Stretching Your Human Capital

Transcription

1 Stretching Your Human Capital How HR can cut costs, create value and help your organization stay on the road of High Performance in this time of crisis

2 The fast-moving events at the capital markets over the last few months have dramatically changed the economic outlook globally. A few quarters ago business was on a roll, fuelled by the easy availability of credit satisfying an unlimited demand. Liquidity is now precious and firms world-over are seeing a dent in their margins. Many renowned names in the financial space in Europe and the US have now fallen or have been targets of distress takeovers either by larger firms or the government. Stock markets around the world have crashed with the emerging markets bearing the brunt Russia and India are now at a third of their peak values. The events have now caused a sentiment of gloom and doom in the global economy with pundits predicting even more pain to come. While India has not been affected yet to such an extent, effects are being felt. Some Indian companies, which went on an expansion and acquisition spree during the boom years, are now finding it tough to pay back credit they took at higher interest rates. Indian companies are also looking to prune costs and are looking at layoffs as a way to cut expenses. There are many negatives aspects to this scenario also creates the burning platform for change in the organization. It gives the opportunity for senior management to introduce stretch to all aspects of business. Organizations will immediately focus on the Supply Chain and Finance functions in this time of crisis to cut costs, but HR has an equally important role to play. Key business value drivers can be impacted using HR a lever. The HR Cost and Value Tree Structure Cutting flab and creating a lean organization Tangibles Productivity Increasing employee productivity incorporating stretch How HR can cut costs and add value Compensation Competency Profiling Redesigning incentive schemes and aligning it to performance Identifying key skill gaps to put the right people in the right job Intangibles Transformation & Change Measuring and tracking effectiveness of change 2

3 Stretching the Structure This crisis also brings about the ideal opportunity to develop leaner operating models to optimize in the current climate. This can be done by clustering neighbouring countries into one central management structure or leveraging scale of operations by setting up Shared Service Centres in functions such as HR, IT and Finance. A focus on non-core activities is also essential and organizations should look at cutting these down or outsourcing them. Organization flab can be trimmed by reducing the hierarchies and departments (or merging these with other departments). Pragmatic Organization Design: Illustrative Strategies Accenture s approach to focusing and appropriately sizing an organization focuses on leveraging organization, team, job and talent management strategies in support of short term goals and long term potential. Optimize by level and nature of the work Centers of Excellence Sustainment Organizations Centralization Shared Services Increase Spans Of Control Maximize Economies of Skill Maximize Economies Of Scale Example Actions: Define/Develop Gearing factors Develop maintenance process Define Drivers Of Organization Sizing Plan Workforce & Talent Pragmatic Organization Design Levers Redesign Jobs & Teams Focus On Core Competencies De-Layer The Organization Example Actions: Outsourcing Networked organizations Workforce planning Apply multiple workforces Competency management High performers management Job Enlargement Within team redundancy Define capacity model drivers Flatten the structure New governance models Case Study A large global telecommunications company decided to re-evaluate and modify its organization structure in response to the changing conditions in the global market. This included a thorough review of its hierarchical levels, organization span of control and the role of technological advances which resulted in the implementation of more virtual teams and models. In addition the organization also focused on outsourcing or automation of clerical functions. Benefits: Increased coordination and communication across geographies and functions. Profits of the company grew 28% in the year vs. 18% for similar companies. 3

4 Stretching Productivity Organizations need to do more with less by reducing operating costs of which people costs are a significant contributor. Businesses need to conduct regular productivity reviews to make sure that there is no slack and every employee is being utilized to its full potential Blanket rules may not be the best option as some functions are at high levels of internal process maturities and may not be able to take such high productivity targets as these may be far above the benchmark. A more prudent way would be take each function and its intricacies and then decide on relevant productivity improvements. This productivity review should then identify functions which have flab and where the workforce can be trimmed. Restructuring might lead to job losses but these painful decisions should be taken as they are the right ones for the long-term health for the business. In uncertain times such as these, clear, direct and regular communication from senior management is necessary to remove doubts from the employees mind. The company should also look at effective redeployment, outplacement and VRS to deal with surplus staff. Measures like these will ensure the long-term effectiveness of the company s employer brand which might otherwise take a beating. Productivity Enhancement : Typical Solution Themes White collar worker Productivity Themes Plant / Area Management Function/ Line Management Clerical Structure / Levels Span Of Control Multiskilling Reengineer Processes IT Enableme nt Outsource noncritical processes Outsource Automation / Self Service Eliminate non value adding activities Reduce duplication of effort transactions effort Each function / role needs to be assessed from perspective of the solution themes 4

5 Case Study To stay competitive in the domestic market as well as to move closer to productivity norms, a large Indian company decided to review its workforce numbers, define the skill and capability gaps. The company also decided to come up with guiding principles for managing its surplus workforce. The key success factors included close monitoring and control by a senior management employee throughout the project to drive toward the stretch targets, a crossfunctional and cross locational team and a focus on quick wins. Benefits: This effort not only resulted in cost savings of up to 25% in the people costs but also qualitative benefits such as an improved work ethic, a culture of questioning of the legacy processes and a satisfied laid-off workforce who were either given a VRS or outplaced. Stretching Compensation Performance management and compensation systems should be driven towards objective targets. On the other hand, this should be balanced with some realism where employees are given the leeway to fail on a few occasions and learn from these mistakes. Compensation systems should then be aligned to promote stretch and employees should be adequately rewarded for their effort. Organizations should also bring in nonmonetary rewards where possible to reduce costs. Precious capital should be utilized through project management that focuses on cost reduction. Components of a compensation system should provide a flexible, sustainable foundation that drives and rewards performance The total rewards structure can be described as a portfolio of fixed and variable reward components, coupled with nonmonetary rewards and recognition programs, benefits, and long-term pay. The total rewards approach provides an end-to-end perspective to managing compensation as a strategic business driver Prioritized KPO s Key Performance Objectives based on Business Strategy Targeted Behaviors Actions that can most strongly impact KPO fulfillment Total Rewards Total Compensation Salary Equivalent Fixed Base Variable Incentive Activity Based Plan Commission Plan Targeted Reward / Bonus Plan Rewards & Recognition Programs Financial metrics Operational metrics Customer Metrics Development Metrics Benefits Pension/401k Perks Comp Model Design Align with KPO priorities Meet Execution Objectives Total Rewards Challenges Balancing considerations of cost (NPV) & business outcomes Tailoring total rewards to talent profile and firm s EVP Variable Incentive Challenges Balancing considerations of team performance and individual performance Targeted design that links to business objectives Designing metrics that are finite & sufficiently measurable Investment in continuous tracking of performance metrics 5

6 Case Study A large liquor manufacturer decided to implement the Balanced Scorecard Approach to Performance Management and then strongly link that to the organization targets. The existing performance management system had a large fixed pay component which did not gel well with the company s cost cutting and High Performance business plan. The company then decided to increase the variable component of compensation significantly. The variable pay was both short term (annual bonus) and long term (share options). This resulted in employees working with a stronger linkage to organizational objectives. Benefits: Business targets over the next three years were exceeded by the firm Stretching Competencies and Skills Competency and skill analysis can enable organizations to get a clear view of their talent inventory and identify key gaps. Gaps that can be fulfilled through internal capability development are identified and redeployment of the upskilled employees is carried out. A direct benefit of this is that recruitment costs can be saved. Other benefits that can accrue out of this are increased employee productivity and a more capable workforce with the ability to hop across the different workforces in the company. Competency and Skill Analysis through Trivium SEE-K Trivium SEE-K can help provide a clear view of the organization s current skills and competencies and identify key skill gaps as it relates to the company s business strategy Accenture has an alliance with TriviumSoft which is a leading software solutions provider specializing in workforce diagnostics (skill and competency analysis). This survey and reporting tool can be customized to client needs and provides current talent state and gap analysis for all skills identified. Trivium SEE-K depicts a visual representation of a company's Human Capital portfolio by workforce addresses a wide array of issues surrounding human assets management, including: Skill/competency tracking Recruiting Staffing Mobility Downsizing Case Study A global bank decided to undertake a thorough skill and competency assessment for its employees using an online survey. This also included identification of redeployment opportunities throughout the organization. Benefits: Allowed the company to identify skills, enable it to assemble multi-skill teams, reduce recruitment and identify employees for succession planning. 6

7 Stretching the Transformational Agenda Organizations that undertake large changes in the scenario should also ensure that change activity is measured to ensure targets are reached, benefits are realised and the impact is managed effectively. The current crisis can be used as an effective tool to accelerate change across the organization and to create a real demand for change at all levels of the business and involvement activity to inform, educate and motivate all the employees. ChangeTracking Framework Each driver of change can be broken down into a number of further clusters. Research by Change Tracking has shown how each of these clusters impact upon different types of business benefit (i.e. cost management, innovation etc.) Is the change on track to high performance? Performance Improvement Improving business performance Achieving project objectives Change Capability Drivers Turbulence Resources Aligned Direction Engagement Team Leadership Emotional Energy Clusters Risks and Roadblocks Changes Taking Place Training and Capability Systems and Processes Vision and Direction Change Leadership Management Skills Communication Involvement Feeling Valued Passion and Drive Disturbance Project Support Accountability Case Study A large utility company undergoing an ERP implementation decided to use a change tracking tool to understand the impact of the restructuring on all employees. It found that the higher levels of the organization were committed and believed that the change could happen while lower levels were not as optimistic. Important commercial functions especially the shared service centres were affected in a bad way. After analyzing these results, HR prepared a detailed roadmap to deal with what people can do to make a difference and how effective the change strategy is. Benefits: Concluded the project deliverables on schedule and a successful roll-out of the ERP system. 7

8 The Bottomline Our experience has shown that organizations can save up to 20% of their people cost through direct measures such as structural change, productivity increase and compensation. Speed and effective implementation are of the essence in this period. The time is ripe to take these tough decisions and stretch all the resources required to achieve High Performance even in these times. The War Room Approach War Room approach that works with key business stakeholders to generate ownership take quick, informed decisions and deliver tangible benefits Value Targeting Value Delivery 1. Plan and Mobilize 2. Quick Wins execution. Delivering Cost and Capital savings Description 1. Mobilise the core team 2. Validate and prioritise opportunities identified for the selected businesses 3. Finalise work plan Obtain stakeholder approval Operationalise the initiatives identified for the businesses Find and deliver quick wins in phases Quick Wins Wave 1 Wave 2 Quick wins delivery will continue Wave 3 Check Point Check Point Check Point Typical Duration 1 week 4 weeks Company involvement Resources in core team Stakeholder commitment Interviews with key finance and operations employees Key BU stakeholder to Support the operationalisation Illustrative Output of Value Targeting ILLUSTRATIVE AND NON- EXHAUSTIVE spans of control Structure Outsourcing of non-core functions Direct Impact Productivity Redesign jobs and teams multi-skilling Re-engineer processes use of technology Align to organizational objectives How HR can cut costs and add value Compensation Competency Profiling Increase variable percentage Long & Short Term Incentive Plans Perform skill assessment Identify Areas for redeployment Increase use of technology Indirect Impact Quick wins larger effect in lesser time Transformation & Change Measure, Track Change Programs Inform, educate & motivate 8

9 About the Authors Anant Bhagwati is a Senior Manager in Accenture s Talent & Organization Practice in India. He has over 8 years of experience in industry and consulting and is based out of the Mumbai office. anant.bijoy.bhagwati@accenture.com Cherian Matthai is an Analyst Accenture s Talent & Organization Practice in India. He has over 2 years of experience in industry and consulting. cherian.matthai@accenture.com About Accenture Accenture is a global management consulting, technology services and outsourcing company. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. With more than 186,000 people in 49 countries, the company generated net revenues of US$23.39 billion for the fiscal year ended Aug. 31, Its home page is 9