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Whilst, its difficult to straight way answer your "Cost Cutting" measure required by your company and needs more information, I am surprised why you thing "Family Owned" business don't give importance to HR.
Just for your information, around the world & within Indian almost more that 80% successful business are "Family Owned". And yes you are right to say how this family owned business run their firm in more ethical and professional way is something that will differentiate between successful and growing firms and those who are happy where they are and don't have any intention to grow up.
"Cost Cutting" is a big challenge and its a "art in HR" you are about to learn in your current firm. Use this opportunity to learn and develop your strategy on advising the company how they should be going about their "Cost Cutting". Your success according to me would be in achieving that right mix where you would do justice to both parties.
Wish you good luck.
5th September 2013 From Saudi Arabia, Riyadh
I suggest you to guide and suggest your management for COST SAVING, convey message down the line. gain the trust, build the responsible atmosphere. things will change.
Things are simple just to understand.
6th September 2013 From India, Gurgaon
I understand your situation. In Family owned business of such kind, its very difficult to take decisions as they don't given much power to HR dept to work efficiently. But surely you will be benefited in future.
Kindly define your position in your organization, are you heading the HR Department?
You have to do a lot of working on this. In mid mfg companies they don't have such data with them.
I suggest you need to make a organization tree and prepare the data as under:
(1) How much timre required for the prodution of single product.
(2) Cost of that product after mfg.
(3) Productivity done by every employee.
(4) Per person cost involvement in every product (Comparison with other employees).
(5) Discuss with the Managers/Supevisors separately and create sheet.
After that discuss with Management defining the cost analysis data of every person. I am sure they will like if you can present such data in front of your management specially output of every employee.
I would request senior members to correct me if I am wrong or add your expert comments.
6th September 2013 From India, Indore
Yes I'm heading the HR department. And its not about production staff, they want to do it with corporate staff. according to department heads all of thr team members are over loaded with work.
No one is in the favour expect the owners.
6th September 2013 From India, Indore
6th September 2013 From India, Lucknow
7th September 2013 From India, Indore
I think we have achieved cost cutting of HR in my company by deploying Technological methods, such as 100% paperless office, watching electricity & Telephone bills, relying more on the internet usage, between our staff members we use CUG close circuit telephone Numbers/lines, which work cheaper in long run, also try to cut on O.Ts …. And so on.
Muscat - Oman
8th September 2013 From Oman, Muscat
You have been given 2 straight forward tasks
The tasks now require you to use your brains, beyond the normal paper work that you have been doing. You said you are here to learn and at the first opportunity to do so, you want to change your job.
The owners have set a target of reducing 25% of corporate staff. They probably know where business is heading and in the tough times they know they have to cut overheads. In that, they are probably right. No hod wants to so that since it brings more pressure in them, in some cases, actually makes them work, brings down moral of the employees and exposes efficiency (or lack thereof). Well, too bad. If the business needs to cut overheads, then corporate salary is the first place to start with as most of the unproductive cost is at corporate administration.
You are asked to compute efficiency of each employee.
So what's the problem ?
Start with each department, get an org chart, check who are wrong there.
Check the work being done
Ask each employee from lowest to highest level, what is the work they are doing, what volume is handled.
You can get enough benchmark for each task from Internet.
Check if same work is being duplicated, if processes are wrong (use common sense). It does not need an MBA to figure out if processes need change.
From this, you will be able to figure out who is working efficiently, who is not and what scope is there for removing people. Brief your management on your progress for each department. If you are doing it wrong, they will tell you. If you actually find that people are already overloaded and your analysis can bring it out, they will accept that and look for other avenues. If they still need jobs cut they will do it anyway and people will simply have to work harder and longer till the economy improves. Lets face it, recession is on and there are few options.
One suggestion, convince your management not to fire anyone till your analysis of all departments are over as it will hamper your work in the next department.
Find out which processes can be streamlined by automation (look at crm, dms, erp as options).
Btw, you may find its the hod that needs to be removed.
I know of a company in USA where during the recession (2007-2008), the board decided to remove all its top managers, and let the next set of managers who were paid much lower, take over. The company survived and is stronger at this time. The new managers were told this is the budget for your department. Reduce your manpower and cost. Some lowered head count, others convinced the entire team to take salary cuts of 25%. If they didn't do it, I am not sure if they would have managed with sharply lower revenues and losses resulting that went on for 4 years. With cost cuts they survived with close to break even.
As for process inefficiencies, I know of a TATA group company that 15 years ago discovered that they had 35 people matching inter department debit notes with inter department credit notes and reconciling them (and god knows how many man hours were spent in having departments made debit notes and the other department make credit noted for the same work). The solution was simple : let the department who has done work for other department make a debit note, get it signed by the receiving department and hand over to accounts to make an entry. The change was logical and common sense. It resulted in reduction of 55 people in accounts.
(Moderators note : I am not naming the company, it was 15 years ago and no one cares since it is not current, and lastly, it's an acknowledged case study and in public domain)
So, Mr suraj, if you want to change your job, by all means do so. Of you thing it's unsafe to work for a company retrenching people, change your job. But, do understand that at times, companies need to make hard decisions and HR has to implement them. Simply because you are given a task that will result on 50 persons losing their job is not the reason to not do that work. Or to feel hurt that they threatened to fire you from the job if you fail.
If you have not done that work before, then it's time to learn something new. If you fail, then at least you tried. Most companies will appreciate the efforts. Unless you got the job projecting that you were capable of doing such an analysis, etc.
Lastly, if you can't do it, and your company management still needs it done, ask them to get in touch with me. My firm does lot of work on profit planning, cost control and efficiency. We can probably do it, albeit, as a professional assignment.
9th September 2013 From India, Mumbai
#AnonymousDear Mr. Sagar,
I agree with the views of Mr. Saswata,
Mr. Sajjad you ideas are also helpful as Mr. Sagar told that it was a mid size mfg family owned business so I don't think they will adopt these facilities in their plant now. Am I right Mr. Sagar?
Many are suggesting to change your job but my view is to face the situation very smartly. What I think that just changing the job is a simple option of running away from the problems. If you can smartly workup this situation, then you will really step forwards quickly towards your growth. I agree its not so easy and its a very big challenge for anybody.
What you will learn by this:
How to face number of persons, people with different minds, opinions, views, how to convince people, facing some litigations and the most important, for handling this situation you have to study and then only you will came to know the deep/internal legal action, tricks etc. This will really help you in your future not frequently. If you can handle labour courts and other litigiations etc.
It might possible some are of the view that keeping your job on delima is not good and you can find other jobs easily but this is the best time of learning and this will definitely take you to the top in term of knowledge, negotiation, litigation knowledge etc.
9th September 2013 From India, Indore
Deep regrets. Sorry for the kind of work you are literally forced to do or quit.
What is most disturbing is why cost cutting is always focused on reducing people employed. Without employees no organization can succeed. The moment there is a crisis they chop their labour.
Cost cutting need not be with cutting on manpower. In fact it should start with other areas such as;
1. Inventory - Raw material stock in excess / work in progress and kept in piles without being completed, / finished goods stock left unsold.
2. Plant utility in terms of resources being used well - power, machine output, quality of the job done, machine condition to deliver etc., which can improve productivity
3. Marketing - focus on increasing sales/ or profits / expanding the market with available resources / pruning channel members
& many more, administrative expenses, logistics etc.,
In fact a good job is where the employees are given more responsibilities during crisis. When HR takes the responsibility of role negotiation and involves employees in organizational goals, there can be excellent results.
In my opinion downsizing has to be the last option. When this is the first thing a company wants to do the organization is not professionally managed. Once the job is over you will also be sent out. That is the value they will hold to HR. This work is not a feather to add in your cap. Just quit if it cannot be truly justified.
In case you need help call. 09952419530
9th September 2013 From India, Tiruppur
I just had a major argument with someone who is implementing cost cutting for his company, asking unions to forgo wage hikes, take some layoff, etc but where the company just spent 6 cr on a work hard play hard conference in Macao.
One good thing I see in this case is that they are reducing corporate staff and not touching manufacturing employees, which is critical. I hope sagar will give us more details
10th September 2013 From India, Mumbai
Sagar - Your dreams have just been answered and now you are wondering how to get out of it. The single most important platform to learn for an HR is when you are required to restructure the organization in a depressed market condition. Are you aware of the amount of knowledge you will gain out of this one single experience? Even if at the end the promoter says get out, you will come out 100 times a better HR professional than what you are now.
You are talking of an opportunity to learn about Employee productivity, team formation, change management, restructuring, conflict management, grievance handling , cost optimization, management interaction, people interaction, exits, employee motivation all in one single experience.
Leaving is an option that is omni present!!! you can LEAVE now and not learn but be happy that you didn't have to face uncomfortable situations or STAY and learn, evolve as a HR professional, face some tough unpleasant situations but come out of it a better HR professional. The Choice, as usual, is yours!!! It always will be....
11th September 2013 From India, Delhi
If 25 people are retrenched today, tomorrow organization might itself sink, resulting in job loss for 500 people.
13th September 2013 From India, Madras
I'm gonna take this challenge, and definatly will give a try at-least.
Mr. Saswata, production staff has already been reduced and the other problem here is, that all the VP, CEO & CFO are from the owners family/relatives/friends who are getting 2-5 Lac every month.
and I m sure owners not even going to reduce thr salary.
so whats the sense of firing a employee who is drwaing 30-50k/Month.
13th September 2013 From India, Indore
In a family run enterprise, normally one would expect the top mgmt to make some sacrifices. After all it is their baby. In your case, it is unfortunate that they are unwilling.
13th September 2013 From India, Madras
I went through all the points discussed.. As first HR of any mfg. co. ( specially family owned), one has to go through this..
First of all.. you need to go through the job profiles of each employee, there are chances that you are not utilizing your resources 100% coz reducing 25% of staff says that many of them are underloaded..
Gather the employee data, their experience and qualification data, their profiles and grade them.
You will need assistance of the directors/ the person who was handling/ hiring people previously.
Nothing is impossible :)
18th September 2013 From India, Mumbai
Does 100% utilization actually exist? Is it practically possible to have 100% resource utilization?
"Gather the employee data, their experience and qualification data, their profiles and grade them". And then what?
Sorry if i sound foolish and ignorant but just trying to understand the process of utilization identification that quite a few feel can be used to reduce staff. Let me explain where my confusion is. I have a internal audit person in my F& A team. In real terms his work is only for a week every quarter where he has to audit the systems and submit his report. If i were to do a utilization chart for him in mid of a quarter, he would be at 10 % utilization and if the same exercise is done in the first week of a quarter, his utilization would be above 100%. Now do i remove him or do i keep him ?
So my question is... How do you decide whom to let go? Do you decide based on what he is currently doing or what he does in terms of the critical nature of his role or his performance or his grades as per his senior's opinion or are there some other factors that decide it?
Incidentally have you noticed that in mid size / smaller organizations, the account / admin. departments are always quite over staffed but the management will never agree to it and you cant touch them...:-)
18th September 2013 From India, Delhi
I agree with your points. When we are talking about 100% utilization, it means to the maximum level.
By grading them and their profiles, we will have clear idea who is doing what during working hours. In our system, there are people doing multiple tasks and performing best in each work given! You can also choose the multi taskers to make a wise choice.
You mentioned about the auditor, you can not say good bye to the employees who are doing special and important job for you. Here we are talking about the number to be reduced from admin/ clerical/ marketing dept or the dept having more number of employees than required ideally.
Other way, lay off is a big task, you can not ask your employees/ under performers to leave immedietly. We should give 1 to 3 months time...
19th September 2013 From India, Mumbai