How to manage the ever-increasing total cost of workforce
Cost of labour or the cost of human resources is one of the topmost expenditure that a company incurs while running a business. The influx of modern technologies into the HR function such as data automation, predictive analytics and artificial intelligence (AI) have now added a certain level of sophistication in how businesses can manage and engage with their workforce for higher productivity. However, this also has translated into more cost to the company as now employers are recruiting staff who are well-versed in these emerging technologies. Such in-depth know how of advanced technologies and new-age skill sets naturally enhances the individual’s remuneration in the job market. Therefore, considering the aforementioned scenario, it is critical for today’s businesses to not only manage this cost optimally, so as to ensure a healthy ROI but also to ensure higher levels of employee productivity. While in larger enterprises, workforce cost management is more kind of good-to-have, rather than a must-have, in case of smaller businesses, where capital is one of the many major hurdles, cost management becomes a matter of indispensability, rather than a matter of choice.
Let us look at some of the key ways on how to improve workforce cost and save funds wherever possible:
- Effective result-oriented productivity analysis of employees: It is imperative to map the productivity of each and every employee working in the organization, against the cost or investments that are being incurred on those employees, from time to time. It must also be noted that productivity benchmarks and targets also shift depending on the nature of the industry and the scale of business in question. Some jobs already have basic benchmarks established while others follow stringent processes and modules. Performance measurement matrices today have become more scientific in nature, with the burgeoning use of various intelligent and intuitive online tools. It is also important to ensure that the employees are a right fit to the organization’s culture and whose objectives are aligned to the overall vision of the organization. Each and every employee should be mapped on the basis of predefined benchmarks and aligned to the same, decisions on the next steps can be actioned. If productivity is not upto the mark specified, an organization may consider transferring the employee to another operational department or allocate him an option, wherein he or she can best demonstrate his/her capabilities. Similarly, if an employee is performing well, incentive should be awarded to encourage productivity and add to their motivation.
- Manpower planning vis-à-vis revenue: The cost of manpower as the ratio of revenue of an organization varies depending on the nature of the business. Meticulous planning and optimal allocation of resources are the absolute prerequisites to keep this at the lowest side. Manpower planning involves reviewing current manpower resources, forecasting future requirements and availability, and taking steps to ensure that the supply of people and skills meets the demand. In a nutshell, over-staffing or under-staffing can both be detrimental for an organization. Balancing out the ratio of labour and work volume, therefore, helps an organization to ensure profitability in the long run. Many business leaders are aware of this and have created systems to sustain this necessary balance. Some common methods that are in place include annual projection of vacancies, long-term estimates of vacancies, fixed minimum man specification requirements and specific position estimations. It also includes how much each team member contributes to the overall revenue (ROI) of that particular team vis-à-vis his individual pay scale.
- Effective utilization of technology: With the advancements in technology, database recording, digital health report recording, analytics, cloud processing and remote work solutions have changed the way workforce operates. Technological breakthroughs have done away with the limitations of geography and time, making today’s workplace more flexible. Any employee can work from anywhere and coordinate/ collaborate with his team members in real time over calls, VCs and other online video and audio platforms and services. For example, with the help of video-conferencing, the R&D team which is centrally located can impart training to teams in regional offices smoothly.
- Cross functional exposure: Optimum utilization of resources through cross functional exposure is a good way to manage cost and help individuals grow, at their own pace and in their own time. For instance, considering today’s integrated digital world, an employee in the marketing department could also easily be cross trained to handle social media platforms or PR functions of a brand. It is a great mutually beneficial concept, where employers can get more work done with fewer employees and employees can add another skillset to their professional portfolio. Win-win for all! Many organizations today also invest in training their workforce. Here, one-size-fits-all training is no longer adequate to meet the unique needs of learners. Employees expect customizable training across multiple platforms. Factoring in such costs is also therefore essential. Many organizations today organize boot camps, workshops, tailor-made training programs to cross train employees and hone their skills in other ancillary functions, apart from their core- competency areas. Internal audits are organized where the specific needs and requirements are identified. Post which, modules and faculties are conceptualized to organize such trainings. Employee exchange programs to domestic and foreign locales are also another way to ensure cross-functional exposure and holistic learning of workforce. In fact, learning and development, today, has become one of the key investment areas for corporates.
On a concluding note, managing workforce cost is not too difficult and can be achieved through keeping a track of finances. Managing finances astutely and implementing practices such as cross-functional training through L&D programs, leveraging best-in-class technologies, effective manpower planning can go a long way in helping organizations make better and well-informed decisions. These practices also facilitate in making comprehensive comparatives of business data and make inclusive predictions for budgets and schedules.