Last month, I wrote about how sustainable cost reduction in financial services (FS) requires finding the right mix of tactical “diet” cost reduction solutions and more strategic “healthy lifestyle” initiatives.

According to a recent Accenture Strategy survey of more than 200 organizations, a whopping majority – 82 per cent of the respondents – reported focusing on cost reduction to improve margins, while only 36 per cent of senior executives said these programs resulted in sustainable benefits.

What is the key to success that this 36 per cent have found? Our research revealed that vision and direction are key drivers of benefits, up to four times more important than other drivers. 

FS leaders looking to improve the yields of their cost reduction programs must reinvent the culture of their organization and create a new “smart spending” mindset among the workforce.

A key part of the mindset shift around smart spending is a clear understanding of the customer and value. Employees and leaders who ‘spend smart’ understand the value sought by customers and can tell between good costs aligned with these needs, against costs that are peripheral or unrelated to what customers value. This is particularly important in a financial services world where customer expectations are shifting and new entrants can serve very specific customer groups or customer needs at lower cost to the industry incumbents.

The missing ingredient in many cost reduction programs is addressing the human element. By creating an inclusive mindset and vision, leaders in FS can use human nature to their advantage. Engaging and motivating the workforce are key elements to positioning cost savings as fuel for growth.

In the next part of this series, we will take a closer look at how to build a motivated FS workforce for sustainable cost transformation.

Many thanks to my colleagues Diana Barae, Shammak Banerjee, Patricia Feliciano and Jan Mueller who authored the recent report: Smart Spending is not Just About the Numbers.

To learn more, register to download the report: Piling off the Pounds in Financial Services