By Dr. John Sullivan who can be contacted at
www.drjohnsullivan,com
************************************************** *******
1. Introduction
When the economy goes into a downturn, what corporations focus on is changes. It shifts from a focus toward growth and hiring to one where CFOs run the agenda and cost-cutting becomes "king."
Unfortunately, during this cost-cutting period, all overhead functions come under intense budget scrutiny, and HR is not exempt from the budget ax. I've been in HR for over 25 years, and during that time, I've helped many firms avoid the budget ax and watched others shrink. As a result of this often-unpleasant experience, I can forecast with a high degree of accuracy that your HR budgets and programs are soon (if they are not already) to undergo intense CFO scrutiny. Unfortunately, most HR departments tend to be reactive, so they often wait until the last minute to fight for their lives and dollars. If you're smart, you will act now both to preserve your individual job and all that you've built during the last six years of HR growth.
2. It’s all about productivity: Become an "HR Hero"
HR needs to recognize (if it doesn't already) that during tight times, the CFO and managers alike all want one basic thing. And that thing is increased productivity, which they define as results or outputs per Rand spent. Incidentally, they don't particularly care how it's done, as long as it is done. Unfortunately, instead of being a "productivity consulting department" with answers on how to improve it, most HR departments hardly know what it is, no less measure employee productivity. Business is simple; CFOs and managers care about improved productivity, product quality, and customer satisfaction, margins, sales, or product development speed. Everything else is, relatively speaking, just "chopped liver."
Right now, HR departments need to focus on productivity. Great ones first identify which people programs (training, compensation, recruiting, or employee relations) can dramatically increase employee productivity. Then they focus their time and resources on those productivity-increasing services and programs. So if you haven't already done it, begin tracking your firm's revenue per employee, profit per employee, or employee output per Rand spent. Next, do a competitive analysis by comparing your figures to your product competitors and to your own "last month's" performance. Then, begin "merciless criticism" of your current approach to improve your results every day until they are the highest in the industry.
Remember, if you can prove that HR increases productivity, product quality, and customer satisfaction, margins, sales, or product development speed... I guarantee you will be an "HR hero!"
3. What steps do you take so they won't cut HR?
The language of business - In order to understand the reasons why they cut HR first, you must understand CFOs. Most CFOs are business school graduates. They are trained to use the language of business, which includes Rands, results, and numbers. In contrast, most HR departments tend to focus on process, transactions, and "running programs." They talk of employee satisfaction, employee growth, and work-life balance instead of ROI, metrics, or business impact. Programs like O.D. and training are almost always the first to go because they tend to be the weakest in HR in making their own business case.
# Action item
Immediately begin a quick and dirty metrics program. Make rough calculations on program impacts and ROI (return on investment). Train your HR managers to talk and think in numbers. Do your assessment of HR program effectiveness and drop or improve those programs with low impact or ROI.
Seek executive sponsorship - even when a company's growth is slowing, there are divisions and products that are invariably still in growth mode. HR has a bad habit of treating all divisions and managers the same. During tough times, it's even more important to focus on powerful managers. Now be aware that although most managers "like" their HR people, what HR is seeking here goes beyond liking. First, we need to get the buy-in and sponsorship of "powerful managers." Next, we need to identify their needs and make your "business case" to these powerful people on how HR can make an impact in the important areas of recruiting and retaining top talent as well as increasing their overall productivity.
# Action item
Identify the business units and products that are in a growth mode. Next, identify the key leaders in those areas that have power and internal political pull. Work with their staff to identify the key business problems within those units. Return later with brief plans on how HR can act to improve their business results (time to market, productivity, margins) through people programs that increase retention, productivity, and the recruitment of top performers. Shift HR resources into these programs and don't forget to use metrics to measure their impact. If you succeed in impacting business results, ask the senior leadership to intervene on your behalf with the CFO. If necessary, ask the business unit manager to fund their people programs directly out of their own business unit budget.
Prioritize your programs and services - HR departments tend to operate as a series of independent "silos" with the philosophy that "all programs are important." Great HR departments work as a unit to focus resources on the most important areas. In addition, great HR strategies are not stagnant. Instead, they shift our focus as the economy changes. Obviously during times of slow growth, most recruiting and retention efforts can be slowed down, while other programs like productivity, performance management, layoffs, and firing bottom performers need to be ramped up.
# Action item
HR needs to prioritize its programs and shift its best talent and resources into areas that will have a more immediate return. This means before the CFO does it, HR needs to shift its internal budget and transfer the best HR professionals into these new focus areas. In addition, growth departments need to receive prioritized service from HR. Problems from these divisions must be handled first, and by our best people. Low growth and low-margin divisions need to come last.
Improve response time and customer service - we all know that the last few years have been hectic in HR due to expansive growth and as a result, it is not unusual for HR responsiveness and customer service to have suffered a little during that period. During tight budget times, it can be deadly to be known as an "unresponsive overhead unit." Bad service and frustrated senior managers are likely to "vote with" the CFO when it comes time to cut budgets.
# Action item
Conduct a "quick and dirty" satisfaction survey among a sample of your managers to identify where you stand. Avoid the temptation to make it anonymous because that prohibits you from identifying who "dislikes you." Internally within HR, begin tracking response times. For every 10th call or request, track the time it takes to get back to customers. Survey several of your "users" each week with a paper or e-mail survey to see what they like and dislike about your service. Track the overall customer service rate and distribute the metrics among your HR staff (if you can afford it, offer a reward for great service).
Become a competitive advantage - most HR programs are "vanilla" and differ little from those at your direct competitors. During tough times, executives become increasingly competitive (they're almost always more competitive than HR people). If HR is to survive budget cuts, it must demonstrate that its programs and approach provide the company with a distinct competitive advantage in the marketplace. This means HR professionals must be able to demonstrate that "the way we do it" is different enough and our results are superior enough so that our HR programs need to be maintained or even strengthened.
In a fast-changing competitive world, "speed doesn't kill," slow kills! Because the speed of change matters, HR must learn to "match" the speed in which their own company's products must improve. This means that HR must continually improve its speed of change and "obsolete" its own HR programs at least as fast as the speed the company improves its products and at a rate that is even faster than the competitors.
# Action item
HR needs to do competitive intelligence and benchmarking against our direct product competitors. HR must prepare a competitive analysis showing how and where our HR programs are superior. More importantly, demonstrate how HR helped us maintain an advantage in sales, productivity, or product development. This means gathering comparison information by talking to "recent hires" from our competitors and even hiring consultants that have worked with our competitors. If it turns out that we are not superior to our competitors, then plans must be made to upgrade the services and programs that have the most impact on business results.
Redeploy the talent - some would argue that CFOs are not "human" (and don't like people), and that's why they cut HR. In fact, most CFOs do realize the value of top performers in key positions, but they do view the average performer as a "cost." Effective HR departments already know how to do layoffs and to "cut costs." But in addition, HR needs to learn how to rapidly redeploy talent. Redeployment means rapidly moving the most productive workers out of low return divisions and jobs and into higher return ones. The shifting of great people into the "right job" can have a dramatic increase in productivity and without the need for any additional hiring.
# Action item
HR needs to begin a redeployment program. This means a proactive effort to identify top performers that would have an increased impact if they were moved to higher growth divisions or more impactful jobs. Unfortunately, most internal people movement programs rely on the employee to volunteer to move. Under redeployment, HR identifies this talent and proactively persuades them to move (or just moves them) into jobs where they can have a larger impact. Conversely, low performers in key divisions and jobs must be transferred to where they might make the most productivity impact or should be moved out of the company.
4. Conclusion
The CFO from a top firm that I once worked for told me at our first meeting that he "hated" HR people. When I asked him why he said it was because they always used a term he hated, "strategic investment." "Strategic investment," to him, meant "putting a lot of money in up front and maybe getting a little return a long time later." He later added that he also loved to cut the HR budget first because no matter how much you cut it...they still managed to "suck it in" and find a way to maintain all of their existing services.
If there is a lesson to be learned here, it is that if HR is to avoid budget cuts, it needs to do a preemptive strike. This means building a relationship with the CFO's office early on in order to identify the criteria that the CFO will use (or did use) for cutting programs. When these decision criteria are identified, HR needs to shift into immediate action in order to improve their "ratings" on these criteria. Because when you do, you can then sit back and relax while the CFO cuts their "other favorites" travel, purchasing, and the IT department!
From India, Gurgaon
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675www.drjohnsullivan,com
************************************************** *******
1. Introduction
When the economy goes into a downturn, what corporations focus on is changes. It shifts from a focus toward growth and hiring to one where CFOs run the agenda and cost-cutting becomes "king."
Unfortunately, during this cost-cutting period, all overhead functions come under intense budget scrutiny, and HR is not exempt from the budget ax. I've been in HR for over 25 years, and during that time, I've helped many firms avoid the budget ax and watched others shrink. As a result of this often-unpleasant experience, I can forecast with a high degree of accuracy that your HR budgets and programs are soon (if they are not already) to undergo intense CFO scrutiny. Unfortunately, most HR departments tend to be reactive, so they often wait until the last minute to fight for their lives and dollars. If you're smart, you will act now both to preserve your individual job and all that you've built during the last six years of HR growth.
2. It’s all about productivity: Become an "HR Hero"
HR needs to recognize (if it doesn't already) that during tight times, the CFO and managers alike all want one basic thing. And that thing is increased productivity, which they define as results or outputs per Rand spent. Incidentally, they don't particularly care how it's done, as long as it is done. Unfortunately, instead of being a "productivity consulting department" with answers on how to improve it, most HR departments hardly know what it is, no less measure employee productivity. Business is simple; CFOs and managers care about improved productivity, product quality, and customer satisfaction, margins, sales, or product development speed. Everything else is, relatively speaking, just "chopped liver."
Right now, HR departments need to focus on productivity. Great ones first identify which people programs (training, compensation, recruiting, or employee relations) can dramatically increase employee productivity. Then they focus their time and resources on those productivity-increasing services and programs. So if you haven't already done it, begin tracking your firm's revenue per employee, profit per employee, or employee output per Rand spent. Next, do a competitive analysis by comparing your figures to your product competitors and to your own "last month's" performance. Then, begin "merciless criticism" of your current approach to improve your results every day until they are the highest in the industry.
Remember, if you can prove that HR increases productivity, product quality, and customer satisfaction, margins, sales, or product development speed... I guarantee you will be an "HR hero!"
3. What steps do you take so they won't cut HR?
The language of business - In order to understand the reasons why they cut HR first, you must understand CFOs. Most CFOs are business school graduates. They are trained to use the language of business, which includes Rands, results, and numbers. In contrast, most HR departments tend to focus on process, transactions, and "running programs." They talk of employee satisfaction, employee growth, and work-life balance instead of ROI, metrics, or business impact. Programs like O.D. and training are almost always the first to go because they tend to be the weakest in HR in making their own business case.
# Action item
Immediately begin a quick and dirty metrics program. Make rough calculations on program impacts and ROI (return on investment). Train your HR managers to talk and think in numbers. Do your assessment of HR program effectiveness and drop or improve those programs with low impact or ROI.
Seek executive sponsorship - even when a company's growth is slowing, there are divisions and products that are invariably still in growth mode. HR has a bad habit of treating all divisions and managers the same. During tough times, it's even more important to focus on powerful managers. Now be aware that although most managers "like" their HR people, what HR is seeking here goes beyond liking. First, we need to get the buy-in and sponsorship of "powerful managers." Next, we need to identify their needs and make your "business case" to these powerful people on how HR can make an impact in the important areas of recruiting and retaining top talent as well as increasing their overall productivity.
# Action item
Identify the business units and products that are in a growth mode. Next, identify the key leaders in those areas that have power and internal political pull. Work with their staff to identify the key business problems within those units. Return later with brief plans on how HR can act to improve their business results (time to market, productivity, margins) through people programs that increase retention, productivity, and the recruitment of top performers. Shift HR resources into these programs and don't forget to use metrics to measure their impact. If you succeed in impacting business results, ask the senior leadership to intervene on your behalf with the CFO. If necessary, ask the business unit manager to fund their people programs directly out of their own business unit budget.
Prioritize your programs and services - HR departments tend to operate as a series of independent "silos" with the philosophy that "all programs are important." Great HR departments work as a unit to focus resources on the most important areas. In addition, great HR strategies are not stagnant. Instead, they shift our focus as the economy changes. Obviously during times of slow growth, most recruiting and retention efforts can be slowed down, while other programs like productivity, performance management, layoffs, and firing bottom performers need to be ramped up.
# Action item
HR needs to prioritize its programs and shift its best talent and resources into areas that will have a more immediate return. This means before the CFO does it, HR needs to shift its internal budget and transfer the best HR professionals into these new focus areas. In addition, growth departments need to receive prioritized service from HR. Problems from these divisions must be handled first, and by our best people. Low growth and low-margin divisions need to come last.
Improve response time and customer service - we all know that the last few years have been hectic in HR due to expansive growth and as a result, it is not unusual for HR responsiveness and customer service to have suffered a little during that period. During tight budget times, it can be deadly to be known as an "unresponsive overhead unit." Bad service and frustrated senior managers are likely to "vote with" the CFO when it comes time to cut budgets.
# Action item
Conduct a "quick and dirty" satisfaction survey among a sample of your managers to identify where you stand. Avoid the temptation to make it anonymous because that prohibits you from identifying who "dislikes you." Internally within HR, begin tracking response times. For every 10th call or request, track the time it takes to get back to customers. Survey several of your "users" each week with a paper or e-mail survey to see what they like and dislike about your service. Track the overall customer service rate and distribute the metrics among your HR staff (if you can afford it, offer a reward for great service).
Become a competitive advantage - most HR programs are "vanilla" and differ little from those at your direct competitors. During tough times, executives become increasingly competitive (they're almost always more competitive than HR people). If HR is to survive budget cuts, it must demonstrate that its programs and approach provide the company with a distinct competitive advantage in the marketplace. This means HR professionals must be able to demonstrate that "the way we do it" is different enough and our results are superior enough so that our HR programs need to be maintained or even strengthened.
In a fast-changing competitive world, "speed doesn't kill," slow kills! Because the speed of change matters, HR must learn to "match" the speed in which their own company's products must improve. This means that HR must continually improve its speed of change and "obsolete" its own HR programs at least as fast as the speed the company improves its products and at a rate that is even faster than the competitors.
# Action item
HR needs to do competitive intelligence and benchmarking against our direct product competitors. HR must prepare a competitive analysis showing how and where our HR programs are superior. More importantly, demonstrate how HR helped us maintain an advantage in sales, productivity, or product development. This means gathering comparison information by talking to "recent hires" from our competitors and even hiring consultants that have worked with our competitors. If it turns out that we are not superior to our competitors, then plans must be made to upgrade the services and programs that have the most impact on business results.
Redeploy the talent - some would argue that CFOs are not "human" (and don't like people), and that's why they cut HR. In fact, most CFOs do realize the value of top performers in key positions, but they do view the average performer as a "cost." Effective HR departments already know how to do layoffs and to "cut costs." But in addition, HR needs to learn how to rapidly redeploy talent. Redeployment means rapidly moving the most productive workers out of low return divisions and jobs and into higher return ones. The shifting of great people into the "right job" can have a dramatic increase in productivity and without the need for any additional hiring.
# Action item
HR needs to begin a redeployment program. This means a proactive effort to identify top performers that would have an increased impact if they were moved to higher growth divisions or more impactful jobs. Unfortunately, most internal people movement programs rely on the employee to volunteer to move. Under redeployment, HR identifies this talent and proactively persuades them to move (or just moves them) into jobs where they can have a larger impact. Conversely, low performers in key divisions and jobs must be transferred to where they might make the most productivity impact or should be moved out of the company.
4. Conclusion
The CFO from a top firm that I once worked for told me at our first meeting that he "hated" HR people. When I asked him why he said it was because they always used a term he hated, "strategic investment." "Strategic investment," to him, meant "putting a lot of money in up front and maybe getting a little return a long time later." He later added that he also loved to cut the HR budget first because no matter how much you cut it...they still managed to "suck it in" and find a way to maintain all of their existing services.
If there is a lesson to be learned here, it is that if HR is to avoid budget cuts, it needs to do a preemptive strike. This means building a relationship with the CFO's office early on in order to identify the criteria that the CFO will use (or did use) for cutting programs. When these decision criteria are identified, HR needs to shift into immediate action in order to improve their "ratings" on these criteria. Because when you do, you can then sit back and relax while the CFO cuts their "other favorites" travel, purchasing, and the IT department!
From India, Gurgaon
Acknowledge(1)Amend(0)
That is a great article.
There are several organizations that look at Training and Development of employees from an ROI perspective. For them, employees are another piece of equipment, and if they need some maintenance and upgrading, then ROI needs to be there!
From India, Madras
Acknowledge(0)Amend(0)
There are several organizations that look at Training and Development of employees from an ROI perspective. For them, employees are another piece of equipment, and if they need some maintenance and upgrading, then ROI needs to be there!
From India, Madras
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