Change is difficult. Change that involves staff cuts or other reductions is especially hard.

And yet, companies must change to adapt to market pressures affecting their business and to adopt new technologies such as GenAI. It’s prompting many to take a hard look at their cost structure to determine how to manage spending more efficiently to free up resources for future growth.

Purpose can guide those decisions, together with a timely vision and strategy. We believe that when organizations connect cost management initiatives to their purpose, vision, and values, their efforts are likelier to be successful and sustainable.

Connecting Cost Transformation with Purpose

Transformations to take cost out of an organization can leave it brittle, and we know from longstanding BCG research that 75% of transformations fail.

Read more on Cost Management

Read more on Cost Management

Cost Management

BCG’s cost advantage approach resets costs within a framework that is customized, precise, and thorough.

Successful transformations, by contrast, can make organizations stronger. A major difference between the two is how an enterprise integrates its purpose, vision, and values into the endeavor. Based on our research and client work, we’ve found that cost transformations are more likely to succeed when these key elements are present:

• Well-articulated purpose and values that are timeless, guide the organization’s decision making, and are linked to the vision. Purpose is the driving force behind why an organization exists. It’s an institution’s reason for being and the role it plays in the world.
• A clear vision that explains where the organization is going and why the changes are happening in a way that is emotional, inspiring, and depicts what the future will look like.
• A strong culture that mitigates harm from challenging decisions, with leaders who lead with their humanity during tough times, and take an ethical, purpose-filled, values-driven approach to change.
• A consistent communications plan that explains why the changes are happening and that is shared with transparency, clarity, and humanity.

Our work with a technology company that was going through a strategic transformation illustrates how purpose can support cost management.

The company wanted help defining its purpose and values and connecting them to the changes it was undertaking. We began by conducting internal surveys, interviews, and other research to identify the company’s strengths and work to crystalize its values. These values reflected the foundation for an authentic purpose that the company’s leadership then seeded through the organization.

At the same time, the company developed a clear strategy consistent with their purpose and values. Together, this made the company’s change management story clear and compelling. The company’s newfound clarity and focus made tough decisions associated with the transition more palatable, which helped employees absorb the changes.

How Purpose Informs Strategy

Purpose and values can inform offensive and defensive strategies related to a cost initiative. An organization that knows its purpose and values can proactively shape and share its vision for cost-related changes, reassure customers, manage volatility, and gain market share.

Fear and anxiety related to a cost transformation may lead people to be less motivated or productive. When that happens, the organization may lose talent, with the most valued employees likely to be the first to leave. This is a key source of risk because an enterprise’s ability to execute on change strategies hinges on keeping and recruiting top talent. Organizations can apply purpose and values defensively to mitigate any potential emotional harm of transformation-related changes to employees.

In addition, leaders should consider the following when integrating purpose into their cost management efforts:

Exemplify focus, clarity, and alignment. Embody your organization’s purpose and abide by its values. When presenting change strategies, use a clear vision and explain the future trajectory.

Show support for employees. Most leaders can sense how employees are feeling in difficult situations, but they might not be sure what to say. To be purpose-driven, acknowledge people’s feelings and demonstrate empathy and understanding. Concede that change is hard but can also lead to positive circumstances. Reinforce how the changes dovetail with the organization’s vision for the future, purpose, and values.

Be transparent. Share specifics about cost cutting changes as soon as possible. In times of change, employees are worried, anxious, and fearful of what it means for them and their colleagues. Use the company’s values to highlight what is not changing to anchor employees in what’s staying the same. Engage with teams at all levels. Use employee dashboards, town hall meetings, and other communication channels to share information and answer questions. The more engagement, the better the results.

Give people a reason to stay. Look beyond people’s immediate wants to appeal to their deeper needs. Make sure they understand why their work matters and where they fit in. When a transformation is clear and connected to the organization’s values and purpose, it provides the intrinsic motivation that can unlock people’s performance and productivity.

A full 75% of transformations don’t achieve their intended outcomes. The 25% of companies whose transformations flourish integrate their purpose, vision, and values into change initiatives, which can inspire, engage, and motivate the workforce.