Given today’s volatile economies and hypercompetitive markets, businesses are under constant pressure to compress costs and improve profitability. For HR, this challenge is multi-faceted as the department is tasked with cutting costs, without cutting heads, and boosting productivity, employee morale, and engagement at the same time. However, being a strategic business function, HR has numerous advantages and can really help companies cut costs. Here are five ways how:
#1 Hire and retain star performers:
An organization’s ability to attract, hire, and retain top talent is critical to compressing costs. This is because an average company spends USD 4,129 per-hire and takes 42 days to fill a job opening. A bad hire can be even costlier – every time organizations replace a bad hire, it can cost them 10 times the salary of the outgoing employee. Add to it the costs of lost productivity and training, and the number could be even more staggering. Leveraging digital technologies such as Robotic Process Automation (RPA), Artificial Intelligence (AI), voice-first solutions, social media, and others, HR can turn hiring, onboarding, and ongoing employee engagement into intelligent processes that accurately identify the best-fit candidates and retention strategies.
#2 Prioritize training and mentoring:
An often overlooked aspect, providing regular employee training and mentoring can help HR reduce costs in a two-fold manner – one, by increasing productivity, and second, by reducing employee turnover. The increase in productivity through training is not only evident when the concerned employee is doing a specific job, but even when he/she is absent/leaves as others who received similar training can quickly fill the void, creating a robust internal succession pipeline.
#3 Automate repetitive processes:
Done right, this can be a real cost-saver as it not only frees human resources from doing manual repetitive tasks on a day-to-day basis, but automation also increases accuracy and speed, eliminating the cost of having to deal with errors and process delays. Yet, despite the advances in RPA, chatbots, AI, and NLP, businesses are missing about 50% of all automation opportunities on average. RPA in HR can specifically provide up to one-third cost reduction by automating recruitments, screening, assessments, payroll, learning, and many other HR jobs and processes. However, concerns of automation taking away human jobs, technology inertia, and lack of expertise are some of the common reasons behind automation not exactly being a workforce favorite.
#4 Promote talent mobility:
Conventional wisdom supports this and it has been proven time and again that developing talent from within is far more beneficial than looking outside. Yet, organizations ignore the value of talent mobility and continue to shell out big bucks to hire external talent. Digest this – it takes 18% more compensation to hire external candidates than the internal promotes in the same jobs. What’s worse - external hires are 61% more likely to be fired from their new jobs than those who are promoted from within the company. Why? Because it takes time for anyone to learn to navigate the ropes of an organization, adjust to the culture and hit the ground running.
#5 Consolidate activities :
Most companies offer discretionary, non-mission critical perks like office parties, team outings, reimbursements, and other such activities which account for a significant portion of operational budgets. Rather than eliminating these to cut costs (which can upset employees), HR can help consolidate some of these spends like combining training and team outing days, scheduling out-of-office activities for various departments together or in the same weekend to make optimal use of external resources such as facilities and trainers.
Do a cost-value analysis for everything
The goal of any cost-cutting exercise should be to eliminate any task whose cost of doing it exceeds the business value it provides. But this analysis is difficult as some tasks do not have a direct monetary value. The bottom line is to take time, identify the gaps, plan the cost cuts and the impact they will have, and only then execute.