For executives tasked with managing costs, the pressure has been relentless. Rising inflation, trade tensions, and geopolitical shocks have eroded financial resilience. Two-thirds of global executives say new tariffs are forcing them to accelerate cost cuts and price increases, according to a recent Bain survey (see Figure 1).

Figure 1

A zero-based cost management system is a no-regrets move, especially in a volatile economy. It enables leadership teams to rapidly shrink the firm’s cost base as much as 25% and redeploy savings to spur growth and expand operating margins. Cost discipline boosts flexibility and competitiveness. That, in turn, can help companies offset the impact of new tariffs and a potential recession.

Top-performing companies act fast when signs point to a downturn. They work feverishly to get ahead of the risks by targeting costs and productivity. Bain research on 5,000 companies globally shows that today’s sustained value creators—those that consistently delivered both real top-line growth and positive economic value added over the past decade—have significantly outperformed their peers over the long term (see Figure 2).

Figure 2

Just 10% of companies achieved this status over the past decade, yet they earned an average total shareholder return (TSR) of 15%—three times that of other firms. These leaders don’t rely on quick wins; they embed profitable growth capabilities that hold up throughout economic cycles, industries, and geographies. These companies excel in cost productivity—growing earnings faster than revenue—underscoring the role of discipline in long-term outperformance.

Cost productivity is a smart downturn play—but it’s also a proven path to long-term shareholder value.

Cost creep

Despite major efforts to streamline and simplify their cost structures, most companies acknowledge that, over time, cost and complexities always seem to come back. A recent Bain study of 470 companies shows only 12% of transformations delivered sustainable performance improvement. Two-thirds of the executives surveyed said they had implemented three or more transformations in the past five years.

Top-performing companies embrace a cost management methodology that allows them to allocate resources with more agility and sustain the results. That helps fuel productivity gains, even in a turbulent economy.

Leadership teams can manage costs on three levels (see Figure 3). In our experience, the most effective cost managers operate on all three, building knowledge and insight from each effort.

Figure 3

Benchmarking and setting targets. This is what most companies do. They figure out where they can compress costs, set top-down targets, and require the business and functional leaders to fall in line. It’s a brute-force approach to cutting costs, but the underlying work and activities don’t go away. As a result, cost reductions typically last only one or two years before creeping back.

Redesigning the work. This is what some firms do. They take complexity and work out of the system by redesigning their operating model and deploying automation and digital technologies. Companies that do this well use zero-based redesign (ZBR), a clean-sheet approach that resets the way work is done. They use ZBR to strengthen capabilities that provide competitive differentiation, while streamlining functions that are less critical. ZBR starts with a “today forward, future back” view. Future back means envisioning customer needs, required capabilities, and cost structure three to five years from now to define a clear point of arrival. Today forward involves defining the pathway to move from where the company is today to that future state.

Successful companies also deploy technology solutions to improve productivity and cost leverage. They evaluate gaps in their tech stack, assess current capabilities, and determine whether new tools can enhance efficiency and effectiveness. They also tap generative AI, but many are finding that the real gains come when it’s paired with classic end-to-end process redesign. Generative AI can automate and accelerate workflows, but without a foundational rethink of how work gets done, the benefits are limited.

Even with new technology and redesigned processes, companies need the structure and accountability to realize savings and sustain them over time. However, most organizations fail to adopt new ways of working to change workforce behavior. As a result, the improvement in performance typically lasts three to five years before the costs return.

Embedding a cost management mindset. Leaders ensure long-term savings and flexibility by building a cost-discipline mindset. It’s rooted in company strategy, developed as a capability, and engrained in the company culture. This is what few firms do—and it’s what separates the winners who sustain value over time from the losers.

They treat cost discipline as a strategic priority, investing in systems that align with enterprise goals. They build capabilities in people, processes, and technology to create and sustain impact. And they foster a culture of ownership and continuous improvement.

Zero-based budgeting (ZBB) plays a critical role in this mix. It creates both the skills and the ownership mindset to take costs out for good and reallocate scarce resources to their most productive use. ZBB is more than just a budgeting process; it’s a set of tools that enables a fundamental shift in a company’s overall approach to cost management, grounded in transparency, accountability, and value-focused decision making.

Companies in this group set top-down targets and redesign the work. But what separates them from the pack is rigorous performance management. They establish routines to identify new productivity initiatives, track the progress of those initiatives, and ensure that gains flow through to the P&L. When savings hit the bottom line, the managers in charge are rewarded. When they don’t, these managers are held accountable. The results stick because cost savings can be identified, tracked, and continually improved. Even companies that don’t deploy a full ZBB program can build cost discipline by increasing spending visibility, understanding what kinds of demand fuel spending, and embedding behavioral change into the organization.

ZBB provides a foundation for transparency and control. It allows leadership teams to understand how much of the company’s cost base is fixed vs. variable. It provides visibility into who’s spending and what they’re purchasing. This enables companies to tie savings delivered and budgets met to incentives and establish accountability across the leadership team. It is not a matter of using one approach for analyzing efficiency opportunities and another approach for designing processes to sustain those efficiencies; it integrates the two. Spending visibility also helps companies create flexible cost structures that they can adapt to changing market conditions. That makes firms nimbler and more competitive, especially amid today’s market uncertainty.

The most effective companies share a distinguishing feature when retooling costs: CEO and CFO engagement in a full change management effort. These leaders acknowledge at the outset that cost management requires new skills and a new mindset. They play a major role in shaping the goal and ambition, and design programs that address the potential barriers to change. Finally, they build the strategic case for change, instead of just implementing it. In doing so, they bring the organization with them.

Businesses face an increasingly unpredictable future as costs mount and risks multiply. Those that embrace all three levels of cost management will be able to navigate near-term market shifts, even as they gain a competitive edge for the long term.