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World-Class HR Organisations Spend 37% Less than their Peers

September 22, 2015

World-class HR organizations now spend 37 percent less than their peers and operate with 31 percent fewer staff, while delivering improved effectiveness and greater agility, according to new research from The Hackett Group.

The research entitled “The World-Class Performance Advantage: Seven HR Capabilities that Drive Performance Leadership,” further identified an array of HR capabilities that drive performance leadership, including: strategic workforce planning; technology/automation strategy; unified streamlined processes and systems; and performance measurement and analysis.

“In the face of unprecedented competition, extreme market volatility, and disruptive change from new technologies, the need for agility is greater than ever before,” said Harry Osle, Global HR Solutions Practice Leader. “Most HR organizations are challenged by flat budgets and FTE counts. But some are succeeding, largely through a focus on operational excellence, leveraging specific capabilities which are correlated with high performance. This is what we’re calling the HR ‘Step up to World-Class’ framework.”

The 2015 analysis of The Hackett Group’s benchmarking database uses detailed HR metrics to quantify the performance advantage of world-class companies compared to typical HR organizations. According to the research, world-class HR organizations excel at cost reduction, and spend 37 percent less than typical HR organizations – saving up to $17 million annually (for the typical company with $10 billion in revenue), while relying on 31 percent fewer FTEs.

World-class HR organizations are those that achieve top-quartile performance in both efficiency and effectiveness across an array of weighted metrics in The Hackett Group’s comprehensive HR benchmark.

World-class HR organizations are distinguished by four characteristics, according to the research: operational excellence; strategic talent management capabilities; close alignment to business needs; and the ability to deliver analytic-driven insights that drive performance.

The research also identified several areas of HR strategy where companies can strive to excel in order to achieve world-class performance.

  • Superior Strategic Workforce Planning (SWP)

World-class HR organizations are much more advanced in their implementation of SWP capabilities, which enable them to better translate business strategy into its implications for current and future talent needs, according to the research.

World-class HR organisations are more likely to have automated workforce-related data, and make greater use of tools and platforms for analysis of this information. To improve in this area, typical HR organizations can take steps that include: benchmarks to set baselines for employee cost and staffing levels; a total cost of workforce analysis; and development of standardized data elements to enable uniform analysis and reporting.

See: Finance and HRD Pose Biggest Security Threat to Organisations. Do You Agree?

  • Technology/Automation Strategy

Technology is another area where world-class HR organizations excel. The Hackett Group’s research found that the world-class HR organisations actually spend 34 percent more on technology per Full-Time Equivalent (FTE) than typical companies.

In some transactional areas, world-class HR organizations rely on automation up to 80 percent more often. This enables more efficient and effective HR processes and service delivery, and allows them to devote more time to talent and business performance-related activities.

To improve, typical HR organizations should take steps such as: working with IT to design a technology strategy; and implementation of road map and data architecture to deliver a comprehensive set of HR services.

  • Unified, Streamlined Processes

Processes and systems that are both unified and streamlined make it possible for HR professionals to operate in a cohesive and productive fashion. This takes explicit design and methodical implementation, along with a relentless focus on process improvement.

World-class HR organizations are three times more likely to assign formal process-ownership roles than their peers. Their processes are designed to be more efficient and effective, as are their organization structures, with 39 percent greater spans of control and 58 percent higher usage of integrated HR applications.

  • Performance Measurement and Analysis

World-class HR organizations are more advanced in their development of performance measurement and analytics capabilities. Their reports on performance are more meaningful and their insights more applicable to decision-making.

More importantly, world-class HR organizations use key metrics to strategically align the HR and business leadership teams around the aspects of human capital that influence performance or have the potential to do so, for better or worse. Some popular metrics tracked via scorecard by more than 50 percent of all top performers include: high performer turnover; workforce cost; performance-based pay differentiator and manager turnover.

Also read: How to Build a Strong Talent Pipeline within Organisations?

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