Saturday, August 2, 2014

Compensation & Benefits is actually costing and budgeting

~70% cost of running an IT or services company or even a knowledge based consulting organisation is towards infrastructure cost and salary and benefits cost.

Revenue-cost=profit. (Revenue minus cost is profit). Profit is key as it is key to expansion, growth and diversification, etc.

Many services companies bag projects and then look for filling positions to deliver them either internally or externally. Internally, they may find resources who fit the bill or else hire from market at the cost that fits the budget. Salary is a cost and cost is decided by looking at operating cost and gross margin on the project. Who said, there is something called C&B. Ask and accountant and he will calculate your cost of resources and tell hiring the hiring budget. Ask project manager to write job specs as he writes project specs, send that to HR to post jobs and let the project manager interview and select. HR shall offer as they have the budget. If HR says guy is not accepting offer as it is less by 30% from his expected salary, the project manager says, give him 20% as I will ask him to manage some other tasks as well. HR even does not know how and why the project manager agreed to raise the salary, the real reason and so offer is made and you have done a C&B job. Well done! That is C&B.

C&B is not a brahmanical hegemony! It is just a cost calculating function. They play with mix of Base/fixed component, Variable/Performance Incentive/Bonus/Rewards and Benefits, employer brand management cost (Welfare, lifestyle, etc)

Any educated person can read and understand a C&B concept book, starting to understand the cost of services and therefore cost of service provider, complexity, scarcity, availability of skills and so the capacity to hire within a band or range. Where do you hire from and where do you lose your people to is one generic concept to set your cost bar. But many companies believe in few sharks at the top who can lead the average bundle of folks and therefore set the cost differently at different levels. High-end topping skills like 'analytical thinking', 'decision-making', problem-solving', 'Insight-building', etc are top end cost over degrees and experiences and one can follow the 20% to 40% ratio as project nature and profitability may be considered.

Talk to any business leaders, for whom  HR hires from market or campus, he would have thought of margins and then he would look at billability and resource cost + bench cost to tell them what budget he has and that becomes the C&B. Name changes but it is all accounting.

C&B is costing and data entry, data keeping. C&B follows what guidelines business gives them after looking at the salary survey report. Market report as well help them in finding what competitors are paying and so correct or re-position salary as strategy may be.
You need to watch your 5 close competitors at max.

It will be interesting to see, how and when has C&B published a job-evaluative, market researched and compared C&B data to management that tells the following-

1. How many of our employees are paid much over the band for what they do?
2. How many are paid over the band
3. How many on the band
4. How many below and quite below the band?

Many a times dumb HR and companies change title to match salary and they go for coffee for bringing this great company-killer solution. MNCs are most screwed in India as they harbor the most awful HR folks many a times who keep HR sound like esoteric and keep people guessing. They buy expensive reports and deploy consultants to show they are doing something like CIA and they would 'completely revamp company processes', make them top company. What happens is , you all know!

Leave C&B to Finance and Accounts and let CFO manage that. HR can  administer by printing letters and data-entry into systems. In that case, we may not need C&B Manager.

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