The Risk Management Impact of the ‘Headcount/Cost Cutting/Rightsizing Mentality’

March 25, 2017 Joanne Flynn


If you are truly thinking about creating a robust Human Asset Management Strategy, then the concept of headcount/cost cutting done in the name of rightsizing represents polar opposite approaches to people as an asset. 

Why?

When we talk about headcount, we are looking at a static numbers game at best, and a leadership and organizational ‘cop out’, at worst. Have you ever worked for a company that reduced headcount by 10%? We’ve all been there. Here are a few scenarios that happen in organizations all the time when we embark on the headcount/cost cutting game:

Scenario 1 - The highly-accepted but strategically-flawed LIFO test – last in, first out.

We somehow justify that longevity is a rational basis to keep people. That process is most often used by people who have longevity in the organization. These people, themselves may be past their human asset ‘sell-by date’.

Risk Impact: LIFO may be the worst way of dealing with headcount issues. What does the LIFO accounting concept have to do with a dynamic, evolving long-term human asset management strategy?

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