Taking costs out of your business:
Rapid Cost Reduction Scan
How Towers Perrin can help




                             R...
Value proposition
       We have a checklist of over 100 cost saving interventions in the area of compensation,
       ben...
Agenda
       The need for speed
       A framework for analysis and action
       Cutting costs from:
           compensa...
The need for speed


                  Large




  SIZE OF
  SAVINGS




                  Small

                        ...
Our overall approach for taking actions


                                             Validation                         ...
Rewards - sample items of checklist of 25
                                                                                ...
Benefits - sample items of checklist of 40
                                                                               ...
Cost savings can mean improvement!
                                                                                       ...
HR Function - sample items of checklist of 35
                                                                            ...
There are different actions that can be taken -
with different timelines

SOURCE                       SHORT-TERM ACTIONS ...
Target spend to ‘pivotal’ roles
                       Talent Segment and Value                                          P...
Moving forward -
How does your company progress from today?

                                       How Towers Perrin Can ...
We can conclude the rapid cost reduction
process in up to four to six weeks
    1                                   2     ...
Rapid Cost Reduction Scan
      Getting insight is necessary to get a clear understanding of the current state of organiza...
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Rapid Cost Take Out

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The current economic turmoil has hit harder and is biting deeper than any downturn in recent memory. The pressure to reduce costs quickly is inexorable in many sectors.

Towers Perrin\'s Human Capital Group has developed a thorough process to identify, prioritise and implement cost cutting measures in compensation, benefits, and the HR function itself. Our approach is to partner with clients, and can include working on the basis of mutually agreed success fees rather than the traditional time and expenses method.

This offering is proving very popular, and I thought you would be interested in knowing more about it.

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Rapid Cost Take Out

  1. 1. Taking costs out of your business: Rapid Cost Reduction Scan How Towers Perrin can help Reproduction in whole or part of this material is strictly prohibited. They should not be relied on as a substitute for specific advice. Therefore, no responsibility for loss occasioned to any person as a result of acting or refraining from acting on the contents of or information contained in these notes can be accepted by Towers Perrin. © 2009 Towers Perrin
  2. 2. Value proposition We have a checklist of over 100 cost saving interventions in the area of compensation, benefits (incl. pensions) and HR function spend Working with our client base, we are adding to this list – and know how – daily Not all measures are suitable to all companies We will identify, quantify, and prioritise what works best for you Proprietary and Confidential © 2009 Towers Perrin 1 Not for use or disclosure outside Towers Perrin and its clients
  3. 3. Agenda The need for speed A framework for analysis and action Cutting costs from: compensation Benefits (incl. pensions) the HR function Optimizing your workforce Moving forward Proprietary and Confidential © 2009 Towers Perrin 2 Not for use or disclosure outside Towers Perrin and its clients
  4. 4. The need for speed Large SIZE OF SAVINGS Small Immediate Savings in Savings in Increased cash current future years ROI financial year SPEED OF SAVINGS Proprietary and Confidential © 2009 Towers Perrin 3 Not for use or disclosure outside Towers Perrin and its clients
  5. 5. Our overall approach for taking actions Validation Realisation Preparation Identification Context/desired Identify required Examine Execute changes outcome: internal data sources of savings in detail Size of savings Obtain internal Speed data Prioritize Risk appetite Benchmark Develop action Approach: plan Qualify potential ‘Top down’ savings Broad involvement Proprietary and Confidential © 2009 Towers Perrin 4 Not for use or disclosure outside Towers Perrin and its clients
  6. 6. Rewards - sample items of checklist of 25 Illustrative Illustrative Estimate Possible Actions – selected examples Ease Risk Timing Make 10% of the workforce €10m CURRENT YEAR redundant OR €2m Cut base pay by 20% IMMEDIATE €1,5m Freeze base pay CURRENT YEAR €0,5m Defer salary increase CURRENT YEAR €0,2m Differentiate on increases CURRENT YEAR €1m Manage out poor performers CURRENT YEAR €4,3m “Shut down”/sabbaticals IMMEDIATE €1,6m Part-time working IMMEDIATE €2,2m Cancel overtime IMMEDIATE €1,4m Reduce bonus IMMEDIATE €1,0m Reduce LTI levels CURRENT YEAR Proprietary and Confidential © 2009 Towers Perrin 5 Not for use or disclosure outside Towers Perrin and its clients
  7. 7. Benefits - sample items of checklist of 40 Illustrative Illustrative Estimate Possible Actions – selected examples Ease Risk Timing Make 10% of the workforce € 10m CURRENT YEAR redundant OR € 1m Close DB plan to new entrants IMMEDIATE € 1,2m Reduce DB accruals CURRENT YEAR € 2,5m Close DB accruals CURRENT YEAR € 0,5m Reduce DC accruals CURRENT YEAR € 0,8m Introduce employee contributions IMMEDIATE Convert employee contributions to € 0,1m IMMEDIATE salary sacrifice € 1,1m Move pension accruals overseas CURRENT YEAR € 0,1m Consolidate pension plans CURRENT YEAR € 0,2m Reduce employee medical IMMEDIATE € 0,2m Multinational pooling CURRENT YEAR Proprietary and Confidential © 2009 Towers Perrin 6 Not for use or disclosure outside Towers Perrin and its clients
  8. 8. Cost savings can mean improvement! ILLUSTRATIVE ILLUSTRATIVE Increase in Indicated Engagement From Current Level (Percentage) Conclusions Each point along the curve represents the best allocation of the corresponding total 1) Additional 40% investment Investment 1) To maximize return on engagement, the curve identifies 2) Maintain current 30% the best allocation of an level of investment yet increase in program investments 3) Maintain increase engagement 2) To maintain current total, the current level of curve identifies how to reallocate engagement 20% across programs in way that can at lower level of actually increases engagement investment 3) To reduce total costs, the curve 10% Current levels of identifies which programs should investment and be reduced to reallocate engagement investments in other areas in a way that maintains current levels of engagement –20m –10m 0 10m 20m 30m Decrease in investment Increase in investment from current level from current level Proprietary and Confidential © 2009 Towers Perrin 7 Not for use or disclosure outside Towers Perrin and its clients
  9. 9. HR Function - sample items of checklist of 35 Illustrative Illustrative Estimate Possible Actions – selected examples Ease Risk Timing Reduce volume: Simplify data € 0,2m CURRENT YEAR management € 0, 3m Reduce volume: Extend self service CURRENT YEAR Reduce HR FTE: Reduce distributed € 0,2m IMMEDIATE specialists Reduce HR FTE: Increase span of € 0,2m CURRENT YEAR control and decrease layers Reduce HR FTE: Increase HRBP € 0,4m IMMEDIATE manager ratio Reduce cost of providing services: € 0,2m IMMEDIATE Recruitment supplier consolidation € 0,1m Recruitment marketing consolidation IMMEDIATE Reduce cost of providing services: € 0,4m FUTURE YEARS Move from classroom to e-learning € 0,2m Centralize training CURRENT YEAR € 0,2m Reduce travel costs IMMEDIATE Proprietary and Confidential © 2009 Towers Perrin 8 Not for use or disclosure outside Towers Perrin and its clients
  10. 10. There are different actions that can be taken - with different timelines SOURCE SHORT-TERM ACTIONS MEDIUM – LONGER TERM ACTIONS Reduce volume of Engage with key managers Identify priority processes (cost, value work etc) Agree what to stop Redesign Communicate and stop Design and implement ESS and MSS Reduce HR FTE Develop staffing principles Redesign structure Apply top down targets Define new roles Manage redundancy process Develop staffing principles Conduct selection process Manage redundancy process Reduce cost of Renegotiate with suppliers Produce business case for changes providing services Confirm potential for greater use of Move work to existing SS, offshore existing shared services, offshoring Conduct RFP for outsourcing Identify potential for selective / broader outsourcing Proprietary and Confidential © 2009 Towers Perrin 9 Not for use or disclosure outside Towers Perrin and its clients
  11. 11. Target spend to ‘pivotal’ roles Talent Segment and Value Potential Strategic Action Today Tomorrow Strategic Build Critical to driving long-term competitive Job families advantage, with specialized skills or knowledge that affect the strategy Core Protect Support Streamline/ Cannot do without, but whose value could Outsource be delivered through alternative staffing Job families strategies other than full-time headcount affected by the strategy Non-Core Redirect Talent whose skill sets no longer align with the company’s strategic direction Source: The Conference Board, Strategic Workforce Planning, 2006. Proprietary and Confidential © 2009 Towers Perrin 10 Not for use or disclosure outside Towers Perrin and its clients
  12. 12. Moving forward - How does your company progress from today? How Towers Perrin Can Help You PREPARE: How much do you need to save? how to approach IDENTIFY: Where are opportunities? potential opportunities fast VALIDATE: Are the opportunities ‘real’? opportunities and considerations REALISE: Decided where to cut? achieve change effectively Proprietary and Confidential © 2009 Towers Perrin 11 Not for use or disclosure outside Towers Perrin and its clients
  13. 13. We can conclude the rapid cost reduction process in up to four to six weeks 1 2 4 3 Insights Workforce Total Rewards HR function Review and understand Understand various current Identify pivotal roles within the Understand various current current business results, total reward components and organization HR procedures, deliverables strategy and operating model organization spend and costs Map current employee Collect and review Assess current reward spend population to roles to develop Assess current HR function organization data regarding across the talent map “talent map” with external benchmark current workforce, rewards data Realign rewards spend to Utilize workforce demographic and HR technology where focus on strategic roles as data to identify opportunities Realign HR function/ available identified in the pivotal role for delayering the organization procedures to focus on Identify key opportunities and analysis and reducing redundancies strategic deliverables and risks within the workforce requirements in economic Identify opportunities to downturn reduce cost for benefits Analyze recent individual spend performance data to identify Identify opportunities to historically poor performers reduce costs Identify volatility risks within the organization concerning pension scheme Develop an HR optimization Develop a workforce plan Develop a rewards reduction reduction plan to strategically plan Establish implementation reduce employee headcount timeline and budget Establish implementation and cost timeline and budget Outcome: Outcome: Outcome: Outcome: Realignment of total rewards Identification of key Clear understanding of the Realignment of HR function spend workforce segments and current state of organization to Reduce cost and optimize to reduce cost and optimize action plan for strategically inform key decisions investment investment reducing employee regarding reductions in cost headcount 5 Change Management Process Proprietary and Confidential © 2009 Towers Perrin 12 Not for use or disclosure outside Towers Perrin and its clients
  14. 14. Rapid Cost Reduction Scan Getting insight is necessary to get a clear understanding of the current state of organization to inform key decisions regarding reductions in cost We are delighted to offer you the following Rapid Cost Scans in order to get this insight: 1. Reward cost scan € 5.000,- 2. Workforce scan € 2.500,- 3. HR function scan € 2.500,- These charges exclude VAT (19%) and an administrative expense loading of 6,5% If applicable, we are open to partnering with you on a gain sharing basis in the follow phase We look forward to meeting you: Suzanne Jungjohann suzanne.jungjohann@towersperrin.com +31 20 7114052 Bert van Loen bert.van.loen@towersperrin.com +31 20 7114111 Ton Winkels ton.winkels@towersperrin.com +31 10 2075732 Proprietary and Confidential © 2009 Towers Perrin 13 Not for use or disclosure outside Towers Perrin and its clients

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