The global financial crisis (GFC) has caused many companies to review every aspect of their operations, including their business models and the way work is performed. Direct labour costs can range from 30 to 80 per cent of an organisation's cost base, depending upon the type of industry. It has therefore constituted a ‘soft target' for cost cutting against a background of declining revenues and profits.
Whilst there are some encouraging signs that Australia may be emerging from the GFC, some companies may be sitting on a ticking time bomb. Research indicates that companies downsizing by more than 10 per cent typically experience subsequent voluntary turnover rates of 50 per cent or greater of surviving employees in the following year compared to companies that don't downsize (Trevor & Nyberg, 2008). It's possible that current lower turnover rates (due to reduced opportunities) may constitute the lull before the storm.
The question now emerging from the GFC is whether it is back to business as usual, or has the impact of the GFC provided a catalyst for irreversible change? The shift to the contingent workforce is likely to be accelerated as organisations want to maintain flexibility and minimise risk whilst at the same time maximising the commitment and performance of their people.
Workforce is a major asset of any business and there is now a great deal of evidence that the contribution of people is the largest driver of organisational performance. Whilst the workforce is the most expensive asset of the business, it is frequently the least effectively managed. As Australia emerges from the GFC, help your business to manage the workforce challenges and opportunities and maximise its best asset.
While many organisations have bundles of HR policies, very few have a workforce strategy and associated strategic plan concerning their most vital intangible asset. There are four key steps to developing a workforce strategy.
A major priority for many organisations in uncertain economic times is to take a proactive risk mitigation approach. Retention represents one of the highest returns on investment of any HR initiative. To that end, your business should conduct a retention risk assessment on your employees, particularly your key talent. The cost of staff turnover can be very substantial, varying between 2.5 to 10 times the salary of the job in question (Cascio, 1991; Mercer Delta, 2006). Many of these costs are indirect and don't show up immediately in profit and loss statements or the balance sheet.
This retention risk assessment, typically by employee survey, should differentiate engagement from retention risk. Often these terms are confused but employees' intention to stay (and not engagement per se), is the strongest predictor of retention.
Consider getting help from an organisational psychologist to help your business effectively manage change during these turbulent economic times. Organisational psychologists have a specialist focus on analysing organisations and their people, and devising strategies to recruit, motivate, develop and change. They base their practice on science, drawing on psychological research and tested strategies to influence how people act, think and feel at work. This scientific approach provides confidence that methods produce measurable, replicable and potentially more cost-effective results.
To locate an organisational psychologist, use the APS Find a Psychologist service by phone (1800 333 497) or internet (www.findapsychologist.org.au).
Cascio, W. F. (1991). Costing human resources: The financial impact of behavior in organizations. Boston: PWS-Kent.
Mercer Delta (2006). Executive Onboarding Research Summary of Effective Practices. Available from www.ivey.uwo.ca/executive/Tal_Dev/Presentations/Executive_Onboarding_Dec06.pdf
Trevor, C. O., & Nyberg, A. N. (2008). Keeping your headcount when all about you are losing theirs: Downsizing, voluntary turnover rates, and the moderating role of HR practices. Academy of Management Journal, 51(2), 259-276.
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