In past recessions, many companies turned to general and administrative (G&A) functions for fast, easy cuts. However, our analysis found that the track record of most companies in managing G&A spending over the entire economic cycle—2003 through 2017—has been mediocre at best. While half of companies in a given year improved their G&A efficiency (G&A as a percentage of revenue) from the prior year, the gains were transitory: Only 6% of companies achieved efficiency gains for four straight years during the period. Come the next downturn, leaders that make the hard investments early—eliminating low-value work, reinventing processes and making the most of digital technology—will fare better than others. They’ll provide fuel for reinvestment to go on offense and emerge from the recession in a winning position.
Michael Heric and Pam Yee are partners with Bain & Company’s Performance Improvement practice.
Cost efficiency has stalled, despite massive investment in digital technologies.