Sunday, January 4, 2009

HR’s Role in Cost Cutting and Controlling Costs

People drive the business. They provide the ideas, the plans, the execution and the energy, along with a lot more. Getting and keeping a talented employee base is critical for future success.

The HR function, if it is used properly, is a tremendously important resource in the business equation of getting and keeping a company profitable. It directly influences the twin goals of increasing productivity and minimizing expenses.

Executives focus primarily on their core competencies since that has been what has made them successful personally. In order to make the company successful, this has to be extended across the organization. Some of the best practices for HR’s role in increasing productivity and controlling the human capital costs are below.

1. Hire the right person.
Jim Collins in Good to Great says, “Think of the small amount of investment involved here compared to what it costs if you hire the wrong person.” Most companies hire based on skills listed on the resume and interviews by inexperienced interviewers. That’s a mistake. To find top talent, first you have to define superior performance. Then you’ve got to take that definition and apply it to performance-based behavioral interviewing and other strategic recruiting techniques to attract the best candidates. You can teach the job but you need to hire the talent.

2. Incent improved performance in productivity and cost control. Both negative and positive reinforcement will motivate people to perform. But as the saying goes, you get more with sugar than you do with spice. The “sugar” you offer can take many forms, such as:
• Implement pay-for-performance programs.
• Eliminate the guesswork on competitive compensation—use compensation surveys.
• Offer flexible work schedules.
• Ask your employees for ways to cut costs. Generally speaking, employees know their jobs better than anyone else.

3. Retain good employees through competitive benefits, communicated effectively.
Like most executives, you want to know that you aren’t paying more than you have to, but enough that your employees feel motivated to perform. Offering the right benefits package can help you achieve this goal. Benefits differ between small and large employers. The standard list of benefit categories may look the same, but the plans, features, and services offered can be very different and so can the costs. The standard list would include insurance coverage for medical, dental, and vision care as well as short and long-term disability, life, accidental death & dismemberment (AD&D), and more and more frequently, long-term care. Get some expert advice on what is needed for the basic plan and how to cost effectively customize it to your employees.

4. Plan and work smarter. Make sure in the execution of your plan that the focus is on the high leverage areas. Even out customer demand whenever possible, so that you can eliminate all overtime and the extra costs. It is amazing how many “extra” non-revenue adding activities exist in all companies.

Above all, communicate, communicate, communicate! This may come as a shock, but even the people who write benefits materials don’t read their own materials. Why? Because traditional benefits booklets tend to have all the appeal of cardboard. Invest in a communication program that includes well written, succinct, compelling, and palatable descriptions of your programs as well as four or two-color professional printing. In addition, hold regular employee meetings to roll out new plans or just help employees understand the value of their benefits and how to use them, including how to keep costs low for themselves and the company.

Once again, while people are important, having the right people doing the right activities in your business plan is critical. If you need help in identifying opportunities within your company on how to impact your bottom line through improved productivity or cost cutting, contact us.



John Maver
Maver Management Group
(925) 648-7561
Maver Management

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