As technology transforms business, leaders need to learn how to cut costs while prioritizing future growth – and embodying care for others
When I speak with chief executives and C-suite leaders in businesses around the globe, one thing is clear. Amid multi-dimensional global uncertainty and fast, relentless change, an old staple of running a business is once again to the fore. The capability to control – and reduce – costs has become a strategic priority as organizations seek to ride the waves of change.
In part, this reflects the economic mood. We may not be in a global recession but the varied challenges facing businesses leave executives in no doubt about the importance of bearing down on costs. Many companies face substantial competitive pressures. As agile, innovative, digital-first disruptors with a low cost base challenge existing models, established organizations are compelled to reduce their overheads. Small wonder that 62% of companies are currently taking cost-cutting action, according to PwC research in May 2025.
Yet if leaders approach today’s cost-control imperative in the way that many corporations tackled previous waves of cuts, they will find themselves losing further ground to the competition. As AI transforms business globally, leaders need a new paradigm for cost control.
The new model is tripartite, comprised of a simultaneous focus on costs, care and growth. It means not just sweating the numbers, but setting aside the spreadsheets and focus on the people involved. Change needs to be human-centered; focused on creating resilience against our fractured, unpredictable world; and part of an enduring mindset shift that prizes the ability to learn, adapt and reorient ourselves, as organizations and as individuals. Here are four ways leaders can rethink the approach.
Beware false narratives
Leaders should beware the false comfort that may flow from cutting costs – because the truth is that cost cutting can only take an organization so far. Delivering a budget freeze, hitting a target for reducing head count, or closing down expensive projects may help move a number from red to black on the P&L statement. It may deliver some short term relief from the pressures an organization faces. Yet it is no substitute for the transformational work of leadership that’s needed to create a compelling vision for the future, or to build a human centered, purpose-led culture that can deliver both commercial and societal value.
Indeed, the idea that cuts and growth are inherently in conflict is itself a false dichotomy. In reality, cuts can be essential for freeing an organization to focus on what truly matters. Leaders need to shape a new narrative. How are you using cost-control measures to support your longer-term mission?
Align around purpose
To answer that question, purpose needs to be central to the conversation about costs. What does the organization want to become? What capabilities need to be protected or grown?
With a clear view of purpose, it becomes easier to see ‘low value’ work for what it is, whether in unnecessary layers of a process or whole activities – or products and services – that don’t align. Target those first and free up capability to do what matters.
Focusing on purpose also means ensuring that meeting short-term pressures doesn’t fatally undermine the organization’s ability to drive growth over the long term. Shutting down innovation workstreams may save dollars today – but at what cost to the business’s future? How do headcount reductions map against the organization’s talent needs?
Be open and caring
One CEO recently told me: “We used to talk about driving results. Now we talk about creating conditions where people can be their best.”
The shift from control to empowerment is a crucial one – yet it’s too often the case that the moment cost-cutting measures come into view, the shutters come down. The office door closes. Employees are frozen out of the conversation.
Leaders are right to be sensitive when jobs are at stake and must act with empathy. Yet that should not mean shutting out people affected by change. Leaders need to be transparent about the business’s position and how it needs to adapt for the future. Involve people in diagnosing the need for change and shaping solutions: given ownership, they will help shape change rather than resist it.
Such an approach also leaves the organization in a better place to move forward in its new shape. It protects, and can even reinforce, that most precious of assets, trust – so easily trashed by badly-handled cuts.
Stepping up to lead
The pressures of a cost-cutting environment put a premium on how leaders act. Being present, visible and accessible, is critical. Be honest about the challenge – even about moments of personal vulnerability.
How cuts are handled will be recalled vividly both by those who leave the organization, whose experiences and stories will affect the company’s employer brand – and by those who remain, who may be saying farewell to valued colleagues and friends. Their continued buy-in and discretionary effort are crucial.
The first step on the road
A bold program of cost-cutting may feel like climbing a mountain in tough conditions: difficult, dangerous, and not something to be repeated. But in truth, cost cutting today cannot – and will not – be a ‘one and done’ process. The market dynamics and transformative technologies that drive a focus on costs this year will still be with us next year, and the year after that.
In response, leaders need to adapt their mindset and lean into the task of continually bearing down on costs, building the organization’s resilience and continually reinventing the business for the future.
Yes, cutting costs can mean difficult decisions and uncomfortable conversations. Yet if leaders embrace the situation and grasp the need to reconcile cost management with care for their people and a focus on purpose-led growth, they can thrive.
It is the only way to ensure an organization stays focused on what matters – and remains fit to navigate the pervasive uncertainty that surrounds it.
