How HR budgeting reduces over-staffing, under-staffing, drives efficiency
Article Summary
Nairametrics interviewed Adeosun Oluyemi Theophilus, an HR expert, who explains that financial resources are needed for Human Resources needs in an organization, hence it is important to have a budget
This is needed to strike the right balance between having too few and too many employees which can cause mass layoffs eventually
He suggests HR teams should work on budgets for the HR needs of the organization by Identifying HR priorities, estimating costs, allocating funds, monitoring spending and more.
Hiring and retaining qualified employees is one of the most difficult challenges that both HR and employers face, as staffing will always be a challenge as long as there is a business to run.
Too many employees can significantly raise your overhead costs, while too few can limit business expansion.
This is what businesses in Nigeria and around the world are currently facing, in addition, it is important to note that overstaffing is one of the reasons for the mass layoffs characterized by many organizations globally.
However, striking a balance between having too few and too many employees can be difficult as it takes financial resources to engage in HR initiatives such as recruitment, training, benefits and others.
In this interview with Nairametrics, we speak with Adeosun Oluyemi Theophilus.
He is an experienced HR Executive working in a multinational Oil & Gas firm and has over 15 years of experience across industries including Fintech, Telecommunications, Technology, Consulting and others.
He pioneers various mentoring platforms, one of which is his online mentoring platform with HR professionals and his weekly YouTube live webinar where he discusses HR domain knowledge.
He discusses why it is important for HR leaders to plan to allocate financial resources to meet the human resources needs of an organization by preparing an HR budget in an organization.
Nairametrics: What is it about HR budgeting and why is it important in an organization
Adeosun Oluyemi Theophilus: In my line of work, one of the tasks I am involved in is HR budgeting.
This is the process of planning and allocating financial resources to meet the human resources needs of an organization.
It involves estimating the costs of HR activities and programs, and determining how much money should be allocated to each area of HR to achieve the organization’s goals and objectives.
This helps to ensure effective resource allocation, cost control, strategic planning, performance measurement, and risk management.
By implementing effective HR budgeting processes, an organization can achieve its HR goals and objectives while controlling costs and mitigating risks.
HR budgeting is important in an organization for several reasons and typically involves the following steps.
Resource allocation: HR budgeting helps an organization allocate its financial resources effectively to meet its HR goals and objectives.
It ensures that adequate resources are available to support HR initiatives such as recruitment, employee training, and compensation.
Cost control: HR budgeting helps an organization control its HR costs by setting clear spending limits and monitoring expenses.
This ensures that the organization is not overspending in any particular area of HR.
Strategic planning: HR budgeting is an integral part of strategic planning, as it helps an organization identify and prioritize its HR goals and objectives.
It ensures that HR initiatives are aligned with the organization’s overall strategy.
Performance measurement: HR budgeting provides a basis for measuring the effectiveness of HR initiatives.
By tracking spending against budget, an organization can evaluate the success of its HR programs and make adjustments as needed.
Risk management: HR budgeting helps an organization manage risks associated with HR activities.
By identifying potential HR risks and allocating resources to mitigate those risks, an organization can reduce the likelihood of costly HR-related problems.
Nairametrics: Why is it important to prepare an HR budget in an organization and what are the steps it typically involves?
Adeosun Oluyemi Theophilus: It is important because financial resources are allocated to it.
Some of the steps involved are:
Identifying HR priorities: Determine the HR priorities and objectives for the upcoming period. These may include recruitment, employee development, compensation and benefits, employee engagement, and other HR initiatives.
Estimating costs: Estimate the costs associated with each HR priority, including salaries, benefits, training and development expenses, and any other costs associated with HR programs.
Allocating funds: Allocate funds to each HR initiative based on the estimated costs and priorities. This may involve prioritizing certain initiatives over others based on the organization’s goals and available resources.
Monitoring spending: Monitor spending throughout the year to ensure that HR expenses are in line with the budget and adjust the budget as needed.
Evaluating effectiveness: Evaluate the effectiveness of HR programs and initiatives and adjust the budget accordingly to ensure that resources are being allocated effectively.
By creating an HR budget, organizations can ensure that they have the resources necessary to achieve their HR goals and objectives and make informed decisions about where to allocate their resources to best meet their needs.
Nairametrics: How can HR budgeting reduce human capital waste, drive efficiency and enhances optimisation to avoid layoffs?
Adeosun Oluyemi Theophilus: Effective resource allocation: HR budgeting helps to ensure that resources are allocated to the areas that are most critical to the organization’s success.
This can help to reduce waste by directing resources to areas where they will have the greatest impact.
Strategic planning: HR budgeting requires strategic planning to determine the organization’s HR priorities and objectives.
This can help to ensure that the organization is focusing on the most critical areas of HR, which can help to drive efficiency and optimization.
Improved forecasting: HR budgeting requires forecasting HR needs and expenses.
This can help the organization to identify potential areas of waste or inefficiency, and take action to address these issues before they become problematic.
Better cost control: HR budgeting can help organizations to control their HR costs, which can contribute to overall efficiency and optimization.
By monitoring HR expenses, organizations can identify areas where costs are higher than expected, and take steps to reduce those costs.
Data-driven decision-making: HR budgeting requires data collection and analysis, which can help organizations to make more informed decisions about their HR priorities and initiatives.
This can help to avoid wasting resources on initiatives that are not effective and focus on those that will have the greatest impact.
By implementing effective HR budgeting processes, organizations can reduce waste, drive efficiency, and enhance optimization.
This can help to avoid layoffs by ensuring that the organization is operating as efficiently as possible, and is able to adapt to changes in the business environment.
Nairametrics: It appears most budgeting is a task most HR officers don’t practice. How can this skill gap be encouraged?
Adeosun Oluyemi Theophilus: I encourage HR professionals to develop skills in budgeting which can be beneficial for an organization in terms of effective resource allocation, cost control, and achieving HR objectives.
Here are some ways to encourage HR professionals to develop budgeting skills:
Training and development: Offer training and development opportunities to HR officers to improve their budgeting skills.
This can include courses, workshops, or on-the-job training, as well as coaching and mentoring.
Collaboration: Encourage collaboration between HR officers and other departments, such as finance or operations, to share knowledge and best practices in budgeting.
This can help to build a more comprehensive understanding of the organization’s budgeting process.
Performance metrics: Develop performance metrics that measure the effectiveness of HR officers in budgeting.
This can help to create accountability and encourage HR officers to develop their budgeting skills to improve performance.
Communication: Foster communication between HR officers and other stakeholders, including senior management and other departments, to ensure that budgeting is aligned with organizational objectives.
This can help to create a shared understanding of the organization’s budgeting priorities and the importance of budgeting in achieving HR objectives.
Tools and technology: Provide HR officers with the tools and technology necessary to develop and manage budgets effectively.
This can include budgeting software, data analytics tools, and other resources that can help to streamline the budgeting process.
By encouraging HR officers to develop budgeting skills, organizations can create a more efficient and effective HR function, and ensure that HR initiatives are aligned with organizational objectives.
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Full Story: https://nairametrics.com/2023/04/27/how-hr-budgeting-reduces-over-staffing-under-staffing-drives-efficiency/
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