While organizations adapt to fluctuating economic conditions, HR must carefully manage HR team costs to ensure that spending remains fully aligned with organizational strategy and expected business value as part of its role as a strategic organizational partner, according to newly published insights from global HR research and advisory firm McLean & Company.
In the face of global economic uncertainty, many organizations are bracing for slow growth over the coming years. While organizations adapt to tumultuous economic conditions, HR finds itself under pressure to not only retain top talent but also demonstrate tangible value, align strategically with organizational goals, and carefully manage HR costs. According to a new blueprint from global HR research and advisory firm McLean & Company, Optimize HR Costs, as organizations seek to manage costs, committing to proactive cost optimization as a strategic HR practice will support resource and cost management and showcase HR’s contribution to the organization.
“Especially in times of economic pressure, cost optimization can quickly lead to cost-cutting, which ultimately perpetuates the unhelpful ‘do more with less’ cycle,” says Lexi Hambides, director of HR Research & Advisory Services at McLean & Company. “While resourcefulness and cost optimization are important skills for HR leaders, it is a disservice to both the HR team and the organization at large to accept this ‘more with less’ challenge without advocating for optimal team workloads and investment for the future.”
The firm’s resource explains that, although cost optimization is often used interchangeably with cutting costs, cost optimization is a much more comprehensive and strategic decision-making process that includes reducing unwarranted HR spending, optimizing cost-to-value, and sustaining cost optimization results. While cost optimization is proactive in nature, changes in the financial landscape can lead to unanticipated budget cuts and cost-cutting mandates. McLean & Company advises that a comprehensive cost optimization plan for HR includes a balance of both proactive and reactive initiatives, allowing for strategic, data-informed decisions in advance of future cost-cutting mandates.
Using evidence-based insights, the recently published blueprint from McLean & Company includes the firm’s three-step process to optimize HR costs. HR leaders can follow the steps below to support the strategic alignment of HR spending with organizational strategy while managing finances proactively before reactive and aggressive measures are required:
- Prepare and evaluate. Evaluate factors that impact the organization’s financial outcomes, establish HR cost optimization goals, and select metrics to monitor progress.
- Uncover and prioritize cost optimization initiatives. Determine negotiable and non-negotiable constraints, brainstorm and shortlist cost optimization initiatives, and identify the criteria that will impact the implementation of said initiatives. Next, create a cost optimization roadmap.
- Communicate and iterate. Plan strategic and tactical communications, build an executive presentation, and align communication to promote strategic change management. Finally, plan to monitor progress and outcomes of the cost optimization initiatives.
A comprehensive breakdown of each step is available in the complete blueprint.
McLean & Company reminds HR leaders that metrics may signal that cost optimization objectives have been achieved, but cost optimization is a never-ending business discipline. As such, embedding cost optimization practices into HR’s culture showcases HR as a strategic steward of resources and reinforces its position as a strategic leader across the organization, whether in uncertain or stable economic environments.
McLean & Company is also pleased to provide a related resource to help HR leaders make informed cost reduction decisions that promote HR’s role as a strategic partner. To access the full resource.
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