Let’s talk about something that keeps every business leader up at night: profitability. I’ve been there—sitting in boardrooms at AIG, crunching numbers at Kemper, or advising clients at Consultgenix—wondering how to squeeze more from every dollar without slashing what matters. Here’s the truth I’ve learned over 20+ years in finance and consulting: Operational cost management isn’t about cutting corners; it’s about making smart choices that fuel growth. At AIG, I drove a 30% profitability boost by rethinking costs strategically. Today, I’ll show you how to do the same because in a world of tight margins, every penny counts.
Why Cost Management Matters in Volatile Markets
Running a business feels like sailing in stormy seas sometimes. Markets shift, competitors pounce, and costs creep up when you’re not looking. I saw this at Lehman Brothers during the early 2000s—economic uncertainty meant we had to be laser-focused on expenses. Fast forward to my role as Personal Insurance Finance Head at AIG, managing $900M in premiums across Latin America and the Caribbean. We couldn’t just hope for more revenue; we had to make profitability happen.
That’s where cost management comes in. It’s your anchor—keeping you stable when everything else is shaky. Done right, it doesn’t just protect your bottom line; it powers your next big move.
Techniques That Deliver Results
Cost management isn’t a buzzword—it’s a toolbox. Over the years, I’ve leaned on a few go-tos:
- Zero-Based Budgeting (ZBB): Start from scratch each year, justifying every expense. At PepsiCo, this forced us to rethink spending habits—and it paid off.
- Activity-Based Costing (ABC): Pinpoint what really drives costs. At Kemper, we used ABC to overhaul unit costing, saving $35M.
- Commission and SGA Optimization: At AIG, I earned the nickname “expense czar” by trimming commissions and overhead without hurting sales, boosting profitability 30%.
These aren’t quick fixes—they’re disciplined approaches. And they work because they focus on value, not just cuts.
A Real-World Impact: 30% Profitability at AIG
Let’s rewind to my time at AIG from 2012 to 2018. I was overseeing Personal Insurance in the LAC region—a $900M operation with plenty of moving parts. Margins were slipping, and the team was stretched thin. My job? Turn it around.
We dug into the numbers—commission structures were bloated, SGA expenses (selling, general, and administrative) were creeping up, and direct marketing spend wasn’t delivering. I led a team of 30+ to rethink it all. We renegotiated broker commissions (saving $2M), streamlined operations via a Shared Service Center in Bogota ($4M annually), and tightened marketing budgets. The result? A 30% profitability jump over three years, plus $20M in EBITDA growth and $40M in debt reduction.
It wasn’t flashy—just relentless focus on what mattered. That’s cost management in action.
Balancing Cost Cuts with Growth Investments
Here’s where people get it wrong: They think cost management means slashing everything. I’ve been in those debates—pushing back when cuts threatened long-term goals. At Consultgenix, we boosted a client’s operational efficiency by 12%, not by gutting their budget but by redirecting funds to high-impact areas like expansion.
The trick? Prioritize. At AIG, we cut non-core units ($54M restructure) but reinvested in product development, launching offerings that added $5M in revenue. It’s a dance—trim the fat, feed the muscle. Ask yourself: What’s driving profit? What’s just noise? That’s your roadmap.
Actionable Tips for Leaders
Ready to take control? Here’s my playbook, honed from PwC to Consultgenix:
- Know Your Numbers: Use tools like Power BI or SAP (I’ve mastered both) to see where cash flows—and leaks.
- Challenge the Status Quo: At Kemper, we questioned every process. Saved $35M by rethinking “how it’s always been.”
- Set Clear Targets: Tie costs to KPIs—profit margins, ROI, efficiency ratios. At AIG, this kept us accountable.
- Engage Your Team: I’ve led cross-functional crews of 9 to 30+. Buy-in matters—explain the why behind cuts.
- Monitor and Adjust: Cost management isn’t “set it and forget it.” Monthly reviews kept us on track at AIG.
It’s not rocket science—it’s persistence with a purpose.
The Human Side of Cost Management
Let’s get personal: Cutting costs can feel cold. I’ve had tough conversations—telling a team we’re outsourcing a function or trimming a budget they fought for. At AIG, when we moved non-core ops to Colombia, I saw the worry in people’s eyes. But here’s what I’ve learned: Done right, cost management isn’t about loss—it’s about empowerment.
When we hit that 30% profitability mark, my team wasn’t just relieved—they were proud. They saw their work as fueling growth, not just survival. At Consultgenix, a client once told me, “Derrek, you gave us room to dream again.” That’s the goal: Free up resources so you and your people can focus on what lights you up.
Why This Matters Now
Profitability isn’t a luxury—it’s oxygen. I’ve steered companies through recessions, expansions, and everything in between. Today, with supply chain snags and inflation biting, smart cost management is non-negotiable. It’s not about surviving tough times; it’s about thriving through them.
Think about your own business. Where’s the waste? Where’s the opportunity? That’s where profitability hides—and I’ve spent my career helping leaders find it.
Let’s Boost Your Bottom Line
Operational cost management isn’t a one-time fix—it’s a mindset. With decades in profitability consulting, I’ve helped businesses turn costs into competitive advantages. At Consultgenix, we’re all about driving value without losing soul.
If you’re ready to optimize your costs and unlock profitability, I’d love to hear from you. Reach out at derrek@consultgenix.com to discuss your strategy. Let’s make every dollar work harder—together.