How to increase shareholder returns by 67%

Hey Everyone,

A McKinsey study found that the best CEOs regularly reallocate budgets every year to the talent and opportunities that deliver the most value.

In simple terms, they regularly redirect resources to where they matter most.

Although this may sound like common sense, it's definitely not common practice. A third of companies only reallocated 1% of their budgets annually, with the average being 8%.

The companies that actively reallocated their budgets delivered roughly 10% annual returns to shareholders, compared with 6% for those that kept things fairly static.

That's a whopping 67% increase in annual returns just from resource reallocation, which over a 20-year period also led to a doubling in company value.

Today, we're breaking down a quarterly process to help you find and strategically reallocate 10% of your resources, so you can also maximize your opportunities and value.

Finding your 10%

Start by listing everything that takes discretionary resources – projects, initiatives, campaigns, ongoing programs.

Leave out fixed costs like rent or baseline headcount. You're looking at the work that could, in theory, be reassigned.

For each item, score three things on a simple 1-5 scale: Strategic fit – does this directly support one of your top three priorities this quarter? If you can't connect it in one sentence, score it low.

Performance – is it delivering measurable results relative to what you've put in? Look at whatever you track — revenue contribution, pipeline generated, adoption, output quality. If the team can't point to concrete progress, that's a signal. Opportunity cost – if you moved the people or money from this item to your strongest initiative, how much more could that initiative deliver? The bigger the gap, the more it makes sense to move. The items that score low on all three metrics are candidates for your 'kill list'. You're looking for roughly 10% of your discretionary budget and team capacity - not a strict number, but enough to be meaningful without creating chaos.

Running the quarterly review

Set up a 60-minute quarterly review with whoever controls budget and team assignments.

This works best as a standing meeting, same time every quarter, so it becomes a habit rather than a one-off exercise. Before the meeting (15 min of prep per person): Each leader comes with their scored list and a one-paragraph case for their bottom-ranked item. Why is it underperforming? What would they do with the freed-up resources?

Surface the candidates (20 min): Go around the room. Each person names their lowest-scoring item and makes the case for reallocating those resources. No defending - just present the numbers and the reasoning.

Decide where resources move (20 min): For each freed item, decide where the resources go. Prioritize initiatives that scored highest on strategic fit and performance. If two leaders want the same resources, the one with clearer short-term milestones gets priority.

Set gates and owners (20 min): For each reallocation, agree on what "working" looks like in 90 days.

Write down a specific milestone (for example, "500 users onboarded" or "two signed contracts"), an owner, and a check-in date. If the milestone isn't hit, those resources go back into the next quarterly review.

Bain's micro-battles framework uses a similar approach – small, time-boxed resource commitments with clear milestones. If the bet works, you double down. If it doesn't, the resources move again. It keeps your portfolio from getting stuck in the same places quarter after quarter.

What to protect

A few things to leave alone.

Fixed costs and baseline staffing: Reallocation works on the variable and discretionary side of your budget like project funding, contractor time, campaign spend, internal initiatives.

Don't touch the operating floor that keeps the business running.

Work that needs time to mature: Some initiatives need more than one quarter to show results.

If you just launched something and it's too early to judge, mark it for review next quarter instead of pulling resources now.

Your team's capacity: If people are already at full stretch, shuffling assignments might create burnout and resentment.

A good rule of thumb is to keep your team operating at roughly 70-80% of capacity so there's room to absorb a move without overloading anyone.

Try this today

We built a free scorecard template for this. Open it and list your five biggest discretionary resource commitments – the projects, programs, or campaigns that take up the most budget and team time.

Score each one on strategic fit, performance, and opportunity cost (1-5 scale).

Circle the lowest scorer.

If you moved those resources to your top initiative, what would change in 90 days?

Bring the answer to your next leadership meeting.

Access the scorecard template here

Go deeper

👉 McKinsey: How to put your money where your strategy is – the original study showing dynamic reallocators earned 30% higher annual returns to shareholders

👉 Bain: The Bain Micro-battles System – a stage-gated approach to testing resource bets in short sprints before committing fully

👉 McKinsey: The finer points of linking resource allocation to value creation – four tactical practices that connect budgets to strategy

Coming up tomorrow

Tomorrow we're sharing a one-page investment brief that helps you evaluate big bets before committing resources.

Have a good one!

P.S. What's harder – spotting the resources to potentially move or actually making the move? Reply and let us know.