Dinesh Divekar
Business Mentor, Consultant And Trainer

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I am working for a trading firm , the Management now wants to control the Employee cost - (reduction of manpower, Salary reduction not required), please let me know what should the HR department do to control the employee cost. Other benefits to employees - Health Insurance for fmly, incentives, yearly increement. Please help me out in framing and submitting good proposal.
From India, Kochi
Dear Sumitha,

If you are from trading firm then the employee cost would be the maximum cost of your business. But then what is the percentage?

Management's penchant for cost cutting is not new. However, what is important is to deprive them of what had been given earlier. By reducing the perks, will their motivation level also go down or remain same? As a HR professional, this study has to be done. In this connection, I have given my reply earlier. You may go through that reply:


If you wish to do the real cost cutting, then the scientific way of doing it is by raising the productivity levels of the employees. Therefore, following questions are relevant in this context:

a) Have the measures of performance been designed for all the employees? Is the performance measured accurately i.e. how do you check that the performance meter is not faulty?

b) Do you measure what deserves to be measured? Have you done the third party audit of the measures of the performance of the employees?

c) Do you maintain records of performance in systematic and and organised manner?

d) After measurement, what you do with the gap in performance? Are there multiple standards or only one standard? What is the cost of under-performance?

e) To bridge the gap between actual and desired level of performance, do you train the employees? If yes then do you have evidence of the increase in performance because of this training?

f) On what parameters do you measure customer satisfaction? What is the Customer Satisfaction Index (CSI)? What is the cost of customer dissatisfaction? What efforts have you taken to reduce this cost?

In the reply to previous post whose hyperlink is given above, I have written that there is cost of cost-cutting measures also. Leadership lies in ensuring that the this cost does not exceed the cost cutting measures itself!

My reply could take you to a new direction altogether. However, this is what public forums are for. Divergence of the thoughts is the essence of the forums. Hence my quaint reply!


Dinesh V Divekar

From India, Bangalore
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