Most Australian businesses have been affected by COVID-19, with Government regulations shifting all non-essential workers from the office to home. A widespread decline in revenue has forced leadership to go back to the drawing board and rethink their strategy for 2020.
We have seen HR pressured to provide options to senior management, workforce cost being first on the chopping block. Understanding that people are a company’s best asset, we decided to provide creative ways for HR to cut workforce costs – focusing on protecting businesses and employees.
How to prep for a workforce cost analysis
First up, time to get a better understanding of your current state and review your expenditure. If you haven’t already, do a full assessment of organisational spending. Cash is king, so focus on both reducing and eliminating non-essential fixed and variable expenses, alleviating the need to cull in other areas. Tackle these quick wins, then move on to setting realistic targets that determine your next steps.
- Access your org structure. Source a complete snapshot of your organisation with associated HR metrics like budget, salary, leave and headcount
- Complete your cash flow forecast. Review wages, rent, tax and supplier payments to figure out how quickly you need to act. Look for non-essential investments that you can pause, reduce or eliminate (e.g. hiring freeze or cut inefficient technologies)
- Conduct what-if scenario planning. Assess the current and future flow-on effects of each crisis management option, showing how each affects the bottom line
- Look closer. After deciding your most viable options, review in scope the non-tangible negative impacts they might have your organisation – be vigilant in identifying hidden costs
Though it’s hard to see the silver linings for COVID-19, it’s been a wake up call for lots of organisations. Take this as an opportunity to reconsider the way you do business. Ask your team questions like, does our current business model allow us to survive this pandemic? How have our customer’s behaviours changed?
By visualising HR data in an org chart, you can easily drill down through a mountain of information, conducting an analysis of your organisation from the bottom up. When you understand your structure, you can quickly identify problem areas.
What are my options?
We have seen organisations’ respond with many different approaches over the past few months. Below is a snapshot of some Australian initiatives.
- Refocus your workforce. In areas that have slowed – identify transferable skills to keep your staff working. If this doesn’t work off the bat, up skill valuable teams e.g. get sales to take online courses to help marketing
- Voluntary employee pay reduction. Present full-time staff an option to temporarily reduce their staff week (e.g. taking an unpaid or annual leave day per week). Most staff are willing to take the cut to prevent future redundancies. A one-day reduction can cut workforce costs by 20%
- Voluntary executive pay reduction. Some high paid executives have put their hand up to significantly reduce their income
- Make full-time employees part-time. This option should be used carefully, as it creates more work down the track. When the brakes come off, it might be better to have engaged employees readily available
- Temporary pay reduction with reimbursement. Reduce pay for employees during the crisis, with the promise of reimbursement when things get back to normal
- Pivot department function. Get creative and provide a product / service where demand has increased e.g. a fashion businesses that produces face masks
- Temporary department shut down. Close departments that are losing money and re-purpose staff with transferable skills
- Change your pricing and terms. Think about how you can sweeten the deal to get paid upfront, helping to improve cash flow
- Review all non-essential expenses. Eliminate, reduce or suspend items that will have an impact in one or six months, not years
- Seek Government help. Eligible businesses can register for JobKeeper from 20 April. Some key requirements include a 30% reduction in turnover compared to last year and all eligible employees must be paid at least $1,500 per fortnight. Check out initiatives like those from HROnboard to help manage this process for you
- Temporarily stand down employees. This means all those who can’t be usefully employed will no longer work or be paid but will remain employed by the business. Most people will be able to access JobKeeper payment for support
- Organise temporary work. When being forced to stand down employees, some companies have organised temporary work for them at a different organisation. This helps to maintain a positive relationship for when things get back to normal
While these changes won’t always be favoured by staff, they’re ultimately aimed at their protection. With so many different routes, it’s important to find data that supports the best strategy.
How can org charts help reduce workforce costs?
Australia’s top business leaders have nominated scenario and workforce planning as most important for responding to a crisis. Org charts allow you to effectively plan and manage what the future of your workforce looks like.
The graph below provides a high-level view of how payroll data provides the foundation for org design. This process allows you to build on your existing HRIS data, developing a bottom-up people strategy to optimise workforce costs.
Figure 1.1 building blocks of future state scenarios
If you have access to an org charting tool, you can visualise your current state and set specific end goals (e.g. reduce total fixed expenditure by 30%). Once you have targets, you can build practical scenarios with data from your payroll system. Below we will cover 9 ways org charts can help you during COVID-19.
Workforce modelling for scenario planning
Org charts provide a sandbox mode that takes a snapshot of your current org structure (the “now”), so you can create multiple what-if scenarios (the “model”). By displaying metrics around headcount, expenses and budget, you can easily see the changes being considered, and if they satisfy goals associated with this change. These metrics are dynamic and will update as modifications are made in the scenario.
Initiative drag-and-drop and conditional formatting allow you to quickly identify problem areas and to plan for the future. With HR metrics associated to help compare two points in time, quantitative goals can be defined.
Quickly answer questions like: What would my budget look like if 50% of staff went down to 4 days p.w? How much will cash flow increase if I reduce salary expenses by 10%?
Figure 1.2 scenario planning chart in org.manager
Flag high-earners and key employees
This logic can be used to quickly find any existing issues in your workforce, be it colour coding your charts to highlight personnel over their allocated budget, salaries above $100k or workers not eligible for JobKeeper. You can also use this tool to identify key players, making sure you are working to retain them.
Audit JobKeeper Compliance
Track and audit those that are eligible for JobKeeper, have completed paperwork and for who payments are being received. Create complex backend job type, visa and award calculations and then display the results in a clear and simple org chart. Review compliance at the individual and department level.
Most people already deal with too many spreadsheets in their day-to-day. When it comes to allocating budgets, make it easier by displaying your data in a visual format. View detailed budgets side-by-side with other departments or compared to previous years. With conditional formatting, you can easily highlight departments who are over or under budget.
Figure 1.3 budget chart
This chart allows you to quickly find all those employees who have accrued too much leave. Great for reducing your leave liability, but also great for making sure your employees are giving themselves time to recharge during a stressful time.
Figure 1.4 leave chart
Visualise employment type
Identify employees based on whether they’re casual, full time, part time or contractors. This chart can help to identify candidates that are eligible for JobKeeper or variable costs.
Figure 1.5 employment type chart
Ad hoc scheduling
Optimise labour scheduling and forecast staffing needs based on volume. Org charts allow you to quickly create and roll-out a new schedule chart that can be tweaked at any time. As everyone in the organisation will have self-serve access, no need for back and forth communication between managers and employees.
Communication across your entire organisation
Uncertainties will make your staff nervous. Org charts can clearly and effectively communicate changes across your entire organisation, allowing employees to get a better understanding of where they’ll fit in the new picture.
Chart & Scenario presentation
Share plans with managers visually, enabling access to an updated org chart alongside tracked changes. Post plans to private work spaces for easy review and continued discussion. Export to PDF, PowerPoint, Excel, etc.
A strong organisational structure is the foundation of strong decision-making. By evaluating your workforce, you can increase productivity and manage workforce changes more effectively.
Why you should get started now
- Can be managed by a small team – minimal resource drain
- Fast implementation timeline
- An easy win. Cost effective solution with quick ROI
- Easy to implement and manage remotely
- It’s more important than ever to identify key staff to protect them
- The quicker you enact your strategy, the more you will save long term
Looking beyond COVID-19, cost optimisation will help your organisation to rebound and grow. While managing the short-term changes, it’s important to be proactive by preparing for the post-corona world. Here are some actions you should be taking:
- Plan your recovery now. Don’t wait to debrief on lessons when it’s all over, set goals and respond looking to the future
- Protect your organisational culture. It takes years to build so be sure to protect all the positive elements. During recovery, a positive and healthy culture will be more important than ever
- Plan to do it once. Few organisations make cuts deep enough the first time, forcing a second round. This creates more uncertainty and can compromise productivity and morale
- Take care of your surviving customers. Some customers are still spending, use your excess capacity to exceed expectations
- If poor decisions were made, don’t let them hold you back any longer. Focus on what your organisation needs to do to survive
- Select a dedicated transition team to build transparency and drive commitment for your choices
Though we all hope to turn things around quickly, reality is you may have to make some difficult decisions. Navigating COVID-19 will require strong leaders, driven by logic and empathy – equipped with the right data. By understanding your current state and working out the most logical decisions, put your business in a strong position to survive.