Cost optimization (CO) is a business discipline and process that helps to maximize business value while reducing costs. And as CHROs’ continue to face pressure to reduce costs without comprising value, CO remains a top priority, and often a challenge, for many HR leadership teams. Although CO is based on the philosophy of finding the right balance of cost-cutting and business value, far too often these decisions are made with a sole focus on financial savings. In order to more effectively evaluate and prioritize CO opportunities, CHROs and their teams need to consider factors that go beyond financial savings. In this short reference document by Gartner, 8 criteria for making CO decisions are reviewed. These criteria span two dimensions: I) BENEFITS AND IMPACT and II) INVESTMENT, TIME, AND RISK. The 8 criteria include 1) strategic relevance, 2) cost savings and productivity gains, 3) business impact, 4) impact on employee experience, 5) investment requirement, 6) time requirement, 7) HR service delivery risk and 8) stakeholder buy-in. HR Leaders can use these criteria and their definitions to create a 2×2 matrix where they evaluate these criteria across the two dimensions. A balanced approach like this one is more likely to help HR teams make better CO decisions that maximize both cost savings and value.
