Optimize your workforce in an economic downturn

KPMG’s workforce optimization solutions help organizations remain cost efficient while looking at talent as a long-term investment.

We may not see a Goldilocks economy in 2023, but you can create a Goldilocks talent strategy

Optimize your workforce while remaining cost efficient

With the Fed hoping the elusive Goldilocks makes an appearance this year, bringing with her an economy that is not too hot nor too cold, companies are looking for ways to be productive, efficient, and competitive.

In this environment, organizational leaders, with CHROs leading the way, must develop a human-capital strategy that is also just right. From a talent perspective, you want to be cost efficient and risk averse, but you also want to be creative and think about innovation and digital transformation. Your plans shouldn’t be too big nor too small.

Companies are striving to meet the professional and personal needs of employees at all levels. These organizations know they not only have to attract workers with new skill sets and knowledge, but they also have to retain and develop key existing talent.

Despite the specter of recession, corporate leaders must think beyond short-term cost-cutting efforts and look at talent as a long-term investment in the business. In the never-ending effort to add strategic value to the enterprise while remaining agile and efficient, there is an opportunity for talent organizations to help firms reposition for growth once conditions stabilize.

What does an optimized workforce look like?

In this context, cost efficiency is not necessarily a matter of initiating a reduction in force. More importantly, it’s about ensuring the right people are in the right roles to do the right work at the right time.

Talent is one of the keys to establishing and maintaining a competitive advantage. Organizations that attract, engage, develop, and retain top talent through modern and meaningful experiences tend to drive the most productivity increases, efficiency gains, and cost.¹ This in turn optimizes and maximizes the potential of their workforce and helps chart a cost-effective path for future growth.

On the other hand, failing to optimize their workforce through human capital programs—implementing cost-efficient, data-driven process improvements to inform strategic decisions, for example—can result in negative cost impacts and long-term repercussions even after the economic downturn subsides.

To avoid that fate, forward-looking companies are going all in on addressing employee-experience. Indeed, in our recent survey of 300 CHROs 61 percent said they need to alter their Employee Value Proposition (EVP) in response to the external labor market. The respondents told us that some of the most important parts of the EVP when attracting, developing, and retaining talent are culture (50 percent), company values and purpose (47 percent), fair pay (34 percent), and offering flexible working (33 percent).²

Getting to that optimized state means more services, and more consumerization of the way employees are treated, and more digital underpinning it all. HR organizations need to deliver that experience in a highly cost effective and positive way that inspires people to focus on doing exceptional work.

Clearly, digital is embedded in virtually every organizational process from front office to back. It harnesses the power of technology to change how people interact cross-functionally. Digital leadership is about understanding how, in concert, these applications can impact the organization at a scale and pace the workforce has not seen previously—but needs now more than ever.

What can an optimized workforce yield?

Uncertain economic times are a great opportunity for CHROs and their teams to do a deep diagnostic of the work they’re doing and ensure it is aligned with the strategic objectives of the entire business.

There are a number of key benefits of working to optimize your workforce during an economic downturn, notably:

Stronger business results

Research suggests that highly resilient workers—individuals with an ability to emerge from challenges stronger or bounce back from adversity—were 31 percent more productive than their counterparts during the pandemic.³ To achieve high levels of resiliency within organizations, clear communication should be disseminated from leadership regarding the overall business strategy and how employees play a major factor in its achievement. Organizations should attempt to identify employees with a high degree of passion, perseverance, and resilience and leverage them to drive results.

Deeper engagement

One of the primary drivers of profitability, employee engagement, declined among U.S. workers in 2021, the first decline in more than a decade.⁴ Since companies with the highest rates of employee engagement are 21 percent more profitable than their peers,⁵ organizations should consistently have a good understanding of their organizational health and “pulse check” engagement metrics to proactively combat any potential negative impacts. Leaders must continually build workforce resilience by fostering a strong and engaging culture and providing their workforce with the support, information, tools, and experiences they need to succeed in a dynamic environment.

Greater process agility

Enhanced service delivery models, ways of working, and analytical capabilities are all viable strategies for reducing costs and improving efficiencies. Talent organizations are encouraged to assess their operating models to ensure leading agile processes are incorporated into their existing procedures. Driving agility within organizational processes enables organizations to quickly adapt to market developments, respond nimbly to customer demands, and address change overall as cost effectively as possible^.6

Activate to optimize

There is no one-size-fits-all solution, no silver bullet. But there are a number of approaches that any business can adopt and customize for their specific operational needs in an effort to improve efficiencies now and going forward. Here are a few high-level ideas to consider:

Align capabilities

Focus on aligning HR operations and processes in a way that can help support and drive the overarching organizational strategy.

Integrate digital operations

Move from focusing on technology to facilitate basic needs to realizing how it can enhance overall HR effectiveness and the employee experience.

Advance your analytics

Push beyond using “rear-view mirror” analytics for traditional HR needs such as retention, attrition and engagement and dig into more comprehensive data sets and relational analytics to answer big questions leaders have about people in the business.

Build a talent marketplace

Understand the skills your organization will need in the years to come and the gaps you will need to fill.

Make purpose real

Recognize that culture, company values, and purpose are vital factors that contribute to organizational success and reputation, particularly when it comes to ESG.

Prioritize wellbeing

Understand that up-and-coming employees expect more than ever from their employers when it comes to caring about their mental health, mental ill health and wellbeing.

Whether it’s consumer and retail, oil and gas, or food and beverage, companies large and small are looking at comprehensive digital transitions, so many are already in a transformational mindset. For CHROs, what matters is inspiring the organization to buy into and share the same vision, mission, and goals.

Footnote

¹KPMG, Reimagine the digital work environment to attract and grow top talent, 2022.

²KPMG, The future of HR: From flux to flow, 2022.

³BetterUp, “Resilience in an age of uncertainty,” 2020.

⁴Gallup, “U.S. Employee Engagement Drops for First Year in a Decade,” January 7, 2022.

⁵Gallup, “Employee Engagement on the Rise in the U.S.,” August 26, 2018.

⁶The Conference Board, “Agility, What does it look like in HR?” August 20, 2021.[PK1]

Optimizing the workforce during an economic downturn

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Activate to optimize (OPTION 2)

Align capabilities	Focus on aligning HR operations and processes in a way that can help support and drive the overarching organizational strategy.
Integrate digital operations	Move from focusing on technology to facilitate basic needs to realizing how it can enhance overall HR effectiveness and the employee experience.
Advance your analytics	Push beyond using “rear-view mirror” analytics for traditional HR needs such as retention, attrition and engagement and dig into more comprehensive data sets and relational analytics to answer big questions leaders have about people in the business.
Build a talent marketplace	Understand the skills your organization will need in the years to come and the gaps you will need to fill.
Make purpose real	Recognize that culture, company values, and purpose are vital factors that contribute to organizational success and reputation, particularly when it comes to ESG.
Prioritize wellbeing	Understand that up-and-coming employees expect more than ever from their employers when it comes to caring about their mental health, mental ill health and wellbeing.

Footnote

¹KPMG, Reimagine the digital work environment to attract and grow top talent, 2022.

²KPMG, The future of HR: From flux to flow, 2022.

³BetterUp, “Resilience in an age of uncertainty,” 2020.

⁴Gallup, “U.S. Employee Engagement Drops for First Year in a Decade,” January 7, 2022.

⁵Gallup, “Employee Engagement on the Rise in the U.S.,” August 26, 2018.

⁶The Conference Board, “Agility, What does it look like in HR?” August 20, 2021.[PK1]

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Robin Rasmussen

Principal, Human Capital Advisory , KPMG US

+1 415-608-1139

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