Cost Management as HR Role

The modern organization is difficult and requires a specific definition of roles within the organization. The cost of employees is enormous, and HR Role is to act like the policeman in the organization. Managers cannot add new workforce without the previous approval of HR, and they have to keep the same structure of employees. HR is responsible for the management of personnel expenses in the organization.

HR is responsible for the reporting of personnel expenses and preparation of forecasts in the human capital management area. This is quite a large change in responsibilities of functions. The personnel expenses are not managed as any other item on the balance sheet; they have to be managed strategically. The role of HR is in keeping the approved targets and allowing to managers growing the business.

The cost management of personnel expenses is about introducing strict roles and responsibilities. HR has to takeover the responsibilities from managers. They do not like this approach, but they have to adjust their behavior. They cannot base their decision on resources available at their cost center. They have to adjust their behavior to rules and procedures defined by Human Resources.

Human Resources has to define following policies and procedures:

  • Job Creation Policy
  • Workforce Planning Policy
  • Base Salary Policy
  • Variable Pay Policy
  • Benefits Policy
  • Promotion Policy

The policies are necessary as the transparent and fair environment is introduced to the organization. HR cannot introduce policies and start making exceptions for the popular managers. HR has to keep the rules same for everyone. Including managers in troubles. Otherwise, HR will not be seen as the fair business partner.

The role of the cost controller does not mean, that HR can demonstrate its power. HR has to judge each case according to written policies and rules. HR cannot publish rules and then behave differently from the written rules. The rules should be visible to everyone, including all employees.

The policies for the cost management can be seen as bureaucratic, but they are a must. Each HR Business Partner needs a solid basis for discussions with managers. The rules are a reliable basis for discussions. Each manager can make a check of the issue and how the issue is compliant with the cost management policies. During the discussion with the HR Manager, the manager and HR employee can agree on steps to be taken.

The cost management is not a favorite task of the HR Business Partner. The specialists from Centers of Excellent have to prepare sets of easy rules as the HR Business Partner can make a clear statement to the manager.

The cost management is about making forecasts and analyses. HR has to project the development of the personnel expenses and has to prepare different scenarios. This role of HR is crucial when the external conditions change rapidly. The organization has to react quickly, and it should base the decision on prepared and discussed forecasts.

HR has to cooperate with the Finance function on the introduction of the cost management role of Human Resources. The Finance guys are usually the gatekeepers for all costs of the organization. They do not trust in the beginning to HR Professionals. They have to incorporated into main decision processes as they can build trust.

The cost management is not popular. Managers would like to have a full freedom. The top management cannot afford to delegate the full cost management authority to managers. The top management needs functions focused on the cost management. It is the role of Human Resources to manage the personnel expenses of the organization.