PEOPLE FOCUS - CIPD

HR MANAGEMENT
PEOPLE FOCUS
The Role of HR in Delivering Rapid
and Sustained Cost Management
In the current business environment, reducing costs
quickly without negatively impacting growth is the
key challenge facing organisations. While rapid and
sustained cost management is a critical strategy. High
performing companies realise that there is a right and
a wrong way to go about reducing costs. Accenture’s
ongoing research into High Performing Business
demonstrates that those who get it right achieve
higher revenue growth, profitability, cash flow and
total return to shareholders. At times of crisis, many
companies make the wrong decisions around where to
cut costs. This has in many cases damaged company
brands and led to an inability to attract the required
talent, when the market changes for the better.
The Role of HR in Driving Rapid and
Sustained Cost Management
HR has a key role to play in assisting their CEO’s in delivering cost
savings, whilst ensuring that operational advantage is sustained.
The current economic crisis presents an opportunity for HR
to play an even greater strategic role at boardroom level.
Now more than ever there is opportunity to agree changes with
employees and trade unions, in order to preserve employee
headcount. A strategic HR function should now be asking if their
company’s operating model and culture is appropriate and responsive
to the current business environment and what actions might they
take to plan and manage inevitable changes over the coming year. If
costs are to be reduced, companies must consider what payroll and
administrative cuts can be made, to achieve the required level of
savings and thus ensure long term business sustainability.
The following table provides some examples of activities that HR can consider to achieve rapid and sustained cost management:
Lever
Take advantage of
Talent Management
Efficiencies
Renew Human
Capital Strategy
Streamline HR
Operations & Processes
Key Activities
• Evaluate lower cost payroll options through lower cost workforces, lower cost locations and geographies
(outsourcing), changes in organisational pyramids or overall workforce optimisation.
• Cut quickly, but cut the right people. Cut “fat” rather than “muscle.” For e.g., counselling out the bottom
10% and reinforce the top 10% so they don’t leave.
• Leverage cost effective recruiting techniques; keeping the talent flow moving – bringing in 5% new talent
(aligning for the future). Capitalise on surplus of skilled workers who in good times might have been
too difficult or expensive to attract.
• Follow rigorous workforce planning processes to align hiring to the new business strategy and anatomy
of the workforce.
• Review compensation policies for current workforce to identify opportunities for cost savings
• Use opportunity to create a structural change in the cost base of the company by looking at where your
talent supply should be coming from (e.g., get out of high cost locations)
• Ensure cost management is a key competency requirement in all HR processes.
• Instil strong business operator values into the current leadership team and into future leaders. Leadership
competencies should include elements of cost management and control.
• Take a look at 3rd party vendors and identify opportunities to streamline.
• Look at changing the overall service delivery model to maximize the use of technology or outsourcing.
Shared services models may be a key consideration.
• Maximise use of existing delivery models and drive down total HR cost.
• Review and optimise current HR processes, using Lean Six Sigma techniques
Payroll is an example of an area where specific cost savings can be
delivered, whilst also driving future growth.
Compensation Management and Strategic
Role Assessment
Organisations can often waste payroll budget by paying too much
money to the wrong people or jobs. They do this by adopting
universal pay policies that do not take into account their unique
needs. In reality only 10-15% of jobs need to be paid at the
median or above.
Using a strategic role assessment approach organisations can
scientifically assess the importance of all jobs quickly, to identify
where best to invest their compensation to increase ROI. High
performing organisations can make savings through not slavishly
following the market rates for roles that are not integral to their
strategy. This can add up to a 10% saving over a 2 year period, or
even quicker with firm management intervention.
The future
Current economic times challenge even the best performing
companies, but also create opportunities. HR can be at the core of
the Strategic Cost Reduction agenda by taking a number of steps to
reduce costs, whilst sustaining growth potential. The challenges of
operating a business today are great but many companies have
proven the ability to outperform their peers in turbulent conditions.
The HR function must now play a central role in assisting their
businesses to make the ‘right decisions’ around how to approach the
economic downturn and to position themselves to capitalise on any
future economic recovery.
Lisa Manselli is a Senior Executive within
Accenture’s local Talent & Organisational
Performance (T&OP) practice.
Lisa.Manselli@accenture.com
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