Shifting tectonic plates of HR - People costs vs employee engagement

26 October 2017

By Alastair Woods

The management of people has always meant navigating competing business pressures – that on occasion come into direct conflict with each other and create critical tension.  One of the biggest challenges for business today could be compared to the effects of shifting tectonic plates pushing against one another.

The first plate is the need to reduce workforce costs. As inflation creeps up, supply chain costs rise and household spending plateaus, there is greater pressure for companies to find efficiencies and savings in the business. Naturally the focus falls on people costs.  The ultimate aim of course is to increase workforce productivity – and for many business, improving the bottom line is the key mechanism to achieve this.

Savings within easy reach have already been identified, for example pensions, outsourcing and shared services.  But there are now renewed efforts to look at the type and location of the workforce, the use of contingent labour and we are seeing renewed interest in reviewing legacy terms and conditions that are no longer fit for purpose.

But the opposing plate is just as important -the talent challenge. The need to have the right skills in place for a changing environment is a clear business priority.  The themes of agility, collaboration and digital skills dominate. So organisations that prioritise costs over employee engagement are putting this at risk.

The combined lenses of fitness and fairness

To support the business, HR needs to balance these two competing priorities.   Our Fit for Growth work has guiding principles that help here - addressing costs while supporting future growth in an area of change.  

The lens of fairness is also crucial here.  Fairness means many things - but we find more organisations are interested in making change that rebalances workforce costs in favour of those who have had reduced access to historic arrangements and pay rises - specifically newer talent and female workers.

A changing landscape

But when tectonic plates push against each other, that pressure creates a change.   A likely outcome of the limited talent pools - and the need to drive productivity is the acceleration of automation and machine learning.  We will see radical change as organisations adapt and new employment models emerge.  

As PwC’s Workforce of the Future report has identified, people are still crucial.  But our roles and how we work will transform.  It is exciting but means the HR community need to deal with ambiguity over the coming years. The key for success in cost cutting, it is surely preparing for this new world – but holding onto adaptable talent for this future.

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