How can HR contribute to cost reduction?
Nothing is worse than a “kneejerk” decision to cut headcount by X%, in order to please shareholders. To reduce the number of painful conversations, the most expensive people are often cut, even though they may be strong performers. When things recover, you regret cutting them, so you rehire them at a higher salary or on an expensive contract basis, and you’ve paid out all that severance cost. Would have been cheaper never to have cut them at all.
Believe me, there are other ways HR can reduce costs. Here are other ideas:
- Salary freeze
- Reduce or forego bonuses
- Reduced work week, with corresponding reduction in salaries (under stressed economic conditions, courts would normally not deem this as diminution of benefits, if the alternative was job cuts)
- offer unpaid leaves with few restrictions. If people are willing to take a break without pay, let them.
- Insource work from expensive vendors. Find people with capacity to do a little more and reduce vendor costs.
- Remarket your insured benefits
- Skip office renovations, new pantries, new aquarium in the lobby, etc. Cut non-people items first.
- Look at your mobility costs! Are you localizing expatriates in a location more than 3, 4 or 5 years? Are rents too high? Are allowances too high? Do you have a one-size fits all policy? Do you have special one-off deals that are not sustainable? You probably know where to cut, but are afraid of taking action.
If you have to cut, there are many ways to maximize savings while minimizing loss of value to the business, both short- and long-term. I can help you with many types of cost-cutting initiatives.
Redundancy/Reduction in Headcount
I have been through several cost cutting exercises, as head of rewards and mobility. I’ve sent expats home, and localised many others (some of them are still friends!) I’ve run the numbers, researched the rules, engaged outside legal, engaged headquarters, engaged finance, prepared the calculations, had them checked, prepared the talking points, the FAQ’s and assisted the 1:1 conversations. I’ve also been on the “receiving” end of a redundancy exercise, so I fully empathise with impacted individuals. I know how sensitive and stressful it is.
I can help you plan and execute a reduction in force/redundancy/right-sizing/organizational review, or what ever you may call it. If you need to reduce headcount, I can help. Why would I ever want to get involved in this again? Because I can help you carry it out “successfully”, if you pardon the expression. I can help you meet the business requirements, while looking at alternative cost reduction options. I can help you with selection criteria, with package calculations, with expat-related issues (health benefits, lease strategies, reassignments, etc.)
Fees are based on agreed scope and hourly billing rate.
Alternative Compensation Cost Strategies
Your organisation can achieve significant cost savings without reducing headcount, such as:
- salary freeze/hiring freeze/promotion freeze, etc.
- bonus/incentive funding rules, thresholds, disclaimers
- reduced workweek
- salary reduction–general or targeted to executives, overpaid employees, etc.
Benefits Cost Strategies
Often there are cost savings opportunites in the benefits area:
- accrued leave balances, encashment practices
- review of pension valuations
- review of health insurance utilisation rates
- use of stop loss insurance or multinational pooling
- dependent eligibility audit (esp in countries where this is administered liberally)
Mobility Programme Savings
Your mobility program–expatriate costs–is likely to offer significant savings opportunities. Savings can reach into the millions, and still have the talent you need where you want it. Best savings targets include:
- tax policy
- allowances for cost of living/goods and services
- hardship or mobility premiums
- use of Local or Local Plus approaches
- localisation of perrennial expatriates (more than 5 years on full terms)
Cuts in these areas are extremely sensitive and unpopular with the expatriates themselves, but if they see the cuts as an alternative to being retrenched, they can work. I know because I’ve done it and seen the results in a corporate setting.
Generally, my fees for cost cutting initiatives are on a billable time basis, or a % of savings basis, depending on the type of initiative.