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 With serious talk of the double dip recession being nearly upon us, I find that business minds are yet again turning to staffing numbers and staffing costs. Jaluch is again receiving phone calls about large scale redundancy programmes and requests for training for staff representatives, who are doubling up as redundancy representatives, have increased dramatically this autumn.
But I still don't get why organisations don't have joined up thinking when it comes to staff costs. Its not all about what your headcount is and what a 10% reduction of that would mean for the bottom line. Why do all staff costs still not come under one budget (or be shown in linked budgets) so that on a one page summary you can see the total salary bill, training costs, healthcare costs, pension costs, recruitment agency fees, legal fees associated with employment matters, NI costs, travel and other staff expenses, IT costs, uniform costs, profit share, directors liability insurances, company vehicle costs etc.
I still see far too often recruitment agency fees not being seen as 'staffing costs' and I still see legal costs associated with employment disputes and tribunals not appearing in any HR department budgets. In fact many managers and directors, whilst being aware of any tribunal awards made against them, are not aware of the legal fees that were incurred defending the tribunal claim. But why not, when all too often the cost of defending a claim can equal or even exceed the actual cost of compensation awarded?
Perhaps this lack of joined up thinking stems from internal politicking? Why for example, would a company secretarial department wish its budgets slashed as a result of HR taking on responsibility for directors insurance, employment legal fees, medical insurance etc. With the ear of the CEO, the director responsible for that budget is going to fight hard to maintain status and financial responsibility levels - that's human nature after all.
Or perhaps it stems from the fact that whilst HR costs are often the highest costs in the business, the HR function is all too often not represented on the board, meaning that others' priorities and views are rated higher than that of the HR department. In this case its down to the CEO to challenge the status quo regarding who does need to sit at board level and down to senior HR staff to demonstrate they have the commercial acumen and strategic vision essential to play a board level role.
Or perhaps this situation has arisen as a result of the HR function having a poor grasp of finances within the business - and failing to organise its own professional development in this regard. Ask any HR manager what their principal responsibility is, and I can guarantee you that the majority will say it is to supporting people, ensuring employee engagement, finding the right people for the right jobs etc. Very few will say that their principal responsibility is to the share holders of the business - after all what that actually means in respect of the 'day job' is usually outside the grasp of those who have not been trained to understand corporate finance.
I know there are numerous other reasons as well, but the fact remains that if you reduce headcount by 10% but increase your legal costs by 30% as a result of some careless management decisions, you will not have achieved the staff cost savings you need. Equally, if you reduce training to save costs, but then lose headcount due to staff seeking professional development elsewhere, which results in your recruitment agency fees increasing, again you will not have achieved what you need to achieve.
So really this is all about joined up thinking and using your common sense. Times are complex and tough so you must:
- have directors and senior managers on board who have oodles of common sense - educational qualifications and/or experience do not equal common sense!
- have people on board who are comfortable and confident to challenge the status quo and as a business be prepared to recognise when your valued and trusted suppliers (whilst still trusted) no longer provide value in the form of a modern cost efficient service
- have a CEO who relishes change and who has great strategic thinking ability skills (no, its not necessarily a given!!)
- put a renewed focus on innovation and change and properly reward within the business your innovators so it becomes clear to all that innovation is a skill you value
And just to push you down the HR common sense route:
I know of two really forward thinking organisations who can support you with understanding how to use social media to recruit in order to more sensibly manage the costs of recruitment.
I know of a great organisastion (Devant) who can support you with corporate legal work such as when you are buying and selling organisations. So if you know it is time to let go of your lawyers (yes, I know they can sometimes feel like a comfort blanket) companies like Devant do the traditional work of lawyers, but with a commercial approach and a sensible fee rate!
I know of another fantastic organisation, Halagen, that delivers great training in finance for non financial people. Perhaps its time you bit the bullet and got your HR staff trained to properly understand the full and varied costs of employing people before making decisions about losing more headcount.
And of course Jaluch can support with employment legal work including compromise agreements, tribunal defences and litigation and where it is sensible for an HR consultancy to do the work at HR rates, we do that, and when it is time for the legal profession to take over at legal rates, we pass work seamlessly on to EFDL who have supported us for years.
You know, in life, there are sometimes some easy solutions to costly problems. But as a business you have to be brave enough to challenge the status quo and let go of past precedent - sometimes easier said than done I know!!
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