Human Resource Cost Reduction
Cost reduction is defined as the achievement of real and permanent reduction in the
unit cost of goods manufactured or services rendered without impairing their
suitability for use intended. Cost reduction must be real and increase productivity. It
must be permanent and should not impair the suitability of products or services for the
intended use.
The scope of cost reduction is wide and it could be applied to wherever cost is
incurred. In many organizations the cost of human resources is very high. The top
management should find ways by which the cost of human resources is reasonably
reduced. Any abnormal reduction of cost in this regard may lead to unfavorable
organizational climate.
In autocratic type of organizational climate the human resources cost will be reduced
since the employer is not so particular about keeping the morale of the employees
high and to motivate them for higher productivity. Since better performance is
ensured through fear, threat, punishment and occasional rewards, there is no need for
spending on welfare cost. In custodial model, over and above their normal salary and
wages the workers look out for welfare measures for which the management has to
spend additional amount. So cost reduction is not fully possible here. In supportive
model of organizational behavior, the management extends leadership and support to
the employees for job performance. Here the employees’ needs are met in High
Order. So it may lead to increased cost. But their future performance may be high
which may lead to increased productivity and ultimately lead to cost reductions.
The human resources cost will increase when custodial and supportive model of
organizational systems are in vogue. The consequent result will be increased work
performance and productivity. When productivity increases it will reduce ultimate
cost of production. In toto, the concepts of increased cost and cost reduction are
changing frequently in regard to the cost incurred on human resources. The future
performance of the human resources depends upon the organizational climate. In
autocratic model, of course, the employer can reduce cost by suppressing the human
resources. But such cost reduction is a temporary one. The workers, who are
dissatisfied with work, wait for the apt time to quit the job which may lead to labour
turnover and subsequent increase in cost due to new recruitment and less productivity.
Even workers, who continue, may not perform up to expectations. In concluding
remarks, the human resources, could be stated as a variable factor which causes both
increase in cost and cost reduction which are the factors dominantly affecting the
future performance of the human resource structure of the organization.
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