Not only do strong leaders deliver the outcomes expected by the senior leadership team and the board, but they do so whilst treating employees fairly, communicating clearly, leading authentically and managing their own and the team’s wellbeing effectively throughout the change.

4. Balancing the need to make decisions vs. the desire to seek more data to inform decision-making 

Strong leaders don’t shy away from identifying the root causes that drive the need to reduce costs. They take accountability for tough decisions. They don’t overuse benchmarking data to make decisions without understanding the complexities and nuances of their own organisation. Leaders understand that often they have to make the best decisions with the information they have quickly and use these decisions to present a new vision for their organisation – one that demonstrates the path from cost reduction to growth and sustainability.

5. Balancing the need to set ambitious targets vs. providing autonomy to teams to set their own targets  

Leaders take a ‘principles-led’ approach towards cost saving targets to stay on course. They don’t just set ‘numbers-based targets,’ they also use qualitative metrics aligned to business outcomes. For example, by taking a customer-centric approach to cost transformation, initiatives would have a minimal impact on quality of service, which could result in improved customer experience due to more efficient use of resources, thus increasing customer loyalty and the Net Promoter Score.

6. Ensuring cost targets are not diluted throughout the programme

Great leaders plan ahead. They collaborate and continuously refine the list of cost reduction opportunities to refer back to when initiatives don’t deliver, deliver less, or are delayed. They continuously measure progress against targets and celebrate successes. They also incentivise people to drive cost-saving activities by incorporating cost targets as part of performance metrics, giving them the space and authority to own and drive cost initiatives.

The benefits of getting this right are significant, and getting these wrong could sink the entire programme, or worse, leave a negative mark on your employees and on your brand that is not easily forgotten.

In summary, here are the key lessons from our experience to ensure sustainable success in transformation programmes:

  • People are the driving force behind every transformation
  • The best leaders are focused on leading people through change
  • A clear vision helps employees prioritise the right initiatives based on business drivers
  • Honest and authentic communications secure employee commitment to change

These leader behaviours are critical for the success of a cost transformation programme and beyond. By taking a human-centred approach, leaders hold the key to re-shaping the culture and values to prepare organisations for long term growth and sustainability, paving the path for cutting costs in a socially responsible way. Stay tuned for our upcoming blog on Socially Responsible Cost Reduction.

To find out more about leader-led change, contact Jay Poorna, Director at Deloitte’s Organisational Transformation team, at jpoorna@deloitte.co.uk.