Strategic savings: maintaining quality whilst optimising costs
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Strategic savings: maintaining quality whilst optimising costs
Five workforce strategies for cutting cost, not quality
In 2023, controlling costs became a critical priority for CEOs – and with the economic outlook not set to settle any time soon, cost optimisation will remain in focus for 2024.
This is echoed by the respondents to a recent survey of our Enterprise Solutions audience – 43% of CEOs, People and Talent leaders felt economic uncertainty was the “biggest challenge” facing their organisation in the year ahead. And a recent EY survey indicated that 98% of CEOs globally are bracing for an economic downturn, with over half believing it could be longer and more severe than the global financial crisis of 2007-08.
Our latest report, ‘The Future of Work’, highlights the challenges facing organisations around the world right now; rising inflation, disruption to supply chains, evolving legislation, geopolitical tensions and climate change.
These uncertainties lead to inevitable cost control measures, as organisations seek to align budgets with slower revenue growth. Capital investments and salaries get frozen. Recruitment and training budgets get cut. But when it comes to sustaining the intended outcomes of cutting costs, many organisations have a poor record. According to consultants Gartner, only 43% of companies actually achieve the cost reductions they strive for in year one. Only 11% can sustain the costs cut over a three-year period.
Are you facing difficult budget decisions? Here’s five workforce strategies to consider first. They’ll enable you to trim costs without cutting quality ¬(and risking the long-term health of your company).
Strategy 1: Outsource your ambitions
Many ‘back-office’ functions such as IT, marketing, payroll, general admin and even logistics are ideal for outsourcing – for any kind of business. When you outsource, the management of these functions tends to stay in-house, and one of the most obvious benefits is cost. Not just direct costs, such as salaries, but you can expect savings on office space, technology and other general expenses too.
I’ll admit that outsourcing to enhance efficiency is nothing new or groundbreaking. However, we’re increasingly seeing forward-thinking companies outsourcing parts of their HR development and business transformation projects to an external partner.
So, rather than just handing over the ‘business as usual’ tasks, organisations are mapping out where they want to be in one, three and even five years’ time - and outsourcing this challenge alongside the core project requirements. External partners are tasked with working alongside the organisation to deliver this wave of transformation.
Alternatively, if a business decides to keep the transformation project in-house, they may choose to outsource specific work packages or parts of a service to an external partner, as part of their extended workforce, giving internal teams the capacity to focus on the larger change management process.
Strategy 2. Leverage your extended workforce
Another key strategy is to make the most of the talent and expertise within your extended workforce. This includes contingent workers, who can provide niche skills, bridge critical skills gaps and even unlock fresh perspectives on your organisation’s challenges. Contingent workers are often highly skilled and trained for the specific role you need. What’s more, they can be hired for any time period, from just days to project completion.
In addition, you should consider leveraging the skills and flexibility of freelancers, the expertise of consultants who specialise in particular niches and other external partners such as agencies, to give your organisation a creative boost on specific projects or work packages.
Strategy 3: Augment your workforce with technology
Technology has been shaping – and reshaping – the world of work since the first Industrial Revolution. What’s new is the exponential rate at which technologies are advancing and their capability to render the current ways of working unrecognisable.
For organisations looking to streamline processes and cut costs, augmenting human capabilities with automation is hugely appealing. Review the tasks your workers juggle – it’s not about replacing people or jobs, but automating individual repetitive, high-volume or dangerous tasks to free up your workforce to complete tasks that require innately human capabilities such as critical thinking and creative problem-solving.
Even before COVID-19 accelerated automation, McKinsey reported that ‘currently demonstrated technologies could automate 45% of the activities people are paid to perform,’ and that ‘60% of all occupations could see 30% or more of their constituent activities automated, again with technologies available today.’
The relentless march of technology won’t just inexorably change how work gets done but the people your organisation needs to do it. It’s already creating new, specialist positions to set up operating programmes, build infrastructure and leverage innovation.
Strategy 4: Enhance your data capabilities
Whatever the state of the economy, leaders still need to ensure the decisions they make today will create the environment their organisation – and its people – can thrive in tomorrow. This means cautiously moving from simply keeping the lights on to strategically planning for the future, including recruitment.
Applying data analytics in your recruitment process opens up a rich vein of valuable information to help you make strategic decisions faster and better. Using a combination of data and predictive analysis, you gain access to real-time information that can help you identify talent, benchmark salaries and find the right people, at the right time.
We’re experienced in working with talent and procurement teams to better understand the markets in which they operate. Our services allow you to track the quality of your suppliers, identify which sources have the best fill rate, monitor emerging talent hubs and ensure you have an understanding of your skills gaps – and how to close them.
Strategy 5: Building a global workforce
Organisations have always sought to control labour costs and in many ways labour arbitrage (or offshoring) isn’t new. Now, factors like lower national tariffs are encouraging competition and, on the surface, the connectivity created by new technologies makes shifting work away from centralised facilities easier and more efficient.
The benefit of forging partnerships with new suppliers or sourcing labour to carry out elements of your production or service in other countries is two-fold: lower costs and access to the availability of labour you need.
But offshoring can be fraught with difficulties. As well as the challenge of controlling projects at a distance (such as quality control) there are differences in culture, language, business models and politics. With strategically located sourcing centres we offer the local knowledge and diversity of people that will be central to your success.
Talk to us about putting your offshoring plans into practice
It’s no longer about “talent at any cost”
Cast your mind back a few years – to the volatile, unpredictable task that was redefining and implementing your workforce strategy during a global health crisis. There was a critical need to just get capacity in the business, regardless of cost, regardless of contract type.
Now, following a period of relative economic stability, many CEOs are saying that cost optimisation is more important than the attraction of talent. That's a significant change, and it's the first time it's beaten it over the course of the last five years. Access to talent and attracting the right skills for your organisation is still a key priority – but no longer at any cost.
This will impact how organisations get work done – you will need to rethink strategies around compensation, contracts, location and technological augmentation. Organisations may also benefit from taking yet another step back from the day-to-day and reviewing the long-term objectives of their partnerships with existing providers. Every programme – but particularly larger and more complex ones – needs a ‘bottom up, top down’ overhaul every five to six years, just to make sure the partnership is keeping pace with changes with changing economic, digital and skills requirements.
Amid ongoing economic uncertainty, the shift from “talent at any cost” to “cost is also important” means that data and market insights are even more critical to inform your talent strategy, so that you're not leveraging your resource in the wrong way.
AUTHORS
Ruth Munday
Global Head of Client Development, Enterprise Solutions at Hays
Ruth joined Hays in 2010. With an Honours degree in modern languages from the University of Liverpool in the UK, Ruth has built a career working with organisations across Europe to help find solutions to a range of workforce related challenges and supporting and advising them through change.
Starting out in a traditional staffing agency operational role she built up teams in the UK and France, where she supported Hays’ fledgling business, now its fourth largest globally. Ruth then moved into executive search for several years, working in the public and private sectors, UK, international and cross border. She then spent several years building our outsourcing business across Europe, leading the sales and solutions teams, developing services and directly working with clients.
Today Ruth is our Global Head of Client Development, responsible for evolving our strategies in key account management and strategic client development and working with our teams and our customers around the world, putting the client at the heart of what we do. In her spare time she teaches yoga, paddleboards and cultivates her encyclopedic knowledge of eighties music.