Cost Cutting in HRM

The HRM Function has a huge impact on the costs of the organization and it can be a significant issue in the recession. The HRM Function does not control just the personnel expenses, but it is responsible for the training costs as well. The recruitment costs can make a huge part of the consulting services costs as well.

The structure of the HRM Costs depends mainly on the phase of the organizational development. The young and quickly growing companies spend their HRM costs mainly in the recruitment and staffing area; the stable organizations spend most of their HRM costs in the training and leadership development area.

The HRM Management has to make a clever decision about the overall HRM costs. The decision has to about a significant decrease of the costs, but it cannot make the future investment huge as the recovery from the recession can be pretty slow.

The training costs cannot be cancelled, the HRM Function has to prepare a good analysis of the training activities and the activities to be stopped for the time of the recession cannot be the ones, which can be risky for the future of the organization. Usually, the HRM Function makes the mistake of cancelling the training sessions, which the company needs for the successful organizational development. When the gap in the know how is recognized, it needs huge investments to fill the gap.

The HRM Management has to know the cost basis of the HRM costs to select the areas to make the cuts and the HRM Management has to assign the priorities to the cost cutting as the top management can ask more in the next wave.