Please note that the new website reflecting the brand Hamza Shayk will be live in September.

Cost Leadership

Strong leadership is a prerequisite for good cost management. Cost leadership starts with the CEO or business unit head and cascades down through the top management team. They need to build a tough cost culture and be good role models in their personal behavior. They need two key staff functions to be very active supporters of cost control – finance and HR. Imprinting a tough attitude to cost right down through the organization takes true grit.

A Challenging Base Case

Your base case position, what you expect in terms of cost trend, will be a big contributor to the cost outcome.

For example, you can start off the annual budget process by telling your business unit heads that this is a year of prudent consolidation, that they should plan on no headcount additions but a 3-4% increase in cost per head plus some small reductions in bought-in costs, and that with that cost base they should be able to manage some modest revenue growth.

Or you could say revenue growth is looking difficult this year and you’d like to see 5% productivity gains, which means that we plan on headcount coming down by 5%, but you don’t want to see any reduction in the revenue plan.

Those are two very different base case positions. Under the first scenario, management gets the message that they can relax a little, they can tread water, put off nasty decisions, and do some strategic thinking. Under the second, their feet are being held to the fire. There’s no standing still. If they’re not growing revenue, they’d better be cutting costs – either way the base case position is that you expect 5% (or whatever percentage works) productivity growth, every year. If you don’t stay paranoid and keep moving forward, your competitors will overtake you.

Once this kind of base case behavior is established, managers will stop coming to budget reviews with a business-as-usual, status quo budget. They will know that won’t survive one minute in the CEO review. The whole tone of the business will have changed.

When you’re doing a house renovation your builders find out fast if you’re a soft touch. At the end of Week 1 they put in for an extra $10,000 because you’ve altered the handles on the cabinets and obviously that’s changed the entire project. Roll over on that and you’re looking at a $50,000 overspend by the end of the month. But if your base case is “no” and you have them accommodate that in the original budget, you can stop cost escalation.

As a strong cost leader, your base case expectation must be for real productivity gains and other unit cost reductions every year. Repeat that message and stick by it, until it is taken as a given by your management team and pushed down by them to the rest of the organization.

More Insights

Got Time?

Dear Leaders, Time management in an organizational setting isn’t just about personal efficiency or productivity. It’s about how an entire enterprise aligns its resources, meets its goals, and creates a culture that values every minute. In essence, time management isn’t about managing time, it’s about managing choices, situations, and people. You must master your time …

Read

The Art of Curating a Balanced C-Suite Team

Dear Leaders, In the orchestral world, a conductor handpicks musicians not just for their individual talents, but for how they harmonize as a collective. Similarly, in the corporate realm, building a balanced and effective C-suite team requires a discerning eye and a strategic approach. It’s not just about gathering expertise; it’s about orchestrating harmony, synchronization, …

Read

Succession Planning: A Tale of Two Futures

Dear Leaders, Picture this. Your star employee, the one who knows your company like the back of their hand, suddenly hands in a two-week notice. There’s a gasp in the boardroom, a sinking feeling in your stomach. Or consider this. After decades at the helm, a charismatic CEO is ready to retire, but there’s no …

Read

The Allure and Illusion of Vanity Metrics

Dear Leaders, In a world increasingly driven by numbers, it’s easy to get swept up in the allure of vanity metrics. These data points sparkle and shine; they look good in a presentation, give our ego a nice little boost, and seemingly declare to the world, “We’ve arrived!” But beneath the sheen, vanity metrics are …

Read

Leadership and Character

Dear Leaders, Pop quiz: What’s the most underrated component in leadership today? It’s not charisma. It’s not strategy. And no, it’s not even about being a “thought leader” (whatever that means). It’s Character. Character is that silent pulse beneath every decision, every interaction, and every pivotal moment in leadership. It’s the unsung hero behind every …

Read

Strawmanning Our Brilliance

Dear Leaders, Last week, I wrote about how the Steelman technique is useful in conflict resolution, decision-making, and building consensus. This note is about situations in which Strawmanning is essential to, well, conflict resolution, decision-making, and building consensus. It’s also highly useful in keeping our egos in check, bulletproofing the strategic planning process, and simplifying …

Read

Steelmanning: Understand Deeper and Win More

Dear Leaders, As C-suite executives, the ability to present your arguments concisely is crucial. But the ability to understand others’ arguments and craft an articulate response that’s well-suited for a given situation is pivotal to your effectiveness as a leader. Your role entails making high-quality decisions – and fast, resolving conflicts in a way all …

Read

Integrating Thoughtfulness into Leadership

Dear Leaders, Almost by definition, an executive is responsible for serving a group of people. Whether it’s identifying opportunities, problem-solving, decision-making, conflict resolution, collaboration, delegation, etc. – all involve people. And the higher the quality of your relationships, the more effective you are as an executive. Technology makes organizing oneself easier, tasks more automated, reminder …

Read

The Magnetic Power of Executive Presence

Dear Leaders, In a world where leadership is often misunderstood, there exists a rare quality that sets exceptional leaders apart: the undeniable allure of executive presence. Picture a leader who walks into a room, and without uttering a word, captivates everyone’s attention. This enigmatic power is not merely about looking the part or playing the …

Read

Leadership and Power

Dear Leaders, In your current position, it’s how you manage the delicate dynamic of leadership and power that determines your overall effectiveness, especially when dealing with subordinates. By definition, leaders always have a measure of power. But many power holders have no trace of leadership. Leadership humanizes you, while exercise of power, although often necessary, …

Read

Executive Behavior: Challenges and Solutions

Dear Leaders, In the fast-paced realm of C-suite leadership, the battle to navigate behavioral challenges is one that separates the exceptional from the ordinary. Decision-making dilemmas, communication hurdles, delegation quandaries, work-life imbalances, and the imperative of adaptability pose formidable obstacles for executives. Yet, with strategic awareness and purposeful action, these challenges can be transformed into …

Read

Bulletproof Problem Solving

Given today’s fast changing business environment, the Future of Jobs report placed complex problem solving at #1 in its top 10 skills for 2020 and beyond. An effective twenty-first century executive is quick on their feet, possesses learning agility, and attacks emerging problems with confidence. While there are plenty of problem-solving methodologies, one of the …

Read

Don’t Lose Customers, Forge Elite Teams Instead

I’ve been a loyal Starbucks customer for 20+ years, mainly because of the consistency in their service and product. However, one of the locations close to me nowadays is a true test of patience; horrible attitude towards customers, lack of consistency in drinks and, worst of all, employees backbiting about each other, their superiors, and …

Read

Email Etiquette: Taming the Beast

“Because the mail never stops, Jerry! It just keeps coming and coming and coming, there’s never a let-up. It’s relentless. Every day it piles up more and more and more, and you gotta get it out but the more you get it out the more it keeps coming in!” -Newman, Seinfeld Most executives I know …

Read

Benefits Administration

Benefits Administration A company’s benefits package can be a very significant part of its total expenses, but in many companies, benefits are not really viewed as expenses. Instead, because of the need to hire and retain top-quality employees, the benefits package is considered a key asset that must be maintained if not increased. While a …

Read

Zero-Based Budgeting

“If the company’s problem did not lie in revenues, it could only stem from expenses.” -Carlos Brito, AB InBev Simply put, Zero-Based Budgeting (ZBB) is a radical cost-control program that foresees a complete annual revision of all the company’s spending. In zero-based budgeting, managers are responsible for creating their budget from “zero costs” every year, …

Read

Hiring and Firing

People Cost The cost of people is the most difficult cost to manage. Because it is so tricky it is usually left until last in any cost-cutting program and any discussion of cost management. Why is people cost so problematic? First, people cost is very sticky. Once people are on the payroll it’s hard to …

Read

Supplier Management

Negotiating with Suppliers The approach to negotiating with your suppliers is simple: treat them as your partners, be tough but fair, and don’t lock yourself in a situation that is impossible to walk away from. 1. Understand the balance of power: Understanding and playing the balance of power between buyer and supplier is a key …

Read

Workers’ Compensation

Workers’ Compensation Insurance There are a number of techniques for bringing about modest reductions in the cost of workers’ compensation insurance. Job Classifications: One of the key determinants of the cost of workers’ compensation insurance is the job classifications into which all employees are slotted. An employee designated in a high-risk classification will cost far …

Read