A matter of cost cutting measures

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Table of Contents

Overview of the case of cost cutting measures
Cost cutting views
Eliminating functions in cost cutting measures
Outsourcing training and development activities
References

Overview of the case of cost cutting measures

Organisational growth depends on many aspects of management that work in a complementary way to determine how organisations perform (DuBrin, 2009). The most important managerial aspects of organisations are financial and human resource management. Financial departments of organisations back the working of other departments including the human management practices. Organisations often work on minimising costs through cutting expenditures so that the profits can be maximised.

Most of organisations and especially those working for financial outcomes work on the basis of minimising costs and maximising profits. Cost cutting measures are commonly practiced by organisations. This is especially in times when organisations seem to experience financial difficulties that are bound to reduce profit making. In such cases, organisational leaders have to sit and deliberate on how to cut costs.

They must identify activities that ought to be eliminated so as to minimise the costs without further impacts on the performance of the organisation. This is what is being revealed in this case study. The focus is on how an organisation or global industry is deliberating on cost cutting measures due to an eminent financial crisis. The organisation is bound to work at a loss, and organisational leaders are deliberating on cost cutting measures so as to tame the losses (Andrews, 2009).

Cost cutting measures are often arrived at after deliberations from organisational leaders. In this case, the organisational executives are involved in deliberating on cost minimisation so as to rescue the financial situation of the organisation. These executives include the chief executive officer of the organisation who is also the president of the company; the chief human resource manager of the company and the chief financial officer.

In cost cutting deliberations, each of the stakeholders gives views or thoughts on the organisational function that has to experience cuts. Some cost cutting measures may not be economically helpful to an organisation and thus have to be justified and if possible eliminated. The outstanding issues in the concerns the conduct of cost cutting measures and especially the choice of functions that deserve cost cuts.

In this case, the company seems to be of the view that the training function is not much beneficial and thus the training budget can be cut. This is in contrast to the modern human resource management perspective that view training as one of the core functions of organisational development (Kandula, 2007).

Cost cutting views

In this case, the financial department of the company had identified adjustments in the human resource department. This opinion was also backed by the chief executive officer. The opinion of the human resource officer was that the human resource activities were consuming a lot of financial resources.

Therefore, the suggestion from the chief financial officer is that the budget of the human resource department should be cut by eliminating a number of functions among them, the human resource development aspect. According to the chief financial officer, a lot of money is expended to human resource development, yet it does not bear considerable gains for the organisation. The organisation can replace this exercise with a cheaper function, which is labour outsourcing.

According to the view of the chief human resource manager of the organisation, human resource development is an important function to the organisation and the budget that goes into this function is justifiable. The human resource executive does not approve of the argument by the chief financial officer by reiterating the relevance of human resource development to the organisations. This brings a standoff between the HR officer and the chief financial officer.

Eliminating functions in cost cutting measures

Cost cutting measures are a short term strategy and have to be applied with caution. This can be done by evaluating all organisational functions to avoid generating problems in the organisation. All stakeholders should be keen and assess all possible areas in an organisation that warrant cuts in order to avoid touching on sensitive functions of the firm. This is because cost cutting is considered to be an exercise that needs critical and strategic thinking.

Prior to applying cost-cutting measures, all costs have to be analysed basing on agreed upon cost cutting structures at every level of the organisation. The costs of products produced and marketed by an organisation is one of the cost areas that should be observed by organisational managers. There are also the costs on taxes and interest, as well as operating costs under which organisations training is found (Kandula, 2007).

A deeper look at organisational function entails an objective assessment of all organisational functions. This is meant to determine their worth to the organisation and the possible dangers of eliminating or limiting the function. Elimination of some functions without prior comprehensive assessment may be problematic.

This is not just from the argumentative point of view, but also from the real applicability. This is what is noted in this case where major stakeholders insist on the elimination of human resource development, which is the training program in the organisation. Training is considered as one of the core aspects that encourage sustainability and improvements in performance of tasks. Therefore, it boosts positive organisational performance (Institute of Management and Administration, 2005).

Many researchers have been looking at the importance of training in organisations. Therefore, the possibility of eliminating or cutting financing on training amidst financial crunches in organisations is still a debatable issue. Notably, training remains to be a critical function that contributes to organisational development.

In times of economic downturn in organisations, several decisions are made with the aim of reducing spending in order to save finances to sustain the organisation. Cost cutting on training cannot be completely implemented. During economic crises, firms often resort to short-term measures of cutting costs (Andrews, 2009).

Most cost cutting measures have a direct impact on human resource functions. Mostly, employees are laid off as a measure of reducing expenditure of firms. However, it has not been common with organisations to eliminate training exercises in times of crises as outsourcing, which is seen as a replacement to training requirements, involves training. Short-term training programs in organisations can be suspended as organisations work on modalities of bailing themselves from financial or economic downturns.

Long term training has to be sustained or experience little cost cuts if organisations wish to achieve continued performance. If possible, cost cutting measures have to be evenly applied in organisations in order to eliminate serious inconsistencies in certain organisational departments. When cost cuts are focused in one area, organisations become prone to mal-functioning because of the complete interference with the ability of the department to execute its mandate in the organisation.

This becomes worse when organisational efficiency is dependent on the targeted department. For the case under study, the organisation had a single view concerning cost cutting measures in the organisation. The organisation only paid attention to one area of cost cutting, which is the human resource development, and not on other aspects of the organisation (Sims, 1999).

Outsourcing training and development activities

According to Greaver (1999), core competencies in organisations are the main human resource tools used in bringing about quick developmental solutions to organisations. Many organisations are working on sharpening core competencies through training and development. In certain cases, organisations seek to get these skills from outside and use them in performing organisational work instead of developing the skills from within organisations.

This is what is referred to as outsourcing. Researchers in management differ on the practice of outsourcing with some arguing in support while others argue against it. Both proponents and opponents of outsourcing have a common ground on a number of arguments informing this practice. A majority of consultants in management agree on the essence of outsourcing certain aspects of training and development that cannot be easily developed by organisations (Sheehan, 2009).

Ritt & Spatzenegger (2006) observed that outsourcing begins with the determining of the core competencies that are needed in an organisation. This is done by highlighting and defining areas that are critical to the success of organisations. The organisation then devotes resources to these areas to the maximum. Areas that fail to show improvement despite maximum devotion of resources should be outsourced.

Outsourcing of training and development is argued to be one way of creating focus in organisational functions. Focus is established through the streamlining of the seemingly difficult operations to be discharged by an organisation. Outsourcing is also one of the strategic measures of cutting costs in organisations, as well as improving the quality of performance in organisations. Core competencies in organisations are unique attributes that add to the competitiveness of an organisation.

They are the main factors on which competitiveness of organisations is founded (Hale, 2006). Outsourcing opens up organisations to development by steering aspects that support performance thus boosting competiveness. Outsourcing ensures the use of experts in discharging organisational activities as opposed to imposing employees on functions that they cannot be efficiently perform (Rowley, 2011).

When organisations choose to outsource, time and financial resources are saved. In this case, organisational finances are only spent on key competencies that assure organisations of positive performance outcomes. In addition, the pace of accomplishing tasks is increased because outsourcing enables organisations to acquire competent people to run organisational activities that cannot be effectively run by organisational employees.

Through outsourcing, organisations can focus on strategic, organisational initiatives. This resonates from the point that outsourcing helps organisations to focus on the main competencies (Kwapong, 2005). Firms are able to identify the main developmental needs thus creating and moulding the general objective into certain initiatives leading to organisational success. Administrative needs, which are part of the factors that increase the operating cost of an organisation, are minimised when organisations choose to outsource training and development.

The overall administrative costs of firms go down because they are left to the specialists who are outsourced. Functions that are not part of the core aspects of organisational activities should be eliminated. This leaves the organisation to concentrate on administering operations that are beneficial (Stroh & Treehuboff, 2003). The activities that are not critical are often seen as liabilities to the organisation because of their failure to make significant contributions to organisational performance (Byham, n.d.).

Outsourcing reduces liability in the organisation via the elimination of activities that have minimal effect on organisational operations. Functions that are not part of core business are eliminated putting the organisation in a clear path of reducing costs (Hale, 2006).

Despite the fact that many organisations outsource one or more functions, many of these organisations do this with precaution (Ramanathan, 2009). Organisations have to work on minimising on outsourcing as much as possible because of the dangers that emanate from outsourcing. Outsourcing is a whole new process that an organisation has to engage in order to identify the best places from where to outsource.

This may be a costly affair to organisations bearing in mind that organisations are required to conduct studies to identify where to outsource the training activities. Additionally, organisations are forced to take time and establish working modalities with firms that offer training and development activities. This is an aspect that has proven to be challenging. The working system and norm of an organisation are affected by outsourcing.

When organisations outsource training and development services, they are bound to lose managerial controls thus affecting other operational functions of organisations (Anderson & American Society for Training and Development, 2000). If benchmarked by organisations, the providers of training and development services often get involved in offering services in many organisations. This is likely to render them inefficient as it concerns service offering in certain firms (Byham, n. d).

In the case under examination, the vice president of human resources should request for time to draw the benefits of human resource development to the organisations. From the argument, the organisation can easily opt on other aspects of human resource can be outsourced. Blackmailing a whole function in the name of cutting costs to avert a crisis is a wrong approach. Cost cutting has to be based on information and a clear understanding of organisational practices and their relevance to the organisation.

References

Anderson, M. C., & American Society for Training and Development. (2000). Building learning capability through outsourcing: Twelve case studies from the real world of training. Alexandria, VA: American Society for Training & Development.

Andrews, T. (2009). The Changing Face of Management in Thailand. New York: Routledge.

Byham, W.C. (n. d). The Outsourcing Question. Web.

DuBrin, A. J. (2009). Essentials of management. Mason, OH: Thomson Business & Economics.

Greaver, M. F. (1999). Strategic outsourcing: A structured approach to outsourcing decisions and initiatives. New York: AMACOM.

Hale, J. A. (2006). Outsourcing training and development: Factors for success. San Francisco: Pfeiffer.

Institute of Management and Administration. (2005). Cost reduction and control best practices: The best ways for a financial manager to save money. New York, NY: Wiley.

Kandula, S. R. (2007). Human resource management in practice: With 300 models, techniques and tools. New Delhi: Prentice-Hall of India.

Kwapong, O. A. (2005). MBA concepts & frameworks: Business tools for practicing professionals. Bellevue, Wash: Songhai Business Pub.

Ramanathan, T. R. (2009). The role of organisational change management in offshore outsourcing of information technology services: Qualitative case studies from a multinational pharmaceutical company. Boca Raton, Fla: Dissertation.com.

Ritt, S., & Spatzenegger, F. (2006). Outsourcing – A Path without Return? Germany: Grin Verlag.

Rowley, C. (2011). Human Resources Management: The Key Concepts. New York: Routledge.

Sheehan, C. (2009). Outsourcing HRM activities in Australian organisations. Asia Pacific Journal of Human Resources, 47(2): 235 – 227.

Sims, R. R. (1999). Reinventing training and development. Westport, Conn: Quorum Books.

Stroh, L. K., & Treehuboff, D. (2003). Outsourcing HR functions: When and when not to go outside. Journal of Leadership and Organisational Studies, 10(1): 19-28.

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