Responsibility takes on a whole new meaning as organizations try to balance the welfare of their people with keeping their businesses afloat. Overwhelmingly we are seeing leaders putting their people first, and exhausting all other cost-savings options in order to retain their talent while staying solvent. A crisis like this is temporary, and those organizations that put people first now will keep their support in the future, as well as be prepared for the rebound when it happens. But this means taking a creative and agile approach to managing reward.
70% of leaders have not experienced a significant business disruption in at least five years.
The behavioral changes needed to fight COVID-19 have led to immediate decline in revenue for most businesses. Learn the right responses to those economic challenges to ensure you are well positioned for the rebound.
Every day, COVID-19 is raising new and complex questions for leaders and organizations to answer. Korn Ferry’s Nathan Blain shares his perspective and advice.
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The first step for most organizations is to evaluate the likely impact of the crisis on the economics of their business. There are two major forces at play here. The first is the extent of revenue loss and the second is the length of time it will take to contain the virus. We can help your senior leaders to identify the most likely scenarios for your organization and generate the cost moderation options for each. We then work with your reward and finance teams to model the impact of each of these cuts on employees and production capacity so you can identify the savings that have the lowest impact on organization performance.
We’ll identify the savings with the lowest impact on organization performance.
Optimizing your reward spend – The cost of rewards investments is usually well understood, but the value created for employees is often not. Korn Ferry quantifies the value to employees of rewards investments through conjoint analysis—a widely used technique in consumer and employee research. We then work with you to cut from investments that are undervalued by employees and invest in programs that are overvalued. We typically find opportunities to save at least 5% of an organization’s reward bill without reducing (and sometimes improving) the perceived value of the total offer to employees.
Reviewing your staffing levels, spans and layers – An analysis of the size and “shape” of an organization often reveals significant cost-saving opportunities that can be realized through focused role design work. We have developed a range of online interactive tools and analytic reports to highlight where in your organization you might be over or under- resourced, what the associated costs are, and how your headcount compares to the market. Our analysis is based on our work measurement methodology, which is the most robust and widely used in the world.
Outsourcing to lower cost markets – Organizations that have carefully defined their operating model can often find opportunities to lock in sustained cost savings by moving work to lower cost labor markets. We can work with leaders to redefine work and the operating models used to deliver it. And, drawing on Korn Ferry Pay – the world’s most comprehensive compensation database – suggest more affordable locations.
Restructuring to deliver efficiencies – As your business moves to prioritize cost optimization, you may need to look at your operating model to reduce redundancies, centralize shared functions and streamline processes. Korn Ferry’s organizational strategy team can support you with a process and tools to deliver these changes without disrupting your business.
We typically find opportunities to save at least 5% of an organization’s reward bill.
This is an extremely unsettling time for employees and leaders will need to work hard to keep them engaged and productive during this time. We work with leaders to help them guide their employees through major disruption. Helping them make the case for change, putting in place enablement initiatives and, where layoffs are necessary, supporting employees to more easily transition to a new career.
We work with leaders to help them guide their employees through major disruption.
In our hands it’s more than just data. We use it to build the DNA of outstanding leaders, effective organizations, high performance cultures and game-changing reward programs. In your hands it can continue to inform smarter decisions backed by more than 4 billion data points, including:
– Over 69 million assessment results
– 8 million employee engagement survey responses
– Rewards data for 20 million employees across 25,000 organizations and 150+ countries
After leaders have ensured the safety and health of their organization’s employees, partners, and communities, it’s time to turn to looking after the organization itself. The disruption to industries, markets, and businesses from the coronavirus means that yearly revenue is likely to be down—significantly so—in 2020. And, for many organizations, that means that leaders will have to consider various cost optimization strategies, including cost cutting and pay cuts, as a result of the coronavirus.
But this crisis is also different from those we’ve experienced before. The recession in 2008 was a financial crisis, when investment dried up and banks stopped lending. But in 2020, we face a human crisis. Although our way of work has changed, we don’t expect it to last forever: it’s a disruption, not an enduring reduction in economic activity. Eventually, we will find ways to contain the virus and move ahead. Organizations should thus carefully evaluate cost optimization tools and consider strategies, such as coronavirus pay cuts and other cost-cutting measures, that may have an undesirable long-term impact.
The potential impact of the COVID-19 outbreak on businesses depends on two key dynamics:
Looking at the crisis from a high level, these two dynamics will lead to four potential COVID-19 cost optimization scenarios for organizations to consider:
Leaders will need to decide which of these scenarios are the most likely to occur in their organization and a strategy and a metrics dashboard to address them with the right measures and cost optimization tools.
In all four scenarios, organizations should be wary of COVID-19 cost-cutting strategies that reduce their capacity: there are ways to counter declining revenue other than a matching reduction in headcount. And those that immediately pull the layoff or furlough trigger may find themselves lagging behind when the economy recovers.
Instead, organizations need to approach the COVID-19 pandemic creatively, seeking ways to trim costs and address the impact that coronavirus may have on pay without having lasting effects on capacity. Here are some cost optimization tools and other measures that may help.
Organizations may first want to consider these coronavirus cost optimization strategies that are designed to deliver one-time, near-term expense savings.
Depending on the severity of the impact on your industry and market, and the length of time it takes to battle the coronavirus, these measures may not be enough to protect your organization, despite the severe impact they may have on pay and employee morale. As leaders evaluate how to balance protecting their capacity with the need to limit costs, they will have to implement additional, more stringent cost optimization tools.
During the second and third month of the crisis, we expect that many organizations will begin to deploy additional coronavirus cost optimization measures to increase their efficiency. The cost optimization tools listed below will help organizations deliver the same level of output at a lower cost and allow them to save money in this calendar year.
Some organizations will find that the first two sets of tools are not enough to allow them to survive the coronavirus crisis. For these organizations, it may be prudent to consider a more foundational restructuring. Organizations should carefully weigh these coronavirus cost optimization tools, as they may result in near-term cash flow declines because they are costly to implement.
Your organization’s success depends on how well it maintains its cash reserves and preserves its capacity, so it can hit the ground running once the coronavirus threat passes. Now is the time to take four critical actions as you consider your coronavirus cost optimization strategy: