Surviving budget cuts: an HR director’s key strategies for advancing people and business in tough times

6 minute read

With budgets being cut it’s vital to still focus on how you can keep moving your people, organisation and business forward during these tougher times. But how? As a CPO Annette Andrews learnt the impact of cost-cutting the hard way. Here she shares her lessons

We are living in challenging economic times, and it is in times like this that organisations start to take a very surgical approach, and quite rightly so, in looking at past spending and future plans. It is a time when budget cuts become a norm, with business leaders being set saving challenges by their CFO with the achievement of these built into objectives and reward. 

This is when businesses look for the quick hits and easy wins, and all too often this comes down to spending cuts around what is ironically their most valuable asset – their people. 

I have seen this repeatedly; it seems quick and easy – a no brainer at the time – but it bites later on, when the consequences of those savings work their way through.   

This also has an impact on the culture of the business, the engagement and productivity of its people and the retention of talent. 

And how is this most often seen: 

  • Recruitment cuts. Guess what? The pressure increases as the existing workload and demands don’t go away on those that remain. This in turn then impacts engagement, performance and retention.
  • Reducing or stopping development activity. Again this has an impact as you need to keep investing in people if you are going to get a return, eg developing people ready for their current and future roles, keeping pace with technology and changing customer needs etc.
  • No investment in leadership. Both current and future. This impacts succession planning, the development of soft skills etc., all critical to continued development and retention
  • The pausing or stoppage of investment in people related systems and technology. Ironically this would enable self-service, provide better data and analytics, and enhance HR’s add value to the business as they move from reactive administration to strategic business partners
  • Cancelling or dramatically reducing the investment in other activities. For example diversity, equity and inclusion, wellbeing and so on. This results in the business falling behind external practice and not meeting internal or external expectations – all of which impact recruitment, retention, engagement, development etc.
  • Benefit reductions. The removal or reduction of certain employee benefits or policies with the impact this can then have on recruitment, retention and engagement. 

Take it as a plea from me, as I have learned some painful lessons along the way. Please really focus on how you can keep moving your people, organisation and business forward during the tougher times. It really pays off, will save money, time and heartache at a later stage and mean that you do not have to restart initiatives (and re-engage your people).

So, building on those lessons learned, what are some  things that you can do?

12 areas to consider now

  1. HR systems
    One of the typical areas of focus for a quick budget save is to place on hold any work that has been planned on HR systems. This is a real bugbear of mine because it is so short sighted and really impacts the enhanced value that self-service and good people data can bring to the business. It is also critical for changing the role of HR from reactive and operational, to that of a proactive business partner that uses people data to support business growth and development. 

    There is a real opportunity here to show and reinforce the value that systems enhancements will bring to the business, and the impact it will have (not just on costs) on moving the business forward. If you cannot get agreement on all of the plans, then really try to get a phased approach agreed so that the work is started and continues to be built upon. 

    My push back to those that would just cut any planned investment has always been to provide data and more data as supporting rationale, to get the support of senior leaders on the benefits it brings for them and to make the point that you would never do this to Finance systems, so why do it to people systems. You cannot run a business effectively without systems and data for both the financials and people – and the data need to talk to each other. 

    The continued investment, even if phased, supports ongoing culture change within the business with greater ownership and accountability for people leaders to manage their people, for employees to do self-service and for analytics to show the impact of other changes (plus associated costs and savings).  Plus, the culture change we need to keep pushing forward on the added value that HR, by partnering with the business and using actual people data, can bring. 
  2. New talent initiatives
    Ensure that you continue new talent initiatives such as graduate and apprenticeship programmes, interns and work placements. They are often seen as an easy target for cost savings, but cutting these programmes can do your brand a lot of damage, impact your talent pipeline and longer term can also affect your gender pay data and diversity profile. Scale them back rather than stop; it can be extremely hard to get them restarted. 
  3. Recruitment
    On recruitment for other opportunities internally, firstly consider if there is an opportunity to restructure roles and remit to make a saving. If there are key roles that need to be filled then encourage stretch promotions and lateral development. This is a great way to get more diverse candidates moving through the organisation. I have also used more fixed term contracts during the tougher times, so that if things do get tougher then these are the roles that you would look to reduce first before considering your permanent employees. Although this can be a controversial approach, it is one that should be considered. By the way, it is also a great way of finding (and trying out) new talent that you may want to make permanent when times improve.
  4. Restructuring
    Also consider with the leadership team if any restructuring is required. Is there an opportunity to create a flatter structure, stop doing certain low value business etc? Personally, I also like using voluntary redundancy programmes before compulsory is considered so that people can self-select out. You don’t have to agree to their going, equally you want your people to be engaged with their role and the business during the tough times as well as the good. Culturally it can help some move out, and enable new talent to come in. Remember that some attrition is healthy – at least 15%, to get the movement of skills and talent around the business. 
  5. Employee benefits
    This can also be a good time to review your benefits; what isn’t being used by employees and enhance their awareness of it, or consider what might be more needed by them and yet at lower cost (and a greater attraction or retention tool).   It can also be an opportunity to refresh your offering so that it is in sync with employee needs in this changing world. My guidance is to never take something away without putting something else in place (even if at lower cost), as it can really impact engagement, and people need to see that they haven’t lost something – in fact they will have gained; it may be something that they may have been asking for and is more in line with external practice and changing cultural needs. The effective communication of any changes is so important. 
  6. Wellbeing
    Wellbeing is a real focus for people and businesses now, with higher absence rates and so on. This will be impacting retention too and will be costing the business money. What are the real areas of concern and support that is needed? This might be an area you can put more focus on and show a potential longer term saving for the business rather than a short-term quick save.
  7. Development
    It is all too easy to just stop all development activity for individuals and teams, particularly soft skills and areas like ED&I, leadership etc. This can mean that people are not equipped for the role they are doing and can become increasingly out of step with changing external norms and the expectations of customers etc. It is really worth carefully considering what can be scaled back rather than cut, otherwise there can be some horrible (and expensive) implications longer term. 
  8. Focused activity
    Are there other areas of the people that are costing the business money – for example recruitment, attrition, absence, performance? Highlight these and get leaders to consider and support how focused activity could reduce the associated cost of these mid to longer term with real benefits for the business. Again, this can help facilitate cultural change when people realise just how much it is costing, and during challenging times. 
  9. Suppliers
    Look at your suppliers. You are likely to have multiple; can these be consolidated and / or savings negotiated with them? Suppliers appreciate the discussion, rather than their losing your business. You may also find that there are aspects of their offering that you are not using or can get access to.
  10. Employee engagement
    Consider how you can further engage your employees (through employee resource groups) to lead on change initiatives, to provide insight on other areas of focus and involve them in creating the solution. It does not always need a third party to help you with this. Sometimes employees understanding the current costs and challenges can help them focus on how the budget available can be used more effectively.
  11. HR’s own wellbeing
    To all CHROs out there, keep looking after yourself and your team. When the pressure is on the business with budget cuts, more pressure falls onto the HR team. This brings additional work. HR often leads culture change initiatives; this is demanding and can fall to the wayside during tougher times. It is worth really considering how resources and time can be made available to keep moving things forward.
  12. Business plan
    Having your CEO’s support is critical, and to do that you need a well thought out and costed plan, showing the business benefits – with data points – even if it is scaled back with elements deferred. 

When times are tough, businesses and their leaders tend to hunker down. Actually, this is a time when leaders need to be more visible, and employees need to hear more and have the opportunity to provide input. So please communicate. You cannot do enough of this and do it in multiple ways. Get your leaders to tell their story, the impact of the economy on the business etc. It has more of an impact when it comes from the heart and really supports engagement and retention. Your people need to know what is going on, feel included, know that they are valued.   

Continuing to make progress across the people agenda is critical to supporting ongoing culture change, even if it is only one step forward instead of two; so that the thermostat can be turned up again when there may be more budget available and you can add to the progress that has been made, rather than having to take a step back and potentially start again.  

Annette Andrews, pictured below, is the founder of Acaria Consulting and former chief people officer for Lloyd’s of London, HR director at Lloyds Bank and Ford Motor Company. She is faculty lead of the Company of HR Professionals 2024 national leadership programme and a thought leader on conscious leadership

Annette Andrews Acaria Consulting

Published 17 January 2024

Focus on how you can keep moving your people, organisation and business forward during the tougher times. It really pays off, will save money, time and heartache at a later stage and mean that you do not have to restart initiatives (and re-engage your people)

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