Gartner Information Technology Research

How Important Are Cross-Functional Cost Optimization Teams for Business?

Published: 31 March 2020

ID: G00721649

Analyst(s): Finance Research Team

Summary

Ensuring optimum cost performance management across functions is a key priority for organizations. Executive leaders must create and leverage cross-functional teams to successfully drive cost optimization initiatives.

More Detail

Cross-functional cost optimization teams typically consist of leaders from each of the major functions and operating units. When putting together cross-functional teams, executive leaders ensure the group has a wide range of backgrounds and expertise. Team responsibilities include identifying cost optimization opportunities across the enterprise and working with stakeholders to act on those opportunities. Such teams ensure that:

  • Cross-company efficiency improvement opportunities are easier to identify.

  • Impacts to other functions are taken into account to avoid a win-lose scenario. For example, IT cutting it’s cost might achieve their objectives but the finance team will miss its productivity goal if it has to revert to pen and paper due to IT switching off its ERP support.

  • More creative solutions to improve efficiencies are put forth.

  • Business buy-in on cost optimization initiatives is easier to obtain.

Data from a 2018 Gartner survey revealed that 53% of companies use a cross-functional team to identify cost optimization opportunities across the enterprise. Small and midsize businesses as well as large enterprises use cross-functional teams at roughly the same rate. For companies currently engaged in a major cost optimization initiative, that figure rises to 67%, indicating these teams play a significant role in driving cost optimization initiatives.

When comparing the effectiveness of organizations that have cross-functional teams versus those that do not, Gartner research reveals companies with strong cultures of continuous cost optimization are more likely to have cross-functional cost optimization teams compared with companies that do not (73% versus 44%, respectively). Similarly, 70% of companies whose executive leaders consistently hit their cost-reduction targets have cross-functional cost optimization teams, compared with 46% of companies who do not. This data suggests cross-functional teams are an important element of successful cost performance management and potentially help drive cost optimization improvements (see Figure 1).

Figure 1. Effectiveness of Companies With Cross-Functional Cost Optimization Teams

In conclusion, a little over half of companies report having cross-functional cost optimization teams. More companies should create and use cross-functional cost optimization teams since survey data validates them as an important component of a successful cost performance management infrastructure.

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