Gartner Reveals Best Practices to Drive HR Cost Optimization During Coronavirus

A Gartner, Inc. survey on March 23 among approximately 160 HR leaders showed that 49% of respondents are implementing organizationwide new hiring freezes, and 41% are focused on making better use of technology. In response to the global COVID-19 pandemic, HR leaders have initialized first cost-cutting measures that aim at reducing costs both in the function as well as across the enterprise, according to Gartner, Inc.

As many companies are experiencing significant declines in revenue over the last several weeks, organizations are implementing a first wave of cost-saving initiatives, such as reducing employee work hours, reducing head count, freezing hiring and/or promotions and more.

“While HR leaders are being cautious about initializing cost-cutting measures, they are preparing for the possibility of needing to take stronger actions to manage costs,” said Matthias Graf, senior director analyst in the Gartner HR practice. “It is critical for HR to take a strategic view as the decisions that are made now will determine how well organizations can sustain performance during this crisis and emerge in a position of strength.”

Cost-saving measures carry inherent risk; HR leaders are essential to determining the possible near- and long-term negative impacts on employer brand and employee engagement. The Gartner survey showed that HR leaders are initializing two main cost-cutting measures both in their function and across the enterprise:

• Within the HR function, HR leaders are focusing their current efforts on making more effective use of technology as well as reprioritizing and downsizing HR services and processes.
• HR leaders’ workforce-related cost efforts include implementing hiring freezes, while mostly holding back for now on driving, larger-scale cost-cutting measures.

Managing HR-related Spend

The Gartner survey showed that 27% of HR leaders are reprioritizing and downsizing HR services and processes and 12% are stopping or limiting consultant spend. These efforts are aimed at driving efficiency and effectiveness in service delivery, instead of driving larger-scale cost cuts. HR leaders are currently refraining from downsizing their function, although this might change amid the growing economic uncertainty.

Managing Workforce-related Spend

Twenty-seven percent of respondents are not planning any workforce-related cost reduction efforts right now. Organizations are still holding back on larger-scale cost-cutting measures and are instead working to avoid adding new costs to the company payroll. Increasingly, however, companies are preparing for a second wave of cost-cutting initiatives and are starting to identify potential employee groups for temporary or permanent downsizing activities, such as furloughs or layoffs.

Greatest Challenges to Optimizing HR Costs

As companies gear up for large-scale cost-cutting measures, they are struggling to identify the most effective means of doing so. When it comes to optimizing costs in HR, 42% of the HR leaders Gartner polled reveal that they are struggling to move beyond the cost savings they have already achieved. More than one-quarter of respondents stated that they find it hard to respond to ad hoc cost-cutting pressure.

Gartner research shows that many companies have completed several rounds of cost optimization efforts across the last decade. Already lean, these organizations are hard-pressed to find additional savings opportunities. Therefore, organizations are focusing cost optimization efforts on service reprioritization and design by limiting service offerings or reducing the service-level agreements (SLAs) for certain offerings.

“To achieve immediate savings on spend, companies should look into reprioritizing current and planned projects,” said Mr. Graf. “Organizations can also think about making staff available for other functions or projects across other business units.”

Learn more about how to lead organizations through the disruption of coronavirus in the Gartner coronavirus resource center, a collection of complimentary Gartner research and webinars to help organizations respond, manage and prepare for the rapid spread and global impact of COVID-19.

About Gartner ReimagineHR

Gartner experts will provide additional analysis on HR trends at the Gartner ReimagineHR Conference taking place September 21-22 in London and October 26-28 in Orlando. Follow news and updates from the conferences using #GartnerHR.

About the Gartner HR Practice

The Gartner HR practice brings together the best relevant content approaches across Gartner to offer individual decision makers strategic business advice on the mission-critical priorities that cut across the HR function. Additional information is available at http://www.gartner.com/en/human-resources/human-resources-leaders. Follow news and updates from the Gartner HR practice on Twitter and LinkedIn using #GartnerHR.

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