Productivity and Total Cost of Workforce Analyses Solution
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In the face of current, unprecedented times and rising costs, many organizations are evaluating their workforce needs and considering to either limiting or cutting in compensation to avoid having to lay off employees or on the other hand reduce their employee headcount. These are difficult, critical, and crucial decisions, which require organizations to act with ‘true and high sense of urgency’ but also to proceed tactically and strategically to minimize the impact of those on the business and the employees.
Any organization’s strategy is based on two critical pillars: efficiency and growth. In this regard, understanding the organization’s cost structure as an integral part of its business model is fundamentally important. In the end costs impact profitability, which determines the organization’s ability to invest in future growth and its ability to compete in the market and ultimately guarantee jobs and continuity.
Nowadays many organizations are looking to reduce their labor spending and total benefits costs and/or on the other hand improve productivity and increase overall efficiency in the workplace to increase profit to ensure the continuity of the business. For most organizations, the biggest cost of doing business is labor. Labor cost forms in in many organizations or all of them a significant part of the operating budget, and managing the cost related to the workforce in an effective and efficient manner enables organizations to gain a competitive edge. Managing the cost of workforce also contributes to the financial vitality of any organization.
All too often, we observe that the discussion about reducing personnel costs focuses solely on 'total rewards', which means that only the direct remuneration and benefits of personnel are considered, and not the other components of the 'cost of workforce.’ Focusing on salaries and benefits alone is misleading whereby this limits the scope which can lead to weak strategic - and tactical business decisions. All too often, this would lead to unnecessary internal discussion, frustration, impasses, and labor unrest. This ultimately leads to disengaged employees, increased turnover, decreased motivation, and productivity.
A more comprehensive approach is to have a detailed and accurate understanding of the Total Cost of your Workforce (TCOW)!
Organizations who have limited understanding of their TCOW risk missing opportunities for stronger/ enhanced performance, increased efficiency, and competitive advantage. TCOW gives organizations a deeper understanding of their largest cost and helps them to evaluate options that could positively impact their business model but also safeguard employee engagement and increase their productivity.
Many organizations can summarize their visible costs: direct compensation, retirement plan cost, employee insurances. But how many organizations truly know their hidden costs: among others cost of turnover, cost of underperformers, cost of absence of workforce management. The cost of unseen, hidden, unmeasured, unknown workforce components literally can cost organizations 25% to over 100% of profitability. By the TCOW approach, these hidden costs can be measured, controlled, and managed in a highly effective manner. Tackling these can decrease labor costs without any reduction in staff and increase workforce productivity in staff-years without any increase in labor costs.
The Management Advisors’ approach towards Productivity and Total Cost of Workforce Analyses consists
of five main steps:
Step-1: project preparation and start-up
Step-2: to collect HR, financial and operational data and data for productivity and total costs of workforce analysis
Step-3: to conduct the productivity and total costs of workforce analysis
Step-4: to draft the productivity and total costs of workforce analysis report
Step-5: to perform project evaluation and closing
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