Transforming HR in an Uncertain Economy
Priorities and Processes that Deliver ROI


  Cynthia DeFidello
  Rob Lamson
  Rob...
Last time…

       What is the optimal structure for HR during a period
       of prolonged economic uncertainty?
       W...
Last time…the best companies use tough times to build advantage


    Savvy companies may indeed need to change the way HR...
Today’s discussion

    High value initiatives that can create immediate ROI
    Consider specific changes to keep HR tran...
Past recessions tell us responses can be crude: some examples

    Pure concentration on cost reduction – top-     Turning...
However, there are many high value initiatives that can deliver
immediate ROI

There are three main sources of savings



...
HR function cost reduction

There are three main sources of savings when we focus on HR workforce size and
volume




    ...
Staying Alive:
The strategic story from leadership

    Step-up leadership visibility                One deep cut, well do...
Staying Alive:
  Our overall approach for taking action



PREPARATION              IDENTIFICATION       VALIDATION       ...
Staying Alive: Identification


  INTERNAL DATA
                                  BENCHMARKS             COMPARISONS      ...
Staying Alive: Identification
Understanding activity can reveal opportunities


     Fragmented work:
                    ...
Staying Alive: Validation


                                                                                              ...
Staying Alive: Realization



 SOURCE                      SHORT-TERM ACTIONS                                         MEDI...
Staying Alive: Insights

    Increasing manager and employee self-service can actually be welcomed!
    Top down reduction...
Unconventional Wisdom:
Stepping away from strategic HR

True Story:
    Senior HR executive under pressure to let go three...
Unconventional Wisdom:
The strategic story from leadership

    The business is under intense cost pressure
    Only those...
Unconventional Wisdom:
Stepping away from strategic HR

There are three main sources of savings



         Focus on Gener...
Unconventional Wisdom: Identification

      % of time spent on strategic work
         By “strategy-focused” players (gen...
Unconventional Wisdom: Validation


                                                                                      ...
Unconventional Wisdom: Realization



 SOURCE                     SHORT-TERM ACTIONS                                 MEDIU...
HR of the Future: A preview

    There is no doubt that the HR function of the future will
      Be much leaner than today...
HR of the Future: The potential


                          Traditional                               New
HR functional gr...
Moving forward:
How does your company progress from today?


                       You         How Towers Perrin Can Help...
Questions?

cynthia.defidelto@towersperrin.com
215.246.7284


rob.lamson@towersperrin.com
617.638.3635


james.millar@towe...
Upcoming SlideShare
Loading in …5
×

Transforming HR in an Uncertain Economy: Priorities and Processes That Deliver ROI

1,817 views

Published on

This Towers Perrin presentation explores changes to keep HR transformation alive in challenging times.

Published in: Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,817
On SlideShare
0
From Embeds
0
Number of Embeds
10
Actions
Shares
0
Downloads
254
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Transforming HR in an Uncertain Economy: Priorities and Processes That Deliver ROI

  1. 1. Transforming HR in an Uncertain Economy Priorities and Processes that Deliver ROI Cynthia DeFidello Rob Lamson Robert Millar February 24, 2009 © 2009 Towers Perrin
  2. 2. Last time… What is the optimal structure for HR during a period of prolonged economic uncertainty? Where should HR apply most of its focus for maximum effect? What are key HR roles that cannot be compromised? How do you deliver HR services for less cost but still effectively and efficiently? How do you determine the most effective use of limited money for new technology investments, if at all? What are the change management implications? Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 2
  3. 3. Last time…the best companies use tough times to build advantage Savvy companies may indeed need to change the way HR is organized, or the way they deliver HR services Organizations that will “win” will be those that build or acquire additional capacity to support the changes required with speed HR will return to the basics: Understand emerging business strategy, and the implications of that strategy for the workforce Identify and quantify short- and medium-term activities that generate immediate savings and/or support essential business strategy Focus on rapid optimization Proprietary and Confidential © 2009 Towers Perrin 2008 Not for use or disclosure outside Towers Perrin and its clients 3
  4. 4. Today’s discussion High value initiatives that can create immediate ROI Consider specific changes to keep HR transformation alive amid challenging times Staying alive Unconventional wisdom HR of the Future Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 4
  5. 5. Past recessions tell us responses can be crude: some examples Pure concentration on cost reduction – top- Turning away graduates already recruited down cutting of staff Voluntary redundancy exercises Small or zero pay increases applied uniformly Reducing the effort on communications Increased base pay to mitigate incentive plan Inappropriate signals about cost-cutting: “Cut loss out taxis – use one of the chauffeurs” Failing to manage the features of Failing to cut hard enough first time round performance programs – base pay, leading to ‘death by a thousand cuts’ incentives, long-term incentives Blanket recruitment and training freezes Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 5
  6. 6. However, there are many high value initiatives that can deliver immediate ROI There are three main sources of savings Cut current costs Reduce future costs Salary reductions Target “spend” Voluntary/involuntary 4 day work weeks Re-design total rewards Involuntary unpaid vacations Customized incentives End sabbaticals Severance Redesign jobs to use part timers Tuition reimbursement Improve return on investment Re-calibrate performance standards Re-mix total rewards Research perceived value Communicate value of total rewards Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 6
  7. 7. HR function cost reduction There are three main sources of savings when we focus on HR workforce size and volume Reduce volume of work Reduce HR FTE Prioritize vs criteria (e.g. strategic value, Apply ratios, spans of control cost, time) and identify work to stop Redesign structure – refine Reduce demand Redesign structure - radical Streamline processes Move work to managers, employees Reduce cost of providing services Reduce use of suppliers Renegotiate supplier terms Increase use of outsourcing Increase use of offshoring Increase use of service centers Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 7
  8. 8. Staying Alive: The strategic story from leadership Step-up leadership visibility One deep cut, well done, keeping conscious of the impact on the brand Keep focused on the external market Focus on critical talent Build confidence Focus on improving existing programs to Keep focused on mission, vision and values execute better, especially performance Laser-like sharpness on capabilities and management resources needed to weather and win – use Continued strategic recruitment this as the basis of cuts Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 8
  9. 9. Staying Alive: Our overall approach for taking action PREPARATION IDENTIFICATION VALIDATION REALIZATION Context/desired Identify required Examine Execute outcome: internal data sources of changes savings in detail Size of savings Obtain internal data Prioritize Speed Benchmark Develop action Risk appetite plan Qualify potential Approach: savings ‘Top down’ Broad involvement Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 9
  10. 10. Staying Alive: Identification INTERNAL DATA BENCHMARKS COMPARISONS EXAMPLE SAVINGS SOURCES Metrics That Provide Sources Types of Comparison Moving from median to Insights LQ in total HR cost per Ratio: total head count Towers Perrin HRSD By company size total FTE would save: to HR FTEs & HRO Surveys By industry type HR function costs per Towers Perrin Human By geography $ % of HR Costs head Capital Metrics By sub-function HR function costs as Saratoga In 5,000 percent of net Everest Research person co. 0.70 20 operating costs Time spent In 10,000 Degree of self-service person co. 2.39 27 Cost per process Ratio of total head In 20,000 count to HR person co. 10.7 39 generalists HR outsource ratio In 50,000 Vendor costs person co. 14.8 34 Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 10
  11. 11. Staying Alive: Identification Understanding activity can reveal opportunities Fragmented work: Illustrative example Over 200 staff touch “International Assignments” (FTE=12) 340 staff touch “exits” (FTE = 27) Managing HR data is a huge burden 14% of all HR time 170 FTE Time spent on strategic work is low: 27% for HRBPs 15% for compensation and benefits specialists Significant differences in time allocation: 14% - 30% for “Staffing” Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 11
  12. 12. Staying Alive: Validation Illustrative example Cost reduction ($m) (20,000 person company) Stretch Sources of Saving Possible Actions High confidence Target Ease Risk Timescale Simplify data management 1.25 2.00 CURRENT YEAR Reduce volume Extend self service 2.00 3.00 CURRENT YEAR Reduce distributed specialists 1.00 2.00 IMMEDIATE Reduce HR FTE Increase HRBP manager ratio 2.50 4.00 IMMEDIATE Recruitment supplier consolidation 1.50 2.00 IMMEDIATE Reduce cost of providing services Move from classroom to 3.00 4.00 FUTURE YEARS e-learning TOTALS 11.25 17.00 Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 12
  13. 13. Staying Alive: Realization SOURCE SHORT-TERM ACTIONS MEDIUM – LONGER TERM ACTIONS Reduce volume of work Engage with key managers Identify priority processes (cost, value 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 existing shared Move work to existing SS, offshore services, offshoring Conduct RFP for outsourcing Identify potential for selective / broader outsourcing Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 13
  14. 14. Staying Alive: Insights Increasing manager and employee self-service can actually be welcomed! Top down reductions, intelligently applied, can be required to break inertia Size thresholds for HR shared service centers are coming down Shared services are rarely fully exploited Multi-country HR shared services are feasible Outsourcing often does not save money (although may help with capital) Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 14
  15. 15. Unconventional Wisdom: Stepping away from strategic HR True Story: Senior HR executive under pressure to let go three director level “doers” Severe pressure to lower costs puts development and strategic HR on hold Rather than fire three doers, the senior HR exec decides to fire herself thus saving the jobs of those needed to deliver the basics Is stepping away from strategic HR a viable option? Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 15
  16. 16. Unconventional Wisdom: The strategic story from leadership The business is under intense cost pressure Only those critical to customer and product quality functions will be continued at staffing levels consistent with volume and revised sales goals Other functions should move to “essential services” only Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 16
  17. 17. Unconventional Wisdom: Stepping away from strategic HR There are three main sources of savings Focus on Generalists Focus on Specialists Eliminate most strategic support Eliminate most specialist support Remaining generalists focus on Replace with external “contract” downsizing/restructuring resources Trust managers to do the right thing and Remaining specialists focus on hold accountable implementation of policy changes Focus on Administration Maintain administrative capability to deliver basic services Take advantage of vendor consolidation of vendors and other low-hanging opportunities Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 17
  18. 18. Unconventional Wisdom: Identification % of time spent on strategic work By “strategy-focused” players (generalists and specialists) By administrative players % of time strategy-focused players spend on admin % of fragmentation caused by strategy-focused players % of strategy-focused players “fully competent” in role % of strategy focused players “needing development” to achieve full competence Does this represent an opportunity for resetting the HR strategic role? Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 18
  19. 19. Unconventional Wisdom: Validation Illustrative example Cost reduction ($m) (20,000 person company) Sources of Saving Possible Actions Stretch High confidence Target Ease Risk Timescale Reduce ‘operational’ generalists 2.00 3.00 IMMEDIATE Focus on Generalists Refocus remaining generalists 0.00 0.00 IMMEDIATE Reduce specialists 1.00 3.00 CURRENT YEAR Focus on Specialists Procure specialist services (when (1.00) (1.00) CURRENT YEAR necessary) TOTALS 2.00 5.00 Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 19
  20. 20. Unconventional Wisdom: Realization SOURCE SHORT-TERM ACTIONS MEDIUM – LONGER TERM ACTIONS Focus on generalists Reaffirm line people management responsibility Redesign structure Agree targets for retained roles Redesign retained role Develop staffing principles for retained roles Ensure line managers equip themselves Apply principles to achieve targets Manage redundancy process Focus on specialists Identify ‘external’ specialist services Redesign structure Agree targets for retained (policy and vendor Redesign retained role management) roles Develop marketplace and vendor management Develop staffing principles capability Apply principles and manage redundancy process Source ‘external’ specialist services when necessary Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 20
  21. 21. HR of the Future: A preview There is no doubt that the HR function of the future will Be much leaner than today Be more focused on the strategic people agenda in the business Play a more enabling and facilitating (rather than delivery) role Be more flexible and dynamic than the hierarchical structures of today Rely much more on external specialist and operational capability Be more customer-focused; addressing business issues in innovative ways Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 21
  22. 22. HR of the Future: The potential Traditional New HR functional groups Project teams Broad scope Focused scope Organizational units Virtual teams Oversight and compliance Dynamic facilitator “One size fits all” Tailored solutions Command and control Enable and engage Transactional, administrative systems Knowledge-based systems, wiki’s, - collaborative environment Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 22
  23. 23. Moving forward: How does your company progress from today? You How Towers Perrin Can Help How much do you need PREPARE: to save? how to approach IDENTIFY: Where are opportunities? potential opportunities fast Are the opportunities VALIDATE: opportunities and ‘real’? considerations REALIZE: Decided where to cut? achieve change effectively Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 23
  24. 24. Questions? cynthia.defidelto@towersperrin.com 215.246.7284 rob.lamson@towersperrin.com 617.638.3635 james.millar@towersperrin.com 215.246.4818 Proprietary and Confidential © 2009 Towers Perrin Not for use or disclosure outside Towers Perrin and its clients 24

×