An understanding of communication styles, personality styles, and channels of communication can help us be more effective in our communications, resulting in cost containment. E-mail, instant messaging, text messages, and meetings are all examples of communication in business. In a survey reported on by the Sales and Marketing Management newsletter 3, 85 percent of managers say that ineffective communication is the cause of lost revenue. This will be addressed in Chapter 7 “Retention and Motivation”. Reducing turnover includes employee motivational strategies. This will be discussed in Chapter 4 “Recruitment” and Chapter 5 “Selection”. By hiring smart the first time, HR managers can contain costs for their organization. In fact, the cost of hiring an employee or replacing an old one (turnover) can be as high as $9,777 for a position that pays $60,000 (Del Monte, 2010). By creating a recruiting and selection process with cost containment in mind, HR can contribute directly to cost-containment strategies company wide. Turnover refers to the number of employees who leave a company in a particular period of time. The hiring process and the cost of turnover in an organization can be very expensive. In Chapter 8 “Training and Development”, we will further discuss how to organize, set up, and measure the success of a training program. Training employees and management on how to work within the law, thereby reducing legal exposure, is a great way for HR to cut costs for the organization as a whole. Some simple training up front (costing less than the lawsuit) likely would have prevented this from happening. This lawsuit cost the organization $2 million 2. For example, a Sonic Drive-In was investigated by the Equal Opportunity Employment Commission (EEOC) on behalf of seventy women who worked there, and it was found that a manager at one of the stores subjected the victims to inappropriate touching and comments. Consider how expensive a sexual harassment lawsuit or wrongful termination lawsuit might be. While this may seem counterintuitive, as training does cost money up front, it can actually save money in the long run. Cost containment strategies around benefits will be discussed in Chapter 6 “Compensation and Benefits”.Īnother way to contain costs is by offering training. In other words, these plans offer flexibility, while saving money, too. For example, a mother of two may choose to spend her flexible benefits on health care for her children, while a single, childless female may opt for more vacation days. It creates more flexible benefits, allowing the employee, based on his or her family situation, to choose which benefits are right for them. This type of plan gives all employees a minimum level of benefits and a set amount to spend on flexible benefits, such as additional health care or vacation time. Cafeteria plans started becoming popular in the 1980s and have become standard in many organizations (Allen, 2010). One possible strategy for containment for health-care plans is to implement a cafeteria plan. This equals roughly 83 percent and 73 percent of total health-care costs for single employees and employees with families 1, respectively. Health care costs companies approximately $4,003 per year for a single employee and $9,764 for families. Change or better negotiate the plan to reduce health-care costs.Reduce the benefits offered to cut costs.Shift more of the cost of health care to employees.We will discuss ways to alleviate this concern throughout this book.įor example, there are three ways to cut costs associated with health care: An HR manager must offer as much as he or she can to attract and retain employees, but not offer too much, as this can put pressure on the company’s bottom line. Containment of costs, therefore, is a balancing act. A company can cut costs by not offering benefits or 401(k) plans, but if its goal is to hire the best people, a hiring package without these items will most certainly not get the best people. The trick is to figure out how much, how many, or how often benefits should be offered, without sacrificing employee motivation. These costs cut into the bottom line of any business. In most businesses today, the people part of the business is the most likely place for cuts when the economy isn’t doing well.Ĭonsider the expenses that involve the people part of any business: If you were to ask most business owners what their biggest challenges are, they will likely tell you that cost management is a major factor to the success or failure of their business.
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