Managers have faced the need to contain or reduce costs for many years although the current economic climate has accentuated that for many. The growing interest in innovative ways to reduce costs will be reviewed in this and subsequent articles over the next few months. Many articles describe the ‘new’ approaches but omit to explain crucial building blocks for those to be successful.
Perhaps the most common approach is to seek a pay freeze or even a pay cut. That does not sound very innovative and it is not when you consider that about 15 years ago some firms started to explore pay freezes but wanted to retain their skilled staff. Some experimented by issuing IOUs to staff which were signed by the Chief Executive and would be redeemed when the financial position of the firm improved. Was that a gimmick? The intention was serious as the purpose was to demonstrate that the firm believed that it would be able to honour the debts within a few years and the senior managers wanted to send out a message of confidence to their staff and customers. However, such an approach to be successful had to have the following key building blocks in place:
- A history of trust between staff and senior managers – it was not seen as a gimmick but a sincere intention to work towards recovery and pay out in the future to those staff who remained in the firm’s employment.
- A realistic assessment by senior managers of when repayment was likely – not a rash promise of a few months but say in 18 – 24 months time.
- An internal commitment to redeem the IOUs.
Regrettably, the failure to take account of the key dimensions of human resource management will lead to many ‘new’ approaches being discredited in the coming months. Nevertheless, through this blog and our work at www.hr-management-dimensions.co.uk we shall continue to comment on current issues, the pitfalls and solutions in implementing effective hr solutions.
© 2012 HR Management Dimensions Ltd.
Web site: www.hr-management-dimensions.co.uk
Blog: HR Management Dimensions