Where Should HR Be Spending Its Budget Right Now?

Looking back over the last 18 to 24 months, the steady cost consciousness due to declines in revenue and increased operating costs led to job losses at a rapid rate, as well as decreased attention to retention and engagement. Now, recessionary conditions are easing, and spending freezes are beginning to thaw, including for HR and talent acquisition. When it comes to investing in the human capital of your company, it is imperative to separate the “want to have” from the “need to have” line items in the budget. Despite showing signs of improvement in the job market, and government reports anticipating stronger hiring by late spring, most companies may not be poised to hire en masse just yet. But for those that have the means to spend on their greatest and most valuable investment — employees — having a clear understanding of what’s most important right now will set the stage for long-term success. In recent conversations with human resource professionals across a wide variety of industries, a common thread appeared regarding the allocation of dollars traditionally earmarked for talent acquisition. When asked what the two most concerning areas for employers and the two areas that will receive additional funding were, the common responses were employee engagement and retention. Joyce Chastain, human resource director for Mainline Information Systems in Tallahassee, Florida, expressed serious concern over battling to keep their top talent. “The business owners feel that they have kept their good folks through the recession because the employees’ choices were limited, but as the economy improves, they may be facing a battle for their talent,” says Chastain. This idea of engagement is relatively new to a lot of companies despite our current economic climate, but as the HR community becomes painfully aware of the cost to replace top talent and the effects on the company’s bottom line, the focus turns to how to keep the employees engaged with the idea that their next job needs to be with their current employer. “That’s a tough one,” says Sherry Moore, human resources director for OceanOptics. “Every company is doing more with less, employees are frustrated with pay raise percentage decreases, and in a lot of cases, no increase at all.” Recognition, internal mobility and better succession planning top her list for HR budgeting this year, and are two areas that again influence retention and engagement. “All things considered, it ends up being a wash when you compare the cost to replacing just one top salesperson,” said Chastain. Productivity is high, but at what cost? According to recent government reports on productivity, overall productivity in 2009 increased 3.8 percent, the most in seven years. The economy also started to grow by the end of 2009, but without any real job creation. Companies were doing more with less. Layoffs left double the amount of work, combined with vacations and sick time that will result in triple and in some cases quadruple the amount of work. Moreover, a Conference Board Survey released in January of 2010, revealed that employee satisfaction was at its lowest in 20 years, and the factors that calculate employee engagement is a main calculation in that survey. When it comes to engaging employees, HR should focus on what it takes to please employees right now, while spending the budget wisely. Taking productivity into account, employers should consider an investment in the technology needed to make jobs efficient. While workers are doing an increased amount of work, having the tools they working at optimum levels will take some of the pressure off, helping them to perform at their peak. Overworked and underappreciated could be the mantra of many members of the workforce. Even if budgets do not allow for raises, bonuses, or even increased staff levels, budgets should allow for employee recognition programs to increase morale and reward those for taking on added responsibilities. Cost-effective recognition programs can be as simple as internal awards — a small token of appreciation, comp time, even a couple of hours off during the day, could help recharge workers and show them that their time is valued and appreciated. Additional funding, or the reallocation of funds to provide enhanced career training, investing in the internal mobility function of the organization, and focusing on employee engagement through programs that promote the culture of the organization can go a long way in retaining your top talent. Despite the indicators that we are in the midst of economic recovery, job losses are still the norm, and overworked and frustrated employees have become the new norm, which leads to a very unique challenge for the HR team. Additionally, many companies reduced salaries to avoid layoffs, and those cuts ranged anywhere from 5-20 percent, with some even higher. Those who were able to maintain their employment are productive because it pays the bills, and frankly, they need their jobs. HR will have to adjust those salaries sooner than later in order to retain those employees and the effect that will slow the recovery period for some companies. In the meantime, if salary increases are not possible, the human resources organization will need to rely on other resources to encourage retention and engagement among their staff. And at the end of the day, the resounding benefits to the organization are seen in the employee satisfaction results, customer satisfaction ratings, and more importantly, the company’s bottom line. Reprinted with permission of ERE Media