Agenda HR Management: Is HR Doing More with Less?

Or is it undergoing a transformation?

By Eric Krell Sep 1, 2013
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Raise your hand if you feel like you and your HR staff are doing more with fewer resources since the 2008-09 global financial crisis. Anecdotal evidence suggests that most of you have your hands held high. Yet data from the Society for Human Resource Management (SHRM) indicate that median HR staff sizes held steady from 2009 through 2012. And HR budgets have increased by 8 percent since 2008, according to The Hackett Group, a Miami-based consulting and research firm.

Don’t put your hand down just yet, though. A deeper look at these data, combined with other evidence, suggests that there are sound reasons for concluding that there is not enough time in the day to keep pace with the changing nature of HR work.

Increased Workload

"Nearly everyone, and nearly every company, faces the challenge of doing more with less" these days, notes Gordon Simpson, senior vice president of human resources for the Americas at DHL Global Forwarding, a logistics company based in Miami.

An example can be found at Popeyes Louisiana Kitchen. Chief Talent Officer Lynne Zappone joined the Atlanta-based fast-food group less than three years ago, at a time when the "people services" function employed seven people. Today, Popeyes’ HR team has grown to 10, and it directly supports roughly 1,400 employees. However, the HR team’s workload has also increased, Zappone points out.

"If you ask my team, they would tell you that they are doing way more with less," she says. "I’ve probably doubled or maybe even tripled the amount of HR activities we are responsible for." Those activities include participating on project teams looking for better ways for the company to develop leaders, build new restaurants and improve the customer experience, among other initiatives.

Zappone says this work is necessary, given what she describes as the HR "transformation" she leads. Popeyes’ larger corporate transformation encourages managers to embrace an ethos of "servant leadership," and Zappone says Popeyes defines that ethos as "developing leaders who put the enterprise and others before themselves." The HR transformation consists of finding more-efficient ways to initiate and complete transactions so that her team has more time for strategic contributions in talent management, leadership development and long-range planning.

Elizabeth Bryant, a Washington, D.C.-based partner in Mercer’s human resource effectiveness practice, reports that much of her current work for clients consists of "HR modernization." She helps clients centralize HR transactions in a corporate HR function or HR shared services center or with an outsourcing provider.

The process of automating more transactional HR work, Bryant explains, contributes to HR practitioners’ sense that they are doing more. The change typically involves moving work conducted manually in field locations to headquarters or a shared services center; the work requires the creation of new processes and, often, the introduction of new technology. "If you’re moving [HR] work over from business units to HR, it’s very possible that the work moved over without a corresponding increase in [HR] head count," she explains. "That was quite possibly part of the business case for the decision [to move HR from business units]. … Until those efficiencies are accomplished, it feels like HR is doing more work—and, in fact, it is more work."

Contrary Data

But are most HR professionals doing more with fewer resources? With some exceptions, the data show that many HR resources have increased.

Since 2008, HR expenses (as measured by the costs associated with HR, such as salaries, benefits, information technology, programs and other functional investments) have increased by 8 percent, according to The Hackett Group. Its database contains information, which is updated annually, on hundreds of global companies, primarily those that are midsize and larger.

In addition, total HR staff size remained unchanged from 2009 to 2012, according to SHRM data.

"I haven’t seen any data, including in what we’ve collected, that indicates HR is a lower percentage of the workforce" since 2008, reports professor Edward E. Lawler III, director of the Center for Effective Organizations at the University of Southern California’s Marshall School of Business in Los Angeles. Every three years, Lawler and his colleagues survey HR functions in more than 200 large companies.

Employers find "a way to expand operations that prevents significant downsizing or layoffs in HR," Lawler adds. He notes that different companies calculate HR expenses and staff sizes differently.

Simpson agrees that calculating these data is a tricky task. "It’s so difficult to get comparable [budget and staffing] numbers," he says.

Data are difficult to find, and comparisons can be confusing without careful analysis—and the right context. For example, although The Hackett Group’s HR-cost-per-employee data show a five-year increase, a closer look reveals that the increase was anything but steady and predictable.

The SHRM data reflect budgets and staff sizes at companies with a smaller average revenue size than those included in The Hackett Group data. Median HR staff size has remained steady from 2009 to 2012, according to SHRM research. During this same period, however, HR expenses have fluctuated.

According to the 2013 SHRM Customized Benchmarking Service, HR expenses increased by 18 percent during the three-year period, but the change was unsteady and largely due to increases after the recession. Salaries, benefits, technology and program costs were included in the HR expense category. SHRM updates the data annually and surveys about 2,500 organizations each year.

"According to these median figures, expenses have varied from year to year, with some notable swings," explains John Dooney, SPHR, manager of workforce analytics at SHRM. "This suggests a strong need for flexibility within the HR function."

The capability to quickly increase or decrease HR expenses in response to macroeconomic and marketplace changes, as well as to internal budget and cost-reduction mandates, remains crucial, according to Harry Osle, The Hackett Group’s global HR practice leader. Hackett’s research indicates that companies performing in the top quartile across a range of efficiency and effectiveness metrics tend to have HR functions that can scale up or down quickly, without sacrificing HR service quality.

Those organizations, dubbed "world-class companies," have "shared services … or a common HR technology footprint," Osle explains. "These capabilities help them ratchet up or down their service offerings without increasing costs. Since 2008, when the economic downturn struck, world-class companies were able to pivot faster and reduce their costs sooner than peer-group companies."

Bryant echoes Osle’s point. "Responding to external economic changes has been very painful if HR functions have not taken any steps to move toward a more modern, flexible model," she says.

Qualitative Reasons

If HR head count and expense data don’t support the idea that HR is doing more with less, why do HR departments know or perceive that they are? There are compelling reasons why HR professionals think the way they do. Possible drivers include:

The rise of the contingent workforce. The U.S. temporary workforce hit an all-time high of roughly 2.7 million people in May 2013, according to the U.S. Bureau of Labor Statistics. Temporary staffing employment in the United States soared by 7.7 percent from January 2012 through mid-2013, according to the American Staffing Association.

On first blush, SHRM data suggest that HR workloads—which are determined by the size of companies’ full-time equivalent workforce—may have decreased from 2009 to 2012. During that period, the ratio of HR professionals to full-time employees increased by 21 percent—from 1.27 to 1.54. After all, if there are fewer people in an organization, the demands on HR professionals would seem to diminish. However, HR professionals are frequently involved in hiring and managing contingent workers as well.

Downsizing issues. HR professionals experience a "double whammy" during staff reductions, Bryant says.

Suppose an organization carries out a companywide staff reduction. "If you are in sales, you are dealing with the reduction" in your sales force, she explains. "But if you’re in HR, you are dealing with the reduction across the organization because that’s the service you provide, and you are dealing with the reduction in your own HR function."

Rigorous budgeting. According to Lawler, HR professionals have to work harder to justify their budgets in the face of greater pressure from financial officers.

"HR budgets are under more-intense scrutiny, and they require a more rigorous business case," says John Challenger, chief executive officer of outplacement consultancy Challenger, Gray & Christmas Inc. "HR has to really produce the metrics that demonstrate the viability of their programs."

Growing use of metrics and analyses. "HR is becoming so much more data-oriented," Challenger notes, pointing to executive compensation as an area where the influence of analytics has intensified.

New Ways of Working

The transformation and modernization that Popeyes’ Zappone and Mercer’s Bryant cite require HR professionals to increase the time they spend working with business colleagues on more-strategic activities.

In addition to placing HR staff on cross-functional project teams, Zappone restructured her function so each business unit is assigned an HR person to help with talent management and other HR services. "All of the business units used to go to the same person for their HR issues," she explains. Now each HR business partner operates "as a trusted advisor to their business colleagues around the people agenda."

Her HR professionals’ new activities in the business "are all about making sure that the company’s people strategy is aligned with the business first," Zappone explains. "The only way you can achieve that is by finding ways to move the transactional work out."

For example, Zappone says she wants to reassign the woman working on payroll to more-strategic work involving HR systems and technology. "We’re a small company that does not have the resources to operate a giant shared services center, but I still have to free up time," Zappone says. "Either I bring in another individual who can manage that work, or I outsource it, or we see if the whole process can be improved so it requires less of my payroll person’s time. We’re looking at all of that."

Eric Krell is a business writer based in Austin, Texas, who covers human resource, finance and social marketing issues.

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