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Transformation for Growth: Funding Scale Without Future Bloat

In our opening perspective, Cost as a Design Choice, we argued that the organizations that outperform across the business lifecycle no longer treat cost as a periodic restructuring exercise.¹ They treat it as a continuous design capability, one that takes a different shape at every stage of the lifecycle. This article examines the first of those stages up close: the growth phase, where the defining question is not “Where can we cut?” but “How do we scale without embedding tomorrow’s inefficiency into today’s expansion?”

Why This Matters Now

Growth hides a lot. Rising revenue can mask structural inefficiency for years, because few leadership teams interrogate cost while the top line is climbing. But the math of scaling is unforgiving. Research published in MIT Sloan Management Review found that between 2000 and 2010, production efficiencies cut the cost of goods sold at the average S&P 500 company by roughly 250 basis points, while selling, general and administrative (“SG&A”) expense as a share of revenue did not move at all.² Companies learned to make things more efficiently, but not to run themselves more efficiently. The reason, the same research notes, is that as a business grows its complexity compounds, with more moving parts and interdependencies that become progressively harder to manage.³

That was not a one-decade anomaly; the most recent data shows the pattern has only sharpened. The Hackett Group’s December 2025 analysis of the 1,000 largest U.S. public companies found that median SG&A reached 14.3% of revenue in fiscal 2024, a five-year high, with 62% of companies seeing SG&A climb as a share of revenue, a deterioration the firm attributes largely to slowing revenue growth.⁴ The lesson is pointed: when the top line cools, the overhead accumulated during the boom does not melt away. It is simply exposed.

For finance leaders, a rising SG&A-to-revenue ratio is one of the earliest and most reliable signals that overhead is outpacing the business it supports, the onset of what is widely termed “corporate bloat.” By the time it surfaces in quarterly results, the underlying complexity (overlapping systems, redundant processes and incremental hires that each made sense in isolation) is already embedded and far harder to unwind.

The cost of that delay is not hypothetical. FTI Consulting worked with a multinational financial-technology corporate whose inefficiency had accumulated through rapid inorganic growth. A single acquisition had doubled its size, layering redundant structures across commercial, finance and supply-chain functions. Unwinding it took a multi-year, enterprise-wide program of 20-plus workstreams; addressing that embedded complexity ultimately lifted EBITDA by more than $180 million. Value like that is far cheaper to protect on the way up than to recover later.

The stakes differ for our two core audiences, but the discipline is the same:

For private equity sponsors, scale-without-bloat is value-creation math. Every basis point of unnecessary cost added during the hold period is a basis point that must be removed before exit, usually under time pressure and external scrutiny. Disciplined sponsors build cost design into the value-creation plan from Day 1 rather than bolting it on ahead of a sale. The looming exit is, in effect, a forcing mechanism: a deadline that keeps the discipline honest.
For corporate leaders, the calculus involves more than margin, and the discipline is harder to sustain: with no exit date to impose on it from outside, that forcing function has to be built internally. Overhead buffers fund culture, internal mobility, innovation and governance, and cutting them too early can starve the capabilities that differentiate the business. The goal is not minimal cost; it is intentional cost. That means separating cost that buys future growth capability, the kind worth protecting, from cost that is pure drag, and holding a clear line of sight from every dollar of overhead to the growth it enables. A practical test separates the two: cost that scales more slowly than revenue is leverage worth funding; cost that rises in lockstep with revenue, or faster, is drag. That distinction, not the absolute level of spend, is what separates a lean business from a starved one.

Designing Scale, Not Just Adding It

The most effective growth-stage organizations introduce cost discipline before external pressure forces the issue, not to spend less, but to protect operating leverage as they scale. For most of corporate history that leverage leaked away, because complexity compounded faster than leaders could offset it. What is different now is that automation and AI make it possible to add revenue without adding proportional cost, which turns the choices below from good hygiene into a real growth advantage. None of this argues against spending ahead of demand: in a true land-grab, over-investing before the revenue arrives can be exactly right. The discipline is in choosing it deliberately rather than drifting into it. In practice, that means a few deliberate choices.

Let digital and AI absorb the growth. This is where the growth thesis is shifting fastest, though not automatically. Today many companies are spending on AI on top of their existing overhead rather than in its place, which is part of why SG&A keeps climbing even as AI budgets grow.⁵ Left unchecked, AI simply becomes the next layer of overhead: model costs, data infrastructure and AI-governance headcount that behave exactly like the bloat it was meant to retire. The design challenge is to make that spend substitutive rather than additive, so new capability retires cost instead of adding to it. Done well, automation, shared services and AI-enabled processes let revenue scale without a proportional rise in cost. FTI Consulting worked with a PE-owned portfolio company to design a modern, AI-enabled platform that positioned the business for 3x revenue growth on a flat cost base, a near-perfect illustration of funding scale without funding bloat. The original sponsor exited mid-transformation on the strength of that value-creation thesis.⁶
Simplify before you systematize. Complexity compounds. Rationalizing the operating model, processes and technology stack early, before they are layered with workarounds, is far cheaper than untangling them later. In that same FTI Consulting engagement introduced earlier, untangling the operating model meant consolidating five overlapping business P&Ls into two, alongside a shared corporate function, a structure that had quietly duplicated over years of expansion.
Build for visibility. Many companies do not have a cost problem so much as a complexity problem masquerading as one. Clean data and clear cost-to-serve visibility let leaders see where scale is creating leverage and where it is quietly creating drag. The signals worth watching are the leading ones that move before the SG&A ratio shows up in quarterly results: widening spans of control, a creeping number of approval layers, and duplicate spend on overlapping tools and vendors. Each is visible early, and each is cheap to fix while it is still small.
Tie headcount to revenue, not to ambition. Growth justifies investment, but it should not suspend the question of return. In practice that means setting revenue-per-employee floors by function and re-basing the headcount plan at each stage of scale, rather than annualizing the prior year’s, so every incremental hire has to clear a return threshold. Revenue per employee can be gamed, though: shift work to contractors and the ratio improves even as the cost migrates into SG&A, so pair it with a cost-per-unit-of-output measure that tracks real productivity. Keeping hiring tightly aligned with revenue, and revisiting that alignment as the business scales, holds SG&A growth below top-line growth, the textbook signature of healthy operating leverage.

The Takeaway for Leaders

The instinct during a growth phase is to defer the cost conversation until the business is “big enough to optimize.” That instinct is precisely backwards. The cost structure of a scaled business is largely determined by the thousands of small design decisions made while it was still growing. Leaders who treat those decisions as deliberate design, rather than as the incidental byproduct of expansion, arrive at scale with operating leverage intact and optionality preserved. Seen this way, cost discipline in the growth phase is not restraint; it is how a company funds its next stage of growth. Every dollar not lost to redundant structure is a dollar available for the next market, product or acquisition.

Cost, in other words, is not something a growth business pays. It is something a growth business designs, and the choices made early determine how much value is available to capture later.

In the next article, we turn to the second lifecycle stage, Transformation for Performance: Protecting Profitability While Sharpening the Business, where the priority shifts from designing scale to defending it.

Explore the rest of the series, beginning with Cost as a Design Choice.⁷ For a broader view of where finance leaders are focusing in the year ahead, see FTI Consulting’s Global CFO Survey 2026.⁸

Footnotes:

¹ Lokhandwala, Ali, Wray, Jeff and Hughes, Jeff, “Cost as a Design Choice: How Private Equity and Corporates Use Cost To Win Across the Business Lifecycle,” FTI Consulting (June 5, 2026)

² Cespedes, Frank V., Dougherty, James P., and Skinner, Ben S., III, “How to Identify the Best Customers for Your Business,” MIT Sloan Management Review (Dec. 18, 2012)

³ Id.

⁴ The Hackett Group, “The Hackett Group finds SG&A Costs at a Five-Year High as 62% of US Companies Struggle to Control Spending Amid Slowing Revenue Growth,” Press Release (Dec. 9. 2025)

⁵ FTI Consulting, “2026 Global CFO Report” (2026)

⁶ Messinger, Dave R., Strong, Patrick and Jones, Carl, “Tripling Revenue Growth Without Increasing Costs Through Digital Transformation,” FTI Consulting (Dec. 19, 2023)

⁷ Lokhandwala et al., Cost as a Design Choice, supra note 1.

⁸ FTI Consulting, 2026 Global CFO Report, supra note 4.