What are the cost risks associated with managing your talent?

In a risk-sensitive business environment, companies walk the tight rope attempting to meet customer demands on one side and running cost-effective lean operations on the other. Focus on overall costs at the business level is a priority for most leaders. However, when it comes to talent and the corresponding risks with respect to cost, most organisations in India have been found wanting.

Do cost pressures on talent keep the CEO and HR heads awake? Does the cost of recruitment and talent retention keep talent managers awake at night? Are leaders worried about their workforce becoming unaffordable? One expects the answers to be affirmative for each of these questions, but the reality is slightly different. Some of these questions have attained a higher significance in the business environment today than they did earlier, say a decade ago.

This is attributable to the fact that HR is increasingly becoming a strategic partner to business. The CEOs today measure HR not only on the parameters of effectiveness of talent, but also on the overall HR costs in growth and consolidation phases alike.

The recent Talent Risk Survey by KPMG shows somewhat counter-intuitive findings that lay the platform for an interesting dialogue. The survey shows that Indian talent managers are relatively unconcerned about cost-related talent risks in comparison to their global counterparts.

Align talent and strategy plans Talent managers traditionally have focused on areas such as the suitability of candidature for key roles, availability of the right talent pool, mechanisms for assessing large talent pool and grooming of in-house talent Of late, conversations have focused on the sufficiency of the talent budget, increasing salary expectations of top talent and overall cost of the workforce.

As organisations start viewing these as an opportunity to drive efficiency, they will start featuring in the key result areas of top HR executives. Awareness and acceptance is the first step to change.

Leading organisations today recognise the importance of cost-related talent risks, but the ones that will be able to successfully overcome it will have to chart out a clear road map for HR cost considerations within the organisation.

Let’s consider simple examples: recruitment cost is controlled by HR, but the salary cost is budgeted under business units. Who in this case takes the responsibility for the overall cost of talent becomes important.

Hiring is a process facilitated by HR, but business takes the final call. Who then is responsible for moderating salary expectations for the right talent becomes relevant. Summarily, the organisation’s talent plan with its cost considerations needs to be aligned with its overall strategic plan. Further, talent-related costs need to be dissected and clear areas of savings and synergies within the organisation ought to be identified.

There is a need for organisations to pursue a holistic framework that recognises and acts on cost-related talent risks.

One of the measures that many leading organisations are adopting is to assess talent cost and alleviate perceived risks is through pro-actively tracking ‘total cost of the workforce’ as a metric with cost per hire, training ROI, HR expense factor, etc. as associated measures.

Employee data Overall, the role of ‘big data and analytics’, in the backdrop of cost risk mitigation, cannot be emphasised enough. However, this is a complex challenge for business and people leaders alike. First, the integrity of huge mounds of employee data being churned out needs to be established.

Second, the data needs to be processed to extract meaningful real-time insights that will help people make cost-related managerial decisions. HR metrics, if utilised properly by talent managers, can enable affirmative action on issues that they are aware of and build awareness of complex people cost issues, which hereto have remained black boxes.

Cost-risk consciousness and data-driven transformation journey for talent managers promise to be an exciting one for organisations and people leaders equally.

Nishchae Suri is Partner and Head, People and Change, KPMG India.

The views and opinions expressed herein are the author's and do not necessarily represent the views of KPMG in India.

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