7 Ways to Maximize HR Costs

Kathleen O'Donnell
April 9, 2024
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Inflation has hit almost every space of our lives: at the grocery store, on vacations, and yep, even in the HR space. HR costs increased significantly in 2023. As if that wasn’t enough to deal with, HR teams have had many critical tasks added to their to-do lists since the pandemic. It’s a “do more with less” world, which places a lot of pressure on HR organizations and companies at large. 

Given these rising human resource costs, how can HR teams make the most of their budgets? The good news is, it’s possible: if you lean into technology, make smart buying decisions, and leverage AI where you can to better solve business challenges and build highly engaged, high-performing organizations. 

It might sound too good to be true, but it’s achievable with the right strategy! This guide will take you through everything you need to know to maximize your HR costs with your current budget to build a stronger HR organization.

7 strategic ways to maximize HR spend 

1. Scrutinize your processes 

The first step to making the most of your HR budget requires taking a long, hard look at your current HR processes, large and small. Keep an eye out for places where a high level of manual work is required, where little to no value is added, and where there are roadblocks and inefficiencies. These are great places to consider adding automation and AI to reduce manual work, speed up timelines for critical projects, and eliminate inefficiencies. 

For example, is your team spending hours collecting and following up on paperwork and trainings for new employees? Adding automated onboarding technology that handles these tasks can offer serious time savings. (And time is money, especially when it comes to your skilled HR professionals.) 

This step should give your HR team more time to focus on high-value work that gets you closer to your goals and aspirations. It’s not meant to find ways to replace your valuable people but to give them the space to become more efficient and effective.  

2. Keep things flexible and simple 

Change is pretty much the only constant these days 🫠. While we can’t control change, we can build an adaptable, flexible organization that embraces simplicity.

Think of how much time your team spends on tasks like updating and rewriting super complex comp plans, org structures, benefit plans, or any other highly complex areas of HR. While you probably can’t strip out everything, you should consider what needs that complexity and where your organization would be better off with a simpler system, structure, or plan. 

With simplicity comes more flexibility and adaptability so you can adjust resources, budgets, and people as needed.

3. Look at the long-term picture 

The step above is a great example of looking at the long-term picture when making cost-efficiency gains. It’s always tempting to think purely in the short term when things are tight—that’s why so many companies default to layoffs. But those short-term approaches can be more costly in the long run: Gartner research has found that layoffs decrease shareholder value in the long run because they harm growth and drive more turnover. 

Instead, focus on what your HR team will need to grow and thrive in the next decade, and the decades beyond that. That longer time horizon will help you consider all the potential gains, costs, and results of changes and investments you make to your HR team. 

And of course, look at the overall business goals for those time frames to ensure you’re prepared and aligned. For example, if your business plans to expand to new regions in the next decade start considering how you’ll recruit and hire those new employees—and, think about how to build efficiency and scale with the right tech from the start. 

4. Prioritize what pays off 

Cost efficiency often leans heavily on cutting costs. But that can miss the efficiency part of the process. Don’t forget to look at what is driving efficiencies and productivity too. 

If your turnover level is quite high, for example, that’s likely costing your organization a a lot of money as you scramble to hire and onboard even more new people. Investing wisely in improving the effectiveness of your hiring process, or investing in your top performers, can yield bigger long-term savings by prioritizing what moves the needle on efficiency and productivity. 

The same goes for low engagement levels—which can drag down productivity, profits, and retention rates. Investing in the time and technology to improve here, like adding in a recognition program (they have high ROI!) can pay off significantly in the long run. 

5. Streamline your tech stack 

The unfortunate truth is that many tech products are now quite expensive, and you might be spending much more on SaaS subscriptions than you’d like. That doesn’t mean they’re not worth it, but it does mean you need to go through your tech stack with a fine-toothed comb and sort out what stays and what goes. 

Sorting out what gets you the most ROI is critical, of course. But you should also look at usage data and adoption rates to see what is actually getting used and what’s just gathering dust (while still getting billed). If you have a platform that is perfect for your HR team’s needs, but the user experience or integrations are so lacking that it’s barely used, it’s time for it to go. It might be better to have fewer platforms that work across all your systems if they’re contributing to organizational silos.  

6. Get informed about AI and automation 

When talking about efficiency, we have to talk about automation and AI. While these are all the rage, there’s plenty of unfounded hype and hyperbole in the AI space.

Consider how to incorporate AI and automation where it would truly make a difference in your org, and look into the reality of what these tools can do by befriending your IT leadership team, talking to HR peers in other orgs, and doing your research on what onboarding these tools would entail. AI can be powerful when done right, but it also comes with legal risks and potentially high costs, so approach with caution.  

7. Ask employees what they think 

If, after all of this strategizing, you’re still stuck on where to pare back your HR investments or increase them strategically, don’t be afraid to ask your employees for potential answers. 

You can focus on just your HR teams, but it can also be effective to survey broader swaths of employees and see how they feel about certain benefits programs, or what processes and procedures they think could be automated and streamlined. Never underestimate the power of employee feedback

Making the most of your HR budget 

Maximizing your HR budget to go as far as possible in these tight-spending times isn’t always easy. It requires careful examination of your current org and processes, an eye to long-term goals and short-term costs, along with a willingness to look critically at your tech stack and usage.

Once you’ve taken those critical steps, you’ll have a clearer idea of what you want to spend on, and where you can save. Don’t forget to ask for employee input too.

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