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How leaders propel sustainable growth with smarter capital decisions

EY Americas
EY Americas

Multidisciplinary professional services organization

3 minute read 19 Mar 2026

Rethinking capital strategies to look beyond burn rate can unlock new momentum for lasting success.

In brief
  • Equipping employees with financial knowledge can transform them into stewards of the company’s resources, driving responsible decision-making.
  • Compensation and incentive structures that reward performance can foster engagement and encourage innovative thinking to propel strategic growth.
  • Having a capital reserve on hand is essential for navigating challenges, seizing opportunities and remaining agile in changing markets.

Across today’s rapidly evolving entrepreneurial landscape, maintaining cost efficiency and effective capital allocation is essential for sustainable growth. To thrive, business leaders must evaluate potential returns against a growing set of risks, identifying critical projects that align with the company’s long-term ambitions. Additionally, balancing debt and equity is vital to minimizing costs while maximizing growth potential, and it’s crucial to engage your team in the pursuit of these goals.

How EY can help

At the Strategic Growth Forum®, we spoke with serial entrepreneur Kevin Lavelle and Melissa McCarthy, Executive Vice President and Head of Corporate Advisory at PNC, to learn more about leading practices for effective cost efficiency and capital allocation.

 

Building a culture of cost efficiency and financial discipline

 

Fostering an ingrained cost efficiency mindset begins with instilling financial discipline across the organization. To that end, educating employees on the impact of their everyday decisions on the company’s bottom line is paramount. This approach to knowledge sharing creates an environment where every team member understands the importance of cost management and commits to responsible spending.

 

Being transparent about company financials is also critical. Sharing relevant financial information, such as performance metrics and budget allocations, can create a sense of ownership and accountability among employees. However, it’s essential to balance transparency with the need to avoid overwhelming employees with complex financial data. As McCarthy notes, “Empowering our teams with financial knowledge transforms them into stewards of our resources.”

Aligning incentives and compensation structures to drive long-term value

Recent EY-Parthenon analysis looked at the importance of including return on invested capital and cash flow metrics in executive compensation incentives. Linking performance to compensation is a powerful way to drive both cost-saving initiatives and strategic growth at all levels of an organization. For example, designing compensation structures that reward employees for their contributions means that incentives align with the company’s long-term objectives. This alignment can serve as powerful motivation for employees to make sound decisions that support the company’s financial health. Lavelle emphasizes the importance of this context: “Helping people understand what those trade-offs are is critical.”

For businesses that are too cash-constrained to offer robust compensation and rewards, exploring noncash incentives can help shift employee mindsets and behaviors without straining cash flow. Performance shares and recognition programs are two examples of noncash measures that can foster engagement and loyalty, making employees feel valued for their contributions and invested in key company initiatives. As McCarthy pointed out, this approach can create “a new capital source at the table” by leveraging employee engagement for growth.

How capital sourcing decisions impact growth and control

When it comes to capital needs, companies must assess project viability and urgency in determining whether to seek external funding or use internal resources. Evaluating the cost of capital and the potential impact of outsourced funding on ownership and control is essential. “Investing in our own capabilities first can often yield the best returns before seeking outside capital,” Lavelle noted.

As the cost of capital soars, implementing strict fiscal discipline and building a reserve of capital, often called a “war chest,” allows businesses to preserve their autonomy, navigate unforeseen challenges and seize growth opportunities. This approach to maintaining flexibility in capital allocation also enables companies to adapt to changing market conditions. “Preserving a level of optionality for your business is critical,” McCarthy said.

Key capital allocation and cost efficiency considerations for business leaders

As you weigh your options for capital allocation and cost efficiency, it’s important to keep the following key considerations in mind:

This article was written by Sonal Singla, Partner, EY-Parthenon, Ernst & Young LLP.

Summary 

Effective capital allocation and cost efficiency are critical components of strategic growth. By fostering a culture of financial discipline and aligning incentives, businesses can navigate challenges and position themselves for long-term success. Leaders who embrace these principles will not only enhance their organization’s resilience but also inspire their teams to contribute to a shared vision of growth and sustainability.

About this article

EY Americas
EY Americas
Multidisciplinary professional services organization
Related topics
Entrepreneurship
Transactions and Corporate Finance by EY-Parthenon
EY

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.