The current economic turmoil has hit harder and is biting deeper than any downturn in recent memory. The pressure to reduce costs quickly is inexorable in many sectors. Towers Perrin\'s Human Capital Group has developed a thorough process to identify, prioritise and implement cost cutting measures in compensation, benefits, and the HR function itself. Our approach is to partner with clients, and can include working on the basis of mutually agreed success fees rather than the traditional time and expenses method. This offering is proving very popular, and I thought you would be interested in knowing more about it.

1. Taking costs out of your business:
Rapid Cost Reduction Scan
How Towers Perrin can help
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Towers Perrin.
© 2009 Towers Perrin

2. Value proposition
We have a checklist of over 100 cost saving interventions in the area of compensation,
benefits (incl. pensions) and HR function spend
Working with our client base, we are adding to this list – and know how – daily
Not all measures are suitable to all companies
We will identify, quantify, and prioritise what works best for you
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3. Agenda
The need for speed
A framework for analysis and action
Cutting costs from:
compensation
Benefits (incl. pensions)
the HR function
Optimizing your workforce
Moving forward
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4. The need for speed
Large
SIZE OF
SAVINGS
Small
Immediate Savings in Savings in Increased
cash current future years ROI
financial
year
SPEED OF SAVINGS
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5. Our overall approach for taking actions
Validation Realisation
Preparation Identification
Context/desired Identify required Examine Execute changes
outcome: internal data sources of savings
in detail
Size of savings
Obtain internal
Speed data Prioritize
Risk appetite
Benchmark Develop action
Approach: plan
Qualify potential
‘Top down’
savings
Broad
involvement
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6. Rewards - sample items of checklist of 25
Illustrative
Illustrative
Estimate
Possible Actions – selected examples Ease Risk Timing
Make 10% of the workforce
€10m CURRENT YEAR
redundant OR
€2m
Cut base pay by 20% IMMEDIATE
€1,5m
Freeze base pay CURRENT YEAR
€0,5m
Defer salary increase CURRENT YEAR
€0,2m
Differentiate on increases CURRENT YEAR
€1m
Manage out poor performers CURRENT YEAR
€4,3m
“Shut down”/sabbaticals IMMEDIATE
€1,6m
Part-time working IMMEDIATE
€2,2m
Cancel overtime IMMEDIATE
€1,4m
Reduce bonus IMMEDIATE
€1,0m
Reduce LTI levels CURRENT YEAR
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7. Benefits - sample items of checklist of 40
Illustrative
Illustrative
Estimate
Possible Actions – selected examples Ease Risk Timing
Make 10% of the workforce
€ 10m CURRENT YEAR
redundant OR
€ 1m
Close DB plan to new entrants IMMEDIATE
€ 1,2m
Reduce DB accruals CURRENT YEAR
€ 2,5m
Close DB accruals CURRENT YEAR
€ 0,5m
Reduce DC accruals CURRENT YEAR
€ 0,8m
Introduce employee contributions IMMEDIATE
Convert employee contributions to
€ 0,1m IMMEDIATE
salary sacrifice
€ 1,1m
Move pension accruals overseas CURRENT YEAR
€ 0,1m
Consolidate pension plans CURRENT YEAR
€ 0,2m
Reduce employee medical IMMEDIATE
€ 0,2m
Multinational pooling CURRENT YEAR
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8. Cost savings can mean improvement!
ILLUSTRATIVE
ILLUSTRATIVE
Increase in Indicated
Engagement From Current
Level
(Percentage)
Conclusions
Each point along the curve
represents the best allocation of
the corresponding total
1) Additional
40% investment
Investment
1) To maximize return on
engagement, the curve identifies
2) Maintain current
30% the best allocation of an
level of investment yet increase in program investments
3) Maintain increase engagement
2) To maintain current total, the
current level of
curve identifies how to reallocate
engagement 20%
across programs in way that can
at lower level of
actually increases engagement
investment
3) To reduce total costs, the curve
10% Current levels of identifies which programs should
investment and be reduced to reallocate
engagement investments in other areas in a
way that maintains current levels
of engagement
–20m –10m 0 10m 20m 30m
Decrease in investment Increase in investment
from current level from current level
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9. HR Function - sample items of checklist of 35
Illustrative
Illustrative
Estimate
Possible Actions – selected examples Ease Risk Timing
Reduce volume: Simplify data
€ 0,2m CURRENT YEAR
management
€ 0, 3m
Reduce volume: Extend self service CURRENT YEAR
Reduce HR FTE: Reduce distributed
€ 0,2m IMMEDIATE
specialists
Reduce HR FTE: Increase span of
€ 0,2m CURRENT YEAR
control and decrease layers
Reduce HR FTE: Increase HRBP
€ 0,4m IMMEDIATE
manager ratio
Reduce cost of providing services:
€ 0,2m IMMEDIATE
Recruitment supplier consolidation
€ 0,1m
Recruitment marketing consolidation IMMEDIATE
Reduce cost of providing services:
€ 0,4m FUTURE YEARS
Move from classroom to e-learning
€ 0,2m
Centralize training CURRENT YEAR
€ 0,2m
Reduce travel costs IMMEDIATE
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10. There are different actions that can be taken -
with different timelines
SOURCE SHORT-TERM ACTIONS MEDIUM – LONGER TERM ACTIONS
Reduce volume of Engage with key managers Identify priority processes (cost, value
work etc)
Agree what to stop
Redesign
Communicate and stop
Design and implement ESS and MSS
Reduce HR FTE Develop staffing principles Redesign structure
Apply top down targets Define new roles
Manage redundancy process Develop staffing principles
Conduct selection process
Manage redundancy process
Reduce cost of Renegotiate with suppliers Produce business case for changes
providing services Confirm potential for greater use of Move work to existing SS, offshore
existing shared services, offshoring Conduct RFP for outsourcing
Identify potential for selective /
broader outsourcing
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11. Target spend to ‘pivotal’ roles
Talent Segment and Value Potential Strategic Action
Today Tomorrow
Strategic
Build
Critical to driving long-term competitive
Job families
advantage, with specialized skills or knowledge
that affect
the strategy
Core
Protect
Support
Streamline/
Cannot do without, but whose value could
Outsource
be delivered through alternative staffing
Job families strategies other than full-time headcount
affected by
the strategy
Non-Core
Redirect
Talent whose skill sets no longer align
with the company’s strategic direction
Source: The Conference Board, Strategic Workforce Planning, 2006.
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12. Moving forward -
How does your company progress from today?
How Towers Perrin Can Help
You
PREPARE:
How much do you need to save? how to approach
IDENTIFY:
Where are opportunities? potential opportunities fast
VALIDATE:
Are the opportunities ‘real’? opportunities and considerations
REALISE:
Decided where to cut? achieve change effectively
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13. We can conclude the rapid cost reduction
process in up to four to six weeks
1 2 4
3
Insights Workforce
Total Rewards HR function
Review and understand Understand various current Identify pivotal roles within the Understand various current
current business results, total reward components and organization HR procedures, deliverables
strategy and operating model organization spend and costs
Map current employee
Collect and review Assess current reward spend population to roles to develop Assess current HR function
organization data regarding across the talent map “talent map” with external benchmark
current workforce, rewards data
Realign rewards spend to Utilize workforce demographic
and HR technology where focus on strategic roles as data to identify opportunities Realign HR function/
available identified in the pivotal role for delayering the organization procedures to focus on
Identify key opportunities and analysis and reducing redundancies strategic deliverables and
risks within the workforce requirements in economic
Identify opportunities to
downturn
reduce cost for benefits Analyze recent individual
spend performance data to identify Identify opportunities to
historically poor performers reduce costs
Identify volatility risks
within the organization
concerning pension scheme Develop an HR optimization
Develop a workforce plan
Develop a rewards reduction
reduction plan to strategically
plan Establish implementation
reduce employee headcount timeline and budget
Establish implementation
and cost
timeline and budget
Outcome: Outcome:
Outcome: Outcome:
Realignment of total rewards Identification of key
Clear understanding of the Realignment of HR function
spend workforce segments and
current state of organization to Reduce cost and optimize
to reduce cost and optimize action plan for strategically
inform key decisions investment
investment reducing employee
regarding reductions in cost
headcount
5
Change Management Process
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14. Rapid Cost Reduction Scan
Getting insight is necessary to get a clear understanding of the current state of organization to
inform key decisions regarding reductions in cost
We are delighted to offer you the following Rapid Cost Scans in order to get this insight:
1. Reward cost scan € 5.000,-
2. Workforce scan € 2.500,-
3. HR function scan € 2.500,-
These charges exclude VAT (19%) and an administrative expense loading of 6,5%
If applicable, we are open to partnering with you on a gain sharing basis in the follow phase
We look forward to meeting you:
Suzanne Jungjohann suzanne.jungjohann@towersperrin.com +31 20 7114052
Bert van Loen bert.van.loen@towersperrin.com +31 20 7114111
Ton Winkels ton.winkels@towersperrin.com +31 10 2075732
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