The Hackett Group: Companies
Can Significantly Reduce HR Costs By Cutting
Complexity in Key Processes, Programs, Technology
World-Class HR Organizations 87 Percent More Likely to Use Common HR Applications, Rely on Fewer Benefit and Compensation Plans
Executives can significantly reduce the cost of HR by reducing the complexity of key HR processes, programs, and technology, according to Book of Numbers(C) research from The Hackett Group, a business process advisory firm (NASDAQ:ANSR).
Complexity reduction is a major focus of world-class HR organizations, which spend 27 percent less per employee on HR than their peers, operate with 35 percent fewer HR staff, and also demonstrate improved effectiveness with fewer voluntary terminations and the ability to fill positions more quickly, according to Hackett. Hackett's research found that world-class HR executives do a much better job of identifying and targeting the specific areas where complexity reduction can have the greatest business impact. For example, world-class HR organizations are 87 percent more likely than their peers to have deployed a common HR application, and also show reduced complexity with 69 percent fewer health & welfare plans, 91 percent fewer savings plans, and 45 percent fewer compensation plans, resulting in reduced resource requirements for benefits administration costs.
Hackett's Complexity Book of Numbers analysis and research also highlighted that HR costs materially increase with each additional HR application. Companies that do not standardize their use of common applications spend more on HR per employee than companies that make high use of common applications.
Hackett's new Book of Numbers research volume, "Optimizing a Return on Business Complexity: Performance Metrics and Practices of World-Class Companies", focuses exclusively on the issue of complexity and complexity reduction in Human Resources, as well as in finance, IT, procurement, and other areas.
The Hackett Group is a world leader in best practice research, benchmarking, and advisory services that empower executives to achieve world-class enterprise performance. Hackett offers analysis and insight backed by metrics derived from 3,300 benchmark studies over 13 years at nearly 2,000 of the world's leading companies, including 93 percent of the Dow Jones Industrials.
"It's pretty obvious to most HR executives that complexity increases costs. World-class HR executives are simply more effective at targeting areas where complexity reduction offers the greatest impact," said Hackett HR Practice Leader Stephen Joyce. "This focus on complexity reduction is a significant factor in how they cut costs, operate with significantly fewer staff, yet provide more strategic benefit to their companies."
According to Hackett, 71 percent of all world-class HR organizations have deployed common HR applications on a global basis, while only 38 percent of typical companies make the same claim. This makes world-class companies 87 percent more likely than their peers to take this approach. To leverage this practice, top companies typically re-examine their HR application development process. Typical companies begin with the development of their "unique" requirements and then build or purchase and customize an application to meet their internal requirements. In contrast, world-class companies find the application with the closest fit to their requirements, then map their business processes to the selected application. Solid business cases are required to justify all customizations.
NOTE TO JOURNALISTS: A chart illustrating select findings described above is available on request, and will be distributed via Business Wire.
According to Hackett, the median HR labor cost per employee rises substantially as the number of systems per 1,000 employees increase. Companies with no common HR software applications also spend 18 percent more on HR overall than those with a high level of common software applications. For a company with 10,000 employees, this translates into savings of more than $3.6 million/year by moving to a high level of common software applications. (For more details and a chart illustrating these findings, see Hackett's IT Complexity release, scheduled for distribution on August 3, 2005. The release will be available online at http://www.thehackettgroup.com or by e-mailing firstname.lastname@example.org.)
In addition to overall HR system complexity, world-class HR organizations target other key areas for complexity reduction. They have 69 percent fewer health & welfare plans than typical companies (1 per 1,000 employees versus 3.1), 91 percent fewer savings plans (.1 per 1000 employees versus 1.1), and 45 percent fewer compensation plans (1.4 per 1000 employees versus 2.5), which drives reduced resource requirements for benefits administration.
The Hackett Group's research into world-class performance is compiled in its Book of Numbers series, which provides senior executives fact-based performance metrics and insights based on Hackett's extensive database of best practices and process metrics in IT, finance, HR, procurement, and other areas. Hackett Book of Numbers volumes are available exclusively to members of Hackett's Executive Advisory Programs -- premium-value, membership-based programs providing confidential advisor inquiry, best practices research, and peer learning opportunities.
More information on The Hackett Group is available: by phone at (770) 225-7300; by e-mail at email@example.com; or on the Web at http://www.thehackettgroup.com.
About The Hackett Group
The Hackett Group, http://www.thehackettgroup.com, a business process advisory firm and an Answerthink company, is a world leader in best practice research, benchmarking and advisory services that empower executives to achieve world-class enterprise performance. Only The Hackett Group empirically defines world-class performance in sales, general and administrative (SG&A) and supply chain activities with analysis gained through 3,300 benchmark studies over 13 years at nearly 2,000 of the world's leading companies.
The foundation of Hackett's benchmarks, transformation services, and membership-based advisory programs is our proprietary database of Hackett-Certified(SM) Practices, approaches which are proven to correlate with superior performance metrics. This unparalleled knowledge repository enables Hackett business advisors to provide data, advice, and strategic insight with a level of integrity and authority available nowhere else. As of this writing, Hackett clients comprise 93 percent of the Dow Jones Industrials, 76 percent of the Fortune 100 and 90 percent of the Dow Jones Global Titans Index.
Hackett-Certified and Hackett World-Class Passport are service marks of The Hackett Group.
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