Respected Seniors, I am working as a Manager HR in one of the medium-sized manufacturing companies, which is a family-managed organization. I have been asked to review all the commercial staff's work efficiency and their occupancy and have been told that a minimum of 25% of staff members should be removed.
I joined this company a year back, and I was in the service industry. While joining a manufacturing unit, I was under the perception that I would be learning a lot of things here. However, because it is managed by a family, they don't give proper importance to the HR Department.
Please suggest, I am really helpless and have no clue what to do.
From India, Indore
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I joined this company a year back, and I was in the service industry. While joining a manufacturing unit, I was under the perception that I would be learning a lot of things here. However, because it is managed by a family, they don't give proper importance to the HR Department.
Please suggest, I am really helpless and have no clue what to do.
From India, Indore
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While it's difficult to immediately answer your "Cost Cutting" measures required by your company and needs more information, I am surprised why you think "Family Owned" businesses don't give importance to HR.
Just for your information, around the world and within India, almost more than 80% of successful businesses are "Family Owned." And yes, you are right to say how these family-owned businesses run their firms in a 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.
Cost Cutting: An HR Challenge
"Cost Cutting" is a big challenge and it's an "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 on 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.
Regards,
Ukmitra
From Saudi Arabia, Riyadh
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297Just for your information, around the world and within India, almost more than 80% of successful businesses are "Family Owned." And yes, you are right to say how these family-owned businesses run their firms in a 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.
Cost Cutting: An HR Challenge
"Cost Cutting" is a big challenge and it's an "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 on 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.
Regards,
Ukmitra
From Saudi Arabia, Riyadh
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Cost Cutting vs. Cost Saving
It is surprising when we, as educated professionals, think about "COST CUTTING" rather than "COST SAVING." Think about a time when you are struggling to survive on a low budget with five family members. What would you do? Would you ask your family members to go for COST CUTTING, or would you reduce expenses to provide for all family members?
I suggest guiding and advising your management on COST SAVING, and communicate this message throughout the organization. By gaining trust and fostering a responsible atmosphere, things will change. Things are simple to understand.
Chill HR
From India, Gurgaon
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It is surprising when we, as educated professionals, think about "COST CUTTING" rather than "COST SAVING." Think about a time when you are struggling to survive on a low budget with five family members. What would you do? Would you ask your family members to go for COST CUTTING, or would you reduce expenses to provide for all family members?
I suggest guiding and advising your management on COST SAVING, and communicate this message throughout the organization. By gaining trust and fostering a responsible atmosphere, things will change. Things are simple to understand.
Chill HR
From India, Gurgaon
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I understand your situation. In a family-owned business of such kind, it's very difficult to make decisions as they don't give much power to the HR department to work efficiently. But surely, you will benefit in the future.
Kindly define your position in your organization. Are you heading the HR Department?
You have a lot of work to do on this. In mid-manufacturing companies, they don't have such data with them.
Steps to Improve HR Efficiency
I suggest you need to make an organizational tree and prepare the data as follows:
1. How much time is required for the production of a single product.
2. Cost of that product after manufacturing.
3. Productivity achieved by every employee.
4. Per person cost involvement in every product (Comparison with other employees).
5. Discuss with the Managers/Supervisors separately and create a sheet.
After that, discuss with Management by defining the cost analysis data of every person. I am sure they will appreciate it if you can present such data in front of your management, especially the output of every employee.
I would request senior members to correct me if I am wrong or add your expert comments.
Regards,
Anurag
From India, Indore
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Kindly define your position in your organization. Are you heading the HR Department?
You have a lot of work to do on this. In mid-manufacturing companies, they don't have such data with them.
Steps to Improve HR Efficiency
I suggest you need to make an organizational tree and prepare the data as follows:
1. How much time is required for the production of a single product.
2. Cost of that product after manufacturing.
3. Productivity achieved by every employee.
4. Per person cost involvement in every product (Comparison with other employees).
5. Discuss with the Managers/Supervisors separately and create a sheet.
After that, discuss with Management by defining the cost analysis data of every person. I am sure they will appreciate it if you can present such data in front of your management, especially the output of every employee.
I would request senior members to correct me if I am wrong or add your expert comments.
Regards,
Anurag
From India, Indore
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Thank you, Anurag! Yes, I'm heading the HR department. It's not about the production staff; they want to do it with the corporate staff. According to department heads, all of the team members are overloaded with work. No one is in favor except the owners.
Regards,
Sagar
From India, Indore
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Regards,
Sagar
From India, Indore
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Well, you can simply leave the company if your purpose for joining the company is not fulfilled and join another good company. It would also be beneficial if you try to educate your seniors about the need and importance of HR, if you find it suitable and if you find yourself and your position in the company suitable for this. If you still find no change in the process and thinking, then you should look for a good opportunity with a company that believes in professionalism. As soon as you find one, you can leave your current company and join the other company.
From India, Lucknow
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From India, Lucknow
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I am very confused because I am now very sure that I don't have any future here. Here, my growth can only be in monetary terms, but learning may not be available. My only concern is whether I should start searching for a new job or should I wait. I don't want to show such a short period on my resume. Please suggest.
From India, Indore
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From India, Indore
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I think we have achieved cost-cutting in HR at my company by deploying technological methods, such as maintaining a 100% paperless office, monitoring electricity and telephone bills, and relying more on internet usage. Among our staff members, we use CUG (Closed User Group) telephone numbers/lines, which are cheaper in the long run. We also try to cut down on overtime.
Regards,
Sajjad
Muscat - Oman
From Oman, Muscat
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Regards,
Sajjad
Muscat - Oman
From Oman, Muscat
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You have been given two straightforward tasks. The tasks now require you to use your brains beyond the normal paperwork 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 the business is heading, and in tough times, they know they have to cut overheads. In that, they are probably right. No head of department wants to do that since it brings more pressure on them, in some cases actually makes them work, brings down the morale of the employees, and exposes inefficiency (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 the efficiency of each employee. So what's the problem? Start with each department, get an org chart, check who is wrong there. Check the work being done. Ask each employee from the lowest to the highest level what work they are doing and what volume is handled. You can get enough benchmarks for each task from the Internet. Check if the 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 until the economy improves. Let's face it, a recession is on, and there are few options.
One suggestion, convince your management not to fire anyone until your analysis of all departments is 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). By the way, you may find it's the head of department that needs to be removed.
I know of a company in the 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 headcount, 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 resulting losses that went on for four years. With cost cuts, they survived with close to breaking even.
As for process inefficiencies, I know of a TATA group company that 15 years ago discovered that they had 35 people matching interdepartment debit notes with interdepartment credit notes and reconciling them (and God knows how many man-hours were spent in having departments make debit notes and the other department make credit notes for the same work). The solution was simple: let the department who has done work for the other department make a debit note, get it signed by the receiving department, and hand it over to accounts to make an entry. The change was logical and common sense. It resulted in the reduction of 55 people in accounts.
(Moderator's 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 the public domain.)
So, Mr. Suraj, if you want to change your job, by all means, do so. If you think it's unsafe to work for a company retrenching people, change your job. But 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 in 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 a lot of work on profit planning, cost control, and efficiency. We can probably do it, albeit as a professional assignment.
Regards
From India, Mumbai
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The owners have set a target of reducing 25% of corporate staff. They probably know where the business is heading, and in tough times, they know they have to cut overheads. In that, they are probably right. No head of department wants to do that since it brings more pressure on them, in some cases actually makes them work, brings down the morale of the employees, and exposes inefficiency (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 the efficiency of each employee. So what's the problem? Start with each department, get an org chart, check who is wrong there. Check the work being done. Ask each employee from the lowest to the highest level what work they are doing and what volume is handled. You can get enough benchmarks for each task from the Internet. Check if the 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 until the economy improves. Let's face it, a recession is on, and there are few options.
One suggestion, convince your management not to fire anyone until your analysis of all departments is 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). By the way, you may find it's the head of department that needs to be removed.
I know of a company in the 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 headcount, 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 resulting losses that went on for four years. With cost cuts, they survived with close to breaking even.
As for process inefficiencies, I know of a TATA group company that 15 years ago discovered that they had 35 people matching interdepartment debit notes with interdepartment credit notes and reconciling them (and God knows how many man-hours were spent in having departments make debit notes and the other department make credit notes for the same work). The solution was simple: let the department who has done work for the other department make a debit note, get it signed by the receiving department, and hand it over to accounts to make an entry. The change was logical and common sense. It resulted in the reduction of 55 people in accounts.
(Moderator's 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 the public domain.)
So, Mr. Suraj, if you want to change your job, by all means, do so. If you think it's unsafe to work for a company retrenching people, change your job. But 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 in 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 a lot of work on profit planning, cost control, and efficiency. We can probably do it, albeit as a professional assignment.
Regards
From India, Mumbai
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I agree with the views of Mr. Saswata. Mr. Sajjad, your ideas are also helpful. Mr. Sagar mentioned that it was a mid-size family-owned manufacturing business, so I don't think they will adopt these facilities in their plant now. Am I right, Mr. Sagar?
Many suggest changing your job, but my view is to face the situation very smartly. I believe that merely changing jobs is simply running away from problems. If you can smartly navigate this situation, you will truly progress quickly towards your growth. I agree it's not easy and is a significant challenge for anybody.
What You Will Learn from This
How to deal with a variety of people with different minds, opinions, and views. How to convince people, face litigations, and most importantly, handle this situation by studying and understanding the legal actions and tricks involved. This knowledge will truly benefit you in the future, though not immediately. If you can handle labor courts and other litigations, etc.
It might be possible that some feel keeping your job in limbo is not advisable and that finding another job is easy. However, this is the best time for learning and will undoubtedly elevate your knowledge, negotiation skills, and legal understanding.
Regards,
Anurag
From India, Indore
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Many suggest changing your job, but my view is to face the situation very smartly. I believe that merely changing jobs is simply running away from problems. If you can smartly navigate this situation, you will truly progress quickly towards your growth. I agree it's not easy and is a significant challenge for anybody.
What You Will Learn from This
How to deal with a variety of people with different minds, opinions, and views. How to convince people, face litigations, and most importantly, handle this situation by studying and understanding the legal actions and tricks involved. This knowledge will truly benefit you in the future, though not immediately. If you can handle labor courts and other litigations, etc.
It might be possible that some feel keeping your job in limbo is not advisable and that finding another job is easy. However, this is the best time for learning and will undoubtedly elevate your knowledge, negotiation skills, and legal understanding.
Regards,
Anurag
From India, Indore
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Dear Sagar,
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 labor.
Cost-Cutting Strategies
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, administrative expenses, logistics, etc.
In fact, a good job is where the employees are given more responsibilities during a 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 to your cap. Just quit if it cannot be truly justified.
In case you need help, call [Phone Number Removed For Privacy Reasons].
Thanks
Regards,
Nalina.K
HR consultant
From India, Tiruppur
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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 labor.
Cost-Cutting Strategies
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, administrative expenses, logistics, etc.
In fact, a good job is where the employees are given more responsibilities during a 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 to your cap. Just quit if it cannot be truly justified.
In case you need help, call [Phone Number Removed For Privacy Reasons].
Thanks
Regards,
Nalina.K
HR consultant
From India, Tiruppur
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Neither you nor I know what is actually happening in that company, so both of us are shooting in the dark. We don't know if they have tried other methods of cost control or profit improvement before asking for a 25% reduction in manpower.
I just had a major argument with someone who is implementing cost-cutting for his company, asking unions to forgo wage hikes, take some layoffs, etc., but where the company just spent 6 crore 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.
From India, Mumbai
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I just had a major argument with someone who is implementing cost-cutting for his company, asking unions to forgo wage hikes, take some layoffs, etc., but where the company just spent 6 crore 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.
From India, Mumbai
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Brilliant Suggestions, Saswata, and absolutely Bullseye!!!
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 from this one single experience? Even if, in the end, the promoter says to get out, you will come out 100 times a better HR professional than you are now.
You are talking about an opportunity to learn about employee productivity, team formation, change management, restructuring, conflict management, grievance handling, cost optimization, management interaction, people interaction, exits, and employee motivation all in one single experience.
Leaving is an option that is omnipresent!!! 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 an 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....
Cheers,
Navneet
From India, Delhi
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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 from this one single experience? Even if, in the end, the promoter says to get out, you will come out 100 times a better HR professional than you are now.
You are talking about an opportunity to learn about employee productivity, team formation, change management, restructuring, conflict management, grievance handling, cost optimization, management interaction, people interaction, exits, and employee motivation all in one single experience.
Leaving is an option that is omnipresent!!! 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 an 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....
Cheers,
Navneet
From India, Delhi
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Saswata is right. Top management has their calculations. These are hard times, and if the company is running at a loss or with a thin profit margin, it is right for the company to retrench a few staff members to save the company as a whole.
If 25 people are retrenched today, tomorrow the organization might itself sink, resulting in job loss for 500 people.
From India, Chennai
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If 25 people are retrenched today, tomorrow the organization might itself sink, resulting in job loss for 500 people.
From India, Chennai
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Thank you, everyone. I'm going to take on this challenge and definitely will give it a try at least. Mr. Saswata, the production staff has already been reduced, and the other problem here is that all the VP, CEO, and CFO are from the owners' family, relatives, or friends who are getting 2-5 Lac every month. I'm sure the owners are not even going to reduce their salaries. So what's the sense of firing an employee who is drawing 30-50k/month?
Regards,
Sagar
From India, Indore
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Regards,
Sagar
From India, Indore
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Salary Considerations for Top Management
Salary for top management depends on the value they bring. Of course, top management personnel can take a cut in their pay if the company is struggling. There have been many instances where top management voluntarily reduced their pay. A classic example is Vikram Pandit of Citigroup, who took only $1 when the company's performance was poor.
In a family-run enterprise, it is typical to expect top management to make some sacrifices as it is their "baby." Unfortunately, in your case, it is evident that they are unwilling.
Regards
From India, Chennai
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Salary for top management depends on the value they bring. Of course, top management personnel can take a cut in their pay if the company is struggling. There have been many instances where top management voluntarily reduced their pay. A classic example is Vikram Pandit of Citigroup, who took only $1 when the company's performance was poor.
In a family-run enterprise, it is typical to expect top management to make some sacrifices as it is their "baby." Unfortunately, in your case, it is evident that they are unwilling.
Regards
From India, Chennai
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I went through all the points discussed. As the first HR of any manufacturing company (especially 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% because reducing 25% of staff suggests that many of them are underloaded. Gather the employee data, their experience and qualification data, their profiles, and grade them. You will need the assistance of the directors or the person who was handling/hiring people previously. Nothing is impossible
From India, Mumbai
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From India, Mumbai
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I have seen a lot of HR folks talk about 100% resource utilization, especially in depressed market conditions and definitely when cost-cutting is being discussed. When Mona just commented on the same, it kind of triggered this question...
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 I'm 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 an 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 the middle 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?
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 midsize/smaller organizations, the account/admin. departments are always quite overstaffed, but the management will never agree to it, and you can't touch them... :-)
From India, Delhi
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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 I'm 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 an 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 the middle 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?
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 midsize/smaller organizations, the account/admin. departments are always quite overstaffed, but the management will never agree to it, and you can't touch them... :-)
From India, Delhi
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Dear Nkulsh, I agree with your points. When we talk about 100% utilization, it means maximizing efficiency. By grading employees and their profiles, we can clearly understand who is doing what during working hours. In our system, there are people performing multiple tasks and excelling in each one! You can also choose multitaskers to make wise decisions.
You mentioned the auditor; you cannot say goodbye to employees who are doing special and important jobs for you. Here, we are discussing reducing numbers in the admin, clerical, or marketing departments, or any department with more employees than ideally required. On the other hand, a layoff is a significant task; you cannot ask your employees or underperformers to leave immediately. We should give 1 to 3 months' notice...
Regards,
From India, Mumbai
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You mentioned the auditor; you cannot say goodbye to employees who are doing special and important jobs for you. Here, we are discussing reducing numbers in the admin, clerical, or marketing departments, or any department with more employees than ideally required. On the other hand, a layoff is a significant task; you cannot ask your employees or underperformers to leave immediately. We should give 1 to 3 months' notice...
Regards,
From India, Mumbai
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