HR’s Real Scorecard: Managing Labor Cost, Not Just People
- Brew Baritugo
- Oct 9
- 3 min read
Let’s be honest. HR isn’t judged by how fun our events are or how colorful our dashboards look. It’s judged by how well we control labor cost without killing growth.
Labor makes up half or more of a company’s total operating cost. When that line moves, it’s rarely Finance’s fault. It’s ours. Hiring faster than sales grow. Training that doesn’t translate to skill. Overtime that hides bad planning. Those are all HR levers.
The question isn’t how to cut cost. The question is which levers we pull to spend smarter.
Lever 1: Headcount and Role Mix
Workforce planning is a financial exercise disguised as HR. Every role is an investment. The good HR teams know when to double down and when to walk away.
The Hackett Group found that high-performing HR functions have 46% fewer transactional FTEs and 53% more in strategic roles like workforce planning and analytics. That ratio tells you everything about priorities.
One company I worked with had three different payroll teams processing the same data. We automated approvals, consolidated tasks, and redeployed six people into workforce analytics. Cost dropped, insight grew, and decision speed doubled.
That’s managing headcount. Not cutting bodies, but moving them where they matter.
Lever 2: Capability and Internal Mobility
Upskilling isn’t just training. It’s cost control. Every time you build internal capability, you save external hiring costs and onboarding drag.
SolTuna, a tuna processor in the Solomon Islands, upskilled its female workforce and added financial literacy programs. Absenteeism dropped 25 percent, productivity rose, and they gained about US$1.5 million in annual output. That isn’t an L&D story. It’s a business case.
The right training pays for itself. The wrong one pays for overtime.
Lever 3: Capacity and Scheduling
This is the quiet killer. Poor scheduling and uneven workloads destroy margins faster than any salary increase.
During the Canadian wildfires, the City of Edmonton tagged overtime hours by cause - emergency versus operational. That simple distinction let them see where poor planning was burning cash. Once you can trace it, you can fix it.
If you don’t track capacity, you’re not managing people. You’re managing noise.
Lever 4: Technology and Redeployment
Automation isn’t about reducing headcount. It’s about redeploying people for higher-value work.
World-class HR functions run at 33 percent lower cost with 72 percent fewer errors because they automate routine work and reinvest that capacity in analytics and strategy. If your HR system doesn’t reduce manual work by 30 percent, it’s not transformation. It’s digital wallpaper.
When It All Comes Together
Here’s what strategic HR looks like in numbers:
Company: 3,000-employee manufacturer
Baseline: Labor = 65% of OPEX, 6% annual overtime growth, 20% skilled attrition
What HR did:
Rebuilt the workforce plan with ROI gates for new roles
Cross-trained operators to handle multiple machines
Introduced predictive scheduling
Automated admin tasks and redeployed HR staff to analytics
Tied performance pay to cost per output
Results (18 months):
Overtime down 25%
Attrition down 8 points
80% of openings filled internally
HR cost per FTE cut by 15%
Labor cost down from 65% to 60% of OPEX
That’s HR performance in real business language.
The Real Measure
HR success isn’t about how many people we trained or engaged. It’s about whether labor cost stayed aligned with growth, and whether we pulled the right levers to make that happen.
Every HR leader should be able to tell the CEO three things: which part of labor cost moved this quarter, why it happened, and what we’re doing next.
When HR owns the labor line, it stops being a support function. It becomes a control tower.
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