Depending on the industry, the cost of salary and benefits absorb between 40 and 80 percent of total expenditures and holds the distinction of being the single largest annual expenditure. As human resource professionals, we recognize that our greatest cost is also our greatest asset. However, conventional as well as professional wisdom spends a considerable amount of time examining and pontificating on how this “cost” might be reduced, minimized, or even eliminated. Beginning with Frederick W. Taylor, business started its successive progression through the next big thing for reducing costs while attempting to improve quality. This progression led to continuous improvement, TQM, six sigma, and lean management becoming parts of the business lexicon. This desire to “right size” staff captures a more than 100-year concern with determining the right number of employees by balancing desired outcomes to desired costs.
Almost daily, the mainstream media reports on organizations reducing cost by adopting streamlined staffing models. Although the desire to improve operations including reduce costs when feasible clearly relates to organizational success, method matters. One of the great temptations of any leader is to forget that “right sizing” includes both desired costs and outcomes. As customers, we typically judge an organization by outcomes and respond accordingly. A recent example of cost outweighing outcomes occurred at your local Apple store (http://news.cnet.com/8301-13579_3-57494841-37/apple-admits-to-screwing-up-retail-staffing-levels-report-says/?part=rss&subj=news&tag=title)
As you look at your organization and attempt to determine how to “right size” your staffing model, what should you consider?
Capabilities – Although an average candidate may look like a good idea when considering cost alone, a less capable person may actually cost an organization more in the end. The quality of the staff directly relates to how many people an organization needs to be successful. A more productive, adaptive, and capable workforce negates the need for additional support and actually “do more with less.”
Best Practices – The other half of the equation pertains to the process, resource, and operations of the organization. In essence, the quality of the resources and how aligned they are with the desired outcomes partially determines the level of staffing needed. Efficient processes mean fewer people.
Adaptability – Ideally, human resources would possess some interchangeability. As needs in the workplace change, employees could be reallocated instead of new people being hired. In less adaptable organizations, improving processes and technology can even increase staffing instead of diminish it as the organization seeks to find new activities for long-term staff.
Planning – The level and quality of the workforce should be assessed and a plan developed to meet current and future needs. If an organization leaves capabilities to chance, the lack of a planning reduces the chance of organizational success. Moreover, rarely does an organization that fails to plan for its future workforce needs know the status of its workforce.
Training – A stagnate workforce fails as a resource. A learning organization ensures that its human resources build on their strengths as well as gain new skills responsive to changes in the marketplace. Training might be the first cut in a downturn, but the opportunity cost of the savings lasts for years.
Metrics – Effective management depends on being able to measure what goes in as well as what comes out. The best way to assess the relationship between capabilities and results begins with measuring.