Analysis

HR can prove its value by grasping the cost agenda with innovative initiatives

David Woods , 03 Sep 2010

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Continuing market uncertainty and the need to keep a tight rein on costs are an opportunity for HR to play a critical role in enhancing the bottom line and demonstrate real strategic value.

As the private sector stutters towards recovery, and public services face a period of prolonged austerity, the economic climate demands a continuing focus on cost control for all organisations.

Successful businesses will be those that learn to do more with less. The HR function is central to ensuring that the workforce is effectively resourced, not to mention sufficiently motivated, to support cost management objectives.

For HR managers, difficult times present an opportunity to demonstrate swift, innovative action and strong leadership, to help create sustainable, long-term value for their organisations.

Further reading

HR functions need to demonstrate their ability to evaluate and change cost structures and reduce immediate spending, by implementing five key measures.

Restructure

HR is expected not only to cut costs via short-term headcount reduction, but to go ‘back to basics’, helping to design an organisational structure that is lean, scaleable and fit for long-term purpose.

HR leaders can demonstrate true value by using their knowledge of the organisation’s vision, strategy and structure to identify the principles on which to base re-organisation. HR is well-placed to identify areas of excess and duplication, creating a clear business case for restructuring.

Align

As Stephen Covey remarks in The 7 Habits of Highly Effective People: "If you put good people in bad systems, you get bad results" – a maxim demonstrated by the catastrophic results of the banking sector’s short-term approach to managing and rewarding people.

In banking, as in any sector, when business and people strategies are misaligned, inefficiencies and barriers to employee buy-in are the predictable result. HR needs to challenge the board to re-examine how they reward key people – those that create the most value – in order to make best use of resources and balance the short and long-term needs of the business.

Involve

HR has a central role in maintaining employee engagement – a key challenge during tough times. Involving staff in the design and delivery of change is crucial to aligning organisational and employee goals, but is difficult when morale is low and insecurity high.

Yet working with your workforce can reap dividends, not least when it comes to cost management. There is an opportunity for HR to help create a cost-conscious culture throughout the workforce, making it clear that cost is the responsibility of the whole organisation.

Measure

HR leaders must speak the language of cost and value. They need to identify how HR costs can work harder for the business and demonstrate creative initiatives to optimise value from precious resources, while maintaining a tight reign on payroll, pensions and learning and development spend.

HR departments need to be lean, fit operations, ensuring that costs are justified by the value added to the business. Then they must prove that value by quantifying the impact of HR in tangible and compelling financial terms.

Develop

When the going gets tough, talent gets going. Tackling talent and performance management head-on, and consistently, will be critical during uncertain times. Loss of talent, and the declining performance that results, quickly undermines the bottom line and can potentially have a negative impact on productivity. To head off this threat, HR leaders must:

  • Use restructuring to redefine roles, provide new opportunities for talent and define accountability
  • Ensure that talent is effectively re-deployed around the organisation
  • Provide skills and tools for people to work ‘leaner’
  • Support senior leadership development to enable leaders to cope with turbulent times
  • Defend development resources for talent and core capabilities, so that these can grow in line with strategic needs
  • Map clear paths for top talent and proactively manage progression

 Tough times present tough challenges. But the current climate presents a powerful opportunity for HR to prove its value in the boardroom, by grasping the cost agenda and leading its organisation to recovery with innovative, sustainable, value-add initiatives.

Mark Williamson is a partner at KPMG Performance and Technology

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