World-Class HR Organizations Now Spend 26
Percent Less, And Have 32 Percent Fewer Staff, While Driving Higher
Effectiveness Levels
World-class HR organizations now spend 26 percent less than
peers on HR and operate with 32 percent fewer staff while driving
dramatically higher levels of effectiveness, according to the
latest analysis of benchmark data from The Hackett Group, Inc.
(NASDAQ: HCKT).
Digital transformation is one key strategy that world-class HR
organizations deploy to raise the performance bar, investing in
cloud-based HR applications and services that are enabling them to
more effectively: design and deliver services around customer
experience; shift resources from low- to high-value activities;
build and deploy sophisticated analytics capabilities; and provide
high-value tools, expertise and insights to business leaders.
A public version of the research, “Forging a Digital Path to
World-Class HR,” is available on a complimentary basis, with
registration, at this link:
http://go.poweredbyhackett.com/wchr1806sm.
World-class HR organizations now spend 28 percent less on labor
and 29 percent less on outsourcing per employee than typical
companies, the research found. They make more effective use of
outsourcing, often selectively outsourcing areas such as
compensation and benefits administration, employee relations and
talent acquisition. While they spend less on technology, they
actually commit a larger percentage of their overall HR spend in
this area.
While world-class HR organizations have fewer staff in every
staffing category, the majority of the gap is accounted for by 33
percent fewer transactional employees and 34 percent fewer staff
dedicated to employee lifecycle activities. Furthermore, the
research found that they make better use of their staff to perform
higher-value talent management and strategic planning
activities.
World-class HR organizations also operate and deliver services
much more effectively than peers, the research found. They see
transaction error rates that are two to five times lower. The high
number of transactions for some processes and the cost to correct
errors translates into a total cost difference between the two
groups that can reach into the millions of dollars. World-class HR
organizations fill jobs internally much more often at all levels of
the organization, demonstrating their superior ability to develop
and move people into new roles. Finally, turnover rates for first-
and second-year hires are significantly lower, which helps sustain
high workforce productivity while reducing turnover costs.
For a typical company with $10 billion in revenue, attaining
world-class performance in HR represents as much as $14 million in
potential savings annually. The Hackett Group’s research also
quantifies the potential for typical HR organizations to use
digital transformation to substantially narrow the cost gap seen by
world-class HR. Proper implementation of digital technologies can
enable typical HR organizations to cut process costs by 24 percent,
enabling them to virtually match cost levels at world-class HR
organizations. World-class HR organizations can use digital
transformation to reduce their process costs by an additional 21
percent.
Most HR organizations have already started the process of
digital transformation, according to The Hackett Group’s research.
An analysis of digital transformation progress in eight key HR
areas found that to date, the majority of projects that have been
completed are in payroll/workforce management and total rewards
administration, areas which are oriented towards transaction
processing and already heavily technology enabled. About a third of
all companies in the research have completed digital transformation
initiatives in these areas. In many cases, these projects involve
cloud-based systems.
Digital transformation pilot projects currently underway in HR
most often focus on areas such as data
management/reporting/compliance and staffing services. These
frequently aim to take advantage of new capabilities (including
analytics) enabled by cloud-based software and service
providers.
“In HR, as in other areas, digital transformation is a
multi-year effort that requires a clear strategy, well-defined
targets and a detailed roadmap of initiatives,” said Franco
Girimonte, associate principal, The Hackett Group. “Building the
digital capabilities of the HR organization requires fresh
strategies and approaches in four key areas: smart technology to
automate and continuously improve processes; AI-powered insights to
drive decisions; new skills like the ability to analyze and
interpret data for key messages and storylines to advise business
decision-makers; and changes in organization roles and structures
to fully leverage HR brain power.”
According to Tony DiRomualdo, senior research director, The
Hackett Group, “Smart automation will take over transactional work,
and even augment HR knowledge work with self-learning systems that
can help identify the characteristics of recruits most likely to be
successful in the roles they’re hired for, or the best mix of
compensation and benefits to drive engagement. But, like many other
digital transformation areas, it requires new skills, a clear
strategy, a change in culture, and organizational commitment to
succeed.”
Max Caldwell, principal and leader, People & HR
Transformation Practice, The Hackett Group, added that “We’ve
reached an inflection point where world-class HR organizations are
moving beyond exploration and adopting new technology and analytics
tools to become leaner, smarter and more customer focused. It’s the
next chapter in transforming HR to operate as a true strategic
partner to the business. Making the journey will require new skills
in areas like data science, smart automation and user-driven
design, and is predicated on organizational willingness to change.
But it gives HR leaders a terrific opportunity to rethink and
reinvent the HR function for the future.”
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.
The Hackett Group’s world-class HR research is based on an analysis
of results from recent benchmarks, performance studies, and
advisory and transformation engagements at hundreds of large global
companies. A public version of this research is available on a
complimentary basis, with registration, at this link:
http://go.poweredbyhackett.com/wchr1806sm.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual
property-based strategic consultancy and leading enterprise
benchmarking and best practices digital transformation firm to
global companies, offering digital transformation including robotic
process automation and enterprise cloud application implementation.
Services include business transformation, enterprise
analytics, working capital management and global
business services. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information
technology, including its award-winning Oracle and SAP
practices.
The Hackett Group has completed more than 15,000 benchmarking
studies with major corporations and government agencies, including
97% of the Dow Jones Industrials, 89% of the Fortune 100, 87% of
the DAX 30 and 59% of the FTSE 100. These studies drive its Best
Practice Intelligence Center™ which includes the firm's
benchmarking metrics, best practices repository and best practice
configuration guides and process flows, which enable
The Hackett Group’s clients and partners to achieve world-class
performance.
More information on The Hackett Group is available at:
www.thehackettgroup.com, info@thehackettgroup.com, or by
calling (770) 225-3600.
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The Hackett GroupGary Baker, 917-796-2391Global Communications
Directorgbaker@thehackettgroup.com
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