As pressure builds on companies from tariffs, market volatility and the renewed threat of a recession, executives are once again doubling down on cutting general and administrative costs, according to Bain & Company’s Michael Heric. 

Even before President Trump’s tariffs drove up inflation worries, a survey conducted by Bain in December and January pointed to more cost-cutting initiative in the works, with nearly seven out of 10 (69%) of 300 business and functional leaders saying they plan on improving their G&A in the next six months, and 25% saying they expect to start immediately. 

Heric, the consulting firm’s global leader of corporate support and service operations solutions and automation, said volatility, like that seen around the pandemic, typically drives companies to focus on trimming G&A. “Whenever there’s pressure, on the cost side the very first place companies go is this area,” Heric said in an interview. “They don’t tend to touch the sales force and they don’t want to touch the product. They say, ‘are we as lean as we possibly could be on G&A?’” 

The G&A expenses — which include costs related to the finance function, human resources, IT, human resources and office real estate — typically range between 6% to 9% of a company’s revenue, he said. Of that, IT usually makes up the biggest chunk, followed by the finance function, he said.  

A report on the findings of the survey, written by Heric and Emilia Fallas, identifies three ways to ensure G&A changes pay off. They caution against only making short-term fixes such as outsourcing work or implementing shared services. 

“People tend to take out costs but they don’t change the work. They do the exact same thing but they just want fewer people to do it and that’s not sustainable,” Heric said. To get more bang for their buck and avoid what the report calls the G&A “treadmill,” companies need to consider deeper changes in several areas. They include: 

1) Aim for bigger savings: Many companies don’t set big enough savings goals: most aim to cut 20% or less with only 6% looking to trim more than 40% of their costs, according to the report. “You would think after spending so many years of these constant cycles of back and forth, take out costs, costs creep back in, etc., that many companies would say I want big improvements around effectiveness or cost savings but in reality what you’re seeing is most think very incrementally,” he said. But companies who are really good at it set their sites much higher, looking to take out as much as 50% of cost. “They're thinking …how do I really transform this function so it’s not just going to be about cost but also about the quality of service they deliver. “

2) Invest in workforce’s digital literacy: The top barrier to making the G&A function more efficient cited by the highest share of respondents (57%) are talent issues. “Digital literacy is not very high in many finance departments. These are brand new skills and you really have to invest in them,” Heric said. Artificial intelligence and other tech applications are complicated and you have to teach people how to use them to get the full value out of them, he said. For example, there are a lot of FP&A people who haven’t been taught or don’t have all the skills they need to fully use platforms. “The number one issue that most of these functional leaders have is we don’t necessarily have the right skills to think about deploying technology,” Heric said. 

3) Harness AI applications for finance function: Many finance professionals spend a lot of time writing queries and manually pulling information about their companies, he said. In some FP&A departments that can comprise as much as 80% of the daily workload. While many people associated with AI with big exciting headlines it’s important to visit how it can be used to speed such day-to-day work. For example, Uber is using an internal system called QueryGPT, which allows employees to ask for data and receive SQL-generated responses. “Previously, that required team members with strong query-building skills and an understanding of the underlying data models, as well as where to find the right columns and tables,” the report states. “The text-to-SQL platform cut query authoring time by 70%, saving approximately 140,000 hours each month.”