Reducing Recruitment Costs

I checked out Seth’s Blog global Alexa traffic analysis and it states – “Visitors to the site spend approximately two minutes per visit to the site and 84 seconds per page view.” I checked out my blog’s analysis and it states- Visitors to the site spend roughly two minutes per visit to the site and two minutes per page view.” My readers spend more time per site visit (2 minutes) than Seth Godin’s (84 seconds) do. Yippee!Obviously I am ignoring the traffic ranking, as there is a few hundred thousand difference.  Now you must be wondering how this data relates to reducing recruitment costs. Read on.

I further analyzed the ranking of Tata Consultancy Services, Infosys and Wipro Technologies; the three technology and business process outsourcing  giants of India. Now look at the table below:

Company Website Global Rank Audience Age Total time on site Time per page view
Tcs.com 12,405 Mostly under 25 6 minutes 44 seconds
Infosys.com 17,672 Mostly under 25 5 minutes 41 seconds
Wipro.com 12,706 Mostly under 25 6 minutes 46 seconds

What am I getting at? Most of the site visitors are young males looking for a job. Each site has a career section that allows candidates to register and submit their resume. Look at the table from a recruitment cost lens. If the organization focuses on career webpage, it can reduce recruitment costs.

The Business Case

Overall, recruitment costs include job advertising costs, recruitment company fees, employee referral, interview travel expenses, relocation expenses and human resource recruitment department operating costs.

Let me take the example of IT and BPO sector recruitment costs. According to the NASSCOM Strategic Review 20011 report, the IT and BPO sector will employ 2.5 million employees in 2011. In comparison to 2010, the total employee strength will increase by 240,000 employees. Secondly, the attrition rate is ranging from 20-40% in the sector. This means that approximately one-third of the employees will change jobs. Back of the envelope calculations show that BPO and IT sector organizations will hire roughly one million employees in 2011.

Most of the demand is for employees with 1-3 years of experience. Their monthly salary ranges between Rs. 20,000 – Rs. 50,000 and the recruitment companies’ fees range between 1-2 months of employee monthly salary costs.

Hence, if I take 10% of annual salary cost to company as recruitment fee and Rs 300,000 as annual salary, nearly Rs. 30 billion will be spent on recruitment fee alone by the sector. Definitely, a line item worth looking at for reducing organization recruitment costs. Especially in case of BPO and IT sector as the profit margins are decreasing with the recession in US and Europe economy.

The Solution

Simply put the organizations need to drive traffic to their websites to ensure prospective candidates submit their resumes on the website. Any percentage increase of hire through website will decrease agency recruitment fee costs.

As in the case of BPO and IT sector the audience age is less than 25. The Gen Y is technologically savvy and looks for the same in websites. Hence, some of things that organizations can look into are:

> Post a video message from CEO or other CXOs explaining the vision and mission of the organization.  Gen Y prefers flat structures, access to senior management and enjoys watching videos. This will increase their enthusiasm to submit their resumes.

> Aptitude tests – IT and BPO sector generally request recruitment agencies to do preliminary screening by giving candidates written aptitude tests. The tests can be web-enabled on the career page to enable candidates to complete it while submitting their resumes.

> Voice and language tests – BPO sector in call center business conducts voice and language tests. The organizations can provide a facility for prospective candidates to upload audio and video recordings for voice tests. Secondly, administer written language tests through web.

> Pre-employment background verification – Provide a facility to candidates for uploading relevant certificates required for background screening. In India, roughly 25% of the resumes are fake or inaccurate. The background screening costs are high if done after appointment. Hence, organizations can conduct a preliminary verification before interview by reviewing the scanned certificates.

> Application processing system – Organizations can provide an application  tracking mechanism to the candidates, either to update them through automated emails or showing the application status on the website.

I was amazed that technologically advanced companies that provide technology and business consulting services have not focused aggressively on developing the career page and attracting candidates through them. Maybe the technology costs are higher, though to me it does not seem so. Maybe the thinking is that putting boots on the ground will reduce the recruitment pressure on the human resource teams. In my opinion, since in BPO and IT sector the recruitment numbers and costs are high, the human resource teams should have all technological advantages to do their jobs better. What is your opinion?

References:

NASSCOM: The IT+ BPO Sector in India – A Strategic Review 2011

Creativity @ Risk

We presume with the world singing paeans of Steve Jobs, Mack Zuckerberg and Larry Page, people appreciate individuals with creative ideas. CEOs who made it big through their creative thinking are glamorized.  Hence, a perception has formed that organizations reward innovative thinkers.

This myth broke in a study conducted by Jennifer S. Mueller, Jack A. Goncalo and Dishan Kamdar. Their research paper titled – “Recognizing creative leadership: Can creative idea expression negatively relate to perceptions of leadership potential?” states, “the expression of creative ideas may diminish judgments of leadership potential unless the charismatic leadership prototype is activated in the minds of social perceivers”. This indicates that people prefer leaders who follow the status quo and provide useful solutions. People choose a creative thinker as a leader only when they asked to select a charismatic leader.

Hence, creativity is at risk unless organizations specially focus on valuing innovative thinkers as leadership potential. Business Week article reports that due to increasing complexity in business and globalization CEOs want creative thinkers. “According to a new survey of 1,500 chief executives conducted by IBM’s Institute for Business Value, CEOs identify “creativity” as the most important leadership competency for the successful enterprise of the future.” CEOs value employees who disrupt status quo, existing business models and organizational paralysis. However, according to the Jennifer Mueller’s study creative thinkers may not be considered as good leadership potential as employees view them as quirky, weird, non-conformists.

Therefore, in the current economic environment the organization risk is huge if organization culture doesn’t promote creative thinkers into leadership roles. For example, the Business Week article mentions “CEOs say one-fifth of the revenues will have to come from new sources.” Hence, loss of revenue due to lack of creative thinkers in an organization can be significant. In my view, most of the risk managers haven’t considered this risk. Interestingly, this is an upside risk, if addressed can yield significant benefits to the organization. So the question is how does a risk manager check creativity levels in the organization?

Before risk managers collectively say that I am being weird and it is not a risk manager’s job to check creative thinking in the organization, here are some of my CREATIVE ideas on ways to do it.

1.   Culture

With management rhetoric on innovation on public platforms, one can mistakenly believe that the organization culture supports creative thinking. However, as Jennifer Mueller points out – “By definition, people will say creativity is positive. It is almost impossible to get people to say they don’t want creativity. But when someone actually voices a creative idea, there is a response of, ‘Wow — What is that?’ This issue really comes to life at the moment the idea is voiced. There is discomfort when people encounter creativity.”

Hence, DNA of the organization should encompass creative thinking. As Jack Anderson and his team states in the paper, “Developing Systemic Innovation in an IT Organization” state- “The systemic innovation initiative allows us to manage innovation as a culture in the same way that we manage quality and safety.”

Therefore, risk managers should check whether the organization culture is giving lip service to creativity or is it ingrained in the psychology and attitudes of the employees.

2.   Reward

The key point brought out by Jennifer Mueller is that people do not perceive creative thinkers to have leadership potential. Therefore, they miss the career path. She mentions – “The fact is, some people are selected for a leadership [track], while others are not. So companies need to think about this issue, and their performance appraisal systems should be changed accordingly. Managers need help in understanding what stereotypes they might have in their minds and how to overcome them.

Hence, the performance appraisal system should be built to recognize the creative thinkers and reward them appropriately. For example, when I was working in Intel, the organization recognized employees who contributed to innovation, even if the business idea or product was not viable or usable by Intel.

Risk managers need to do a quick assessment on the performance appraisal system to evaluate whether the organization has a process for rewarding creative thinkers. Secondly, conduct an analysis of the number of promotions of creative thinkers to the total. The ratios will reflect whether any bias exists against promoting creative thinkers to leadership positions.

3.   Engagement

The tone at the top matters for ensuring commitment to creative thinking. Jack Anderson mentions that at Intel –“Managers play a key role in enabling an environment that supports innovative behavior. We engaged senior managers and employees as innovation champions, allocated adequate budget for the initiative, and set up a management-based steering committee for innovation and research” I remember in my business group at Intel senior management allocated 1 hour every month of their weekly meetings for juniors to present new ideas. They would evaluate the idea, and if it was useful give the go ahead to the team to submit a concept note.

Risk managers can check the existence and working of management committees dedicated to the task of nurturing creative thinking within the organization. Secondly, analyze the time committed by senior managers for mentoring creative thinkers.

4.    Agents

Management appoints agents or champions to transmit the creative thinking message across the organization. Agents are responsible for the transformation. Agents develop strategy, implement, monitor and measure creative thinking initiative within their business unit. At Intel in a business unit, there were innovation sponsors and agents who acted as contact points for the business unit staff. They aligned the global process with the business unit and provided regular guidance to the team.

Risk managers must check the process of delivering creative thinking message to employees lower down the ladder. If agents are appointed, risk managers need to check their role, performance and effectiveness.

5.    Training

Sometimes we believe that creative thinkers are born or it is a mindset. However, creative thinking can be taught to all. Organizations have commenced creative thinking classes that provide basic training on how to do it and merge it in daily working environment. For example, in a recent article of Businessweek Chief Technology Officer Ananth Krishnan of Tata Consulting Services (TCS) says – “TCS has made innovation a component of training programs, from its leadership institute, to which 50 senior managers are sent every year, to its four-day “Technovator” workshop, at which its programmers are taught to think creatively.”

Risk managers should review the training strategy for creative thinking. Then check the delivery, coverage and content of the training. Review training feedback forms and performance evaluation forms if available. This will facilitate in measuring effectiveness of training.

6.    Investment

Investment means budgets allocated for tools, technology, training and processes to make creative thinking mainstream in the organization. As TCS Chief Technology Officer Ananth Krishnan says – “If I come up with an innovation, whether it’s an incremental or a disruptive idea, I need to know whom to go to with it, and there needs to be an organizational process for moving it forward.” TCS launched IdeaMax, a Digg-like social network that allows employees to submit, comment and vote on ideas. They are applying collective intelligence techniques for harnessing creative ideas.

Risk managers must review the budgets to ensure that organization allocates appropriate amounts and uses them correctly.

7.    Value

Organizations invest in creative thinking to get business value. Business value can be assessed by calculating the amount of cost savings and revenue generated from creative ideas. New ideas, innovations and process changes result in new/modified products, patents and business models, which add to the profitability of the organization.

A cost-benefit analysis of investing in creative thinking helps to determine success of the initiative. Risk managers can either prepare or review the cost-benefit analysis of creative thinking to assess business value derived from the program.

8.    Evaluation

A periodic evaluation of the program is a must to measure its effectiveness otherwise one is moving without a compass. The creative thinking initiative evaluation can be done by conducting an organization survey to take employee feedback. The purpose is to measure change in behaviors. Another aspect to look at is the key performance indicators. Some key performance indicators are number of rewards and recognitions,  number of people trained in creative thinking, number of new ideas etc.

Risk managers need to verify the results of the organization survey and review key performance indicators to evaluate the success of the program.

Conclusion

In my view, neither size nor good reputation ensures success unless the organization has a competitive edge. Innovation is the key component for ongoing prosperity of a company. Hence, most organizations need creative thinkers. To hire and retain creative thinkers’ organizations must promote them to visible leadership positions. In short, organizations require a culture that encourages creative thinking. Risk managers can contribute by periodically assessing organization commitment to creative thinking and value received from the investment.   To end:

“Go round asking a lot of dam fool questions and taking chances, only through curiosity can we discover opportunities, and only by gambling can we take advantage of them” – Clarence Birdseye

References:

  1. Recognizing creative leadership: Can creative idea expression negatively relate to perceptions of leadership potential? By Jennifer S. Mueller, Jack A. Goncalo and Dishan Kamdar
  2. What Chief Executives Really Want- IBM Study
  3. How to Build a Culture of Innovation- TCS- Bloomberg Businessweek
  4. Developing Systemic Innovation in an IT Organization – by Jack Anderson, Luis Gimenez, Deanna Nunley, and Esther Baldwin, Intel Corporation

Risk Managers – Change Mindset For Strategic Risk Management

In the previous post, I discussed the role risk managers can play in Strategic Risk Management (SRM). In my view to enter into the SRM arena, risk managers need to change their own mindset first. Presently the risk management function focuses on mitigating operational risks at micro level and hedging financial risks. To add to the confusion people equate SRM to Financial Risk Management. In my view SRM is more than hedging of risks, as this is risk mitigation where risk is viewed as a threat. Business strategy covers market, operations, finance, resources and products. Hence, SRM encompasses exploiting the upside and protecting the downside of business strategies across functions to increase business value

Risk managers are nowhere near addressing the strategic risks.  As per the survey “Fall guys : Risk management in the front line – A report from the Economist Intelligence Unit Sponsored by ACE and KPMG”  – just 41% of the organizations involve risk management function in formulating and implementing corporate strategy. The gap is huge and risk managers need to restructure and reframe their departments to focus on strategic risk.  I am giving here three suggestions for risk managers to bring about this change.

 1.    Fragmented risk management departments

Risk management function in a large organization constitutes of internal audit, compliance, information security, disaster recovery, fraud risk and physical security departments. Sometimes these departments are integrated and reporting to one Chief Risk Officer. In some organizations, these departments are reporting to different functional heads, namely Chief Financial Officer, Head of Shared Services, Chief Technology Officer etc.

These departments are all focused on addressing the financial and operational issues of the business. None of them has the objective to provide a strategic level understanding of business risks to CEO and board. When the department structuring and key performance indicators are incorrect, it is not possible to address larger issues of the business. The first step is to restructure the risk management function and prepare an annual plan incorporating time for addressing strategic risks. Risk management function should integrate embed itself in the organization framework.  

2.    Risk managers focus on negative aspects

Generally, on checking risk registers one will find negative aspects –  threats and weakness with a “what can go wrong” analysis.  Risk registers do not contain the opportunities business managers can exploit to increase business value. The positive aspects or the upside of risk is not evaluated by risk managers. Without it, how can they contribute to strategy? According to Economic Intelligence Unit survey, senior managers think risk management function top three objectives are- identifying new and emerging risks,  enabling managers to make better business decisions and ensuring corporate survival.

Sit back and think about it, how many risk managers have effectively contributed towards these objectives in the last year. Risk managers need to start working towards being business partners and enablers. That is, focus on the constructive aspects and become solution providers.

3.    Supply not meeting demand

According to the Economist Intelligence Unit survey, the top three activities, which risk managers focus on, are – conforming to regulatory requirements, securing corporate reputation and image, and stemming financial loss. The top three risks which senior management are concerned about – weak demand, instability in one of the major markets, and financial market instability. In the analysis of top ten, some of the risks mentioned in senior management demand and risk managers supply chart are common. However, it is clear that there is variance is senior management requirements and risk managers’ fulfillment. What is demanded is not supplied.

Hence, it shouldn’t surprise risk managers that senior management is frustrated and does not see value add from their role. Risk managers need to get a better understanding of senior management expectations to become involved at strategic level. Leave the risk management jargon at your desk and focus on understanding business strategy.

Closing thoughts

Risk managers need to develop a holistic view, look at the big picture and understand macro level risks. The focus should shift from identifying micro level financial and operational weaknesses in the business to strategic level. Risk management functions need to rebrand themselves from being problem creators and nitpickers to business partners and positive contributors. The doors to the CEO and board cabins will only open when risk managers effectively address strategic business risks and demonstrate to board their business understanding and usefulness

References:

  1. Fall guys : Risk management in the front line – A report from the Economist Intelligence Unit Sponsored by ACE and KPMG

Sonia Gandhi Acknowledges Corruption Problem In India



Sonia Gandhi

Mrs Sonia Gandhi, Congress President during her speech at Teen Murti House on the 10th Indira Gandhi Conference titled ”An Indian Social Democracy : Integrating Markets, Democracy and Social Justice acknowledged the problem of corruption and the moral challenges facing Indian society. Her two significant statements are given below:

“Graft and greed are on the rise. The principles on which independent India was founded, for which a generation of great leaders fought and sacrificed their all, are in danger of being negated.”

“Our economy may increasingly be dynamic, but our moral universe seems to be shrinking. Prosperity has increased, but so has social conflict. Intolerance of various kinds is growing… We are right to celebrate our high rate of economic growth. We must do all that we can to sustain it. However, let us not forget that growth is not an end in itself.”

She stated that India cannot hide behind the growth story. Corruption needs to be addressed to have a balanced growth. If not addressed, it may turn into the biggest blockage in progress of India.

A candid admission on the challenges of Indian economy and society. A significant change in stance. Looks like there is still hope for India.

Protectors of the Nation Losing Ethics

The last temptation is the greatest treason: to do the right deed for the wrong reason – T. S. Eliot

The Adarsh Housing Society Scam is in the news for the last week. As per media information, permission was obtained from Navy and other government ministries to build a six-story apartment for the Kargil war widows and heroes, in Colaba Mumbai.  The land in question belonged to Navy, and initially a No Objection Certificate was obtained to build a six-story building. In its place there is 31 story building. The residents are senior retired army commanders, ministers and their relations and government bureaucrats. The present Chief Minister of Maharashtra Ashok Chavan, who had approved the land, has apartments allotted to his relatives, since the land is in a prime locality where apartment prices are in crores.

Presently, the Navy is denying approving the No Objection Certificate and the big wigs caught in the scam are pleading ignorance to the fact that the building was for Kargil war widows and heroes. Government and army have commenced investigations to find the people responsible for the scam. A lot of heads are expected to roll when on submission os final reports.

In Times of India, today an excerpt gives the idea that the scam was pre-planned. “S. V. Joshi, Principal Secretary to Maharashtra Government, wrote to the environment ministry: The members of the society are the officers from defense services who have dedicated their lives in the service of Motherland and deserve all special consideration, and several members of the society are even today fighting at Kargil.” This message was written less than a month after the Kargil war against Pakistan was won in 1999. This clearly showed that sentiments of patriotism were exploited to get permission which would normally be not available in a sensitive army area.

Indian population is well aware of corruption amongst politicians and bureaucrats. However, it expects army staff to strictly adhere to a moral code of ethics. Indian army officers take the following oath

I (name) hereby solemnly affirm/ swear that I will bear true faith and allegiance to the Constitution of India, as by law established and that I will, as in duty bound honestly and faithfully, serve in the regular army/ air force/ navy of the Union of India and go wherever ordered, by land, sea or air, and that I will observe and obey all the commands of the President of the Union of India and the commands of any officer set above me, even to the peril of my life.

It is disconcerting to hear that Army Chiefs are occupying houses of army officers who have lost their life, most probably following an order from one of them.  The officers who sacrificed their life stayed true to their oath; but what about the rest?

My question is will  officers follow the orders of their Army Chiefs in the next war? These officers will know that basic rights granted for safety and security of their family after their death will be snatched to add to the accumulated wealth of corrupt officers and politicians. In such a case it is difficult to expect officers to comply with orders at the risk of their life.

If military of a country loses ethics, and is motivated by money, then the country’s security is at risk. Where is the civilian population supposed to look for their safety and security? Should a revolution occur with civilians taking up arms to defend the nation?  That day does not look far.

Common Wealth Games Fraud

The Delhi Common Wealth Games (CWG) investigations by Central Vigilance Commission (CVC) are revealing irregularities and fraudulent practices adopted by the organization committee members. The estimated figure for misappropriation of funds is Rs 8000 crore (Rs 80,000 million). The investigations have recently commenced and the problems reported in the media are:

  • Purchase contracts signed with varying rates for the same product;
  • Prices over-inflated in some contracts;
  • Contracts given to relatives and friends;
  • Sub-standard products purchased;
  • Vendor payments made without confirming quality and delivery;
  • Payments made to non-existent vendors.

 Final investigation report is awaited; however preliminary findings indicate various wrongdoings. In my view, the organization committee members ignored the Prevention of Corruption Act and government procedures for contracts and tenders.  The results may show cases of fraudulent contracts and transactions, accepting bribes and contravention of procedures.

From the perspective of purchasing process, the following control issues are apparent:

  • Improper and inadequate vendor selection and evaluation procedures were followed.  
  • Conflict of interest was not disclosed while signing contracts with related parties.
  • Tenders were not given to bidders quoting lowest price of the product.
  • Vendors did not deliver the contracted quality and quantity as per the delivery schedule.
  • Vendors were not penalized for sub-standard quality or late delivery.
  • Vendor payments were not linked to delivery of products or completion of deliverables.
  • There was no segregation of duties. The same officials authorized the contract and approved payments.

 An independent evaluation of contracts by risk managers may have prevented misappropriation of funds. A periodic audit by government agencies could have highlighted these issues at an earlier stage.  As Comptroller and Auditor General (CAG) group is required to conduct periodic audits of all government expenses, it is surprising that these issues were not discovered earlier.

This clearly indicates  mis-utilization of public funds. Indian public is expecting an explanation from the government. The government’s commitment to reducing corruption will be determined by the actions it takes on the findings mentioned in the final report.

Let us wait and watch.

Auditing – Food For Thought

I am hungry and desperately need some food. I am contemplating whether to prepare a plain dosa, have a nice paneer paratha, cook a continental breakfast, call for home delivered pizzas or go out and eat. Loads of options. Let me decide while I read these questions on auditing on LinkedIn. Lots of questions are popping up regarding audit planning, audit programs, project execution, etc. Food and audit got linked somehow (blame it on the gender :)) so food has to wait while I write this article.

There are some common practices which auditors follow while executing an audit assignment. Some practices effectively derail the project and quality of the deliverables is yuck. So here goes, my opinion on how to conduct a delectable audit.

Courtsey fotolia.com1.       Audit programs

 When cooking we pick up a recipe, get the ingredients in the quantity mentioned and follow the instructions.

When we want to start a new audit, we look for a Standard Audit Program. There is nothing like a Standard Audit Program and the same practice of cooking can’t be applied to auditing. An organization has specific strategy, mission, vision, culture, products, services, processes, technology and people. An audit program should be prepared after understanding all the components which make the organization unique. One can use prior knowledge and experience to prepare a custom made audit program specific to the business.

 Prepare an audit program after understanding the business of the client properly.

 2.      Audit supervision

Have you observed the cooking in a major hotel? The main chef is present and directs all the junior chefs. He/she is constantly supervising and tasting the dishes. He/she is responsible for ensuring proper quality and taste of the dishes. Isn’t it remarkable that the food on every guest’s table is presented in the same manner and tastes exactly the same?  

For audit supervision we need to follow the same process. Auditor supervisors and managers have a habit of putting their best foot forward at the beginning of the assignment. They are present for planning the assignment, holding the kick off meeting with the client personnel and organizing the resources. Nearing the end of the audit, the supervisors are present all the time to review work, hold discussions with staff and client, finalize the report.

However, their presence is sorely missed in between the project period. Sometimes, the client starts wondering whether the audit is being supervised at all, or is it just the juniors are working on the job. Since the audit supervisor failed to visit the client in between he/she is unaware of the observations and problems. A last minute fire fighting is done to wrap up the audit.

Audits need to be supervised for the duration of the project. Ensure audit supervisors time is allocated for periodic reviews and client discussions.

 3.      Audit staff

 Ever had a situation when you organized a dinner at home for 10 people, and a considerate spouse or family member invited another 10 without informing you. You were enlightened regarding this nice gesture at 6 pm when you had finished cooking the dinner. The party generally gets ruined because last minute efforts are made to organize food and drinks, and everybody feels a little bit embarrassed and uncomfortable.

When an audit project is getting delayed adding staff at the last minute to maintain the deadline is not a good idea. The new staff needs time to understand the client’s business, work in progress and what they need to do to complete the project. The client staff gets hassled with the increased number of people asking basic questions near the end of the assignment. The message which goes out to the client is that these guys don’t know what they are doing and wasting our time.

Think twice about adding new staff at the last stages of the project. It might not be the right solution to meet the deadline.

 4.      Audit work-papers

Courtsey keralatoflorida.blogspot.com As a sixteen year old when I was new to cooking I decided to figure out a shortcut to cooking vegetables. I figured that my elders were creating unnecessary hue and cry about following the recipe.  I thought, let me put the vegetables to cook, and once they are tender I can add salt and all the other spices. Idea was that I don’t have to be in the kitchen at all. Needless to say, it was a disaster, rather inedible. Mind you, I did try self appreciation to save face but nobody took a second bite.

 I won’t recommend adopting the same method for preparing audit work papers. As auditors, we have to prepare lots of work papers for our observations and as an evidence of conducting the audit. The work papers require a lot of time and energy. We think let us do it at the end of the project rather than simultaneously as we do the work.

The problem with this approach is that critical points of audit are missed since there is no written documentation available for review and understanding. Secondly, as most of the observations, discrepancies and risks are in the mind of the audit staff, some are forgotten by the time of finalization of audit. The other aspect is that if the specific audit staff falls sick or has some emergency because of which he/she can’t attend office, the rest of the team is left in the dark.

Prepare audit work papers as you do the work to avoid dishing out something inedible to the client.

 5.      Audit communication

Have you attended those parties where the music is so loud that one has to shout to get heard? There is no way to have a conversation unless one is directly speaking in the ear of another. I generally come out feeling; I wish I could have talked to so and so about this or that, maybe I will give a call tomorrow. These parties are basically big time mindless bliss; the things which you can do happily are dance to the music and drink yourself silly.

An auditor has to adopt very sane practices while communicating with the team and client. Communication cannot be delayed till the end of the specific step or project. It has to be constantly done to keep the team members and the client personnel on the same page. It is a two way communication here, speak and listen. Listening is crucial to the success of the project.

Lastly, adding numbers to the communication list and sending for your information messages does not help, since it creates a din and message gets lost. So decide in the beginning of the project, who will be communicated what and in what form. Define and formalize the communication channels at the beginning of the project with the stakeholders.

Audit communication is a critical art which has to be mastered. Do it properly without creating to much noise.

Courtsey dailydave.runvile.com

My Breakfast

What do you say, are the above mentioned points food for thought? Shouldn’t we be thinking of adopting some good practices and burying some of our bad auditing habits?

Now I am really hungry, am going to have this breakfast. Slurp. You all have a nice weekend. Love, drink and eat 🙂

Cutting Costs in a Positive Way

Ryanair CEO Michael O’Leary grabbed headlines recently by making a statement in a magazine interview- “Why does every plane have two pilots? Really, you only need one pilot. Let’s take out the second pilot. Let the bloody computer fly it”. When asked what would be done in an emergency he replied specially trained flight attendants could assist.

According to him a flight attendant can do a pilot’s job. It saves costs, as a flight attendant’s salary is lesser than a pilot’s. In his viewpoint this is a good way to cut costs and reduce air ticket price for the low fare airlines. I think my sentiments are shared by the general public. Passengers to save a few dollars would not like to lose their peace of mind while flying.

Unfortunately, while making efforts to cut costs and increase profits, extreme measures are taken without viewing the cultural, social, environment and security impact. The biggest line item in a Profit & Loss statement is employee benefits. Most organizations focus on cutting jobs and freezing/ reducing salary and perks. A survey published in 2009 by Challenger, Gray & Christmas, Inc regarding various methods adopted for cost cutting during recession showed the following three top initiatives:

  1. 67% respondents focused on reducing travel expenses
  2. 58%  respondents initiated hiring freezes and reductions
  3. 56% respondents did permanent workforce reductions.

When layoffs are done it has a lot of impact on the organization culture and future profitability. The employees who were working before were doing something. So what part of the work is not required during the recession? Companies fail to bifurcate the job description into critical, necessary and optional activities.  Focus is on reducing the headcount. Instead focus on reducing the optional activities and improving the functioning of the critical and necessary activities. One must remember there are no easy quick fix solutions to cost cutting.

Approach cost reduction exercise after detailed analysis of costs. Study each line item and its components including the loss contributing factors.  Focus on understanding aspects which are reducing productivity, resulting in stock losses, increasing insurance costs etc.  

To show how each element of cost should be studied I am giving some unorthodox examples out here of improving productive work time of employees while reducing costs of the organization. These should be adopted only after undertaking a detailed analysis of the organization culture, requirement and dollar impact.

Restrict/ Disconnect Internet:

This might sound like a backword move on technology but it is worth exploring. IDC study conducted in 2008 shows an employee spends 2.09 hours excluding lunch for non-work related internet activities, 30 to 40% of Internet usage in the workplace is not work-related, while 75% of all Internet porn traffic is done during the nine-to-five Although, human resources department build in one hour of work-time in the salary cost for non-productive usage of Internet, the actual time is double of it.

A good way to start is to assess whether employees need the Internet connections at work or can access be restricted by filtering sites. Secondly, if they are not allowed Internet connection on their desk, will their morale reduce? In Internet is discontinued, an alternative cyber café can be made available to employees to use in their free time. Employees would also be free to use web on personal cell phones. To keep morale high, consider whether any alternative fun activities can be provided which are less time consuming and cheaper.  

Evaluating this option will increase the number of hours the employee is focused on official work. Simultaneously, it will reduce the technology infrastructure costs of providing free net access to employees, reduce information security threats and minimize the risk of employees contravening intellectual property rights of another organization.

Prohibit Smoking:

I am not being high handed out here because I personally do not smoke. You might be wondering how it is linked to productivity and cost reduction.  Some organizations are prohibiting smoking in office and a special area is allocated as a smoking zone. A smoker depending on the smoking habits takes periodic breaks to visit the smoking area in the office. For smoking each cigarette he/she spends around 10 minutes. So a person smoking five to six cigarettes during office hours wastes at least an hour of work time more than a non-smoking employee.

Health insurance costs for smokers are 10-40% higher than non-smokers. As per 2004 study smoker health cost are higher by $17,500 during their lifetime in comparison to non-smokers. A person who quits smoking saves $ 9500 during their lifetime.

Here the suggestion is to prohibit smoking completely in office or if possible do not hire smokers. This will increase productivity, reduce health insurance costs and decrease absenteeism from office for sick leaves.

Keep Paper Towels in Washrooms:

This might be sounding like a completely bizarre idea. Most organizations now install hand dryers in the washrooms to save costs on paper towels while considering the environmental aspects.

A person using a hand dryer takes 4-5 minutes for drying his/her hands, in comparison to less than a minute with a paper towel. An employee visits the washroom around 4-5 times during the day, so ends up spending an extra twenty minutes drying hands.  Hand hygiene study shows that some people go without washing hands for 38 hours at a stretch. You can say yuck again but it is the truth. So if it is going to take more time and effort, the chances of washing hands are less. Lastly, 80% of the diseases are transferable through touch.  

This one simple act, adds to the productive time in office, reduces health risks and consecutively decreases health insurance costs. Ever thought, a simple thing like paper towels could be so critical in office hygiene and productivity.

If the above mentioned measures are adopted by an organization productive work time increases. On a rough average the additional productive work time for a non-smoker is 1 hour and 30 minutes, and for a smoker is 2 hours 30 minutes. Multiply this with the number of employees and average hourly salary cost, the cost savings will be considerable.

The point I am attempting to make is that cost cutting should be an ongoing exercise in any organization. There are unique perspectives from which costs can be viewed. Wear different hats and brainstorm on the various ideas before implementing.

What do you say, does this make sense?