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Cost chopping strategy in HRM during economic slowdown


The reduction of the money spent on the procedures of an organization or on the provision of products and services. Cost-cutting actions such as budget reductions, salary freezes, and personnel redundancies may be studied by an organization at a time of recession or financial difficulty or in situations where inefficiency has been revealed. Alternative methods to cost-cutting include modifying organizational constructions and redesigning organizational processes for increased efficiency. Excessive cost-cutting may have an effect on production and quality or the organization's capability to add value cost lowering strategy or cost decrease both are same. It is wide-ranging program where many people are focused on reducing cost from each regions of developing activity. cost lowering may be accomplished through reduction, reduction, modification, substitution or creativity. All cost individuals are considered and with in depth examination the best and least cost journey is adopted for each and every activity. The very best method to achieve email address details are to bench mark operating guidelines to top notch companies. This rives every One to complement or even exceed these statistics.

Why cost reduction

  • profits
  • waste reduction
  • increase productivity
  • competition
  • resource conservation
  • image enhancement

Where to implement cost reduction

Areas for cost reduction are

  • raw material procurement
  • logistics - inbound and outbound
  • production department
  • energy
  • human source of information ( out sourcing )
  • sales & marketing
  • finance


HRM is the process of acquiring, training appraising and compensating worker and of going to to their labour relation, health insurance and security, and fairness concerns.

Business is performed for individuals, by folks and of the folks. HR is the most tactical field in the business. It perform the actions like hiring training, compensation, appraising & expanding staff which is the part of each manager's job. By doing these activities is the organization achieves it objectives and fulfills the needs of the average person working in the business and society.

Change is the rule of present environment for just about any business to increase change is similar to a faith. This happens with the change in the surroundings like increase and tough economy. In both time periods HR serves a profit centre for the business. In the boom period the current economic climate, it hires more number of people, creates new opportunity in the market, provides best ability to the business etc. but in the period of recession also it become a profit middle. This we have discussed at length below:-

If we analyses the current market situation it is the recession period. A lot of the organization is following various strategies to face this era of difficulty. This is clearly seen in recent taking place JET AIRWAYS-1800 EMPLOYS RETRENCHMENT. The aviation industry is the most detrimental hit industry in this era. Jet airways retrenched its 1800 employees but later on due to political pressure it took back its employees to help ease the situation. Using this method the HR department is trying to balance the problem with the existing situation. At the time of downturn HR mainly reduce its operations in selecting the new employees, compensation given is less, trains the worker to cut down the costs etc. Through these measures it tries to keep the success in the organization in term of cost of employees, the creation, working, etc.

HR make change in the existing policy of the business which copes up with the situation on the market and can have the ability to make earnings with the best usage of available resources.

Moreover, HR priorities the activity in the business according the most important and essential resources are prepared and carried out properly in the business.

So they are a few of the step which are taken by HR office in enough time of downturn.


There are various HR methods which the corporation can follow at the time of recession. These are discussed below:-

Most of the time, monetary downturns are short-lived so keep the bigger picture of the long-term development in sight. It's much easier to make investments training time for new recruits during slower development period. It's also worth remembering at if you dismiss employ during a downturn, not only their a cost, you will have to appoint someone to take their places when time gets better- and that can cost far more money in the long run.

Don't recruit a problem

In the first circumstances, it's essential, in tough times, to ensure that you have the right people working out for you. The recruitment process should be conducted with thorough thoroughness.

They are three key areas to note:

  • legal requirements
  • best practice
  • collect facts

do ensure that you ask questions that are relevant to the work bing recruited for and do not be afraid to develop in some tests. Some excellent CVs don't hold up under scrutiny. After the candidate was analyzed and evidence accumulated to see if he/she could deliver the skills claimed, the result were both shocking and disappointing.

Apportioning the resource wisely

Limit activities with limited business purposes. Instead, plan a sales or other company meeting with a clearly identified profit purpose. You can make it fun, for example, using a stable speaker. Create specific specific performance requirements from the reaching.

Reduce expanses that don't add value. Instead include low-cost but high-impact benefits at a time when all of those other business community is reducing.

Be genuine with the employees about difficult times. Let them know how you do so that they understand true financial picture. Often employees are willing to make reductions and changes when they understand the facts. You will discover no winners if the business goes down. Communicating clearly and seriously with this employees also helps to place decrease the rumors flying around the task place.

See the metallic lining

Give employees positive fed back once you can acknowledge when a job is well-done, and consider non cash incentives. It can make a major difference to employee's inspiration.

Regardless of the financial local climate it's realistic to ask the employees to do their best. If they're not performing with their full potential, the right performances appraisal, encouraging suggestions for both celebrations, can be handy.

Look for cost-effectives away to keeping up-to-date -indication up free of charge newsletter and subscribe to great value products and services which trim your costs, but nonetheless keep you up-to-date with sensible information and advice, keeping you abreast of the ever changing employment regulation.

Keep on training your people

All the study shows that the companies who weather the surprise best perform better because they continue their training. It doesn't need to be expensive classroom training. There are so many cost-effective-alternatives- buy a book(of series of books), arrange exclusive classroom andonline training, encourage employees to be seconded on to other tasks of work outside their regular sphere of activity.


The recession is an opportunity for HR experts to step and add strategically. Inside the traditional strategy paradigm, we get started by looking at the macro-economic environment. Then we look at the micro-environment - what impacts us and our rivals. Next, we establish which tactical factors HR affects straight. Finally, we drop down to our tactics- The tough economy is about the creative Human Resources Management. The HRM Function is asked to bring new ideas, to improve the HRM Procedures and develop or change the techniques. And this effort must be cheap or it must cut the costs of the organization. The HRM Innovation is easy in times of the business enterprise growth, but the recession is not good for big impressive HRM Initiatives.

The HR Management must focus on unpopular innovations through the downturn as the role of HR through the recession is to save lots of money to the business. The senior management desires all the support functions to bring progressive ideas and alternatives which will lead to more powerful organization, when another growth era comes.

The point must be targeted by HR management during recession are as follows:

  • To optimise the manpower durability.
  • To take proper initiatives to increase the output and efficiency of the whole organization.
  • To focus on settlement benefits.
  • Redesign training and development programs.
  • Ensure your organization's policies and handbooks are current. Remember that an annual review of your worker handbook for conformity by an experienced professional is strongly suggested. Also, each worker having a copy of the employee handbook is insufficient. They need to have the ability to read and understand the content. Make sure that you provide employees a handbook in a terms they can read and understand.
  • Layoffs are never easy. Ensure you are familiar with your legal tasks in a lay off to reduce your organization's risk. Be sure that you have properly identified the requirements you are using to determine who'll be release.
  • Alternative Workweek Schedules and Flexible Arranging can maximize creation and cut-back on overhead charges for organizations. Be sure you follow every one of the DLSE guidelines when deciding if an alternative solution Workweek Agenda or Flexible Scheduling is right for your company.
  • Cutting Pay may be a choice to consider to save on today's costs. Is this really an option for your company? How are your pay scales as related to the marketplace? Are you willing to risk getting rid of key employees whose talents may be needed by other organizations, because you thought we would reduce their pay at this time? Remember, you ought not cut pay with out a recovering strategy of how you will re-adjust when the current economic climate has changed.
  • Downsizing does require internal document maintenance for your organization. As jobs are improved and obligations are increased changes also must be produced to your job descriptions.
  • On the other hands the HR Management must find some progressive solutions through the downturn like,
  • To identify the real key employees and to intact them in the organization.
  • To identify the true top potentials and to strengthen their development program. The HR Management has to have priorities in mind and the strategic impact of the HRM Inventions in the recession time. The role of the HR Management is never to minimize the expenses for the time being, but to make the organization stronger and ready for the future growth.


The HRM Function is asked to bring new ideas, to improve the HRM Procedures also to develop or change the methods. And this effort should be cheap or it has to cut the costs of the business. The HRM Creativity is straightforward in times of the business enterprise growth, but the recession is not good for big innovative HRM Initiatives.

Alternatively, the top management understands your time and effort to innovate the HRM Operations better. The very best management is in the search for the potential cost savings and they count number every single cent brought by the lines management. The HRM Costs generally are a very significant cost to the organization and the HRM Function needs to be proactive.

The HRM Function must focus on unpopular innovations through the recession as the role of Human Resources during the tough economy is to save lots of money to the organization. The top management desires all the support functions to bring ground breaking solutions, which will have to make the group stronger, when the next growth time comes.

The HRM Development through the recession must focus on the next topics:

  • Reduce the number of employees in the organization
  • Strategic initiatives to boost the productivity and efficiency of the whole organization
  • Redesign of the payment scheme
  • Cancellation of several benefit schemes

On the other hand the HRM Function has to find innovative solutions for the next topics:

  • Identifying the real key employees also to keep them in the organization
  • Identifying the true top potentials and also to enhance their development program

The second two issues have to be finished with the minimum amount additional costs which is a really hard task to perform. The HRM Function really needs priorities in mind and the tactical impact of the HRM Innovations in the recession time. The role of the HRM Function is never to cut the costs for enough time being, but to help make the organization better and ready for the future growth.

Like a leader and proper partner in your organization, you have the tools to assist your enterprise in making it through and flourishing through these difficult times. First you will need to start thinking strategically

  • How can the business make effective and inexpensive changes that will assist through these difficult times?
  • What may i do to reduce our organization's risk for fines, violations and/or unnecessary legal proceedings?

Following area should be viewed:

  • Ensure your organization's regulations and handbooks are current. Remember that an annual review of your employee handbook for compliance by an experienced professional is highly recommended. Also, each staff having a copy of the employee handbook is not enough. They have to have the ability to read and understand the content. Be sure that you provide employees a handbook in a language they can read and understand.
  • Layoffs should never be easy. Ensure you are aware of your legal responsibilities in a lay off to minimize your organization's risk. Make sure that you have properly defined the requirements you are employing to determine who'll be release.
  • Alternative Workweek Schedules and Flexible Scheduling can increase production and cut-back on overhead costs for organizations
  • Cutting Pay may be a choice to consider conserving on today's costs. Is this really an option for your organization? How are your income scales as related to the market? Are you willing to risk shedding key employees whose skills may be needed by other organizations, because you chose to reduce their pay at this time? Remember, you ought not cut pay with out a recovering strategy of how you will re-adjust when the market has changed.
  • Offer Professional Development as a reward or incentive to employees for performance and hitting goals. Professional Development courses are an economical way to prize employees with the present of education and skills they will use throughout their life-time.
  • Downsizing does require internal document maintenance for your company. As careers are revised and responsibilities are increased changes also must be made to your job descriptions.
  • Remember that the law is very specific on what positions can be viewed as Salaried - Exempt and what constitutes an unbiased Contractor. Looking at adjusting your staff to fit into one of the two categories is NEVER the response when trying to save lots of money.


In the current economic local climate, cost cutting methods are still at the top of the agenda for most firms, so I thought it could be good to revisit this topic from a few weblogs back.

Recently, I wrote about slicing costs through services quantity reductions, as well as service range reductions.

Recent presses as well as industry players are discussing demands for costing concessions on a fairly regular basis now. At TPI, we know of several conditions where clients are calling for a 5 percent to 15 percent decrease in the rates they pay for offshore labor.

Such cost reducing contributes to pressure in the entire service delivery value chain. If I'm being paid less, then I need to discover a way to reduce my costs as well as my hazards (which have a cost because some of these risks will eventuate).

So, one action we can get to see is companies lowering their costs. On way to do that is by employing more junior (i. e. lower paid) personnel for work that is labor-intensive. Now, if those people are less beneficial because they're less experienced or less well-trained, then your end result could actually be an increase in the number of devices (i. e. more time)--thus, probably increasing the total cost for the client.

And it's really not just the number of hours the service provider staff devote, it can even be service buyers who have to invest more time into managing a relationship with more junior people, thus, giving a double strike.

And this is the key. The focus needs to be on total cost, definitely not unit costs. Don't get me wrong, oftentimes there is a strong website link between unit costs, volumes and total costs, but the end-game is to lessen total costs--with anything else a distraction.

Having a concentrate on total cost reduction, the entire spectral range of options becomes available. Some may necessitate harder work, some may take much longer, some may work in the short term but cause significant longer-term issues.

Being clear about both brief- and longer-term needs and implications helps guide you through options such as quantity reductions, product price reductions, range reductions, redistribution of work between company and client to boost efficiency and performance, re-balancing of risk to the party best-placed to control it, and numerous others.


Most Popular Cost-Cutting Move in HR: Streamlining

Streamlining is typically the most popular and effective approach to managing HR costs, relating to a survey conducted by the Institute of Management and Administration.

IOMA, in its just-released HR Management and Cost Control Review, asked respondents to determine the five categories where they were most successful in controlling costs. Topping the voting, at 62. 8 percent, was streamlining HR operations.

The most popular choice after that, at 54. 7 percent, was using the Internet to recruit.

Streamlining happened on a number of fronts, individual remarks from respondents uncovered. While one medical company with 56 employees come up with packets of most required HR information and made a checklist so nothing gets overlooked, another company, with 949 employees, implemented People delicate.

"Headcount studies passed through five differing people seven different times, " the HRIS/task manager accepted. "We removed five steps in employing People soft, conserving us two work days and nights. "

Another company melded its training and development functions in to the career function and uses one director - somewhat than two - to oversee both functions. A nonprofit association with 1, 095 employees, in the mean time, moved lots of functions and related paperwork onto its Internet. "We live more fruitful because employees can gain access to an on-line insurance plan manual rather than calling HR staff, " the group's reimbursement manager reported.

Internet for selecting/retention

HR professionals also focused on the Internet this past year to find and retain the services of employees, IOMA's review found. Whether mid-sized or large, companies reported saving huge money by relying on the Internet alternatively than recruiters or papers ads to employ new employees because of their firms.

"Utilising the web for recruiting somewhat than [using] recruiters has saved hundreds of thousands of us dollars, " a director of settlement from a Midwest company with 14, 000 employees told us.

Added the director of HR at a midsize talking to firm in the Southeast, "Using Internet-based recruiting has kept about $30, 000 in recruiting costs in 2001. Implementation involved placing vacancies on Monster. com at about $350 each. Each publishing made about 10 functional resumes. "

Other cost-control strategies

Other strategies that garnered high marks were automating HR functions via HR Internet or Web-based HR applications (41. 9 percent overall) and asking staff to take on more obligations (39. 2 percent).

For the former strategy, employers reported moving all time credit card techniques, benefits information, benefits and training enrollment, 401(k) administration, worker data changes and performance evaluations to a Web-based format, keeping anywhere from $10, 000 to $2. 5 million.

Approaches by size

Smaller size companies, those with up to 200 and 251 to at least one 1, 000 employees) relied more seriously on the utilization of the Internet for employing/recruitment to cut costs. Larger companies with more than 1, 000 employees, however, relied on streamlining HR functions and types of procedures.

Companies with 251 to 1 1, 000 employees are usually more willing than other size organizations to look at or change HRIS systems/software to manage their HR department costs (48. 6 percent).

Smaller firms with 250 or fewer employees, subsequently, favored placing HR staff performance goals/increasing HR staff accountability (39. 0 percent), alternatively than asking personnel to take on more duties.

Approaches by industry

Across all companies, organizations cited either streamlining HR operations and types of procedures or utilising the web for hiring/recruitment as the utmost successful means to controlling HR office costs.

Interestingly, completely of the travel companies queried cited streamlining, whereas 100 percent of private practice companies cited Internet selecting/recruitment as their most reliable technique.

Other interesting variances that took place:

  • 57. 1 percent of low cost/retail companies cited a cutback on staff travel and conferences,
  • 66. 7 percent of vehicles employers noted a reduction in internal HR personnel;
  • 66. 7 percent of travel employers also cited outsourcing one or several HR functions;
  • 47. 1 percent of service companies said the adoption or change of HRIS systems or software was one of the most useful cost-control techniques.


The time of recession most of the companies follow the various strategies to keep edge in the market. In lots of organizations the HR strategies are evolved to deal up with the situation. During the boom throughout the market most of the organization hires the new employees, educate them with objective of development and maximization of the prosperity and resources of the business.

But reverse is what goes on during recession. Their concentration changes into the flatter and slim management. The most frequent strategy is the price CUTTING STRATEGY. They decrease after their cost of recruitment, training, payment etc. Moreover they retrench some of their employees. It is mainly done with the employees who are in the probation period.

In these period companies focus stay towards increasing the production more efficiency in the organization. They make an effort to retain the best talented & most productive worker in the business.

During boom, company offers new products acquire new company in the order to get edge over the competitors. But in Recession Company rather than growth or addition to new products, targets the performance of the existing product.

So by pursuing a few of these strategies, business achieves their aim in the era of recession by cost trimming and performance.


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