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3-step plan for HR departments to optimize costs in rough economy

HR teams are being reminded to think critically about cost management in their own ranks as the economy starts to get bumpy.

McLean & Company released a blueprint, titled Optimize HR Departments Costs to Prepare for a Recession, to help HR leaders conduct some navel-gazing.

“Cost optimization needs to set an organization up for success in the long-term, which means layoffs and workforce reductions are often not the best options,” says Rachel Stewart, practice lead, HR research & advisory services at McLean & Company. “In a recession, HR will likely find itself operating in reactive mode. While HR can return to proactive and strategic cost optimization opportunities later, when conditions improve, decisive action on reactive measures must be taken now.”

Dual role for HR in a recession

When a recession hits, HR plays a dual role, the company said.

Working with senior leaders on organization-wide cost-cutting initiatives is typically the dominant focus, but HR also needs to prepare for cost optimization initiatives within its own department. This ensures organizational budgetary goals are achieved while also positioning the HR department for a quick recovery post-recession, supporting both short-term and long-term organizational goals.

3-step plan in 3 key areas

To create a recession-responsive cost optimization plan, McLean & Company suggests that HR teams and leadership follow three steps while focusing on three key areas — HR initiative prioritization; vendor management; and HR workforce optimization. The three steps are:

Plan and define goals. The first step includes conducting a SWOT (strengths, weaknesses, opportunities, and threats) analysis, identifying the organization’s business context and HR response mode, listing cost optimization constraints and parameters, and setting cost optimization goals.

Determine cost optimization initiatives. Step two calls for discovering HR initiative cost optimization opportunities, unearthing workforce optimization initiatives, and identifying vendor management cost optimization initiatives.

Prepare an action plan. The final step requires establishing a prioritized and aligned cost optimization roadmap, developing a communications plan, and creating an executive presentation about the roadmap that focuses on the essentials.

McLean & Company has offices in Toronto and London, Ont., with additional locations around the globe.