Welcome to this week’s Discuss HR, the HR blog written for and by members of Human Resources UK
Very brief intro from me again today. Just a reminder to all of you that the networking events kick off next week. Likewise any job seeker or hiring manager should join our newly created subgroup HR Job Club – go to the “More” section in the main group for more info.
Today we welcome back our regular writer and experienced HR practitioner Jill Hart-Sanderson who looks at one of my favourite subjects, cost! (Ed Scrivener)
How much does HR cost?
 |
| Or, how much does HR save? |
How much does HR cost your organisation? The HR team’s wages, office space, training courses, stationary, web space.... how much does it actually cost to have a whole department dedicated to dealing with complex people and legal issues?
Imagine the situation, a company is losing money. They need to make savings. The board look at expenditure and decide the staff costs in department X are too high, and they need to reduce overheads by £25K. There are 12 people employed in department X who work hard and earn £25K each. The board decide to make one person redundant in order to cut the budget. What are the effects of this decision?
Firstly all of the employees in department X are put ‘at risk’. They are very unhappy but are told they will be involved in the consultation process. Consultation takes place. There are lengthy discussions about the alternatives to redundancy; including how if they all reduce their hours by 8 per cent everyone will keep their jobs. All the employees agree this is the best way forward and accept the reduction in pay and hours. HR is informed of the agreement and make the necessary adjustments to contracts and payroll. Everyone keeps their jobs and the organisation saves around £25K a year – or does it?
The employees in the department work in sales. The reduction in the number of hours worked by the team as a whole is reduced. The number of sales made also reduces, but by much more than expected.
Next, the manager notices an increase in the numbers of days sick taken by the team. He contacts the HR team who monitor the amount of time off taken. The team struggle to cope with the workload when some of the team are off sick, so agency staff are appointed to cover on a short-term basis. On returning to work after a period of sickness the employees have a sickness review meeting with their manager. One of the team feels that the manager has been dismissive and unsympathetic about his illness and makes a formal complaint. The complaint is taken up by HR and it escalates into a formal grievance.
In the meantime, one of the sales team has had enough of having to cover colleagues’ absences and train up temporary workers. Her frustrations come to a head when a customer complains about the amount of time they have had to wait to get through on the phone. She becomes angry with the customer, swears at them and hangs-up the phone. The customer complains to the sales manager who then takes up the incident with the team member and asks the HR department for advice. A formal disciplinary procedure is started. The disciplinary procedure is followed by dismissal and an appeal.
The sales manager is now suffering from work-related stress. His team used to be happy and productive. He is now spending most of his time dealing with disgruntled employees and unhappy customers. His doctor advised him to take a week off but he only stayed off for two days – he is worried about his reputation and how the team would manage without him. He has taken up HR’s offer of support and will be seeing a counsellor next week.
Now think back to the events that lead to this scenario. By trying to save £20K, on a purely financial basis the organisation has incurred all of the costs of temporary staff, managers’ time, HR time, reduction in sales, professional counselling costs, recruitment costs to replace the dismissed team member, as well the cost of potential tribunal claims.
The time spent by the HR team and senior management when dealing with any formal procedure is often unaccounted for, and as all of these people will be doing this as part of their working day, the actual hourly costs can be huge. However the most important thing the company has lost is engagement - the psychological contract has been broken. There is no longer a desire to work well. There is little trust between the workers, management or the board. Customers are also feeling the effect and it’s eroding the organisation’s previously good reputation. How much does it cost to fix all of this?
Although this is a fictional company, how many times have we found these patterns emerging?
How would it have been different in your organisation? What could HR teams do to prevent this situation?
Perhaps the question should be how much does good HR save an organisation rather than how much does HR cost?
About the author
Jill is passionate about using creativity to unlock people's potential, finding practical solutions that make a real difference to organisations. Her extensive management experience in both the public and private sectors combined with HR consultancy has given her a real insight into how great HR can transform individuals and businesses.
*****
Discuss HR is the blog for Human Resources UK, the leading LinkedIn group for those involved with HR in the UK. Next week’s Discuss HR will be written by our latest guest writer and Employment Lawyer Louise Taft
No comments:
Post a Comment