Years ago, I was grinding at my job as the head of finance for a $1B business unit inside a top-5 P&C insurance company.
Working til 8pm and putting in a few hours on Saturday morning were very normal at the time.
Then I reluctantly took a week off to vacation in Paris and Lisbon with a group of friends.
I was reluctant because I knew how much extra work/stress it would create when I came back after a week off - this was before remote work was normal, so I was totally disconnected abroad.
Walking back in the office, I quickly checked-in with my managers, “what’s on fire?”
Them: “Nothing.”
Me: “Really?!”
Them: “Really.”
What felt miraculous to me at the time is the business didn’t stop making money while I was gone. In fact, the business didn’t change at all. And all those problems I would normally get pulled into resolved themselves.
And NONE OF THEM ACTUALLY MATTERED a week later.
That’s the lesson here…
And it’s actually a lesson about efficiency within a large business.
Which is something I’ve been personally working on for the past 2 years as the expense leader for a $60B business unit.
Here’s what I’ve learned:
How to cut costs in a business
I’ve supported dozens of business leaders including VPs and C-suites through various finance roles in the last decade+.
And 95% of them have the same mentality:
Their current department is understaffed
If we cut any expenses, we’d give up margin/growth/[insert goal]
They are super efficient and leverage tech/innovation everywhere
Their people are the BEST
Which is obviously all B.S.
But you can’t blame them…
Every efficiency push against their current team disrupts their status quo and causes them to solve problems they don’t have today - i.e. if you tell them to cut 5% of their team, they have to do some real work!
There’s a select few leaders who are innovators at heart - they can’t sit still and they jump from role to role to reinvent it from the ground up.
But let’s set them aside for now.
People are surprisingly innovative when you force them
What’s wild to see is a business leader finding millions of $$ in savings weeks after they asked for an investment to improve their operations.
None of the circumstances changed - except they were told to find millions of $$ in savings or else.
Threats aside, the only tactic I’ve found to be effective in cutting expenses at scale are when you tell someone how much they have to cut.
Why does this work?
Well, think about your own personal budget. Which is easier for you:
“I need you to find money to save and tell me how much that will be” or
“I need you to find $100 per month to save or else”
Think about how you would approach each of these. They feel similar enough, but in a world where you are “already understaffed and too lean” the first one feels impossible. I’m not going to cut my gym membership, or stop eating food…
But the second one breeds innovation.
You’ll think about how you can negotiate better terms with vendors, cut unused software licenses, automate work and avoid hiring that temp to do data processing.
You’ll make quick 1-time investments to save the recurring expenses (I’ll take that trade any day of the week).
It’s a whole different ball game.
Worst case, they’ll come back to you with ideas on how to cut $6M/month instead of $10M/month. But you were only expecting $5M/month anyways…
You may have noticed I’m writing on a new platform now (it’s called Substack).
I’m doing that because I want everything to be free for you. And the old platform charged me, so I had to sell stuff to keep up with software costs (booooo). I’ll still offer a few of my ebooks for sale, but that’s it. No more courses or other distractions - plus I have 2 small kids and want to spend more time with my family.
I also decided to stop writing on LinkedIn to grow this newsletter.
I took a couple months off social media and realized how much better life is without it. So I’m not going to contribute to that anymore. Plus, the comments are getting out of hand on that platform.
Give me feedback, reach out, ask questions.
I want this newsletter to be a resource for you as much as it helps me clarify my thoughts.
Thanks for being a subscriber!
Whenever you are ready, check out a few of my comprehensive playbooks:
The FP&A OS documents exactly how I build and improve FP&A teams.
The Finance Manager Playbook is my resource (with templates) on how to manage a high-performing finance team.
Thanks!
Brett Hampson