High Performing Organisations address new challenges and opportunities by aligning the organisation’s business resources and focus on maintaining cost-efficient operations in an integrated fashion across the organisation, in pursuit of sustainable competitive advantage.
On average, direct HR costs account for28%of overall operating expenses.
PwC has found 15%-25% of HR operational cost savings, equate to 1.5M to 2.5M savings for every 10M of direct HR spend by Driving cost reduction and efficiency through HR.
HR is an enabler of strategic priorities such as workforce investment, which accounts for over 30% of an organisation’s revenue.
What additional cost points should you consider?
• Does your total HR spend exceed £1600per employee?
• Does your HR staff spend over 50% of time on administrative tasks?
• Do HR labour costs per employee served exceed £1000?
• Is your HR staff to headcount ratio is greater than 1:93?
There are many potential improvement opportunities that reduce inefficiency and allow HR to spend more time meeting business demands for managing in times of uncertainty.
Potential improvement opportunities
Ensure HR activities support mission-critical needs of the organisation, simplify and automate processes and eliminate non-value added activities
Cost management and control processes
The full potential of simplifying processes and eliminating non-value-added activities can only be realised after a baseline for managing costs is in place.
Organisation and Job Design
Reduce duplication and focus on type and number of activities, job fragmentation – focus on type and number of activities, rationalise span of control and coordinate work allocation base on role and/or skill set
Develop consistent policies and processes to achieve cy in programs, delegation of authority economies of scale
Deploy technology to maximise consistency, efficiency and functionality, decommission processes and activities are impacted redundant systems and address limitations and training opportunities
Outsourcing and Contracts
Verify that supplier capabilities meet business needs, assess service levels and contract terms, reduce spending through contract renegotiation and minimising non-core supplier services and establish supplier governance structures and protocols
Contracts and 3rd party spend management
How companies manage contracts and 3rd party spend goes beyond sound contracting processes.
Instill a new “cost management culture” through improved budgeting and management reporting processes and clear delegation of authority
Identify and eliminate root causes of data issues, particularly where downstream processes and activities are impacted
Companies have seen expenses drop by as much as 20% or more by outsourcing HR administrative and transactional tasks.
Re-engineering HR processes, if used effectively, can reduce overall HR costs by another 20%