Always Be Cutting
Balancing budgets has become a juggling act for firms with long-term goals.
May 30, 2025
When it comes to budget planning for the remainder of this year and beyond, there’s a new ABC rule for finance leaders: Always Be Cutting.
Led by the government and technology sectors, which together have let go of more than 80,000 workers, layoffs are back again this year. For those who still have jobs, numerous surveys show that pay raises will be lower this year than in 2024 and 2023. On the corporate side, merger-and-acquisition activity, which was supposed to take off under the new administration, is trailing last year’s volume, as companies hold off on deals amid slowing growth and global economic uncertainty. Some firms have already cut or suspended dividend payments this year as well. “CFOs are playing up their roles as chief expense officers this year,” says Jeff Constable, co-leader of the Global Financial Officers practice at Korn Ferry. Constable says tariffs, high interest rates, and declining consumer spending are prompting CFOs to play it safe. “Cutting costs does not require creativity or risk-taking, so it ends up being kind of a ‘comfort zone’ for CFOs,” he says.
Still, it’s a delicate and volatile balance to strike, with the timing and level of tariffs and other global developments sending finance teams scrambling to adjust capital-allocation and balance-sheet models almost every day. According to David King, a professor of management at Florida State University’s College of Business, the challenge CFOs face is how to cut while still investing in critical areas for long-term growth, like AI.
To be sure, while overall business investment is expected to decline, spending on information-technology budgets will likely increase by 9.3 percent this year. “There’s a cost to overinvesting now, which is tying up funds that could be used for other things once the situation improves,” says King. In general, firms can offset technology investments through such measures as reducing hiring or head count, shifting funds from other areas, ending product lines, or even divesting businesses, says Reena Patel, a principal in the Global Financial Officers practice at Korn Ferry.
Larger firms with longer product lead times have more options available to them to deal with short-term volatility, says Shane Goodwin, a finance professor at The Cox School of Business at Southern Methodist University. These firms, he says, have the power to renegotiate contracts with suppliers to address wild fluctuations in pricing caused by tariffs or other issues, for instance. They also can move some operations to cheaper locations or change suppliers. Goodwin says finance leaders learned from the pandemic that overcutting and overinvesting both have their downsides, and that the key to navigating uncertainty is to not get caught flat-footed. “They are being more strategic about making sure short-term cuts don’t hurt long-term opportunities,” he says.
