Cost Cutting while Maintaining the Desired Level of Human Capital - Literature review Example

Human Resource Planning Introduction Modern business environments are characterized with increased competition within and across organizations and industries, financial and economic meltdowns, rising pressures to minimize costs, increased expectations from customers, changing consumer needs, tastes and preferences, the invariable pressure to achieve global competitive challenges and capitalizing on opportunities presented by progress in information technology systems. With such dynamics, the function of the HR has transformed greatly in ways not envisaged a decade ago which includes centralizing and decentralizing the HR functions, redefining roles, business needs getting more priority in delivery of HR services and more significantly, automation, streamlining and reengineering of majority of regular transactional activities of HR functions (Armstrong, 2006). Concomitantly, considerations such as reducing costs, satisfying customers and the increased need for flexibility, efficiency and quality remain the critical success factors for players in the global business arena, which has in effect, generated change in human resource planning. More often than not, economic and financial recessions generate negative attitude about the HR since they are charged with the responsibility of laying people off and cutting programs in line with the organizational directives as noted by Lussier (2011). In times of recessions, the management is usually too preoccupied with organizational survival and the need to reduce costs considerably that there is limited time allocated to strategic development efforts. Snell & Bohlander (2012) indicates that what is oblivious to the management is that margins are inadvertently reduced in the haste to generate satisfying expense line items that has an impact of minimizing the short to long-term competitiveness of the organization. Therefore, the HR is accountable to ensuring that the organization is able to strike the balance in cost cutting and maintaining desired level of human capital without necessarily threatening the long-term competitive advantage and sustainability of the organization. Role of HR function in developing strategy that ensures cost cutting while maintaining the desired level of human capital In regards to CGMS, the main challenge is striking the right balance in ensuring that it preserves its committed, reliable and productive human capital while ensuring that there is sufficient cash flow during the recession period and after the recession period has passed. The role of the HR function therefore is to develop programs, which will generate fast behavioural effect on costs and margins since development of programs that do not offer quicker solutions in relation to cutting costs will not generate sufficient support from the management who are focused and interested in fast impact initiatives as suggested by Snell & Bohlander (2012). The HR is accountable to ensuring that the developed programs have the elements of ownership where all stakeholders including the management and the labour force within CGMS are accountable for the financial results of their decisions and performance respectively. This will entail developing systems to establish business acumen where the labour force and the management see the connection between their actions and financial results in order for them to modify their actions and decisions accordingly and appropriately (Lussier, 2011). The HR’s role in the situation also would entail designing programs that promotes innovation through allocation of low budget. These have the potential to stimulate enhanced creativity and innovation among workers as they seek ways in which they can improve their performance and increase their outputs using limited/ low budgets hence, surviving the harsh economic times with no one being laid off (Snell & Bohlander, 2012). Be it as it may, the HR may be forced to lay off some of the human capital not only with the view to cut costs but also to maintain the desired level of human capital and more importantly to ensure the organization retains the best human resource in the field. This means that the role of the HR function will entail cutting off the right people, those employees, other things being equal, whose financial conduct is least supportive of the present financial mission of the organization (Armstrong, 2006). In addition, the role of the HR function will constitute retaining the right employee, other things being equal, who portray financial behaviour that is most supportive of the present financial mission and goal of the organization. In regards to planning for the financial future of CGMS, the HR will be responsible in developing the right employee in the right way by instilling the right financial conduct in the employees who are best suited to helping support and advance the financial mission of the CGMS as a corporate organization. By so doing, the HR will achieve the right mix in relation to having the right people, for the right job and for the right cost hence, achieving the conflicting goals of minimizing costs and maintaining the desire level of human capital (Snell & Bohlander, 2012). It will be crucial for the HR function to help the workforce and the management to look at the recession or the slow down not as a challenge but as an opportunity for the organization to re-evaluate its internal priorities and take the opportunities to be innovative in using low budgets to achieve enhanced productivity and performance. This will help avoid the tendency of seeing recession periods as the appropriate time of using redundancies and layoffs to downsize and applying excessive cost cutting measures, which impact on the margins in the long term, thus minimizing the benefit of cost cutting (Lussier, 2011). More often than not, cost cutting implemented in the short term results in long term harm on the competitiveness and profit sustainability of the organization, which is coupled with low employee commitment, morale and loyalty as they are more likely to see themselves as merely another depersonalized cost. Developing a human resource plan that takes the present situation into account, while building a foundation for future growth Bandt & Haines (2004) defines human resource planning as linking the issues of human resource to the business needs of the organization. The process constitute establishing and responding to the needs of an organization and developing new guidelines, systems and programs which ensures improved productivity and performance within changing situations. The goal of HR planning is to allow organizations to anticipate future needs and establish practices and programs that will help in meeting the identified future needs. This ensures that the right people with the right attributes, skills and knowledge are available when and where the organization requires them as echoed by Lussier (2011). According to Bandt & Haines (2004), through HR planning, an organization such as CMGS is able to have control over its future by effectively and efficiently preparing for eventualities, which it achieves by anticipating changes and developing suitable plans of actions. More often than not, failing to plan is planning to fail since organizations that are better equipped to capitalize on future situations, their organizational future improve (Snell & Bohlander, 2012). The main challenge in human resource planning is attracting suitable employees. For the CMGS, the challenge compounds into ensuring cash flow and retaining the right level of human capital. This problem can be solved by developing a HR plan that constitutes establishing a HRIS module, which will not only help the management in knowing what everyone within the organization is doing, but also, help CGMS cut costs and help the company give its human resource access to information more effectively and efficiently as echoed by Walker (1993). Developing a HR plan that takes the issues at CGMS into consideration entails one that analyzes the role and responsibility of each employee and evaluating how they can be utilized effectively to ensure costs are minimized and their individual needs are met as supported by Snell & Bohlander (2012). Effective planning will be crucial in helping CGMS respond to present and future challenges proactively and safeguard against last minute recruitment exercises and more so, over or understaffing which has a negative impact on productivity of the firm (Bandt, & Haines, 2004). This means developing a comprehensive selection and recruitment program within the HR plan in order to know who does what, when, how and at what cost (Lussier, 2011). The other way of developing a good HR plan suitable for CGMS would be to seek a consensus and fully engage the stakeholders who include the management and the labour forces in coming up with the best way in which the company can stop haemorrhaging money. As described by George Williams, CGMS’s CEO, improve the performance of the order book and more importantly ensuring that nobody loses their job. Mutual engagement will ensure that the developed plan would receive support during implementation (Bandt & Haines, 2004). In addition, as the stakeholders engage in designing the plan, they will in the process identify alternatives to downsizing, which will help minimize costs while sustaining the right level of human capital currently, and in the future, which includes early retirements, job sharing, salary reductions and restricted overtimes among others (Walsh, 2009). Through engagement of all stakeholders, it will safeguard against cost cutting measures that have long-term impact on margins, which are usually because of diminished motivation among workers, dampened creativity and initiative and employee turnover of reliable and valuable people who may move into the competitor’s camp. Hence, reduce the organization’s competitiveness and value both in the present and in the future. Bandt & Haines (2004) indicates that involving all stakeholders in critical processes of an organization especially in decision-making and problem solving translates to improved work performance and efficient productivity. HRIMS According to Walker (1993), Human Resource Information Management Systems entails technology-based systems for assembling and processing information related to the HR function. Also referred to as human resource information systems, HRIMS are software programs that address the needs of the human resource in regards to planning, making accessible information about employees and highlighting an organizations’ regulatory compliance as noted by Gueutal & Dianna (2005). Among the challenges facing CGMS as highlighted by the HR Director is the lack of an HRIS module to help in important processes of the company. Processes such as selection and recruitment, which will help the company in knowing who does what, when, how and at what cost thus aiding in decision making in relation to minimizing costs and retaining the right level of human capital. Based on the current situation, HRIMS would help CGMS resolve its present challenge and ensure competitiveness and sustainability into the future. Using HRIMS, the company will be better placed in ensuring all areas have adequate number of people and safeguard against imbalance where some areas have more people and others have less than enough (Kavanagh, et al., 2011). By using the HRIMS, the HR will assess the right people and ensure they are retained. In addition, developing effective HR planning based on information generated by the HRIMS, the company will be able to keep an eye on the future and try position itself to take advantage of the inevitable upswing in the economy. Investing in HRIMS will generate more benefits in the present and ensure the company is strategically positioned to counter future challenges and sustains its competitive edge (Gueutal & Dianna, 2005). According to Kavanagh et al. (2011), the HRIMS is a tool that will help the HR and the company in general, to focus on effective HR management by supporting processes such as selection and recruitment, performance management, employee growth and development and aligning the employee needs with organizational needs. This will essentially help CGMS safeguard against losing valuable and loyal employees in case CGMS decides to cost cut by downsizing, enhance individual performance and enhance individual accountability. Walker (1993) indicates that HRIMS will function in aiding the HR Director in planning the workforce required to accomplish the organizational goals, retaining the right people and provisioning them with necessary tools to make them more productive. HRIMS will not only ensure that the right people are in the right jobs, in the right time and at the right cost, but also, help in tracking and monitoring their performance (Kavanagh, et al., 2011). Legal implications of downsizing Among the solutions generated to solve CGMS’s present predicament is downsizing. Be it as it may, it is important that prior to taking this action, the company addresses the legal implications attached to downsizing. As earlier indicated, the company should in consultation with the workforce seek alternatives to downsizing which includes reducing remunerations and benefits, reducing the number of hours worked, carrying out terminations based on performance, renegotiating employment contracts, job sharing and telecommuting among others as highlighted by Walsh (2009). As stated by Stacey, the challenges can be resolved by using the current situation as a good case for using redundancies and layoffs to downsize. However, it is crucial that the redundancies made meet legal definition and are executed in line with established policy. The company should consult the workforce representatives and the employees themselves prior to terminating them. In case the employees belong to a labour union, the company should notify the union about laying off its member to avoid legal repercussions. In addition, if the downsizing will constitute to mass layoffs, the company should give the workforce, state and local agencies notices to notify them of the impeding layoffs (Walsh, 2009). It is important that the process of downsizing and selection process is clearly stipulated to ensure those that deserve the termination get it and ensure the company is not sued for discrimination. Walsh (2009) notes that it is also important to ensure that employees who are terminated are duly compensated. As Stacey suggests, redundancies and layoffs are legally justifiable only when they meet legal definition and are executed in line with established policy. References Armstrong, M. 2006. A Handbook of Human Resource Management Practice. New Delhi: Kogan Page Publishers. Bandt, A., & Haines, S.G. 2004. Successful Strategic Human Resource Planning. New Jersey: Systems Thinking Press. Gueutal, H. G., & Dianna L. S. 2005. The Brave New World of eHR: Human Resources Management in the Digital Age. San Francisco: Jossey-Bass. Kavanagh, M.J., Johnson, R.D., & Thite, M. 2011. Human Resource Information Systems: Basics, Applications, and Future Directions. London: SAGE Publications. Lussier, R.N. 2011. Management Fundamentals: Concepts, Applications, Skill Development. London: Cengage Learning. Snell, S.A. & Bohlander, G.W. 2012. Managing Human Resources. London: Cengage Learning. Walker, A. 1993. Handbook of Human Resource Information Systems: Reshaping the Human Resource Function with Technology. New York: McGraw-Hill. Walsh, D.J. 2009. Employment Law for Human Resource Practice. London: Cengage Learning. Read More