Do you understand your staff costs?
The recession was painful and the recovery will be extremely slow as the economists predict. But it showed pretty interesting information for many HR Managers. They had no clue about the structure of the staff costs and how the recession will impact its size and structure. Many organizations were ruining their net profits, but the employees were still eligible for the bonuses.
Human Resources lost its focus on the clear compensation strategy in the times of the booming economy. The organization was in the real war for talents and it was adding benefits, increasing the base salaries and the bonuses had to be excellent and the total cash had to fight the competitors on the market.
This strategy worked. And then it stopped working from a day to day. The compensation strategy was not aligned with the performance of the organization; it was aligned with the war for talents. It was extremely expensive and not respecting the changed reality.
The HR Manager started to make ad-hoc decisions and the cancellation of many benefit plans followed. But the HR Managers had no clue about their impact on the profitability as they had no clue about the usage of the benefits.
Many HR Managers had issues to calculate the prediction of the bonus payments as the rules for the bonus calculations were adjusted every year to make employees happy. And the rules were making the employees unhappy then.
Human Resources has to set the compensation strategy again and it has to set the position on the compensation market and to point the differences in the compensation structure against the competitors.
HR has to set the clear compensation rules as the compensation is in line with the net profit development and the organization always operates on the safe side.