This Towers Perrin presentation explores changes to keep HR transformation alive in challenging times.

1. Transforming HR in an Uncertain Economy
Priorities and Processes that Deliver ROI
Cynthia DeFidello
Rob Lamson
Robert Millar
February 24, 2009
© 2009 Towers Perrin

2. Last time…
What is the optimal structure for HR during a period
of prolonged economic uncertainty?
Where should HR apply most of its focus for
maximum effect?
What are key HR roles that cannot be compromised?
How do you deliver HR services for less cost
but still effectively and efficiently?
How do you determine the most effective use
of limited money for new technology investments,
if at all?
What are the change management implications?
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3. Last time…the best companies use tough times to build advantage
Savvy companies may indeed need to change the way HR is organized, or the way
they deliver HR services
Organizations that will “win” will be those that build or acquire additional capacity to
support the changes required with speed
HR will return to the basics:
Understand emerging business strategy, and the implications of that strategy for
the workforce
Identify and quantify short- and medium-term activities that generate immediate
savings and/or support essential business strategy
Focus on rapid optimization
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4. Today’s discussion
High value initiatives that can create immediate ROI
Consider specific changes to keep HR transformation alive amid challenging times
Staying alive
Unconventional wisdom
HR of the Future
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5. Past recessions tell us responses can be crude: some examples
Pure concentration on cost reduction – top- Turning away graduates already recruited
down cutting of staff
Voluntary redundancy exercises
Small or zero pay increases applied uniformly
Reducing the effort on communications
Increased base pay to mitigate incentive plan
Inappropriate signals about cost-cutting: “Cut
loss
out taxis – use one of the chauffeurs”
Failing to manage the features of
Failing to cut hard enough first time round
performance programs – base pay,
leading to ‘death by a thousand cuts’
incentives, long-term incentives
Blanket recruitment and training freezes
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6. However, there are many high value initiatives that can deliver
immediate ROI
There are three main sources of savings
Cut current costs Reduce future costs
Salary reductions Target “spend”
Voluntary/involuntary 4 day work weeks Re-design total rewards
Involuntary unpaid vacations Customized incentives
End sabbaticals Severance
Redesign jobs to use part timers Tuition reimbursement
Improve return on investment
Re-calibrate performance standards
Re-mix total rewards
Research perceived value
Communicate value of total rewards
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7. HR function cost reduction
There are three main sources of savings when we focus on HR workforce size and
volume
Reduce volume of work Reduce HR FTE
Prioritize vs criteria (e.g. strategic value, Apply ratios, spans of control
cost, time) and identify work to stop Redesign structure – refine
Reduce demand Redesign structure - radical
Streamline processes
Move work to managers, employees
Reduce cost of providing services
Reduce use of suppliers
Renegotiate supplier terms
Increase use of outsourcing
Increase use of offshoring
Increase use of service centers
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8. Staying Alive:
The strategic story from leadership
Step-up leadership visibility One deep cut, well done, keeping conscious
of the impact on the brand
Keep focused on the external market
Focus on critical talent
Build confidence
Focus on improving existing programs to
Keep focused on mission, vision and values
execute better, especially performance
Laser-like sharpness on capabilities and management
resources needed to weather and win – use
Continued strategic recruitment
this as the basis of cuts
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9. Staying Alive:
Our overall approach for taking action
PREPARATION IDENTIFICATION VALIDATION REALIZATION
Context/desired Identify required Examine Execute
outcome: internal data sources of changes
savings in detail
Size of savings Obtain internal
data Prioritize
Speed
Benchmark Develop action
Risk appetite
plan
Qualify potential
Approach:
savings
‘Top down’
Broad
involvement
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10. Staying Alive: Identification
INTERNAL DATA
BENCHMARKS COMPARISONS EXAMPLE SAVINGS
SOURCES
Metrics That Provide Sources Types of Comparison Moving from median to
Insights LQ in total HR cost per
Ratio: total head count Towers Perrin HRSD By company size total FTE would save:
to HR FTEs & HRO Surveys By industry type
HR function costs per Towers Perrin Human By geography $
% of HR
Costs
head Capital Metrics By sub-function
HR function costs as Saratoga In 5,000
percent of net Everest Research person co.
0.70 20
operating costs
Time spent In 10,000
Degree of self-service person co.
2.39 27
Cost per process
Ratio of total head In 20,000
count to HR person co.
10.7 39
generalists
HR outsource ratio In 50,000
Vendor costs person co.
14.8 34
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11. Staying Alive: Identification
Understanding activity can reveal opportunities
Fragmented work:
Illustrative example
Over 200 staff touch “International Assignments” (FTE=12)
340 staff touch “exits” (FTE = 27)
Managing HR data is a huge burden
14% of all HR time
170 FTE
Time spent on strategic work is low:
27% for HRBPs
15% for compensation and benefits specialists
Significant differences in time allocation:
14% - 30% for “Staffing”
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12. Staying Alive: Validation
Illustrative example
Cost reduction ($m) (20,000 person company)
Stretch
Sources of Saving Possible Actions High confidence Target Ease Risk Timescale
Simplify data management 1.25 2.00 CURRENT YEAR
Reduce volume
Extend self service 2.00 3.00 CURRENT YEAR
Reduce distributed specialists 1.00 2.00 IMMEDIATE
Reduce HR FTE
Increase HRBP manager ratio 2.50 4.00 IMMEDIATE
Recruitment supplier consolidation 1.50 2.00 IMMEDIATE
Reduce cost of
providing
services Move from classroom to
3.00 4.00 FUTURE YEARS
e-learning
TOTALS 11.25 17.00
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13. Staying Alive: Realization
SOURCE SHORT-TERM ACTIONS MEDIUM – LONGER TERM ACTIONS
Reduce volume of work Engage with key managers Identify priority processes (cost, value etc)
Agree what to stop Redesign
Communicate and stop Design and implement ESS and MSS
Reduce HR FTE Develop staffing principles Redesign structure
Apply top down targets Define new roles
Manage redundancy process Develop staffing principles
Conduct selection process
Manage redundancy process
Reduce cost of Renegotiate with suppliers Produce business case for changes
providing services Confirm potential for greater use of existing shared Move work to existing SS, offshore
services, offshoring Conduct RFP for outsourcing
Identify potential for selective / broader outsourcing
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14. Staying Alive: Insights
Increasing manager and employee self-service can actually be welcomed!
Top down reductions, intelligently applied, can be required to break inertia
Size thresholds for HR shared service centers are coming down
Shared services are rarely fully exploited
Multi-country HR shared services are feasible
Outsourcing often does not save money (although may help with capital)
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15. Unconventional Wisdom:
Stepping away from strategic HR
True Story:
Senior HR executive under pressure to let go three director level “doers”
Severe pressure to lower costs puts development and strategic HR on hold
Rather than fire three doers, the senior HR exec decides to fire herself thus saving
the jobs of those needed to deliver the basics
Is stepping away from strategic HR
a viable option?
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16. Unconventional Wisdom:
The strategic story from leadership
The business is under intense cost pressure
Only those critical to customer and product quality functions will be continued at
staffing levels consistent with volume and revised sales goals
Other functions should move to “essential services” only
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17. Unconventional Wisdom:
Stepping away from strategic HR
There are three main sources of savings
Focus on Generalists Focus on Specialists
Eliminate most strategic support Eliminate most specialist support
Remaining generalists focus on Replace with external “contract”
downsizing/restructuring resources
Trust managers to do the right thing and Remaining specialists focus on
hold accountable implementation of policy changes
Focus on Administration
Maintain administrative capability to
deliver basic services
Take advantage of vendor consolidation
of vendors and other low-hanging
opportunities
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18. Unconventional Wisdom: Identification
% of time spent on strategic work
By “strategy-focused” players (generalists and specialists)
By administrative players
% of time strategy-focused players spend on admin
% of fragmentation caused by strategy-focused players
% of strategy-focused players “fully competent” in role
% of strategy focused players “needing development” to achieve full competence
Does this represent an opportunity
for resetting the HR strategic role?
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19. Unconventional Wisdom: Validation
Illustrative example
Cost reduction ($m) (20,000 person company)
Sources of Saving Possible Actions
Stretch
High confidence Target Ease Risk Timescale
Reduce ‘operational’ generalists 2.00 3.00 IMMEDIATE
Focus on
Generalists
Refocus remaining generalists 0.00 0.00 IMMEDIATE
Reduce specialists 1.00 3.00 CURRENT YEAR
Focus on
Specialists
Procure specialist services (when
(1.00) (1.00) CURRENT YEAR
necessary)
TOTALS 2.00 5.00
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20. Unconventional Wisdom: Realization
SOURCE SHORT-TERM ACTIONS MEDIUM – LONGER TERM ACTIONS
Focus on generalists Reaffirm line people management responsibility Redesign structure
Agree targets for retained roles Redesign retained role
Develop staffing principles for retained roles Ensure line managers equip themselves
Apply principles to achieve targets
Manage redundancy process
Focus on specialists Identify ‘external’ specialist services Redesign structure
Agree targets for retained (policy and vendor Redesign retained role
management) roles Develop marketplace and vendor management
Develop staffing principles capability
Apply principles and manage redundancy process Source ‘external’ specialist services when
necessary
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21. HR of the Future: A preview
There is no doubt that the HR function of the future will
Be much leaner than today
Be more focused on the strategic people agenda in the business
Play a more enabling and facilitating (rather than delivery) role
Be more flexible and dynamic than the hierarchical structures of today
Rely much more on external specialist and operational capability
Be more customer-focused; addressing business issues in innovative ways
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22. HR of the Future: The potential
Traditional New
HR functional groups Project teams
Broad scope Focused scope
Organizational units Virtual teams
Oversight and compliance Dynamic facilitator
“One size fits all” Tailored solutions
Command and control Enable and engage
Transactional, administrative systems Knowledge-based systems, wiki’s, - collaborative
environment
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23. Moving forward:
How does your company progress from today?
You How Towers Perrin Can Help
How much do you need PREPARE:
to save? how to approach
IDENTIFY:
Where are opportunities? potential opportunities
fast
Are the opportunities VALIDATE:
opportunities and
‘real’? considerations
REALIZE:
Decided where to cut? achieve change
effectively
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24. Questions?
cynthia.defidelto@towersperrin.com
215.246.7284
rob.lamson@towersperrin.com
617.638.3635
james.millar@towersperrin.com
215.246.4818
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