Abstract
HR Cost reduction and optimization has really become a challenge with this global Covid 19 pandemic situation. Unexpected cost factors involved with the pandemic has to be overcome by HRM while enabling its work force to give an uninterrupted and quality service as previous to its customers.
The
plan of actions which are taken to minimize the cost must have both short term and
long term advantages. For an example reducing
headcount may help reduce costs in the short term. But it can also leave the
remaining employees demotivated and worried for their own positions, in turn
lowering productivity and competitiveness which may directly
effect to the service quality of the customers.So
what are the global HR methodologies to use for cost optimizing while maintaining
the required level of service quality in banking sector?
HRM has an important role to serve in these cost reduction measures and guide work force to designated targets without having quantitative or qualitative loss to the organization. It's important to think through what the right HR cost reduction means are for your organization's particular situation.
Here we are discussing global HR practices used to being more
cost efficient without fading the level of service quality of the organization.
Hiring freeze
This is a common practice which is often
implemented when the economy goes into a downturn. It is important to
reevaluate all the open positions and identify those who are capable within the
organization. So that those roles can be reopened and filled in a timely manner.
Cancel outsourcing and bring the work in-house
Lot of
organizations may be paying a premium for the flexibility offered by a third
party. If organizational bandwidth is sufficient to do the work with internal
resources it could be a win win situation since the business can able to save
money and retain the employees. But it is important to consider tenure of any
contractual obligations with the third party before canceling the contract
otherwise there may be a fee/penalty due to break the contract.
Redistribute work internally
When projects are canceled or delayed,
the demand and the workload on the workforce may low. To avoid layoffs and
hiring in different areas, organization can redistribute work within the internal
employees. For example, if recruiting slows during a particular period, we may
be able to use the recruiters' time in other areas of HR. This is same in the
other departments too.
Eliminate or reduce external training
Training is important for organizations and employees, since it can build new skills, help with retention and provide the organization with new ideas. Apart from external training, organization may have subject matter experts within the company who can run training sessions to fill the gap. HR can consider reducing the number of external training sessions taken in the given year, but not hiring them all together.
Streamline processes
By reviewing existing organizational
processes, we may be able to identify areas where efficiencies can be found or
running with excess staff. So freeing up
such employees and assign them to another task would save both cost and time in the organization. This prevent the costing associated with recruitments, trainings and development workshops.
Monitor and limit overtime and shift payments
HR team can play an important role in helping the organization to analyze extra working hours by reviewing practices of employees to reduce overtime and shift payments where possible. There may also be features that HR team can enable in their HR software to flag overtime when an employee is scheduled for too many hours. This provides a proactive approach to reduce costs.
Encourage employees to utilize their leaves
Having
employees use their leaves will reduce the organization's debt. While this doesn't
provide a cash benefit but it does improve the organization's balance sheet.
Deal with underperforming employees
Offer VRS and early retirement packages to employees who are not meeting organizational expectations can be used as a productive mean of cost savings and it is an added reason to focus on the higher-performing employees.
Reference
Daniel D. (2020) HR under pressure to cut cost.hrdigitaltrends.com. [online] Available from: https://www.hrdigitaltrends.com/story/14417/hr-under-pressure-cut-costs-know-how-protect-what%E2%80%99s-important. [Accessed : 03 June 2021]
Seow H. (2020) managing HR cost in a global pandemic.twobirds.com/ [online] Available from: https://www.twobirds.com/en/news/articles/2020/singapore/managing-hr-costs-in-a-global-pandemic. [Accessed : 03 June 2021]
4 Comments
Danushka this is a good article. Globally HR leaders often respond to ad hoc cost reduction requests, leading to unintended consequences for the business. To maximize cost savings, HRM and leaders should pursue cost optimization through both function-specific and enterprise-wide programs. Cost optimization is a business-focused, continuous discipline intended to maximize business value while reducing costs.
ReplyDeleteThanks Thushara, You are correct. HR leaders are focusing on cost reductions and streamlining the HR processes in global market.
DeleteThis is a timely topic. Because due to the covid-19 pandemic, most of the organizations in almost all the industries tried to go for the cost-cutting concept to survive in the business as most industries are suffering due to this pandemic.
ReplyDeleteCost-cutting is not easy for a company that produces high-quality products or delivers services in high quality. It needs thorough planning and monitoring. But with sudden problems like the covid-19 pandemic, most of the organizations had to go for ad-hoc cost-cutting. But to give the service or the product in the same quality even after the cost cut needs a lot of hard work and innovative thinking.
As you mentioned, some organizations stop their hiring process and run with minimum requirements. Some fire underutilized people. Some cancel outsourcing and try to do it all by themselves. Implement work from a home culture so that no need to facilitate most of the employees.
But when doing this cost-cutting thing, need thorough monitoring. Otherwise, this will end up with quality dropping bad behavior. It will affect the companies in the long run.
Thanks for sharing your view Panduka, I agree with you. Even though we have to go for cost cutting strategies, it should be clearly observed and monitored. Otherwise it may lower the quality of products or services that company provides. Proper cost cutting procedure should be implemented to avoid certain risk factors.
ReplyDelete