Cost transformation without cutting growth capability: a COO's guide

BCG's 2025 survey, which drew 2,080 respondents across all industries in six countries, found that only about 20% of cost programmes succeeded. Deloitte's 2026 survey of 500 C-suite executives at organisations with revenue above US$5 billion reached a similar conclusion from a different direction: only 14% achieved their primary enterprise cost reduction goal, even though 96% of respondents were pursuing a cost transformation and 67% expected to hit overall targets.

The gap between expectation and result is the first finding. Two-thirds of leaders expect to deliver, yet roughly one in seven does. Deloitte also reports that 59% of organisations are targeting a cost base reduction of 10% or more, and that announced programmes have risen by 26%. More ambition, more programmes and a lower hit rate suggest that the methods are the problem, not the intent.

Older evidence points the same way. McKinsey studied 238 companies in the S&P Global 1200 that had announced G&A reduction initiatives from 2003 to 2010 and found only 62, one in four, sustained their reductions for four years. A Bain survey from 2012, now dated but consistent, found that nearly 60% of executives pursuing cost cuts of 20% or more acknowledged failure. Across fifteen years, the pattern has barely moved.

For a COO, the implication is humility about the base rate. A programme launched with the usual playbook has roughly a one-in-five chance of success. The task is to understand why programmes fail and to design around those causes. What to do: before approving any target, ask the programme team to state the three most likely causes of failure in your organisation, and the control that addresses each.

Context also matters when reading these numbers. Success is defined differently in each study, and the surveys sample large organisations that tend to run formal programmes. A smaller business may find its position better or worse. But the direction is the same across consultancies, years and geographies, and it is wiser to plan for the low base rate than to assume the organisation is the exception.

Bain's 2026 midyear private equity report adds a reason for urgency: a deal that needed 5% annual EBITDA growth for a 2.5x return a decade ago now needs closer to 10% to 12%. Owners and sponsors facing that arithmetic are pushing portfolio companies hard on cost, which makes the quality of the programme design more important, not less. A weak programme in this environment destroys value twice, once in the disruption it causes and again in the growth it forgoes while the organisation is distracted. Setting a realistic base rate at the outset is therefore a matter of investment discipline, not pessimism. Boards should expect the programme team to present the base rate alongside the target, and to explain what makes this programme different from the four in five that miss.

BCG found that half of its respondents said their companies pursue cost programmes every one to two years. That is not a transformation; it is a recurring tax on management attention. It suggests that savings are not sticking, and that the organisation reverts to its previous shape once the programme team moves on. Each round also trains employees to expect the next, which makes them less likely to commit to structural change.

BCG identifies four evergreen causes of cost creep. Lack of P&L accountability was cited by 80% of senior leaders and 67% of middle managers. Overhead generating more overhead was observed by 74% of both groups. Companies hiring rather than redeploying talent to new priorities was reported by 79% of top leaders and 67% of middle managers. Struggling to capture promised productivity savings was reported by 76% of senior leaders and 57% of middle managers.

These are organisational design problems, not spending problems. They describe a company in which no one owns the cost, support functions grow to serve themselves, new priorities are staffed by adding people, and productivity gains are not turned into smaller budgets. A flat reduction does nothing to change any of them. The only durable response is to change accountability, structure and planning rules.

What to do: pick the one cause that is most visible in your business and fix it before launching a savings target. If P&L accountability is weak, restructure budgets so that each leader owns the cost of the activities they control. If overhead breeds overhead, set a rule that new central roles must be funded from existing budgets. If hiring is the reflex, require a redeployment review before any external requisition is approved.

The gap between senior leaders and middle managers in BCG's data is itself informative. Senior leaders are more likely than middle managers to see weak accountability, hiring reflexes and uncaptured savings. Middle managers, who live with the consequences, are less likely to name them as company-wide problems, perhaps because they see their own unit more clearly than the whole. A COO should test the diagnosis with both groups before committing to a design.

BCG's survey ranked blunt workforce reductions as the most disruptive of the approaches it studied, with a three-fold negative impact on employee engagement. The effect is unsurprising. When a company removes a fixed share of staff across the board, people who are valuable and mobile leave first, institutional knowledge is lost, and managers spend months managing fear rather than customers.

The damage falls hardest on the activities that generate growth. Account management, product development, customer service and sales operations are often staffed lean already, because they are visible to the P&L. Central functions, by contrast, have more slack to absorb a cut without changing output. A uniform percentage therefore harms the most productive areas more than the least, and growth capability erodes just when the business needs it.

There is a coordination effect as well. Bain's 2012 research found that at least 60% of the value in cost-reduction efforts depends on initiatives requiring coordination across units, and that a startling share of overhead cost sits in the seams between functions. Cutting within silos does not touch those seams. The savings that matter lie in the interfaces, handoffs and approvals that no single leader owns, and which headcount targets cannot reach.

The implication is that the unit of analysis should be the activity, not the department. Map the activities that touch customers, revenue and product advantage, and decide that these are protected or invested in. Then examine everything else for duplication, complexity and low value. This is what we mean by targeting cost by activity value. It requires data on how time is spent, which most organisations can assemble within a few weeks.

There is also a signalling cost. Employees read a flat cut as evidence that leadership has no view on what matters. The best people, who have options, conclude that the company is shrinking rather than refocusing. A COO who can explain which activities are being protected and why gives the organisation a reason to stay and to carry the programme forward, which is worth more than the saving from any single reduction in force.

Resilience functions deserve particular care. Cost programmes often trim security, testing and risk capacity because their benefits are invisible until something fails. IBM's 2026 Cost of a Data Breach report puts the global average cost of a data breach at US$4.99 million, a 12 percent increase on the prior year, which is a single event that can erase a year of savings in a mid-sized business. A COO should therefore classify risk and control activities by consequence of failure rather than by cost, and protect those where the downside is large. This is the same activity-value logic applied to protection rather than growth.

BCG found that companies including all support functions in scope double their likelihood of a successful programme. The reason is that support functions are where complexity accumulates: layers, committees, reporting cycles, exceptions and parallel systems. A programme that excludes them to avoid conflict forfeits the most accessible savings and signals that the exercise is aimed at front-line staff.

A practical starting point is a complexity inventory. List the number of products, price lists, customer segments, suppliers, systems, approvals and reports, and ask for each what it contributes to revenue or risk reduction. Tail items typically have high cost to serve and low value. Removing a product variant or a bespoke approval step reduces cost in every function that touched it, and it does so without cutting a person.

Duplicated work is the second target. Where two teams produce similar reports, handle the same customer query or maintain parallel data, one can be removed. Unlike a headcount cut, the removal is chosen on the basis of what the organisation actually does. The people concerned can be redeployed into growth activities, which is where BCG's finding on hiring rather than redeploying becomes relevant: 79% of top leaders say their company hires when it could redeploy.

What to do: set a goal for complexity removal, such as a defined reduction in product variants, approval steps and reports, before setting a financial goal. Measure it monthly. Complexity is easier to count than cost, it is a leading indicator of savings, and it focuses managers on the structural problem. Savings then follow as a consequence of a simpler operation, which makes them far more likely to last.

Take care to separate complexity that customers value from complexity they do not. A bespoke service for the largest accounts may be expensive but profitable and sticky; a bespoke price list nobody can explain is not. The test is whether the customer would notice, and whether they would pay for it. This keeps simplification aimed at the organisation's own friction rather than at the differentiation that earns its growth.

Ambition matters, but only when matched to delivery. McKinsey's G&A research found that companies that trimmed G&A by more than 20% in year one were four times more likely to sustain results than those that took smaller steps. Small, gradual cuts allow the organisation to absorb and reverse them. A bold first-year move changes structure, and structure is what holds the savings.

Delivery is expensive and often under-funded. Deloitte reports that 77% of organisations invest US$0.20 to US$0.90 per dollar targeted to generate savings, and its advice is to establish a restructuring reserve for that cost. It also says to assume that 20% to 25% of targeted value will be lost to friction. Yet only 24% of organisations account for value leakage during a cost transformation. A plan that omits both the investment and the leakage will report a shortfall by design.

The implication for the COO is a more honest business case. State the gross target, the expected leakage, the cost to achieve and the net saving, and agree them with the CFO before launch. Present them to the board as a range. This is less impressive than a single headline number, but it protects credibility, and it ensures that a shortfall in delivery is discussed early rather than discovered in the annual accounts.

What to do: build a savings bridge with four lines: identified value, leakage allowance, one-off cost and net recurring benefit. Update it monthly and review it at the executive committee. Where leakage exceeds the allowance, investigate the cause: it is usually a specific unit failing to take out the cost it has agreed, or a saving that has been reinvested without approval. Tracking both makes the programme self-correcting.

Be careful with the word bold. It refers to the depth of structural change in the first year, not to indiscriminate cutting. A bold programme can still protect customer-facing capability, and in practice it must, or the saving will be offset by lost revenue. Boldness is best expressed in the number of layers removed, the variants discontinued and the approvals abolished, with each decision traceable to the value map.

Deloitte reports that tech modernisation (67%) and AI (66%) are the top priorities leaders cite as cost optimisation strategies. That is a notable shift: technology is no longer only an enabler of cost reduction but a primary lever. It reflects a belief that automation, workflow redesign and AI agents can remove work, not merely speed it up.

The caution is that readiness lags ambition. Deloitte found that 55% of leaders pursuing AI cost reduction admit their current IT platforms are not ready to deploy these tools. McKinsey's research on technical debt points the same way: CIOs estimate that tech debt amounts to 20 to 40% of the value of their technology estate. An AI initiative laid over fragile, fragmented systems will produce prototypes, not savings.

For a COO, the practical question is sequencing. Where processes run on well-integrated, documented systems, automation and AI can deliver quickly. Where they run on spreadsheets, manual reconciliations and legacy interfaces, the first step is to simplify and modernise, and the saving comes in the second phase. Both are legitimate, but they have different timelines and different costs, and a business case should say which applies.

What to do: classify the top twenty processes by technology readiness. Prioritise those with high volume, clear rules and clean data for early automation. For the others, define the simplification or modernisation work needed first. Do not count AI savings in the plan until a working pilot has demonstrated the reduction in effort in a real process, with the time saved removed from a budget rather than reabsorbed into the team.

Process redesign should come before tooling in almost every case. Automating a process that contains unnecessary approvals, duplicated checks and exceptions simply makes the waste faster. The sequence we recommend is to remove steps, standardise what remains, integrate the data, and only then automate or apply AI. Each stage reduces the effort required by the next, and the final automation is smaller, cheaper and more reliable. It also gives the COO a clearer baseline against which to measure the saving, because the effort removed at each stage can be observed and counted separately. Teams that skip to the last step tend to discover that their data, rules and ownership are not ready, which is the situation that 55% of leaders in Deloitte's survey already recognise.

The programmes that last are those that become part of how the business is run. BCG notes that companies addressing each of the four evergreen cost drivers can improve their odds of building a long-term cost capability by a factor of two to three. That means ownership, rules and rhythms: leaders who own the P&L, planning processes that expose overhead growth, and a routine review of cost against value.

Reinvestment is part of governance. BCG describes a case delivering more than US$1 billion in gross cost savings, of which 25% was reallocated into growth areas. Whatever the share, the principle is to decide in advance how much of the saving will be put back into capability that earns returns. It changes the message to employees from cuts to reallocation, and it keeps the programme tied to the growth agenda.

The COO's role is to make cost visible. A monthly dashboard showing cost by activity, complexity indicators and the status of savings against the bridge allows leaders to see drift early. Productivity savings should be converted into budget reductions or redeployed headcount within the planning cycle, because BCG found that 76% of senior leaders and 57% of middle managers say their company struggles to capture promised productivity gains.

What to do: assign one named leader to each saving, put it in their budget, and include delivery in their objectives. Hold a quarterly review that asks three questions: what has been delivered, what has crept back, and what has been reinvested. Then repeat the exercise annually as part of planning. A cost transformation that is run this way ceases to be a programme and becomes a habit.

Finally, communicate the logic of the programme repeatedly and honestly. BCG found that blunt reductions damage engagement, and employees judge a programme by whether the criteria for decisions are visible and applied consistently. Publish the principles: which activities are protected, how complexity is being removed, how redeployment works and what share of savings goes back into growth. A programme with visible rules retains the people it needs and earns the cooperation that structural change requires. One with hidden criteria produces rumour, attrition and a quiet withdrawal of discretionary effort from the very teams that drive revenue.

Karter McKinley supports COOs under our Strategy and Transformation service: mapping activities by value, designing the savings bridge, setting up ownership and governance, and tracking delivery with the management team. Our focus is on the execution of the programme and the capability it leaves behind, not a recommendation document alone.