Tad Leaby, a Tampa, Fla.-based business writer, states in Business Finance, September 2000 issue, HR departments that tend to make the best use of their initiatives and maximize their ROI are the ones that best align their initiatives with their company’s strategies. These departments have simplified their systems to cut administrative costs, outsourced more selectively, and taken advantage of automated systems. Controlling costs will always be an HR issue. But these days, a bigger HR issue is recognizing the monetary value of the human assets within the organization.
Hacket Benchmarking and Research in Hudson, Ohio, conducted a study of best practices with HR departments at more than 1,400 companies ranging in size from $200 million in annual revenues to nearly $147 billion. Here is a summary of its findings:
- HR costs have remained stable as the value HR adds to the organization has grown.
- HR is spending less time on administrative tasks and more time on employee selection, retention, and development. However, HR managers still spend about 25 percent of their time on lower-value-added administrative tasks and not enough time on decision support.
- Companies that ranked in the top of the study in terms of profitability spend 40 percent less time solving HR administrative problems and almost twice as much time on HR decision support as other companies in the survey.
- The amount of money HR invests in finding, attracting, and retaining employees has doubled in recent years, in part, due to the tight labor market.
- There’s also been a threefold increase of HR investments recently in enterprise resource planning (ERP) systems designed to integrate employee data.
- ERP systems enhance HR’s administrative capabilities, improve the function’s information storage and retrieval processes, and facilitate the development of employee self-service tools.
- Annually, HR spends $1,584 per employee.
- HR costs are significantly lower for larger organizations, due to economies of scale. Organizations with more than 25,000 employees incur 30 percent lower costs per employee than those with fewer than 10,000 employees.
- Outsourcing remains a major HR cost—about 21 percent of its total budget. However, outsourcing expenditures declined 22 percent in recent years, most notably in training, development, and administration. HR departments are also more selective about what they outsource.
- Approximately 80 percent of the companies in the study outsource their pension and welfare plans’ administration, and nearly 70 percent outsource their pension plan’s administration.
The lesson HR can learn from this study is that increased investment in technology helps yield greater efficiencies and keeps costs under control, despite the currently sparse supply of labor. IBI