SG&A Cost Survey 2024

In our latest “Business Excelleration^™ Podcast,” we share insights from The Hackett Group’s 2024 SG&A Cost Study, exploring how European companies reduced costs while North American companies saw increases. To thrive, companies must assess performance, prioritize actions and align artificial intelligence (AI) with business goals. This episode hosted by Matt Douberly who is joined by, Tom Kellaway and Murray Shevlin as they discuss how generative AI can offer productivity gains of up to 44% and help organizations save up to $300 million annually by adopting Digital World Class^® practices.

Welcome to The Hackett Group’s “Business Excelleration^™ Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Matt Douberly, senior manager in the North American Benchmark practice at The Hackett Group. He is joined by Tom Kellaway, European Benchmark practice leader, and Murray Shevlin, leader of the North American Benchmark practice. The discussion centers on the cost performance of the largest 1,000 public companies in Europe and North America, highlighting trends and challenges in managing sales, general, and administrative (SG&A) costs.

European companies have reduced SG&A costs as a percentage of revenue – from 12.2% to 10.8% – while North American companies saw an increase from 12.8% to 13.7%. Despite cost optimization being a top priority for chief financial officers, 62% of companies experienced rising absolute costs. The primary obstacles to cutting SG&A costs include inflation, geopolitical instability, supply chain disruptions and organizational inertia. Many companies struggle to prioritize actions or implement necessary change management strategies. The discussion underscores the need for clear starting points, actionable priorities and strategic tools to overcome these challenges.

Generative artificial intelligence (Gen AI) offers transformative potential in SG&A cost optimization, with productivity gains reaching up to 44%. AI can support incremental improvements such as summarizing customer interactions or HR policies, freeing resources for higher-value activities. Transformative changes, such as eliminating over a million annual hours in sourcing operations, and breakthrough innovations like reducing supplier onboarding time by 90%, demonstrate AI’s impact.

The Hackett Group defines Digital World Class^® organizations as those excelling in both business value and operational excellence. Such companies realize significant cost savings: a $10 billion company could save $300 million annually across SG&A functions. Key areas such as finance, human resources, information technology and procurement contribute to these savings. Digital World Class^® functions also achieve superior outcomes, such as increased financial analysis time, higher return on investment in procurement, and more involvement in strategic business planning, highlighting their broader organizational impact. Attaining Digital World Class^® performance is a deliberate, multiyear process, requiring a clear vision, action plans and a focus on transformative change. The Hackett Group’s benchmarking methodology helps companies quantify these opportunities, offering a fact-based approach to driving meaningful progress.

Then, the conversation shifts to the role of AI and its integration into broader service delivery models. The most critical component of AI success is data. Organizations with clean, reliable, and accessible data will have a significant advantage in scaling AI. Boards, investors and other stakeholders increasingly demand organizations address AI opportunities. However, AI cannot be treated in isolation. It must be part of a multifaceted service delivery model that includes technology, people, process design, data, service partnerships and governance.

Time stamps:

• 0:12 – Welcome to this episode hosted by Matt Douberly.
• 1:18 – Trends in SG&A costs.
• 3:43 – Challenges in cost reduction.
• 5:20 – Role of Gen AI in cost optimization.
• 9:14 – Digital World Class organizations and savings potential.
• 12:41 – Achieving Digital World Class^® performance.
• 15:08 – Identifying root causes and generating breakthrough improvements.
• 16:31 – Adoption of Gen AI: where companies stand.
• 18:31 – Characteristics of cost-cutters and inflation beaters.
• 22:10 – Integrating AI into the service delivery model.
• 23:45 – Addressing talent and capacity freed up by AI.
• 27:00 – Business priorities for managing SG&A.