People programs pay off: understanding workforce optimization is no longer a luxury--it is essential to attract and keep the best talent that will, in turn, improve a company's bottom line.

• Author: Flannery, Thomas P.
• Position: Workforce Optimization

The CEO of a major company emerges from a meeting with senior management. With revenues down for the third year in a row, the stock is trading at two-thirds off its highest value. Personnel costs represent the largest expense, but are also the largest asset. After several rounds of layoffs, the company has already cut as close to the bone as it dares. Human Resources reports dismal morale among the remaining professionals due to market uncertainties and rising costs of health and other benefits.

Sound familiar? In today's uneasy economic environment, thousands of executives are facing some or all of these dynamics. The time has come for some very creative thinking.

It's been said repeatedly that competition in the 21st century will be based on the caliber of the workforce. As such, the challenge for companies is defining how to optimize their workforce to yield the greatest value by producing the required results. Be they public, private or not-for-profit, organizations can no longer rely on past practices to be competitive in the future. Executives must examine cost effectiveness, and take appropriate smart risks to find new ways to keep their best people and to drive growth.

What Is Workforce Optimization?

The key to workforce optimization is people programs that can be categorized in three general areas: 1) reward and benefits programs; 2) human resources programs -- including succession, development and performance management; and 3) infrastructure programs that manage personnel and address compliance issues.

Many companies are discovering new and innovative ways to maximize the effective yield that HR programs provide. Evaluating what contributes to a program's yield requires thinking at the organizational level. The effective yield needs to include items that don't show up on expense lines: the cost of personnel turnover and the potential expense/risk of performing a function poorly.

To determine yield, ask these kinds of questions: What are the priorities of our employees? What constitutes our 'ideal' employee, and how do we attract and keep that employee? These "soft" issues translate into hard costs and savings, and can affect how an organization manages its human capital.

New Approaches to Benefits

Defining and delivering benefits can have a major impact -- not only on a company's cost structure but also with its employees' perceptions and satisfaction. The following illustrate how some companies are dealing with the new...