To become more competitive and flexible, companies need to optimize their structure and operational support. This will enable them to provide quality services and achieve the desired performance at the lowest cost.
The term Selling, General, and Administrative expenses (SG&A) includes all management structure and support function costs, i.e. non-production resources, which are not directly involved in the operating cycle.
Although reducing SG&A will improve a company’s profitability, it is the quality of operational support, in particular, that creates value, along with the quality of performance management by Finance, talent management by Human Resources (HR), supplier panel optimization by Procurement, innovation by Research and Development (R&D), productivity by IT, and sales generated by Marketing and Sales.
By controlling SG&A, companies can ensure that non-production resources are allocated in the best possible way, to create value for the company.
Controlling SG&A begins by understanding and analyzing structures and support functions and then continues by identifying the optimization levers. Launching an SG&A optimization program raises a number of questions:
- How can the company strike a balance between cost, efficiency, and value creation?
- What should the target level of SG&A be? What is the target for each function, bearing in mind the degree of maturity, strategic challenges, and level of SG&A in comparable organizations?
- What are the optimization levers? To what do they contribute and how accessible are they?
- To what degree should the company reconsider its organization model to optimize SG&A (e.g. centralization, pooling, and outsourcing)?
- Are the correct initiatives in place at the right levels of the organization?
- Is the cost of the Head Office appropriate?
- Are processes optimized?
The best-performing companies have managed to implement a virtuous model, whereby SG&A savings are reinvested into transformation projects to ensure sustainable performance.
How can Argon Consulting help you?
Our consultants’ operational expertise and experience in SG&A projects enable us to quickly identify which optimization levers to activate to guarantee results.
Our areas of work:
- Performing the SG&A diagnostic (benchmarking), and identifying actionable optimization levers and their results in terms of benefits and accessibility. Planning for an optimized structure and support functions
- Elaborating and managing an SG&A transformation plan, to activate the levers in optimization projects and manage their implementation
- Launching a Lean Office project, which involves deploying a Lean approach within corporate functions and support functions for key processes
- Managing SG&A by implementing an SG&A performance-tracking system, including full-time equivalent trends, costs, and key performance ratios