Published on Wednesday, February 13, 2013
How Efficient is Your HR Department?
Apparently when it comes to world-class HR organizations, size isn’t everything. This is according to a new study from the Hackett Group, the global strategic business advisory and operations improvement consulting firm, which suggests that top performing HR organizations spend 27% less per employee and operate with 24% fewer staff.
The findings are based on HR metrics research from global 1000 companies compiled over the past two years. Hackett defines world-class as companies that “. . . achieve top-quartile performance across a weighted array of efficiency and effectiveness metrics.”
According to the authors of the study, success elements grow out of three general areas and depend on HR organizations’ emphasis on them: operational excellence, integrated talent management, and strategic partnerships with the business.
The keys to operational excellence for these high performing HR departments, according to the research, were greater use of or adherence to automation and standardization, complexity reduction, operating with a flatter organization, and effective outsourcing of certain HR functions.
With respect to complexity reduction, the study found that these world-class HR organizations use nearly 70% fewer job grades in their compensation structures. The study also found that they use 40% fewer health and welfare plans.
Integrated Talent Management
The study found that world-class HR organizations spent 15% more of their “total process costs” on strategic workforce planning, and they place a greater emphasis on integrating their current and future workforce needs with the business strategy. The research also suggests that the HR departments in these high performing firms are more skilled at HR analytics and modeling—skills critical in understanding talent management.
The authors of the study suggest that another primary element in a world-class HR department is the extent to which the department partners with business leaders on the strategic business planning issues.
These high performing organizations also measure what they manage. The authors of the study report that while only 20% of typical HR organizations report metrics for HR-managed projects, world-class HR organizations do this on over three times more projects. Also, close to 80% of world-class HR organizations report organizational metrics for change initiatives.
While the study focused on large global organizations, even small companies can benefit from the results of the study. For example, any firm no matter the size can look for ways to reduce the complexity of how it functions. By doing so, high performing HR departments are able to focus on more business critical functions.
ASE members interested in understanding key HR efficiency metrics should visit ASE’s HR Metric Toolkit. This free, member-only tool allows you to measure key operational metrics in your HR organization.
Source: The Hackett Group