1. Cost Reduction: With or Without Headcount Reduction
Roselyn Sands
Thomas McCabe

2. 1. Context van de opdracht
(Remember Darwin?)
Survival of the Fittest:
How « fit » are you?
Do you « work smart »:
Right person/Right Skills/Right Place/Right Time?
1. Context van de opdracht

3. “Fitness” Requires Cost Competitiveness
68% of organizations are under severe pressure to reduce HR costs*
1 in 4
Organizations truly understand the full HR cost baseline*
25% reduction of operating costs are typically achievable on large scale HR transformations*
* Source: Corporate Leadership Council 2011

4. Examples of Human Resource Costs
‘Visible’
Human Resources Costs
Human Resources / Payroll Costs
Processes, Policies, Program & Service Delivery Budget
Staff Time Spent
on Human Resources Administration
Excessive Vendor
Fees
‘Invisible’
Human Resources Costs
Added Costs
Lost Productivity
Lost Revenue
Capital Utilization
Lost Revenue
Due to Lack
Of Training
Lost
Productivity
Due to
Absenteeism
Benefit Coverage for Ineligibles
Ineffective
Human Resources Service Delivery Model
Misaligned
Compensation
Programs
Payroll
Errors

5. HR Cost Reduction with or without headcount reduction – That is the question!
Employment costs
HR functional costs
Cost of employment
Resources
HR service delivery
Vendor management
Salary costs
Tax efficient compensation
Change pay mix
Cost effective HR policies
Redundancies
Review working practices
Refocus employees
Address absenteeism and turnover
Policy and process efficiency
HR structures
Roles and responsibilities
Compliance versus discretionary activity
Value of services delivered
Consolidation of multiple vendors

6. HR Costs Ideas Opportunities Reduce overtime cost
Address working patterns and organization to reduce overtime use
Reduce social security taxes through / of tax effective compensation
Cost effective compensation design:
Benefits in final (car)
Profit sharing agreements
Savings plan
Think benefits too (not only compensation)
Evaluation of current benefits leading to social security savings:
Lunch vouchers
Supplementary pensions
Laptop/Mobile phone/Internet
Cost efficient HR policies
Evaluation of current HR policies to ensure they take advantage of tax effective planning opportunities:
Hiring policy
Termination policy
Global mobility policy

7. Human Resources Ideas Opportunities
Reduce contractors and temporary headcount
Undertake analysis of non-permanent headcount
Review cost saving opportunities and understand any resourcing issues that might arise
Introduction of innovative working practices
Review of working time arrangements to assess opportunities to implement flexible or reduced work hours or career break
Refocus employees
Redeploy employees in areas where shortage of resource needs.
Review resourcing needs and roles and responsibilities to understand where there may be redeployment opportunities
Assess where activities and training may be required to prepare for redeployment
Address turnover and absenteeism issues
Understand reasons for absenteeism and employee attrition (eg, leavers interview)
Develop mitigation activities to address these issues
Redundancies Headcount reduction
Careful planning and preparation is essential
Information and consultation requirements
Calculation of budget for redundancies costs
Readiness of the business to deal with an up turn in the market

8. HR service delivery Levers Hypotheses Opportunities
Introduction of efficient and effective HR processes reflecting best practice
Back-office efficiencies and savings could be achieved in the HR function through:
Policies and process: efficiencies and effectiveness in the delivery of HR processes with increased automation and consistency where appropriate
Structure: Changes to the way the HR function is structured and located including shared services and outsourcing options leading to cost savings through wage arbitrage
Roles: Moving to best in class HR to FTE ratio and increasing line management responsibility leading to headcount reduction
Review of HR function including:
Feasibility study for introduction of HR shared services, outsourcing and relocation of processes to low cost locations
HR process assessment to review effectiveness and efficiency against best practice
Assess HR non-headcount spend to review value for money and ensure the HR function is optimizing return on investment
Review of current HR structure and roles and responsibilities. Comparison against internal and external benchmarks and ensure work is being undertaken at the appropriate level
Alternative HR deliver models including SSC, outsourcing and low cost locations
Implementation of an appropriately structured HR function
Compliance versus discretionary activity
Quick win cost reduction opportunities through ceasing all non business critical activity
Review non headcount costs and assess where non business critical activities are occurring
Undertake ROI assessment to ensure it is delivering against objectives

9. Manage HR vendors effectively
Levers
Hypotheses
Opportunities
Evaluation of HR vendors
Evaluation and proactive management of HR vendors may lead to a reduction in costs through:
Consolidation of multiple vendors
Lower cost providers
More effective / efficient service
HR vendor review (including expatriate relocation) – efficiency and effectiveness
Organisations commonly use multiple HR vendors across function and operating companies. Making the most of potential economies of scale to consolidate providers can provide some substantial cost saving opportunities.
Review HR vendors in place across different groups
Consider length of contracts in place including break clauses and potential penalties
Understand interest in consolidating providers