Strategic Role Assessment: Reducing Costs Without Reducing Quality
by Alan Gibbons
All companies are concerned about their spending these days, and sometimes it seems as if workforce cuts are inevitable. But during the recession, many companies confuse eliminating jobs with eliminating costs. Making across-the-board head-count reductions without adequately taking strategic capability or areas for growth into account can be damaging to longer-term talent positioning.
What companies need is a comprehensive approach to reduce workforce costs without impairing workforce quality. To do this effectively, a company must be able to analyze the different roles in its workforce. This can be done by carrying out a strategic role assessment (SRA).
The purpose of SRA is to identify strategic talent, or individuals who are top performers relative to their peers and who perform roles that directly support an organization' s strategic goals. An assessment of the entire workforce - function by function and business area by business area - can be conducted, plotting people according to two spectrums: performance, from exceptional to low, and value, from mission-critical to nonessential.
This analysis enables organizations to become more nuanced and informed about how they invest in their workforces. For instance, many organizations routinely waste payroll budget by failing to set salary levels properly. The result: too much money paid to the wrong people and too little to the ones whose contribution is mission-critical. In today's cash-strapped global business environment such waste is unacceptable, especially since payroll can represent 40-70 percent or more of revenues for service or knowledge businesses.
With the SRA approach, roles can be clearly segmented, and reward decisions can then be made on a transparent and equitable basis, each job being paid according to its strategic value to the organization and market competitiveness. Base pay and total cash compensation levels can be set appropriately and checked against local-market benchmark data.
One of the results of an SRA may seem counterintuitive during a recession: Some employees actually may need a pay increase because of their importance to the organization. This reinvestment is more than offset, however, by recalibrating the pay of core or necessary workers - depending on their performance grades - and by counseling low performers in dispensable roles out of the organization.
SRAs also can mean some workers receive salary reductions - perhaps back to levels from three to four years ago. Yet, the assessment advantage from a cultural impact perspective is the process is comprehensive and equitable. Management can say to the entire workforce, "We're going to use business-case data and workforce performance analysis to look at where strategic value is being created in the organization, and we're going to adjust pay scales in light of that assessment."
The ultimate result of a strategic role assessment is a powerful compensation strategy tailored to the organization and thus difficult for its competitors to replicate. And the payoff can be significant: from 6 to 10 percent of total payroll costs during a one- or two-year period, with the added advantage of having a less negative effect on workforce morale and engagement. In fact, this is a strategy that can legitimately claim to protect jobs.
[About the Author: Alan Gibbons is a director in Accenture's Talent & Organization Performance practice who focuses on performance and rewards.]
by Alan Gibbons
All companies are concerned about their spending these days, and sometimes it seems as if workforce cuts are inevitable. But during the recession, many companies confuse eliminating jobs with eliminating costs. Making across-the-board head-count reductions without adequately taking strategic capability or areas for growth into account can be damaging to longer-term talent positioning.
What companies need is a comprehensive approach to reduce workforce costs without impairing workforce quality. To do this effectively, a company must be able to analyze the different roles in its workforce. This can be done by carrying out a strategic role assessment (SRA).
The purpose of SRA is to identify strategic talent, or individuals who are top performers relative to their peers and who perform roles that directly support an organization' s strategic goals. An assessment of the entire workforce - function by function and business area by business area - can be conducted, plotting people according to two spectrums: performance, from exceptional to low, and value, from mission-critical to nonessential.
This analysis enables organizations to become more nuanced and informed about how they invest in their workforces. For instance, many organizations routinely waste payroll budget by failing to set salary levels properly. The result: too much money paid to the wrong people and too little to the ones whose contribution is mission-critical. In today's cash-strapped global business environment such waste is unacceptable, especially since payroll can represent 40-70 percent or more of revenues for service or knowledge businesses.
With the SRA approach, roles can be clearly segmented, and reward decisions can then be made on a transparent and equitable basis, each job being paid according to its strategic value to the organization and market competitiveness. Base pay and total cash compensation levels can be set appropriately and checked against local-market benchmark data.
One of the results of an SRA may seem counterintuitive during a recession: Some employees actually may need a pay increase because of their importance to the organization. This reinvestment is more than offset, however, by recalibrating the pay of core or necessary workers - depending on their performance grades - and by counseling low performers in dispensable roles out of the organization.
SRAs also can mean some workers receive salary reductions - perhaps back to levels from three to four years ago. Yet, the assessment advantage from a cultural impact perspective is the process is comprehensive and equitable. Management can say to the entire workforce, "We're going to use business-case data and workforce performance analysis to look at where strategic value is being created in the organization, and we're going to adjust pay scales in light of that assessment."
The ultimate result of a strategic role assessment is a powerful compensation strategy tailored to the organization and thus difficult for its competitors to replicate. And the payoff can be significant: from 6 to 10 percent of total payroll costs during a one- or two-year period, with the added advantage of having a less negative effect on workforce morale and engagement. In fact, this is a strategy that can legitimately claim to protect jobs.
[About the Author: Alan Gibbons is a director in Accenture's Talent & Organization Performance practice who focuses on performance and rewards.]