Use Case: Improved Profit Margins
2021-12-20
Issue
The Client was in midst of fighting off a hostile takeover bid from a competitor, partly by agreeing to improve its operating margin, which meant that People Cost (it’s second biggest class of expense) had to be reduced within 12 months.
Barrier
Turnover is always an issue. The recent war on talent has made this more challenging. The Client thought reminding employees The Client did not have a digital global total reward database supplying detailed structured reward data. It could not manage and control reward in detail. Like many large global organizations, the client’s workforce planning used actual costs for salary and bonus, but it averaged out and allocated other people costs (e.g., benefits, allowances) and rewards to standard rates percentage uplift by dividing the total cost of the reward by total headcount. Although this approach is simple to implement, this approach understates or overstates the true cost of employees or groups of employees. Consequently, cost management decisions would be based on false and incomplete data. As a result, the people cost management and forecasting had to make do with data that misrepresented 30% of cost at the employee level (which is the level where the cost should be actively managed).
Solution
The Client adopted uFR as the digital total reward platform while using a third-party Financial Business intelligence tool which was seamlessly integrated to support detailed workforce planning across its business. This provided the tools to model and what-if with people cost using data that showed the true cost of all forms of reward at the individual employee level. For a global firm with many underlying reward systems could have been a data integration nightmare for the Financial Business Intelligence tool. However, the Client was able to use only one integration (to uFlexReward). An implementation process for a Financial Business Intelligence tool that usually takes months and requires constant management and maintenance was completely taken care of via one API to uFR.
Benefits
Through the digital total reward system, the client was able to make data-based decisions and discovered cost savings via unvalued allowances/benefits as well as providing a mechanism to assess a local hire versus an expensive expatriate assignment. The HR team was more confident that they had the true data to assess possible changes and their true cost impact to the bottom line. The Client ended up improving margins through this analysis.
