Human & Financial
Resource Allocation by Activity
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Template for: Human & Financial Resource Allocation by Activity
The goal of this analysis is to identify on one page (or
maximum of two pages) all of the strategically relevant activities that the
business performs, and to indicate the number of people required to perform each
activity and the total cost of each activity. Identifying how many people
perform each activity can usually be determined quickly.
In many companies, personnel-related expenses (salaries, benefits, office
space) represent 70% or more of the company's expenses. Because
people-related costs are often very large, and because people can often be
re-allocated swiftly, this page is extremely important. In practice, this
analysis receives a great deal of attention.
The initial list of activities shown on the template web page is general
enough to get most businesses started in building their customized value chain.
In practice, however, it is usually better to refer to the list of activities
as "a list of activities" and not "a value chain" because
some people are programmed to resist new terms and new ways of doing things.
The level of detail of the activities listed depends on the immediate purpose
of the analysis, the number of different types of activities performed, and the
number of people applied to the business. Although most people find that a one
page list is easier to view and to analyze, isolating strategically distinct
activities sometimes requires a second page. For example, a national property
and casualty insurance company could list "Claims Management" as a
single activity ,or sub-divide the activity as follows:
- "Centralized Claims Administration"
"Claims Field Office General Management"
"Claims Field Investigation, Negotiation, and Reserving"
"Claims Field Office Clerical Support"
"Claims Reinsurance, Billing & Collection"
"Claims Technical Services."
If your business is part of a larger corporation, another column should be
added to show employees allocated to this business from horizontal units (cost
centers). The column should be titled something like "Staff Applied
From Other Areas." A cross check can later be made with the horizontal
unit(s) to ensure the proper allocation. If, for example, a company has a
centralized sales force of 500 people who sell for five SBUs, then the sum of
number of people applied to sales from the five individual SBUs should equal
500.
If many part-time employees or consultants are used, it is useful to add
another column for them as well.
As mentioned earlier, the total expenses of a business can be viewed and
analyzed as the sum of all expense items on the profit and loss statement. As
shown on the template
web page, the total expenses of a business can also be viewed as the sum of
the costs to perform all activities. Both tools are useful; and both should be
used.
Analyzing expenses by activity helps to answer the following key
questions:
- If you hire (or fire) one more person, what activity should get (lose)
that person?
- If you add (or subtract) one more dollar, what activity should receive
(lose) that dollar?
Cost cutting companies can cut compensation corporate wide (using a
P&L statement) or skillfully streamline staff sparing strategic strengths
(by using the human resource allocation by activity table just discussed).
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