“World-class” human resource departments are more efficient and effective than their peers -- they may spend more on technology, but their overall costs are smaller in large part because they require fewer staff, and they tend to make less errors, according to The Hackett Group’s report, “Raising the World-Class Bar in HR Through Digital Transformation.”
Those HR organizations in the top quartile in effectiveness and efficiency, deemed “world-class” by Hackett, spend 25 percent less than the typical HR department listed in the report’s peer group, and the best require 30 percent fewer staff. A typical company with $10 billion in revenue could potentially save as much as $15 million annual if they were to attain “world-class performance.”
It’s not that the world-class group is cheap – it just allocates its spending differently, particularly for technology, according to the report. Many are anteing up more dollars for “the new wave” of HR cloud-based applications and services ranging from core human capital management systems to individual applications such as talent acquisition, learning, and talent analytics and reporting.
Moreover, while the best organizations may spend more on outsourcing, they do so selectively, such as for the functions of compensation and benefits administration.
“This allows them to tap into greater expertise and leverage both the capacity and capability of vendors,” the authors write. “This helps increase agility by providing resources that can scale to demand, freeing HR staff to focus on anticipating and responding to critical business needs.”
These efficiencies are against a backdrop of continued flat-to-decreasing headcounts and budgets in HR, according to the report. Overall, the number of HR FTEs is expected to decline by 1.4 percent, slightly more than last year’s actual 1.3 percent reduction. Budgets, however, are expected to fall by an average of 1.6 percent – significantly more than the 0.3 percent actual decrease in 2016.
“This suggests that, while most HR organizations face an ongoing resource squeeze, some are successfully making the case for greater support of their performance improvement and capability development efforts,” the authors write.
World-class HR organizations are also more effective, as their error rates for different transactions range from two to five times lower than those of the peer group – which can translate into a cost savings into the millions of dollars.
“The bottom line: achieving world-class HR yields a tremendous cost and productivity advantage,” the authors write.
The HR function has been impacted by technology more so than any other employment factor, as HR leaders and managers are increasingly focusing on more strategic efforts “involving the people side of the profession,” according to HR Dive.
“Increasingly, HR is turning to automation and emerging artificial intelligence to build essential people management traits such as trust and engagement within their systems,” HR Dive writes.
To aid in recruitment, skills and knowledge assessments, more HR departments are employing data analytics, particularly, “people analytics.”
“In essence: Technology is swinging the other way on the pendulum, and is now more capable of returning the human factor to employment processes,” HR Dive writes.
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Katie Kuehner-Hebert
Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.
