When the pressure is on to reduce costs, G&A often finds itself on the chopping block. It’s seen as an easy target (“just overhead”), but this view can be oversimplified and even misleading.
This is the second post in my series on cost-cutting strategies. In the first I covered how to cut costs without cutting people.
G&A includes groups like finance, HR, IT, and legal but it’s helpful to identify non-standard groups as well. For example, a customer call center may be classified as G&A but is actually a cost to service customers (COGS).
I’ve seen non-standard groups account for a significant share of G&A. This means true G&A is lower than it appears, which is good, but it can also signal that the rest of the business might be less scalable than it seems. These non-standard groups should be analyzed separately, particularly if they actually belong in another functional area.
It’s also helpful to identify how much of G&A is truly essential, like payroll, IT security, and basic accounting, versus nice-to-have G&A, like development programs, employee engagement and culture building.
To be fair, nice-to-have is subjective and every company will have a different list. However, once identified, these groups have the most potential for reduction.
Regardless of the category, there are a couple ways to lower costs:
Create and review efficiency metrics for each dept
Every G&A dept should become more efficient over time, or scale naturally with revenue growth. Below are a few metrics to track over time, or versus competitors if the data is available:
- Dept cost as % of revenue
- Dept heads as % of total headcount (or G&A)
- HR & IT: Dept heads per employee or spend per employee
- HR: # of hires / recruiting heads or the cost of new hires
- Legal: Outsourced versus insourced
If these metrics start to show a decline in efficiency, approach dept leaders with curiosity, as there may be insights about the business that aren’t widely understood. However, stay focused on finding practical ways to improve efficiency rather than merely cataloging challenges. Declining efficiency may be temporary or could indicate a need to focus on future scalability.
Consider an efficiency initiative
This could be via some methodology such as Six Sigma or simply gathering the relevant players and brainstorming and implementing efficiency ideas over time. The solution could be via automation 🤖, eliminating or consolidating steps ✂️, using AI to handle repetitive steps 🧠, or even relocating staff to lower cost geographies 🌍.
Use a more qualitative approach
I’ve often seen decisions made through intuition, feedback, and evaluating group leaders’ performance, as opposed to focusing too closely on data. This approach captures context that data alone can’t, like team dynamics, leadership capabilities, and dept challenges.
Sea Cloud Consulting 
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