Beyond the Quick Win: Building a Sustainable Cost Transformation Strategy

Financial institutions often fail to sustain the benefits of a cost transformation strategy because they overlook the deeper, systemic changes needed across people, processes, and technology. Highly skilled employees are frequently underutilized, spending time on low-value tasks instead of those aligned with their expertise, while inefficient organizational structures create friction and duplication. 

Many companies also lack a strong performance measurement framework, making it difficult to identify areas to improve or track progress effectively. “Dark work” – tasks that consume resources without delivering real value – often continue unnoticed, further eroding efficiency. 

Workflows frequently remain burdened by unnecessary steps, handoffs and redundancies – inefficiencies that could be resolved through better use of existing tools and automation to eliminate repetitive tasks and streamline operations.

To sustain cost transformation gains, financial institutions must focus on aligning talent, refining operations, and fully leveraging technology to embed continuous improvement. By pairing tactical cost transformation techniques with strategic transformation levers – and grounding these tactical efforts with strategic objectives – organizations can drive profitability while maintaining the ability to scale, grow and deliver. 

Sustainable cost transformation is not just about having both tactical and strategic levers. It’s about aligning the tactical levers to the strategic goals of the organization.

• What is typical? Financial institutions often take a reactive approach to cost transformation with a goal of delivering immediate savings. This puts the focus on tactical cost transformation levers including headcount reduction, location strategy (shifting headcount to lower-cost locations), and reduction in vendor and technology spend. These actions can quickly boost profitability but can have unintended consequences including reduced capacity to deliver, and reduced ability to grow and scale over time. Headcount reductions and near/offshoring exercises can expose deficiencies in process and technology that have a negative impact on overall efficiency, quality of service, and client experience.
• Why should FIs consider strategic cost transformation levers? Financial institutions should construct a cost transformation strategy that considers the long-term vision and objectives of the business. We recommend pairing tactical cost transformation techniques with strategic transformation levers, defined as levers that structurally improve how work gets done and that enable increased throughput and capacity.

These strategic levers produce three outcomes: 

1. Support the development of an organizational structure, process and technology that is sufficiently mature to initiate and sustain the pressures of tactical cost reduction techniques
2. Enabling high-quality service delivery at a lower marginal cost in the future 
3. Increasing ability to scale and grow in line with business needs and vision.

People

• Align talent and skills with work: Support efforts to avoid underutilizing highly qualified employees on tasks that do not match their expertise. Confirm the workforce possesses the necessary skills to perform efficiently
• Improve organizational structure: Reduce friction and duplication of work by optimizing reporting lines, management layers, and team structures.

Process

• Measure performance: Deploy a structured KPI framework and measurement system to support data-driven decision-making in the areas where there is greatest room for improvement, and enable continuous improvement over time
• Eliminate “dark work”: Identify and eliminate work that is being done, but that is not needed and does not create economic value for the business despite consuming valuable time and resources
• Optimize processes: Refine and optimize business workflows to remove friction, unneeded steps and handoffs, and eliminate duplicative processes and redundancy. 

Technology

• Utilize technology: Make existing technology work harder for the business. Drive maximum uptake and adoption of time- and effort-saving tools that already exist within the financial institution
• Automate workflows: Drive adoption of purpose-built tools and technologies that streamline workflows, eliminate manual processes and replace inefficient workarounds or improvised legacy systems
• Deploy automation and AI tools: Automate repetitive tasks to maximize return on human capital expenditure.

Capco’s approach is to conduct a structured exercise to clarify an organization’s objectives and motivations within the broader business and economic context. 

This allows each firm to identify and prioritize the tactical levers that are most relevant and impactful, and the strategic levers that are necessary to enable change and sustain it in the future. It also helps to align the tactical levers with the organization’s strategic objectives.

We also consider long-term sustainability as part of this approach. To support execution, we work with organizations to identify where and how to build mechanisms that allow for ongoing capacity adjustment and redeployment. 

Capturing the full value of cost takeout requires more than just tracking efficiency gains. It depends on building structures and discipline around redeploying or removing excess capacity. 

Drawing on deep financial services industry expertise, Capco collaborates with its clients to translate strategy into executable optimization efforts, helping financial institutions achieve measurable results and competitive advantage through cost transformation.