Protecting Your Human Resources Budget in Difficult Times: Seven Actions to Take Now

Jack J. Phillips, Ph.D., and Patti P. Phillips, Ph.D.

The Situation

As a result of the COVID-19 crisis, many executives predict the global economy will be in a recession for the rest of 2020 and perhaps even into 2021. Consequently, many top leaders will conduct reviews of programs in an attempt to reduce budgets and save money. Are you prepared to show how your major HR programs drive the business in this new post-pandemic world? Implementing some actions now can safeguard your budgets during and after this time of uncertainty.

The Challenge

After the last recession, the Great Recession in 2008-2009, Economist magazine conducted a study of the impact of the recession on key organizational roles. The magazine developed a list of winners and losers. The No. 1 winner was the chief financial officer. They suggested that this person will steer the organization back to financial health. The No. 1 loser was the chief human resource officer. HR experienced the greatest budget reduction on a percentage basis. Also, the CHRO had to clean up the aftermath of all the job layoffs, restructuring across the organization. Will this recession be the same?

Organizational leaders need to perceive HR as an investment and not a cost. If top leaders see HR as a cost, they will control it, reduce it, or perhaps even eliminate it if they can. This results in weak partnerships, diminished influence, decreased support, and reduced funding. If HR is seen as an investment, leaders may maintain it, enhance it, and maybe even protect it. Additionally, this also helps build business partnerships, improve client relationships, and increase funding. What is the best way to convince executives that HR is an investment? Measure the return on investment of a major HR program using a standard ROI calculation. Top executives need to see HR as an investment that yields a positive return, not a necessary cost that must be accepted.

HR Value Definition

The value of HR programs is described using five levels of outcomes:

  1. Reaction to the HR program
  2. Learning to make the HR program a success
  3. Application of what’s necessary to make the HR program a success
  4. Impact from application, expressed as output, quality, cost, time
  5. ROI, the comparison of benefits to cost

Executives would like to see impact and ROI for expensive HR programs.


Actions to Take Now

Seven actions you can take now to protect your L&D budget:

  1. Measure the impact and perhaps ROI of a major HR program now. Think about a program that has been recently conducted. Now is the time to collect data for level three (application) and level four (impact), and maybe even level five (ROI). This is not the ideal scenario because you didn't necessarily plan for the HR program to deliver the business results, but you may be surprised at the success. If it’s not successful, you will know what to change to make it successful.
  2. Ensure that virtual HR programs are effective. With so many HR programs now shifting to virtual delivery, we need to ensure that they are working, particularly at level three (application), level four (impact), and maybe even level five (ROI). Unfortunately, there is a problem with many virtual programs breaking down at levels three and four—not delivering application and impact.
  3. Update your measurement and evaluation strategy. If your HR evaluation or analytics haven't focused on connecting major HR programs to the business, then it's time to make a change. Adjust your strategy now.
  4. Design future HR programs to deliver results. Important new programs should start with why, and the “why” is a business measure. And the proposed HR program must be the right solution to drive business measures. SMART objectives are needed, not only for reaction and learning but for application and impact as well. This provides the focus you will need to deliver results.
  5. Capture more executive-friendly reaction measures. Reaction to HR programs is always captured. Executives are more interested in measures such as relevance, importance, intent to use, and recommendation to others. Steer away from happiness measures that may not get them excited.
  6. Be prepared to forecast the impact and ROI of a major HR initiative. The only way a new program may be approved and implemented in the post-pandemic era might be to provide a forecast in advance. This will be the new normal for many and you have to be prepared to do it.
  7. Share the joy of delivering and measuring business results. The effort to connect HR to the business is not solely the responsibility of the HR analytics team. The entire team—from analysts, designers, developers, program owners, facilitators, participants, and the managers of the participants— everyone on the team has a role in this critical process.

Examples of each of these strategies, along with tips and tools to use are available from ROI Institute. When the crisis ends, and we face a new normal, your budget should be protected, and HR should thrive, even in a downturn.