Cost Reduction: With or Without
Headcount Reduction
Roselyn Sands
Thomas McCabe
(Remember Darwin?)
Survival of the Fittest:
How « fit » are you?
1. Context van de opdracht
Do you « work smart »:
Right person/Right Skills/Right
Place/Right Time?
March 2013
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Cost Reduction: With or Without Headcount Reduction
2
“Fitness” Requires Cost Competitiveness
68%
of organizations
are under severe pressure
to reduce HR costs*
25%
1 in 4
Organizations truly understand
the full HR cost baseline*
reduction of operating
costs are typically achievable
on large scale HR transformations*
* Source: Corporate Leadership Council 2011
March 2013
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Cost Reduction: With or Without Headcount Reduction
Examples of Human Resource Costs
Human Resources / Payroll Costs
Processes, Policies, Program & Service Delivery
Budget
‘Visible’
Human Resources
Costs
Staff Time Spent
on Human Resources
Administration
‘Invisible’
Human Resources
Costs
Benefit
Coverage for
Ineligibles
Added Costs
Lost Productivity
Lost Revenue
Capital Utilization
March 2013
Ineffective
Human Resources
Service Delivery Model
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Lost
Revenue
Due to Lack
Of Training
Payroll
Errors
Cost Reduction: With or Without Headcount Reduction
Excessive
Vendor
Fees
Lost
Productivity
Due to
Absenteeism
Misaligned
Compensation
Programs
HR Cost Reduction with or without headcount
reduction – That is the question!
HR cost reduction
Employment costs
Cost of employment
HR functional costs
Resources
HR service delivery
Vendor management
►
Salary costs
►
Redundancies
►
►
►
Tax efficient
compensation
►
Review working
practices
Policy and process
efficiency
Value of services
delivered
►
HR structures
►
►
Change pay mix
►
Refocus employees
►
►
Cost effective HR
policies
►
Address absenteeism
and turnover
Roles and
responsibilities
Consolidation of multiple
vendors
►
Compliance versus
discretionary activity
March 2013
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Cost Reduction: With or Without Headcount Reduction
HR Costs
Ideas
Opportunities
Reduce overtime cost
►
Reduce social security taxes through / of tax effective
compensation
Cost effective compensation design:
► Benefits in final (car)
► Profit sharing agreements
► Savings plan
Think benefits too (not only compensation)
Evaluation of current benefits leading to social security savings:
► Lunch vouchers
► Supplementary pensions
► Laptop/Mobile phone/Internet
Cost efficient HR policies
Evaluation of current HR policies to ensure they take advantage of tax
effective planning opportunities:
► Hiring policy
► Termination policy
► Global mobility policy
March 2013
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Address working patterns and organization to reduce overtime use
Cost Reduction: With or Without Headcount Reduction
Human Resources
Ideas
Opportunities
Reduce contractors and temporary headcount
►
Undertake analysis of non-permanent headcount
►
Review cost saving opportunities and understand any
resourcing issues that might arise
Introduction of innovative working practices
Review of working time arrangements to assess opportunities to
implement flexible or reduced work hours or career break
Refocus employees
►
Redeploy employees in areas where shortage of resource
needs.
Review resourcing needs and roles and responsibilities to
understand where there may be redeployment opportunities
►
Assess where activities and training may be required to prepare
for redeployment
Address turnover and absenteeism issues
►
Understand reasons for absenteeism and employee attrition
(eg, leavers interview)
►
Develop mitigation activities to address these issues
Redundancies Headcount reduction
March 2013
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Careful planning and preparation is essential
►
Information and consultation requirements
►
Calculation of budget for redundancies costs
►
Readiness of the business to deal with an up turn in the market
Cost Reduction: With or Without Headcount Reduction
HR service delivery
Levers
Hypotheses
Opportunities
Introduction of efficient
and effective HR
processes reflecting
best practice
Back-office efficiencies and savings could be achieved in
the HR function through:
Review of HR function including:
Alternative HR deliver
models including SSC,
outsourcing and low
cost locations
Implementation of an
appropriately structured
HR function
Compliance versus
discretionary activity
March 2013
►
Policies and process: efficiencies and effectiveness
in the delivery of HR processes with increased
automation and consistency where appropriate
►
Structure: Changes to the way the HR function is
structured and located including shared services
and outsourcing options leading to cost savings
through wage arbitrage
►
Roles: Moving to best in class HR to FTE ratio and
increasing line management responsibility leading
to headcount reduction
Quick win cost reduction opportunities through ceasing all
non business critical activity
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►
Feasibility study for introduction of HR shared
services, outsourcing and relocation of processes to
low cost locations
►
HR process assessment to review effectiveness and
efficiency against best practice
►
Assess HR non-headcount spend to review value for
money and ensure the HR function is optimizing
return on investment
►
Review of current HR structure and roles and
responsibilities. Comparison against internal and
external benchmarks and ensure work is being
undertaken at the appropriate level
►
Review non headcount costs and assess where non
business critical activities are occurring
►
Undertake ROI assessment to ensure it is delivering
against objectives
Cost Reduction: With or Without Headcount Reduction
Manage HR vendors effectively
Levers
Hypotheses
Opportunities
Evaluation of HR
vendors
Evaluation and proactive management of HR
vendors may lead to a reduction in costs
through:
HR vendor review (including expatriate
relocation) – efficiency and effectiveness
Consolidation of
multiple vendors
March 2013
►
Consolidation of multiple vendors
►
Lower cost providers
►
More effective / efficient service
Organisations commonly use multiple HR
vendors across function and operating
companies. Making the most of potential
economies of scale to consolidate providers
can provide some substantial cost saving
opportunities.
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►
Review HR vendors in place across
different groups
►
Consider length of contracts in place
including break clauses and potential
penalties
►
Understand interest in consolidating
providers
Cost Reduction: With or Without Headcount Reduction