The Hackett Group Research Alert: World-Class HR Organizations Spend 27
Percent Less, Operate with 24 Percent Fewer Staff
New Book of Numbers Research Details Elements of HR Strategy That Help
World-Class HR Organizations Achieve Operational Excellence
MIAMI & LONDON -- January 31, 2013
World-class HR organizations operate at 27 percent lower cost per employee
than typical companies and also utilize 24 percent fewer staff, while still
achieving higher effectiveness, according to new Book of Numbers^™ research
from The Hackett Group, Inc. (NASDAQ: HCKT).
The Hackett Group's research detailed three important elements of HR strategy
that drive operational excellence at world-class HR organizations: an emphasis
on enhancing HR’s operational excellence and helping the company achieve its
strategic goals; a systematic, integrated approach to talent management; and
an ability to create strong, strategic working relationships with the
"HR organizations today face significant challenges," explained The Hackett
Group Global HR Transformation and Advisory Practice Leader Harry Osle. "While
company revenues have risen by nearly 20 percent over the past three years, HR
budgets and staffing have actually declined slightly. This has created a
tremendous productivity gap that must be overcome. Our research shows not only
that it is possible, but also explains precisely how world-class HR
organizations manage to do more with less and play a key role in helping their
The Hackett Group's research findings are based on the latest HR metrics from
detailed benchmarks executed at Global 1000 companies over the past two years.
Hackett defines world-class as companies that achieve top-quartile performance
across a weighted array of efficiency and effectiveness metrics.
The Hackett Group's research found that world-class HR organizations excel at
cost reduction, spending 27 percent less on HR services per employee than
typical companies. They reduce labor costs, which represent more than half of
total HR costs, by 29 percent, and also spend 50 percent less on outsourcing.
At the same time they dedicate 25 percent greater spend to technology.
Finally, world-class HR organizations operate with 24 percent fewer HR staff
per 1,000 employees, including 31 percent fewer transactional staff and 20
percent fewer employee life cycle staff.
To achieve greater levels of operational excellence, world-class HR
organizations focus in four key areas. They make dramatically greater use of
self-service for payroll, training, and total rewards administration and
staffing services. Automation and standardization in these areas leads to
higher-quality decision-making, which drives lower costs. In addition, they
focus heavily on complexity reduction, utilizing nearly 70 percent fewer job
grades, almost 40 percent fewer health and welfare plans, and over 40 percent
fewer compensation plans. They have significantly flatter organizations, with
more than 20 percent fewer managers that have greater spans of control, to
streamline management, reduce costs, and speed up decision-making.
World-class organizations use HR outsourcing more effectively. While they
outsource administrative activities at similar levels to typical companies,
they retain significantly fewer in-house staff associated with these
processes, reaping greater cost benefits from the outsourcing arrangement.
Typical companies appear to make few internal changes after outsourcing,
inhibiting cost and productivity advantages.
Integrated Talent Management
A second key to world-class HR performance is an increased focus on the
development and performance of employees. World-class HR organizations
dedicate a greater percentage of their total process costs to internal talent
management, with a particular emphasis on strategic workforce planning, where
they spend 15 percent more than typical companies and also allocate more
staff. Their strategic workforce planning staff and skills mix are very
different, suggesting more high-level consulting capabilities as well as more
staff skilled in analytics and modeling.
Overall, world-class HR organizations are much more likely to pursue an
integrated talent management approach than typical companies. They tightly
integrate with business strategies and objectives, identifying skills that are
needed by their company today and in the future, and often take a multi-year
perspective that enables them to develop needed skills internally. World-class
HR organizations have nearly twice the number of internal placements that
typical companies have, and are also able to recruit staff externally much
more quickly when necessary. Finally, they recognize the link between employee
engagement and performance, and are far more rigorous in measuring it as well
as providing people managers with the training and support they need to be
True Business Partnership
The third differentiator of world-class HR organizations is their greater
ability to align with business strategy. HR executives at world-class
organizations have a seat at the table, and are universally involved in
business planning. Less than half of typical companies make this same claim.
Staff at world-class HR organizations are much more likely to be involved in
activities requiring business-oriented skills, and HR staff overall are more
engaged in managing and facilitating organizational change.
An increased focus on measurement and analytics is another way that
world-class HR organizations partner with the business more effectively. While
only 20 percent of typical HR organizations report metrics for HR-managed
projects, world-class HR organizations do this over 3 times more often. Also
close to 80 percent of world-class HR organizations report organizational
metrics for change initiatives. This helps HR leadership build credibility
with executive management.
According to The Hackett Group Senior Director of HR Advisory Nathalie
Bression, "World-class HR organizations set themselves apart from the peer
group by their commitment to operational excellence, their mastery of talent
management, and their ability to act as true partners to the business.
Achieving world-class performance isn't easy. But when a company's employees
are truly in alignment with its current needs and long-term goals, the
strategic benefit can be very real."
About The Hackett Group
The Hackett Group (NASDAQ: HCKT), a global strategic business advisory and
operations improvement consulting firm, is a leader in best practice advisory,
business benchmarking, and transformation consulting services including
strategy and operations, working capital management, and globalization advice.
Utilizing best practices and implementation insights from more than 7,500
benchmarking studies, executives use The Hackett Group's empirically-based
approach to quickly define and implement initiatives that enable world-class
performance. Through its REL group, The Hackett Group offers working capital
solutions focused on delivering significant cash flow improvements. Through
its Archstone Consulting group, The Hackett Group offers Strategy & Operations
consulting services in the Consumer and Industrial Products, Pharmaceutical,
Manufacturing, and Financial Services industry sectors. Through its Hackett
Technology Solutions group, The Hackett Group offers business application
consulting services that help maximize returns on IT investments. The Hackett
Group has completed benchmark studies with over 2,800 major corporations and
government agencies, including 97% of the Dow Jones Industrials, 86% of the
Fortune 100, 90% of the DAX 30 and 48% of the FTSE 100.
More information on The Hackett Group is available: by phone at (770)
225-7300; by e-mail at firstname.lastname@example.org.
The Hackett Group, Inc.
Gary Baker, 917-796-2391
Global Communications Director
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