Information on managing IT individuals through a cost reduction effort as well as specific cost reduction tactics relating to the organization that focus on organization size and structure, employee benefits and motivation, and workforce options. Specific cost reduction tactics related to the processes of managing human resources are:
- Labor is typically the largest portion of the IT budget. It is paramount to understand where you use the labor so you are able to make informed cost reduction actions. Use time reporting to understand the activities and accurately report costs by application, business area, or function. If you have not implemented accurate and detailed time reporting, do it now. Without good information on time, cost reduction efforts are a guess.
- Track productivity levels, employee metrics, and work hours. Using surveys, measure and report employee satisfaction. A motivated and highly productive employee actually saves you money. For example, the best employees can be ten times more effective than the mediocre ones, yet typically cost less than two times as much in salary costs. Therefore, a plan based on having fewer employees, but great ones, always pays off. Unfortunately, the larger the IT organization, the harder it is to find and deal with the worst performers.
- Get new employees productive as soon as possible with comprehensive new employee orientation and mentoring. Encourage and support the integration of new employees and new skill sets into the IT organization.
- Document employee skills in an inventory profile to optimize resources across the organization. In addition to managing resources, it is important to optimize efficiency by ensuring the appropriate resources are on the right projects. This is easier with visibility to skills. A skills inventory is also useful if you need to make organizational changes or changes in responsibilities or projects. Identifying gaps in skills is helpful when making outsourcing decisions and defining the need for cross-training. Have a formal training plan documented for each IT employee, as properly trained employees are more productive and effective.
- Review the skills necessary against your skills inventory to ensure you have primary as well as secondary backup coverage for each skill area. Invest in cross-training and backup for all key positions and knowledge areas. Being dependent on one person is costly in the event of turnover or if employee reductions are necessary.
- Unwanted turnover costs money in recruitment, retraining, and hiring. Standard industry estimates are that the cost of replacing a good employee is a full year of salary plus benefits. It is far less expensive to keep good employees. Ensure that you clearly document and communicate roles, responsibilities, and career paths. Conduct regular performance reviews providing employees with honest feedback and improvement goals. Do not let the annual performance review be the only feedback, but rather provide honest and sincere feedback, both positive and negative, on a regular basis. Conduct exit interviews for any terminations and resignations as they are a great source of information and can help identify areas needing attention.
- There is value in terminating bad employees and addressing poor performers. The worst employees have negative productivity as they distract others. You actually make money with their absence.
- Recruit employees through cost-effective methods. Consider using online web posting services as it may reduce recruitment fees and costs.
- Hiring mistakes cost money. There are many direct and hidden costs of a poor hire, such as the time spent in the hiring process, training, retraining, productivity impact of other staff, management coaching, and the termination process. Review your hiring process to determine improvements. Obtain multiple inputs when interviewing prospective employees and do thorough background checks. Consider doing skills and personality profiles or rating assessments to ensure a good fit. Develop an evaluation to clearly identify and rate the job requirements including both hard and soft skills. One example of how to improve the process and avoid hiring mistakes is to set up two back-to-back interviews. The first one with three key staff is to evaluate technical skills and provide feedback on personality fit. In the second interview, look for key characteristics, such as self-starter, motivation, and so on.
