Looking to reduce costs? You’re far from alone. Business leaders across sectors are seeking effective cost management strategies in the midst of weakening sales and unanticipated downturns.
But while it’s tempting to eliminate jobs and slash budgets, such moves may do more harm than good. Many of the most common short-term fixes lead to bigger issues like disengagement, burnout and lowered productivity. In fact, one study indicates these cost cutting measures ultimately hurt your bottom line by impacting the workforce in negative ways.
While thoughtful cost saving strategies are a good start, maintaining a true competitive advantage requires cost optimization. You need innovative ideas for tightening business expenses without harming employee engagement and productivity.
Let’s look at several proven methods now, along with some cost optimization examples from successful organizations.
Why is business cost optimization so important?
In today’s fast-paced business world, companies face more pressure than ever to cut costs while still delivering real value. But reducing headcount and increasing workloads isn’t always the answer — and can even cause damage.
What’s a business leader to do? Don’t just cut costs — optimize them.
Cost optimization isn’t merely a way to reduce waste. It’s about improving business outcomes by analyzing expenditures and identifying hidden inefficiencies. Effective cost optimization strategies allow you to:
- Enhance cashflow to invest in new opportunities, technologies and talent.
- Foster a culture of continuous improvement where teams think creatively about how to deliver better results with fewer resources.
- Make more informed decisions by leveraging advanced analytics and technology.
- Respond fast to market changes and consumer demands through improved operational agility — the kind that empowers you to seize new opportunities your competitors may miss.
Plus, a well-implemented cost optimization strategy enhances employee engagement — it gives team members a chance to share their ideas and take ownership of how things run. When people feel like their voices matter, they’re more likely to contribute ideas for improving efficiency. The result is a positive cycle where everyone works together to improve, grow, and stay ahead of the competition.
5 proven cost optimization examples of strategies that actually work
Ready to optimize costs at your organization? Start today with these five impactful examples of cost optimization strategies in action.
1. Streamline technology
Did you know nearly half of the software licenses organizations pay for go unused? Or that most companies spend nearly $10,000 per employee, per year on applications? Virtually every organization has an opportunity to significantly reduce wasteful spending simply by managing SaaS spending. Getting and staying ahead of these expenditures allows you to prevent overspending and free funds for other initiatives.
One of the most notable examples of this cost optimization strategy in action comes from IBM. The global enterprise consolidated 16,000 applications down to 4,200 to reduce duplication, streamline IT operations and cut unnecessary costs.
Start by auditing existing tools to identify which applications are essential and which ones to consolidate or eliminate. Then streamline your tech stack to enhance productivity, allowing teams to focus on using fewer, more effective tools. This not only reduces costs associated with licensing and maintenance but also simplifies employee training and support.
2. Use workforce analytics
Workforce analytics is a powerful tool for organizations looking to optimize costs. Analyzing real-time employee performance data makes it easy to uncover skills gaps and identify untapped capacity. This approach allows you to deploy talent where it’s needed most, maximizing productivity and minimizing costs.
Case in point: When manufacturing supplier Parts ASAP acquired 18 companies and expanded to 65 locations, leadership used employee data for insights and ideas. The result? The company achieved 122x ROI, plus $6.82 million in added benefits through expense reduction and revenue gains. Leadership also:
- Improved overall employee productivity by 18% after uncovering and addressing unproductive behaviors.
- Decreased non-productive time by 42% through targeted coaching conversations.
- Generated 12,000 additional productive hours monthly across their workforce.
Best way to get started? Use your employee data to guide cost-effective workforce optimizations that boost productivity, lower expenses and drive profitability with data-driven insights.
3. Go hybrid or remote
Hybrid work models offer yet another opportunity for significant cost savings. Allowing employees to work from home opens the door to lower office space expenses, fewer utilities and lower facilities management costs. The best hybrid models not only reduce unnecessary spending but also boost employee productivity and allow you tap into a broader talent pool.
Apparel manufacturer FAM Brands discovered the power of this cost optimization method when HR used location insights to understand where people do their best work. The data revealed employees who work from home are more productive than those who don’t. This led leaders to expand the company’s talent pool by recruiting from new locations, while simultaneously minimizing office space costs.
If you haven’t established a hybrid work culture, now’s the time to start. Start by determining where and when your teams work best — whether fully remote or a mix of in-office and at-home work. Then build your hybrid work policy based on the needs of your specific workforce.
4. Embrace AI and automation
Automation is now a cornerstone of cost optimization for many businesses — for good reason. By automating repetitive tasks and streamlining critical business processes, organizations free up valuable employee time for higher-value activities. This not only enhances productivity but also reduces the likelihood of errors.
But how much does it save, really? According to recent surveys, automation enables business leaders to address and fix $600 billion worth of data errors each year while improving employee engagement and agility.
If it’s been awhile since you’ve audited team workflows, now’s the time. Audit your current processes to identify bottlenecks and identify tasks with potential for automation. This one move is a great way to fix inefficiencies and lower labor costs.
5. Optimize headcount planning
How much more efficiently would your organization operate if you could get team sizes just right? By using data to make informed decisions about headcount and budget allocations, you ensure business costs align to actual business needs.
Echo Global Logistics used this strategy after eight acquisitions and a shift to remote work. Executives transformed how they allocate resources and make headcount decisions, resulting in $600,000 in labor cost savings. In addition, the company prevented unnecessary hiring by identifying and activating underutilized talent.
To begin optimizing your headcount investments, use workforce analytics to ease the process. This allows you to quickly analyze workload distribution and identify untapped capacity — both now and in the future.
Optimize costs today with ActivTrak
While there’s no quick fix for cost optimization, the examples and ideas above are a great place to start. Streamlining tech stacks, leveraging data and fostering a cost-conscious culture opens the door to long-term savings and growth.
As businesses continue to face economic challenges and evolving market dynamics, the importance of cost optimization will only increase. Embracing these strategies today will position you for success tomorrow, allowing you to thrive — no matter what changes your workforce faces.
Ready to take the next step in your cost optimization journey? With ActivTrak, cost optimization and cost reductions go hand-in-hand. More than 9,500 organizations rely on our workforce analytics software to:
- Understand which apps employees actually use — and what to consolidate or eliminate.
- Develop ideal hybrid work policies with location-based productivity data.
- Make data-informed capacity and headcount decisions.
Join the 9,500+ customers who trust ActivTrak to unlock their full potential today. Contact sales to learn more and get started on the path to sustainable success.
