The Real Impact of Budget Cuts: Beyond the Spreadsheet
by David Walter, Executive Director – Innovation & Strategy, Secora
How cutting the wrong costs and ignoring inefficiencies builds hidden debt — and how our clients are turning that around.
A Volatile Environment Demands Better Decisions
The global economic landscape is shifting fast.
In the US, Trump 2.0 signals a return to protectionist policies — with proposals like a 145% tariff on Chinese imports. That may impact Australian supply chains, especially in sectors reliant on imported parts, plant, and equipment – or supplying materials to support them.
Back home, the Australian election narrative is already focused on fiscal responsibility. Regardless of who wins, cost pressures across government and industry are rising — and the response away from the political spending announcements is all too familiar: cost cutting.
Asset Management Debt: A Hidden, Growing Risk
Asset Management Debt refers to the accumulation of hidden liabilities within an organisation's physical asset base — not financial liabilities, but performance, reliability, and lifecycle risks that result from years of underinvestment, inaction, or poorly prioritised effort.
Unlike conventional debt, this burden does not appear on a balance sheet — but it has tangible, measurable impacts across operations, sustainment, workforce, and strategic delivery.
It builds up in four primary ways:
Deferred Maintenance and Capital Renewal - Equipment continues to operate beyond its designed parameters or lifespan without the necessary investment to sustain it, leading to compounding wear and increased likelihood of failure.
Insufficient Planning and Data Integrity- Poorly integrated planning systems, missing asset data, or low confidence in performance information prevent organisations from making informed, proactive decisions.
Organisational Fragmentation and Role Drift - Teams become reactive and siloed, support roles are dissolved, and engineering or asset functions are consumed by administrative burden. The result is a breakdown of functional governance.
Erosion of Capability and Confidence - As systems degrade, so does trust in process. Skilled personnel are either lost or underutilised, while frontline staff spend more time firefighting than improving. This weakens the workforce's ability to recover even when investment resumes.
It manifests as:
Declining asset reliability and increasing downtime.
Escalating corrective maintenance costs.
Loss of tacit knowledge and workforce fatigue.
Reduced availability of critical assets and infrastructure.
Higher whole-of-life costs, as problems compound and require more intrusive, disruptive fixes later.
Just like financial debt, the longer it goes unacknowledged or unpaid, the more expensive it becomes to reverse. And in many cases, by the time leadership is forced to act, the organisation is already in a performance crisis.
Why Cost-Cutting Alone Doesn’t Work
Budget cuts, on their own, do not improve efficiency — they only shrinks the system that provides it. Without a strategic lens, cost-cutting creates instability, builds operational fragility, and undermines the very functions that deliver value.
From my experiences here’s how the downward spiral typically unfolds:
First to normally suffer are Improvement Programs Are Paused or Scrapped. As these things are seen as discretionary spending. The very individuals and organisations that identify and remove inefficiencies — continuous improvement, digital uplift, reliability engineering — are shelved. This removes the only practical path to actual productivity gains.
Next to suffer is Support Functions Are Deemed Non-Essential Planning, data, engineering, and logistics roles and activities are often cut next. These aren’t “doers” — but they are the multipliers. When removed, decision latency increases, technical assurance drops, and oversight becomes blurred - mistakes be come common.
The clearest identifier is that Preventive Maintenance Is Delayed or Cancelled. With limited funding, maintenance plans are “optimised” by deferring work, and without the adequate analysis of the impacts. In reality this creates a false sense of immediate cost savings. Eventually in the future failure rates increase, requiring more unplanned interventions and longer asset outages — often at higher cost and greater disruption.
The last of the downward spiral is the Loss of Organisational Learning and Continuity. With now fewer people, gapped positions, and higher turnover, the organisation's organic knowledge systems collapse. Lessons are relearned. Workarounds become norms. Auditable, reliable processes degrade — making compliance, assurance, and innovation much harder. And, inevitably the need to hire and purchase expertise into do organic roles.
The result:
Short-term operating costs may decrease.
But medium-to-long-term costs rise faster and more unpredictably.
Workforce morale declines, and internal confidence in leadership erodes.
Systems default to survival mode — focused on meeting immediate minimums rather than building value.
Cutting spend without changing how work is done simply delays the problem — and often multiplies it. Efficiency requires structure. Resilience requires investment. Capability requires continuity. The organisations that thrive in a constrained environment are not the ones who cut deepest — they’re the ones who wisely invest in efficiencies.
Visualising the Problem: The Debt Pyramid
This pyramid reflects what we've seen too often. The visible cuts are only the top. Below the surface lie the real liabilities. At the base: a compounding structure of delays, inefficiencies, and capability erosion.
The longer it’s ignored, the harder — and more expensive — it becomes to unwind.
The Pattern
Let’s be honest: when I, or the team at Secora, propose efficiency reforms or productivity-linked asset strategies, we often hear the same responses:
“Now’s not the time.”
“Wait until the new budget lands.”
“We don’t have the funds.”
“It’s too complex to fix right now.”
“We tried something similar — it didn’t work.”
“Leadership’s focused elsewhere for now.”
And in the meantime, critical enablers are quietly removed and warnings ignored:
Engineering staff disappear from planning roles.
Preventive programs are scaled back.
Decision rights become diffused or elevated to the most senior of roles.
Untracked inefficiencies remain untouched.
Inventory grows while performance declines.
Skilled personnel exit without replacement.
Reporting grows, but insight shrinks.
Maintenance becomes reactive.
Lessons Learned
1. Quick Wins Don’t Always Save Money
Decisions made to avoid $2M in annual staffing costs created $10M+ in emergent operational costs and undermined assurance of operations across multiple sites. What looked lean due to cost cutting became unsustainable.
2. Support Functions Are Enablers
An asset centric business learned that strategic asset teams weren't an overhead — they were enablers. Our work converting their consultancy-heavy energy transition strategy into a working implementation program preserved capability and reduced reliance on external vendors.
3. Efficiency is a Capability Multiplier
When engaged recently we didn't suggest for more budget. We implemented productivity efficiencies into the established processes. That’s what unlocked the savings and built a foundation for asset resilience across their global fleet — without waiting for budget increases.
There is a better way. Industries succeed not by spending more, but by spending smarter:
Re-using underutilised data to refine asset planning.
Realigning responsibilities so engineers engineer — not chase signatures.
Turning reporting exercises into actionable productivity initiatives.
Removing duplicate efforts, unclear accountabilities, and process bottlenecks.
In each case, it wasn’t a big transformation project, but targeted activities and changes.
A Strategic Approach to Efficiency
Secora’s method isn’t about identifying what to cut — it’s about the convergence of:
Process improvement
Integrated Planning
Engaged People, and
Maximising Technology.
Under supported foundational asset management practices of the Secora Asset Management Framework. That helps address asset blind spots caused by overwhelming amounts of data or unowned accountability, that hide inefficiencies and waste. Or, where there are performance gaps caused by legacy habits or poor interfaces
This work sits beneath the surface — but it’s where the real savings lie.
Your Call to Action
If your organisation is under budget pressure, don't just cut. Target your waste and inefficiencies. Ask yourself:
What’s costing us value without being on a ledger?
Where are we seeing signals of declining asset health, staff fatigue, or unmeasured waste?
Am I over loaded with information and data, but little knowledge or wisdom in my area to enact it?
What would we need to measure and change if we were held accountable for 2 years from now — not 2 weeks?
What have we cut in an effort to reduce costs, that is now having the reverse effect?