How the HR Department Can Optimise Costs

Cost optimisation remains a top concern for human resources as the demand for high-value services rises in tandem with the need to boost productivity. HR leaders regularly face ad hoc cost-cutting strategies that could have unintended consequences. It's critical to avoid a knee-jerk reaction even though departments are under pressure to reduce costs.

Ad hoc urgency must give way to a strategic perspective, as how you manage costs today may affect performance sustainability performance later on. Human resources should look into cost optimisation through enterprise-wide and function-specific initiatives to cut costs as much as possible.

 

What is cost optimisation?

Cost optimisation is an ongoing discipline with a business focus that seeks to increase corporate value while reducing costs. While the financial gain is unquestionably crucial, other aspects must also be considered, including the impact on operations and staff morale.

Aside from being profitable, investing in your employees is also morally right. Human resources can help the company to attain its goals of fair compensation, adequate benefits, an open-door policy, and a pleasant working environment. Companies must therefore see the effect of cost-cutting measures on employees as a hidden cost.

Human resources professionals need to take action to identify and deliver short-term efficiency gains while minimising the risks involved. Here are five critical areas where human resources can improve profitability while preserving staff productivity and satisfaction:

 

1. Make succession planning and employee development a top priority

Employee career growth can help the HR department save costs by boosting productivity and reducing staff turnover. When employees are absent, retire, or quit, gaps can be filled through upskilling, cross-skilling, and succession planning. It has been repeatedly shown that developing talent internally is much more advantageous than doing it through external recruitment. Despite this, businesses still overpay for outside talent while disregarding the significance of internal talent mobility.

 

2. Smart hiring and the retention of staff

A company's capacity to draw in top talent, keep them on board, and reduce costs is essential. This is because hiring someone costs money and takes time. A bad recruit can cost 10 times the departing employee's salary. It's possible that the final cost will be significantly greater if you account for wasted productivity and training expenses. Intelligent systems that identify the best-fit applicants and retention strategies may be developed for hiring, onboarding, and ongoing employee engagement.

 

3. Automate everything (when possible)

Automation can help you save significant money and time when done right. The cost of managing errors and process delays is decreased, and it frees up human resources from performing manual and repetitive tasks. It also enhances accuracy and speed. Although technology has made significant strides, organisations are still not taking full advantage of the opportunities presented by automation. Automating numerous HR procedures and services can reduce costs by up to a third, including recruitment, screening, payroll, and training. Automation is sometimes disregarded, though, for various reasons, including concerns about replacing human workers and a lack of experience.

 

4. Consolidate expenses and perks 

Most companies offer benefits and incentives, including training, team-building exercises, and office parties, which account for a sizeable portion of their operational costs. It's not a matter of eliminating these costs (which would hurt employees). Still, HR can look into ways to consolidate some of these costs, like combining team building and training or planning out-of-office activities to include all teams to maximise the use of outside resources like facilities and trainers.

 

5. Perform a cost-value analysis on every single thing

Any effort to reduce costs should aim to eliminate any places where the cost is greater than the value to the company. Consider the expected benefit and potential drawbacks of all cost initiatives within the scope to reach the best match. Make it a point to list and order the activities that will best advance your objectives. To ensure support and commitment to your decisions, make the prioritisation process transparent and include stakeholders in the selection of initiatives.

 

HR must go from being reactive to being proactive

HR faces the complex task of increasing productivity, staff morale, and engagement while reducing expenses without laying off staff. Leveraging technology can be a quick victory to automate time-consuming and unpleasant everyday tasks. 

Nowadays, so many new HR software can support HR teams in streamlining procedures, integrating with external applications, introducing workflows, and developing digital forms that enable teams to work effectively and rapidly.

If you make cost optimisation a continuous, always-on discipline, you'll be prepared for a crisis and understand what cost actions to take. You will have moved from a tactical, reactive approach to a continuous, proactive one where you can use resources and talents to increase business value.

 

Visit the HR Library to acquire all relevant HR resources.

Contact here for more information on hiring employees.