From a 10% Cost-Cutting Mandate to a 25% Increase in Profitability

When “costs” are the symptom, not the problem.

Executive Summary

A European industrial conglomerate (approx. 40,000–50,000 employees, ~12–15 billion EUR in revenue, ~400–500 locations worldwide) commissioned WB to implement a 10% cost-reduction program for its Indian subsidiary (including three production sites). WB was appointed as an integral part of the project team—from analysis through on-site implementation.

It became clear early on that “costs” were merely a symptom. The root cause lay in mistrust, rumors, a lack of transparency, and a communication approach that was “normal” within the corporation but had a different effect in India. Through a combination of data analysis, on-site interviews, supplier clarification, and the establishment of effective collaboration routines, a 6% cost reduction was achieved in the short term. Subsequently, the cost-cutting mandate evolved into a performance program that increased profitability by 25% within two years. In the third year, WB transitioned into an advisory board/India sounding board role.

Background:

An experienced corporation—and yet a blind spot specific to India. The corporation was professionally structured on an international level: clear management logic, established reporting systems, cascading objectives, and regular feedback processes. India was not an “exotic” unit, but rather one subsidiary among many.

That was precisely the blind spot: India was treated—with the best of intentions—just like any other overseas subsidiary. From headquarters’ perspective, that made sense: the same standards, the same transparency, the same expectations.

On the ground, however, the situation unfolded differently. Not as an open conflict, but as a creeping dynamic:

• Employees were unsure about where things were headed.
• Reservations began to arise regarding the parent company.
• Rumors were circulating about possible changes and consequences.
• In some cases, information was presented differently than it actually was—often not with the intent to deceive, but out of a combination of uncertainty, self-protection, and the fear of appearing “wrong.”

When these signals reached headquarters, they were interpreted primarily as one thing: “The costs are too high—and we don’t have a clear picture.”

The Task for WB: Reduce Costs by 10%—Using Lessons Learned from Programs in India

The group approached WB with a clear expectation:

“We need a cost-cutting program in India. We have to cut costs by 10%. And we need someone to set that up and see it through with us on the ground.”

WB was commissioned because the client wanted to combine two things:

1. Experience with cost-reduction programs in India (including in complex organizations, not just in small units).
2. The ability to identify the root causes of difficult situations—including crises and conflicts—rather than merely addressing the symptoms.

Important: WB was not a “consultant on the sidelines,” but was integrated into the project team—with access to meetings, data, stakeholders, and decision-making processes.

Work Mode: WB as an integral part of the project team

The setup was deliberately operational:

• WB attended the relevant meetings in India and Europe
• took on specific work packages (analysis, interviews, actions, implementation tracking)
• held discussions throughout the entire organization: executive management, division heads, teams—all the way down to front-line employees
• was involved in the decision-making process with European management
• Worked directly with external stakeholders (including supplier communication and negotiations)

Depending on the phase, up to 15 WB staff members were involved (including Finance/Accounting, industry experts, tax and structural specialists, negotiators, and HR and communications professionals). Not to “make a big show,” but to capture the reality: In challenging situations in India, numbers, contracts, processes, relationships, and culture are often intertwined.

Analysis Phase: Why “excessive costs” Was Not the Correct Definition of the Problem

The project got off to a traditional start: cost structure, purchasing data, process chains, variances. But after only a short time, a recurring feeling began to emerge among the project team: The numbers don’t tell the whole story. WB observed (and later confirmed) an informal dynamic:

• There was a lot of talk about “openness,” but critical issues weren’t consistently brought up.
• Minor discrepancies were treated as “not that important”—until they later became major issues.
• Local management spoke of openness, but did not involve the relevant employees below the management level
• In terms of communication, there was effectively no exchange across hierarchical boundaries; instead, there was a strong tendency not to identify problems as such, but rather to “solve them somehow” without bringing them to light.

This led to a paradoxical situation:

• Headquarters believed there was transparency (because reporting was in place and the Indian management constantly spoke of openness).
• India believed it was being cooperative (because it said “yes” and maintained harmony).
• The Indian management was completely unaware of the situation “on the ground” because there was a lack of communication with the employees. As a result, only the management’s assumptions were confirmed.
• In truth, there was no shared, reliable reality.

WB formulated a core hypothesis internally:

“The company doesn’t have a primary cost problem—it has a problem with transparency and cooperation that masquerades as a cost problem.”

This hypothesis was the turning point because it shifted the focus: away from cost-cutting measures alone, and toward the question of why certain costs arise in the first place.

The first measurable lever: a 6% cost reduction achieved by eliminating uncertainty premiums

In the purchasing department, there was a particularly concrete example of how mistrust and uncertainty lead to direct costs.

What Awaits Headquarters

“We’re cutting supplier prices. Negotiating more aggressively. Implementing our guidelines.”

What Actually Happened in India

The local team was afraid of damaging relationships with key suppliers. At the same time, the directives from Germany were interpreted in India as a warning: “Things are getting tight. There could be consequences.”

Instead of openly discussing this conflict of objectives (“We’re supposed to drive down prices, but we risk damaging the relationship—how can we resolve this together?”), a typical defensive mindset took hold:

• People tried to meet the requirements without having to have uncomfortable conversations.
• Uncertainties were not openly addressed.
• Rumors in the market heightened anxiety.

What WB identified

Part of the supposedly “excessive prices” was not a traditional procurement issue, but rather consisted of risk premiums: Suppliers factored in uncertainty—for example, due to rumors, unclear payment terms, and concerns about sudden changes.

WB worked with the team to carry out a structured analysis and reorganization:

• What is actually planned—and what is just a rumor?
• Which payment and terms logic results in unnecessary risk premiums?
• What adjustments can stabilize the relationship without losing room for negotiation?

Result: Thanks to this clarification and specific adjustments, safety margins were reduced. This led to a short-term cost reduction of 6–8%—not by “cutting costs at any cost,” but by eliminating uncertainty from the system.

The lesson: In India, costs often arise in situations where organizations cannot openly discuss conflicting goals.

The second reality: The greater potential lay not in cost considerations, but in performance considerations

As the discussions became more open (and WB was able to speak confidentially with all parties involved), issues came to light that had not been apparent before:

• a lack of cooperation between sales, purchasing, production, and customer service
• Contradictory market assumptions that were incorporated into decisions without being verified
• Pricing decisions made more out of caution and uncertainty than out of genuine market logic

The surprising finding: The company’s prices were in the double-digit percentage range below the price level achievable in the local market.

It was clear, then, that while a straightforward 10% cost-cutting program would have been “easily implementable,” it would have missed the mark. The central task was not to “cut costs,” but to improve the quality of decision-making, coordination, and market development.

A Turning Point in the Project: Don’t Just Demand a Culture of Collaboration and Error Tolerance—Practice It

A crucial step was that WB, together with the client, took the topic of “communication” out of the “soft” category.

The logic was:

• If discrepancies aren’t identified early on, they will end up costing a lot later.
• When problems cannot be addressed without losing face, backdoor solutions emerge.
• If “openness” is merely claimed but lacks a reliable process, it will not materialize.

WB therefore supported the establishment of specific routines:

• Meetings where deviations are not penalized but resolved
• Feedback formats that work in India (without causing embarrassment or resorting to blame)
• Clear translation of headquarters’ intentions (“What do we really mean?”) into local capacity for action
• Cross-functional coordination instead of silo optimization

A Powerful Tool: Sending an HQ Employee to India

In collaboration with the corporate group, an experienced employee from headquarters was sent to India for several months to improve cooperation between India and Europe—with authority, acceptance, and a clear mandate.

WB provided support in this regard:

• selecting the right person,
• onboarding and operational support (WB acted in an “assisting” capacity at times, in the sense of enabling),
• the development of a training and meeting program tailored to India,
• On-site implementation—including support during critical meetings.

At the same time, WB remained important as an external component because external roles often have access to information that is difficult to obtain internally: frustration, doubts, informal resistance, and unspoken conflicts of loyalty.

Results: A cost-cutting initiative becomes a sustainable performance program

The project had two measurable aspects:

Short-term effects

• 6–8% cost reduction through the elimination of safety margins and the standardization of supplier and payment procedures

Medium-term effects (within 2 years)

• +25% profitability through better coordination, higher-quality decision-making, and a more realistic approach to market and pricing dynamics, as well as more efficient key account management
• reduced employee turnover (as a result of improved leadership and collaboration)
• significantly more stable collaboration between headquarters and India (fewer rumors, less back-channel communication)

Transition to Year 3: WB as an Advisory Board / India Soundingboard

After the intensive phase was completed, WB transitioned into an advisory/sparring partner role:

• Semi-annual feedback sessions; participation in strategic meetings
• Ad hoc support as needed (e.g., for a human resources issue or the implementation of a corporate policy)
• Conducting Confidential Feedback Sessions
• A point of contact for local employees—similar to an ombudsman—in case of problems

This wasn’t simply a matter of “letting a project run its course,” but rather the logical next stage of maturity: Once processes and culture are in place, less operational support is needed—but there is still a need for an independent forum for critical decisions.

Lessons Learned & Takeaways (Applicable to Both Small and Medium-Sized Businesses and Large Corporations)

1. A cost-cutting mandate can be the wrong diagnosis. In India, “costs” are often a symptom of uncertainty, misunderstandings, and a lack of coordination.
2. Transparency does not come about through reporting alone. It arises from safe environments where deviations can be identified without the risk of losing face.
3. Supplier prices often include risk premiums when the situation is unclear. Reducing uncertainty often lowers costs more quickly than through price negotiations alone.
4. The greatest opportunities for improvement often lie in cross-functional collaboration. When sales, purchasing, production, and customer service are not aligned, hidden losses occur—on both the cost and revenue sides.
5. Lasting impact comes from “enablement”—not from pressure. Training and meeting routines that are truly put into practice change behavior and results.

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