Research
Hackett: HR Organizations are Forging a Digital Path to World-Class
World-Class HR Organizations Now Spend 26 Percent Less, And Have 32 Percent Fewer Staff, While Driving Higher Effectiveness Levels
MIAMI & LONDON, July 26, 2018 – 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, Inc.
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 17,850 benchmarking studies studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 90% of the Fortune 100, 80% of the DAX 30 and 57% 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.
