As in the case of other divisions in an organization, HR is also responsible for the need to reduce as well as prevent unnecessary expenses under their control. This ensures that everyone contributes to the organization's financial performance. HR can help organizations make the financial cake bigger for the organization and its workers, provided matters for which they are responsible are done well.
Capable leaders can see the need to have an effective plan in order that HR can contribute to savings and, thus, improve the organization's bottom-line.
It is unfortunate that many corporate leaders do not see the connection between Human Resource Management and cost saving. They only see HR as an overhead, as a cost. They may have forgotten that HR involves more than HR processes and practices. It is about people, their knowledge, competence and skills. It is about recruiting the right people and ensuring that they stay and contribute to the success of the organization.
Seven possibilities how effective HR save money
The following are areas where HR can save money for the organization:
Improvement of efficiency means the job is completed earlier than expected, or at least on time. Output level is higher which can result in higher revenue for the organization.
Employee retention saves money.
If people leave, additional expenses are incurred when recruiting people as their replacements. Imagine if the employee turnover is high. Training of new employees adds to the overhead cost. However, effective training reduces the possibility of jobs being done anew, thus helping to reduce costs.
Training existing employees to cover the jobs of other employees also incurs additional cost. But it also prevent incidence of additional expenses since there is no need to recruit additional people when some workers take approved leave of absence.
HR can help the organization comply with safety rules. Poor safety compliance leads to injuries and even death. This can cost a lot of money to the organization, beside getting a bad image.
HR can help reduce negative impact on the environment. This has become a very important matter for organization to consider at this time. Being not environmental-friendly can have negative impacts on organizations. Organizations can incur liability for non-compliance. Environmentally-conscious people refuse to have any dealings with organizations with operations having adverse impacts on the environment.
Some people refuse to work for organizations whose activities pollute the environment. Environmental concerns are becoming important issues which leaders in organizations cannot choose to avoid.
Strategic HR management helps organizations to effectively achieve their financial objectives. Organizations aim for higher revenue all the time. Cost reduction together with higher profitability is even better. HR people play important roles in this respect.
Some organizations consider HR outsourcing as a way of reducing costs. This appears so but in this case, HR is not truly helping to reduce overhead. HR "itself" is used to reduce costs.
Another instance where effective HR save money for organizations is during recession or when the organization is experiencing financial difficulties. Many people will get laid off, thus helping to reduce overheads immediately. This has a negative impact on HR whereby people in HR become the first casualties.
Effective HR save money for your organization when you have put in place the right HR policies and processes, recruit the right people and provide them with the right skills and knowledge, among others.