World-Class HR Organizations: Spend 13% Less; Operate with 15% Fewer Staff

World-class companies now spend $1,614 per employee on HR, 13% less than typical companies, which spend $1,864, according to 2006 Enterprise Book of Numbers research from The Hackett Group. 

World-class HR organizations also operate with 15% fewer staff, with 11.5 FTEs per 1000 employees versus 13.5 for typical companies.

Hackett found that world-class HR organizations go beyond simple centralization in their approach to SSOs, taking a customer-centric, business-oriented approach that focuses on standardization, simplification, and consolidation.

Over 60% of all companies with HR SSOs have been able to achieve cost reductions of 21-80%, while also showing similar improvements in internal client satisfaction, HR staff productivity, and overall quality.

To generate these results:

  • Top-quartile HR SSOs often utilize service level agreements to define and monitor performance measures and targets. 
  • These world-class HR SSO performers also focus on training, providing staff with 40 hours per year, more than double that offered by typical companies. 
  • World-class HR SSOs also create hierarchically flat, role-based organizations with fewer managers and less than half the job grades of typical companies. 
  • World-class HR SSOs make more effective use of technology, with a single ERP/HRMS and a much less complex overall IT architecture.

Hackett's 2006 Enterprise Book of Numbers, "2006 World-Class Metrics: The 5 Best Practices of World-Class Companies," details five best practices that empirically correspond to world-class performance in HR and other SG&A areas: strategic alignment, cross-functional partnering; complexity reduction; technology enablement; and business process sourcing.

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