World-Class HR: More than a Cut Above the Rest

By Theresa Minton-Eversole Nov 6, 2014
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Anything you can do, I can do better. That could very easily be the subtitle of a new report put out by The Hackett Group that highlights what differentiates world-class human resource organizations from their peers—or their wannabe peers.

World-class HR organizations are those that are among the top quartile of companies in both efficiency and effectiveness, according to The Hackett Group's benchmarking methodology.

These HR organizations “show an unrelenting commitment to operational excellence,” said the company’s Global HR Transformation and Advisory Practice Leader Harry Osle, in a statement about findings of the report, which is titled The World-Class Performance Advantage: How Leading HR Organizations Outperform Their Peers.

Increasing your budget for additional technology spend? World-class HR organizations spend on average 8 percent more on technology per employee, much of which is allocated to automating administrative and transactional activities and streamlining processes. Commitment to process simplification and continuous improvement helps these organizations maintain a smaller number of job grades, pay plans and benefits plans. Increased reliance on self-service tools helps increase HR managers’ productivity, leaving more time for high-value non-routine activities like talent management and strategy.

Speaking of talent management, is your organization focusing more on recruitment and retention? World-class HR organizations’ comprehensive approach to strategic workforce planning (SWP) focuses strongly on placing internal talent. They’re better able to move and grow talent internally to fill skill needs as changes in their organizations warrant. They’re also more likely to have succession management plans supported by leadership development programs for senior leaders and high-potentials, as well as retention plans for their succession candidates.

A common platform and tools provide consistent information and access to standard data and analyses across the organization—data that’s needed to implement the SWP process on a large scale.

Results from such an approach are evident in recorded retention rates, especially among new managers. The managerial retention rate after one year on the job for these world-class organizations is 86 percent better than that of their peers; it’s 70 percent greater after the second year. Similar retention rates are reported for other professionals: 78 percent after one year and 57 percent after the second year.

Price of Excellence

Overall, world-class HR organizations outperform their peers by a margin of up to $10 million in cost savings for a typical large company, according to the report, which is based on the consulting firm’s analysis of more than 100 in-depth HR benchmark studies performed at large companies over the past few years.

What’s more, world-class HR functions deliver services at 23 percent lower cost and greater effectiveness with fewer staff. Specifically, they require 32 percent fewer full-time equivalents per employee and run with fewer managers, which reduces overhead and accelerates decision-making.

Managers are also given broader spans of control, and staffs comprise more professionals who have the skills needed to conduct higher-value analytical and consultative work. These professionals analyze workforce data to identify supply and demand trends and risks, and work with company leaders during business planning processes.

As for outsourcing, world-class organizations outsource similar administrative activities as their peers. The difference is that once they do, they retain fewer in-house resources to manage the service provider or to do related work that’s kept in-house, thereby reaping the full benefits of such arrangements.

Finally, world-class organizations focus more on what’s most important to measure as opposed to what is possible to measure, notes the report. They publish HR scorecards with standard performance metrics quarterly, acknowledging that such frequent performance communication helps the HR function build visibility and trust among executive levels of leadership.

Steps to Achieving Greatness

World-class status need not be the elusive Holy Grail for HR departments that don’t yet have such polished playbooks. The report provides the following suggestions for improving overall performance of HR functions:

  • Formulate implementation and management approaches to technology investments.
  • Commit to process improvement by aggressively simplifying or eliminating tasks, standardizing processes and data, and automating as much as possible.
  • View outsourcing as a means for improving efficiency and effectiveness, which must be closely managed to reap the most benefits.

Regarding talent management:

  • Move beyond merely providing data. Consult with senior leaders to identify and address their most pressing talent needs; to weigh the implications of trends; to create new or revise existing strategies; and to make decisions about hiring, development plans and workforce improvement initiatives.
  • Bring in trained data analysts who can help establish a common platform for accessing standardized data and who can communicate insights and implications for SWP decision making.
  • Develop scorecards for HR performance metrics that are aligned to business priorities and communicate them frequently to senior management.
  • Acquire, develop and deploy staff with the right mix of business skills and HR expertise that allows them to more fully participate in business strategy discussions and execution.

Theresa Minton-Eversole is an online editor/manager for SHRM.

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