HR by the Numbers: 2025 Spending and ROI Trends

[00:00:00] Mo Fathelbab: Welcome to today's episode of People and Strategy. I'm your host, Mo Fathelbab, president of International Facilitators Organization, People and Strategy is a podcast from the SHRM Executive Network, the premier network of executives in the field of human resources. Each week we bring you in-depth conversations with the country's top HR executives and thought leaders for today's conversation.

I'm excited to be joined by James Atkinson, VP of Thought Leadership at SHRM and Chris Courneen, senior Vice President and Global Head of HR at MS International, MSI. Today we'll be discussing the latest insights from SHRM'S 2025 CHRO benchmarking data brief. Welcome James and Chris. Thank you. Thank you.

Great to have you all. James. Can you share the, backstory of why SHRM conducted this survey? when, who, was surveyed and, what was the goal?

[00:01:04] James Atkinson: Absolutely. So, we put together the data for the CHRO benchmarking data brief. It actually comes from our 2025 benchmarking survey. This is an initiative that we've been doing for several years around benchmarking with the goal of really, capturing a wide range of HR metrics that HR executives would care about in order to.

Know, run their functions. And so this particular data brief, it's part one of a four part series. So we're gonna capture data not just for the CHRO or HR head of HR, but also for, recruiting executives, l and d executives and talent management executives as well. So excited to talk about this first part, as, that part of that broader series that we're looking at.

[00:02:00] Mo Fathelbab: Wonderful. Well, let's dive in. So after reviewing the findings from this 2025 CHRO benchmarking data brief, what stood out to you both the most from this data? Chris, I'll start with you.

[00:02:13] Christopher Courneen: I think the increasing investment or increased investment in both headcount for HR folks, within organizations, but also, the continued investment in strong merit increases and, generally the HR budget, you know, stood out to me.

I think part of that is because, we saw a shift through COVID that suddenly HR was at the forefront of many people's, minds and. Seeing that shift in terms of investment from the business maintain itself, I think suggests the seriousness with which, the, responsibility that we all have to, really be good stewards, not only of those investments, but of the people across our organizations.

And that seems to be continuing.

[00:03:01] James Atkinson: Thank you, James. Yeah, so in addition to just those additional investments, I think one of the things that stood out to me was looking at that metric around revenue per FTE, which really connects in with productivity and how that has, rebounded since some of the challenges across the last few years.

So thinking about those increased investments, we're also wanting to see how those investments translate into, the, business results that we are looking for as well.

[00:03:32] Mo Fathelbab: Yeah. well, the thing that certainly struck me is that there's, an overall increase in investment, and it's 2.4% in 2025.

That's double from where it was in 2017. so what is driving this higher HR spending and how can, CHRO's ensure a strong return on investment? let's start with you, James.

[00:03:55] James Atkinson: Yeah. So Mo, as, you mentioned, we're seeing, you know, a couple of trends in terms of that increased investment. so one, and one of the reasons why we're seeing that like HR costs are just going up, Costs across the board are going up, but we see certain costs in HR, whether it's related to the people that are being invested in. certainly wages have been, growing and, we've seen some wage inflation, which is one of those, the largest or, Biggest challenges that our heads of HR have told us about across the last, few months as well.

And so we're just seeing kind of overall cost increases. but that's just, you know, one part of the story. The other part is that really, that ratio of HR expenses to overall operating expenses and that ratio is going up. So we see. Again, that ratio kind of hitting about 2.4% in 2025, and really doubling where it was, just back in 2017.

And I think that really gets to not just that increase in cost, but also that kind of increase in kind of importance and responsibility that we see around HR as it's. Really tries to drive organization-wide change and initiatives as well. So whether it's investing in better, you know, workforce technology, whether, it's investing in, you know, the people themselves.

we see the, these last four years HR really standing in the center of a lot of those organization-wide initiatives. And I think the investments that are coming into HR right now are a reflection of that.

[00:05:45] Mo Fathelbab: Chris, does this increased budget allocation with HR align with what you're seeing as an HR leader?

[00:05:51] Christopher Courneen: Yeah. You know, and I'll say some of it is good and some of it to, to James' point is, a challenge for us. So, you know, yes, the, cost of payroll, and wage inflation is there. But also, you know, if I look at the cost of benefits and administering benefits, if I look at the cost of technology and, the plethora of.

New options and fancy, exciting tools that are available. I think at the same time, you know, I find myself thinking about cost controls. Where can I control this increase in an area in which I'm not either seeing that return, back to the business and maybe even a step lower than that, being incredibly disciplined about how we manage.

The process of communicating what that return looks like to the business. How are we measuring the, ROI of some of these increased costs, particularly where they're driven by decisions that HR leaders are making to invest in something new or to go deeper into something we were already doing. and the expectation that we be as.

Critical and as capable at communicating back to the business, the ROI, on these investments. But, I will tell you some of them in particularly for our organization and some of my peers, the costs that are going up sometimes are not good costs. and the challenge of navigating.

Taking care of our employees, expanding access to things like benefits, and then managing the cost of the business and the, cost of the employee is a unique challenge I think we've all faced over the last several years.

[00:07:29] Mo Fathelbab: Yeah. Yeah. James, what does this say about how the role of the CHRO is being viewed in 2025?

[00:07:38] James Atkinson: Yeah, again, I think we've seen, an elevated role of the CHRO across the last few years. and some of it was in, you know, in the midst of crisis. there was just a strong need to turn to that head of HR and figure out what are we gonna do when it comes to new work models, when it comes to, Great resignation when it comes to all of the things that have been happening across the last few years. And I think it, it brought us to this point where, you know, the head of HR is that strategic partner across the C-suite when it comes to thinking about, you know, those big talent issues. but I think it also puts, you know, puts that additional pressure on the head of HR as Chris was just saying, to make sure that they're delivering against.

all of these things that they're being asked to do as well. And so it's a great opportunity. but it is something that, that we know that HR executives are gonna have to rise to that challenge as well.

[00:08:50] Mo Fathelbab: Yeah. Yeah. Thank you. And Chris, I believe you too are seeing an increase in HR employee ratio.

how can CHROs meet the demand for more HR while maintaining efficiency and productivity?

[00:09:05] Christopher Courneen: You know, it, there's. Two things going on, I think actively, not just within my organization, but if you look at the business landscape as a whole, which is, needing to maximize the investment and the spend particularly around, Labor as labor is harder and harder to acquire in the United States, but also, ma with that maximizing the productivity and the output of our HR organizations. And so while there definitely has been a trend that I have seen of increasing HR, you know, resources within our own function, I'll tell you.

This feels like a bit of a lagging indicator in some ways because we are already seeing some of that payoff of these technological investments and we, I say with my team all the time, the junk work that we used to be bogged down in, we are finding ways to automate through a variety of technologies, the work where we're not adding value.

And so, I don't think at present time I'm seeing quite as much increase in the need for heads within HR, but the job is harder than it used to be because what comes with, a fairly recent and dramatic improvement in productivity even within our organization, is a higher level of expectation for the work that people do.

And so, you know, the, expectation isn't just for HR leaders, it's. All the way throughout the organization as we find ways to eliminate a lot of those root tasks. And a lot of the things that as, either revenue or the size by headcount of an organization grows, you know, there was some formula about how many HR folks you might need to support, people.

And, I think that formula is being reworked live every single day, in our experience is it's been reworked fairly dramatically. And that now. We are significantly more productive. I don't quite need to grow at the same rate, but for everybody in the organization down to, you know, entry level recruiters or coordinators all the way up through myself.

What we do with that time that we've created for ourselves and the level of value we add to the organization continues to increase. I tell everybody, yeah, this is great. The job just gets harder and that's part of the fun.

[00:11:27] Mo Fathelbab: So I find that fascinating. Chris, you're saying everybody is working at a higher level than they were just a little bit ago because of the automation that is now available to us.

[00:11:38] Christopher Courneen: Yeah, I mean, if IE, even if I look at, you know, I'll use my entry level recruiter as an example, an entire layer of our organization, we were able to, generally speaking, automate it. And we said, Hey, wait a minute. If you were working at that layer, I gotta upskill you to do the next job. The next job's harder.

The next job's a little more exciting. I'm not sure, you know, the, level of excitement someone has about, you know, coordinating interviews or managing calendars or doing those sorts of things. or answering the same question over and over again. And so, yeah, I'm gonna get you into a more exciting role, but it's gonna be harder.

And that is, is. Every level of the organization and what we expect of our teams and of ourselves is gonna continue to evolve. And if the business continues to invest the way, at least the data says businesses have been investing the expectations on what that output is, or as James put it, what that payoff is gonna be high.

At the end of the day, we're business leaders. it's no different than the expectation of investments in any other part of the organization.

[00:12:45] Mo Fathelbab: think that's a fair comment. Thank you. so onto the third, finding. So the revenue per full-time employee ratio has rebounded to that of pre pandemic levels.

so James, what are we seeing here when it comes to trends in revenue for 2025? Yeah. So,

[00:13:03] James Atkinson: as you noted, we've seen, a bit of that, that upswing and that revenue per FTE. So 2025, the median revenue per FTE, from our data was, almost 173. Thousand, per FTE, dollars per FTE. and that is the highest figure we've seen since 2017.

but it's a huge increase from that median back in 2022, which was just over a hundred thousand. and so what we're seeing is maybe more of a stabilization in, the workplace productivity following some of those. Speed disruptions we had across the last few years. So if we really think about where we are right now, it's back to where we were a few years ago.

And the question is that. Is that a good thing? Well, one, it's a great thing that we made it through that set of challenges. it's a great thing that's, you know, we've gotten some, a little bit more of a stabilization in terms of turnover. Got a little bit more, stabilization in terms of, kind of employee, we'll call it morale and motivation and.

job satisfaction and things of that nature. So, you know, we've seen some positive changes there. but then on the flip side, it's what are we doing moving forward as we think about all these investments that Chris was just alluding to as well. and how that those investments in technology are really pushing us forward.

to higher levels of productivity. So we've got back to where we were, but it's probably not where we want to be.

[00:14:52] Mo Fathelbab: Chris, are you all seeing the same thing?

[00:14:54] Christopher Courneen: Yeah, absolutely. And I think, you know, part of, you know, our responsibility as business leaders is to be, you know, continually finding opportunities to, you know, maximize the profit of our organizations or maximize the spend on grant dollars toward our mission or whatever organization we're in.

And, the overall productivity of the organization is a big swing on that. It's something that I follow fairly closely. I was sharing with James, you know, just before this, that looking within our own industry, my industry as a whole islagging and catching up with its own productivity metrics and, I think some of it.

Relates to another finding in, the survey. And, that's really about, you know, the voluntary quit rate. And, I go back to the challenge of, not only acquiring, but retaining talent is equally as important as the investment we make into our organizations. And in many ways, those investments are designed to help us acquire and retain talent.

And if you're not doing that well. You're gonna struggle from a productivity perspective if you're always chasing your tail. And so, you know, I, go back to do these things, help us accomplish what we're trying to accomplish. and yes, we are getting more productive. I think James Rise is a very good point, which is, I don't know that.

We are as productive as we would want to be, and the challenge will be to increase productivity and, some of the short term uncertainty in the, you know, economy, particularly in the United States, is making that uniquely challenging. And so it puts more pressure on business leaders and HR leaders to make sure that we're keeping our eye on the prize and that we're marching in the right direction.

[00:16:40] Mo Fathelbab: Yeah. So speaking of retention, finding number four says that merit increases are also on the rise. James, does that say anything about, companies approaching employee retention differently?

[00:16:54] James Atkinson: Yeah. You know, abs absolutely. I'll take a step back and just note that, our data shows that organizations are.

Allocating a larger share of operating expenses to employee salaries and, salaries and wages like, so just in, in addition to the merit increases themselves, it's just costing more to, to maintain, you know, your levels of employees. And so that in and of itself is. Kind of an indication that we are needing to spend more, whether it's to hire or retain those employees.

and that is indicative of changes that we've seen across the labor market for the last. Several years where we have been in a period of labor shortages. Now we're seeing some loosening of the labor market overall in the last few months in particular. but still we're at a historical place where, there are simply more job openings than there are people to fill them.

So even if it's a little bit easier, we're having to still work harder than we've had to in, in a number of years. And so. I, mention all of that just to say that there is more effort put into kind of that, the wages. There's more effort put into ultimately the merit increases when we start thinking about retention itself.

And so what we saw in the data, this, in this particular data brief is that. wage inflation went up to about, I'd say 3.6% I believe. and that was surpassing kind of that 3% medium we saw just a few years ago. And so that's wage inflation was the number one sided challenge that heads of HR told us in some separate research that we did.

but when it comes to merit increases, that's really a way to say, Hey, you're doing a great job and we wanna make sure that you. Continue here. it's about rewarding your top talent. It's about ensuring that, you retain that talent. 'cause obviously it's a lot harder to, you know, upskill someone to those levels of productivity than to, to take that person who's already doing a great job.

And so I think that shift we're seeing from really focusing on that merit increases, focusing. And on the retention Is, is a part of that strategy to, to really keep people in your organization, but also, especially in the midst of this economic uncertainty that we're seeing right now.

[00:19:44] Mo Fathelbab: Yeah. Chris, I see you nodding.

[00:19:47] Christopher Courneen: It. this is a challenge that I think we have had over the last few years, and to James' point, when the market is not an employer's favor in terms of the supply of labor in the United States, I think a combination of things have happened. The wage inflation in this continued, period is one of them.

As James was talking, I was reminding myself. Of, another discussion I was in, which is the larger employers who have the ability to leverage global talent also have a new set of technology to help them do so. and even that has not been enough to make up for the labor shortage. And so, you know, I think the.

Combination of, you know, the, I'll call it flat resignation rate in the brief and the increase in merit is, indicative of this uniquely challenging period that we're in. I think James called it historical and I actually went back through the Fred data to try to find like, gosh, when did this.

Start, and I think it was right around 18, leading into 19 where this imbalance began. and I've been telling folks, this isn't a COVID problem. This is a macroeconomic issue that the US finds itself in. And there's not a silver bullet. And it's not like there's a magic change coming once we get over.

This COVID hump that's, I think we've proven out that this is something that HR leaders are gonna have to really be keen at handling. and your strategies that worked 6, 7, 8 years ago don't work today. And I wouldn't be shocked that four, three or two years from now we'll be using different strategies as we're grappling with this.

'cause this is really the first time, at least in any of our generations, that we have had this unique challenge. and I think that's playing itself out in the data.

[00:21:49] James Atkinson: We have seen this series of labor shortages since 2018. I will add to that, that we also don't expect that to change anytime soon.

especially due to key demographic shifts that we're seeing, not just in the US but in a lot of, countries around the world. we're gonna have fewer and fewerpeople available. That are working within the labor market itself. And so, we are gonna continue into, continue in these periods of labor shortages where retaining talent and competing heavily for that talent, is going to just be the norm.

So we have to continue to evolve those strategies.

[00:22:37] Mo Fathelbab: So AI is not gonna fill these gaps.

[00:22:41] Christopher Courneen: I'm

[00:22:41] James Atkinson: It's not gonna fill all of them.

[00:22:42] Christopher Courneen: Which AI CEO have you asked and which one has made the loudest argument today?

[00:22:50] Mo Fathelbab: Alright, moving on to finding number five. So, the data brief shows that half of HR departments are outsourcing more and more of their HR functions in 2025, but that also means about half manage all. The HR responsibilities internally, what are you guys currently seeing when it comes to, the broader trend of outsourcing HR functions?

I'll start with you Chris.

[00:23:18] Christopher Courneen: I, this was the one that was probably the least surprising to me. I mean, technology being the main, you know, outsourced solution. I think there is significant advancement. Active and on the horizon that make this more and more attractive to HR leaders, particularly as you're navigating these complexities?

you know, the one area that I will say, I think remains true, and that is. What is being outsourced, whether it be through automation or things like, you know, third party leave administrators, or all sorts of other things are to allow the core HR team within an organization to focus on the hardest work that is left.

And so as I looked at the data, it just ringed to me even more that the job gets harder. we are using things like technology to get rid of the junk work. We are using things like technology to give employees access directly at their own fingertips to do things that used to float through HR. And we are leaving ourselves with the harder work.

and a lot of what I see being outsourced is the work that leaves the hard stuff with that core HR team. And so, As I looked at this, it was a reminder to me that for those of us, within our organizations that are engaged in this work, there is this upskilling imperative that is never gonna end because we're gonna find ways to shift the work that we don't add as much value to either a technological solution or some other solution.

and I don't think that's changing.

[00:24:54] Mo Fathelbab: The upskilling imperative is never going to end. I love that, James.

[00:24:58] James Atkinson: Yes. Yeah, so I think Chris said it well in that there's just going to be a continued, need to outsource certain things so that you can focus internally on the things that simply cannot be outsourced.

What we saw in our data was, you know, about one in four organizations are outsourcing their HR technology. about one in five are outsourcing parts of their recruiting or their l and d. And again, I think it reiterates this idea that, there, there are just core things that need to be focused on and the job's just gonna continue to change to.

Focus on those particular things and let, whether it's technology, whether it's an outside service, bring in and, be able to do the things that, that they can do well and efficiently across organizations. but it's your, it's what you know about your organization that is going to be the thing that keeps you as an HR professional.

Really exceptionally valuable. 'cause those are the things that are hard to do efficiently and at scale across organizations.

[00:26:16] Mo Fathelbab: Yeah. so closing question for you both. what is one takeaway you each hope our audience will have after, reading this data brief?

[00:26:28] Christopher Courneen: Chris, I'll start with you. I think the big takeaway for me would be the what underlines all of this is the level of responsibility that we have as HR leaders to measure and quantify and then translate into a language that business at large understands the ROI.

On both these increased investments and why we have to continue focusing on some of the big things that we focused on, like retention and acquisition of talent. and if you do that well now that job doesn't end, you keep pounding that drum. And if that's an area where you're not quite at the level you wanna be, that's where I'd put a whole lot of focus, because it's gonna be, as James said, important.

The next time we look at your revenue per FTE metric, that we're seeing some return on all these investments and that you're communicating how the work that you're doing is aiding in that increased return.

[00:27:28] Mo Fathelbab: And this really says, this tech, advancement is not, it's not an option. you are going to be impacted very much by the competition if they're leaning into this and you're not.

Would you say that's true, Chris?

[00:27:43] Christopher Courneen: Yeah, the, I've said this to a bunch of our leaders here. it's my punchy, but I believe she's saying it's adapt or die, period. Like if you don't, y you fail. and we are at a point where whether you as an individual, you, your team, or you, your business at large is at significant risk if you are not figuring out how to adapt, because someone else will, and you are gonna struggle to remain competitive if you do not.

[00:28:12] Mo Fathelbab: Yeah. so James, last, word, so to speak, what do you hope that the audience will take away after reading the data brief?

[00:28:21] James Atkinson: You know, I hope the audience takes away one, the, level of responsibility that, that they have as HR. So we'll double down with what Chris just said, but also just the kind of excitement about where we could go next as well.

I think I go back to that revenue per FTE metric of, okay, we're in the same place we were about eight years ago. but we can't stay there. So what does it look like for the future? and how do we ensure that we're continuing to improve that productivity of our organization, in a way that is, you know, that is exciting for the HR profession.

[00:29:04] Mo Fathelbab: And that's where we'll end it for this episode of People and Strategy. A huge thanks to James and Chris for your valuable insights. You can follow the People and Strategy podcast wherever you get your podcasts. Also, podcast reviews have a real impact on podcast visibility. So if you enjoyed today's episode, leave a review to help others find the show.

Finally, you could find all our episodes on our website at SHRM dot org slash podcasts. Thank you for listening and have a great day.