Top 5 Actions for GBS Leaders to Excel in SG&A Cost Optimization

Introduction: The Imperative of SG&A Efficiency

In today’s dynamic economic environment, Global Business Services (GBS) leaders face increasing pressure to demonstrate tangible value, especially in cost optimization. Drawing inspiration from the familiar political campaign phrase, “It’s the economy, stupid,” GBS leaders must keep cost efficiency at the forefront of their agendas to meet stakeholder demands and drive shareholder returns. 

What does McKinsey’s Research Reveal about SG&A Efficiency?  

Recent research by McKinsey & Company, highlighted in the article “The SG&A challenge: Achieve excellence and outperform your peers,”  underscores the critical importance of sustained SG&A (Sales, General, and Administrative) efficiency. The analysis of 882 global companies revealed that while SG&A efficiency ratios¹ continue to improve, the rate of progress has slowed over the past eleven years. Notably, 234 companies, dubbed “Sustained Transformers”, consistently outperformed their peers by implementing bold changes in their SG&A operating models, resulting in superior total shareholder returns (TSR)². 

Transitioning from these broad industry findings, the focus shifts to how GBS organizations specifically contribute to SG&A excellence, and what actionable steps leaders can take to replicate top performance. 

Methodology: Comparing the SSON 20 Most Admired GBS/SSOs 

To examine the unique impact of GBS on SG&A efficiency, a sample set of high-performing organizations was selected: the Shared Services and Outsourcing News (SSON) 2025 20 Most Admired GBS and Shared Services Organizations (SSOs). These entities were chosen for their demonstrated alignment with leading practices, as determined by rigorous benchmarking against top industry standards.⁴ Unlike the McKinsey Sustained Transformers, which were selected solely for consistent SG&A improvement, the SSON 20 Most Admired GBS/SSOs were evaluated across wider criteria. As GBS is only a partial contributor to SG&A efficiency, one should not expect a direct performance correlation between the Sustained Transformers and the SSON 20 Most Admired GBS/SSOs. Nevertheless, if there is a correlation between GBS leading practice adoption and overall SG&A efficiency, it would likely be from the 20 Most Admired GBS/SSOs.   

How do the SSON 20 Most Admired GBS Compare on SG&A Efficiency? 

A comparative review of SG&A efficiency ratios from 2013 to 2024 shows that the 20 Most Admired GBS/SSOs performed favorably relative to the wider market. The median SG&A efficiency ratio declined by 0.62% annually among these GBS leaders, compared with a 0.43% reduction across the McKinsey dataset. Although the McKinsey Sustained Transformers achieved a more substantial 3.0% annual reduction, this was influenced by factors such as industry mix and the criteria used to select each respective set of companies.³ 

Possibly more telling is that the 20 Most Admired GBS/SSOs frequently outperformed their industry peers on TSR from 2013 to 2024. The point of comparison was the S&P Global 1200 Index TSR for each company’s respective industry sector.  Fifteen of the twenty companies had comparable information available.  Collectively, these fifteen companies exceeded their industry TSR benchmarks by 25%. Eleven companies individually exceeded their industry benchmarks. The McKinsey Sustained Transformers increased their TSR at 1.7 times the rate of the other companies studied in the S&P Global 1200 Index for the same period. The difference in performance to the 20 Most Admired GBS/SSOs, however, can largely be attributed to industry composition. For instance, sectors such as Information Technology, which experience higher TSR, were not represented among the 20 Most Admired GBS/SSOs. 

The 4 Transformation Strategies: Overview and GBS Influence 

The research identified four primary strategies for driving SG&A efficiency, each with varying degrees of GBS involvement:   

1. Adjust the Business Portfolio: Strategic shifts such as acquisitions or divestitures can alter SG&A needs. GBS leaders typically have limited influence here, as these decisions are driven at the enterprise level.
2. Change the SG&A Cost Structure: Analyzing the sensitivity of SG&A expenses to revenue fluctuations revealed that the 20 Most Admired GBS/SSOs were able to tightly manage their SG&A efficiency ratios when revenue fluctuated within 10% in a year.  When revenue increased more significantly, SG&A costs increased at a slower rate.  When revenue decreased more significantly, SG&A costs decreased at a lower rate. The more GBS leaders can reduce the labor component of SG&A, the better they can maximize the SG&A efficiency ratio when revenue rises and mitigate the drop in efficiency when revenue drops. GBS can leverage process standardization, right-shoring, and increasingly, artificial intelligence (AI), to drive efficiency. However, AI adoption is still augmenting: errors and contextual limitations remain.
3. Reduce External SG&A Spend: External expenses in areas like sales, marketing, and logistics represent significant opportunities. Effective collaboration with cross-functional teams is required, and while some GBS leaders have achieved success, this remains largely untapped.
4. Lower Operating Costs of SG&A Service Delivery: Most GBS organizations focus on operational cost reductions. Expanding these efforts beyond traditional back-office functions to mid- and front-office processes can yield further gains.  Operating cost reduction needs to be applied across a broad range of SG&A functions and improvement levers, as highlighted below, to be impactful. 

One Company’s Journey Toward SG&A Transformation

A leading consumer goods company embarked on a multi-year effort to improve its SG&A efficiency.  They established a company-wide SG&A transformation office with heavy participation from business units, GBS, and corporate functions.

GBS was a significant player. GBS started with a combined Procurement/Marketing effort to optimize external marketing spend, yielding over $200 million in annual SG&A savings.

GBS then progressively built out its portfolio of services globally across multiple functions, deploying multiple improvement levers (consolidation, outsourcing, right-shoring, technology-enabled process improvement, and service and demand management)

Concurrent with GBS, the business rationalized its product portfolio toward those requiring less marketing and sales investment.

This case study demonstrates how one company pursued its SG&A transformation. 

With these transformation levers established, the next section distills actionable recommendations for GBS leaders to translate analysis into results. 

5 Actions for GBS Leaders: Practical Steps to Achieve SG&A Excellence 

GBS leaders seeking to outperform peers in SG&A efficiency should prioritize the following five actions: 

1. Attack SG&A Spend, Not Just Service Costs: Expand the scope of cost optimization efforts to encompass all SG&A expenses, including those outside traditional GBS boundaries, such as external marketing and sales spend. 
2. Apply a Wide Range of SG&A Efficiency Improvement Levers:  Leverage a comprehensive toolkit, process improvement, automation, right-shoring, and AI, to address both labor and non-labor SG&A costs. 
3. Extend Improvement Efforts Across All SG&A Functions: Drive efficiency initiatives beyond the back office, integrating mid- and front-office processes to maximize impact across the organization. 
4. Embrace AI to Transform the SG&A Cost Structure: Adopt artificial intelligence solutions to manage transaction volumes efficiently, reduce reliance on manual labor, and improve scalability. 
5. Organize for SG&A Transformation: Establish a dedicated SG&A transformation office, either embedded within GBS or closely aligned with it, to set clear goals, build necessary competencies, and drive coordinated change initiatives. 

These recommendations build on the strategies described above and are tailored specifically for GBS leaders, offering a structured pathway to improved SG&A performance.   

Conclusion: GBS Contribution and Ongoing Opportunities 

The evidence confirms that GBS organizations can be significant drivers of SG&A efficiency and shareholder value. Even among the best, opportunities for further improvement remain. By embracing a holistic approach, attacking total SG&A spend, deploying diverse improvement levers, expanding functional scope, harnessing AI, and organizing for transformation, GBS leaders can position their organizations to outperform the competition and sustain value creation in a rapidly evolving business landscape. 

1.  _{“The SG&A challenge:  Achieve excellence and outperform your peers”, Josh Peters, Jung Paik, and Martin Rosendahl with Abhishek Shairali, McKinsey & Company, October 2025}
2. _{SG&A efficiency ratio is calculated as annual SG&A expenses (sales, marketing, distribution, and other general overhead non-production costs) divided by annual revenue.} 
3. _{Total Shareholder Return measures the total return on an investment in a company's stock over a specific period. It includes both capital gains (stock price appreciation) and dividends paid to shareholders.} 
4. _{The SSON 2025 20 Most Admired GBS and SSOs are 3M Global Business Services, Allianz Services, ArcelorMittal Business Center of Excellence, Bosch Global Business Services, Cardinal Health Global Business Services, Cencosud Shared Service Center, Coca-Cola Europacific Partners Integrated Shared Services, DHL Global Forwarding Freight Global Service Center, Ecolab GBS+, Henkel Global Business Solutions⁺, Johnson & Johnson Global Services, Mastercard Global Business Solutions Center (GBSC), Merck (GBS) Global Business Solutions, SCG Corporate Accounting Services, Shell Business Operations (SBO), Siemens Global Business Services, SLB Global Business Services, Takeda Business Solutions, Tesco Business Solutions, and TNB Global Business Solutions. SSOs and GBS were first identified as admired through a comprehensive analysis of SSON cross-channel data such as SSON Impact Awards, the SSON Research & Analytics World's Best GBS Award, previous top 20 winners, recommendations from SSON Judging Faculty and SSON Global Advisory Board, as well as other research and awards. Following this initial identification, the shortlisted GBS/SSOs participated in an extensive benchmarking study that evaluated their service delivery model, digital ecosystem, notable achievements, and performance benchmarks. Winners were determined based on the outcome of this study.}