The Human Resources Software Handbook : Evaluating Technology Solutions for Your Organization

Without Spending More, World-Class HR Organizations Use Technology to Improve Productivity, Strategic Alignment

November 12 2004 - (Newstream) World-class HR executives do a dramatically better job of leveraging technology, even though they spend no more than their peers, according to the 2004 HR Book of Numbers(c) Research Series from The Hackett Group, a business advisory firm and an Answerthink company (Nasdaq: ANSR). This leverage plays a key role in helping world-class HR executives generate significant return on investment in the form of decreased costs, less staff, and a wide range of other efficiency and effectiveness benefits, Hackett found.

According to Hackett's research, world-class companies spend almost exactly the same amount on technology per employee as their peers. But their improved ability to leverage technology is a critical enabler that helps world-class executives spend 27 percent less per employee on HR than their peers, operate with 35 percent fewer HR staff, and also provide higher value to their organizations, with improved HR productivity and strategic alignment virtually across the board. For example, world-class HR organizations are over 4 times more likely than their peers to own one or more strategic corporate initiatives. World-class HR organizations also have 61 percent fewer voluntary terminations and fill professional positions 35 percent more quickly than their peers.

Hackett's research tracked a broad array of areas where world-class HR executives leverage technology more effectively than their peers. For example, they are 110 percent more likely than their peers to use a high degree of functionality in their HR applications and 178 percent more likely to make management decision-making the primary use of their HR application. Other areas where world-class HR executives more frequently rely on technology include resume capture, applicant tracking, paperless payroll, requisition tracking, and employee self-service.

The Hackett Group is a world leader in best practices research and process benchmarking, helping executives achieve significant and sustainable progress towards world-class performance through empirically based analysis and advisory services. Hackett offers analysis backed by research at more than 2,400 client organizations, including 93 percent of the Dow Jones Industrials.

The Hackett Group's 2004 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 HR, IT, finance, procurement, and other areas. The HR Book of Numbers series is offered as part of Hackett's HR Executive Advisory Program, one of nearly a dozen Business Advisory Services -- premium-value, membership-based services providing confidential advisor inquiry, best practices research, and peer learning opportunities.

To achieve Hackett's world-class designation, an organization must score in the top 25 percent of Hackett's current database in both efficiency (cost and productivity) and effectiveness (quality and business value) output metrics in a given functional area. For comparison purposes, Hackett also calculates the median results for all non-world-class companies, which are identified as "peers." In this way, Hackett defines "world-class" with empirical data, isolating the characteristics shared by today's world-class organizations.

"There's a lot more to achieving world-class performance in HR than just leveraging technology," said Hackett HR Practice Leader Stephen Joyce. "But clearly, despite the fact that they don't spend more, world-class HR executives take a very different attitude and approach towards technology than their peers. They understand it better, and work hard to ensure that they derive as much value from it as they can. As a result, technology plays an important role in how they achieve the results they do. Technology is key to how world-class companies streamline processes, cut costs and staff, reduce error rates, stay more productive, deliver information more effectively, and make better strategic decisions."

Greater Technology Leverage

In terms of technology spending, Hackett's research found that world-class HR executives and their peers dedicate almost exactly the same amount per employee on technology. But since world-class organizations operate with 35 percent fewer HR staff per thousand employees (10.5 versus 16.2), this actually translates into a 53 percent higher technology investment per HR staffer.

Virtually across the board, Hackett determined that world-class HR executives do a better job of leveraging technology than their peers, and this leverage plays a key role in helping them generate better results. A total of 86 percent of all world-class HR organizations use a high degree of functionality in their HR applications, making them 110 percent more likely to do this than their peers. A total of 25 percent of all world-class companies identify management decision-making and planning as a primary use of their HR application, while only 9 percent of peer companies make the same claim, a gap of 178 percent. World-class companies are also twice as likely to generate management reports from a central repository.

World-class HR organizations see similarly greater leverage of technology in many other areas tracked by Hackett, including: resume capture (126 percent greater usage than peers) applicant tracking (56 percent greater), some degree of paperless payroll (317 percent greater), requisition tracking (222 percent greater), and as an enabler of employee self-service for data management, compliance and reporting as well as for staffing services.

Less Overall Spending, Better Performance

According to Hackett's research, world-class executives spend 27 percent less on HR per employee than their peers ($1,390 versus $1,892) and operate with 35 percent fewer HR staff per thousand employees (10.5 versus 16.2). They also provide much higher levels of value to their organizations, outperforming their peers across a wide range of efficiency and effectiveness metrics, and show dramatically better strategic alignment than their peers. For example, at world-class organizations, senior HR executives are 115 percent more likely than their peers to report to the chairman/CEO. HR executives at world-class organizations are also 67 percent more likely to tie business strategy to people strategy and 84 percent more likely than their peers to have an articulated explicit workforce strategy in place. World-class HR executives are also over four times more likely than their peers to own one or more strategic initiatives.

Many other Hackett metrics demonstrate the improved effectiveness achieved by world-class HR executives. World-class HR organizations have 61 percent fewer voluntary terminations per thousand employees, and they fill professional positions 35 percent more quickly than their peers. HR staff are also able to spend 223 percent more time than their peers doing analysis for standard reports and less time collecting and compiling data.

Quality and productivity measures are other areas where world-class HR executives clearly outperform their peers. World-class HR executives see dramatically lower error rates than their peers in key areas such as employee data management (29 percent lower), compensation administration (50 percent lower), and health and welfare administration (43 percent lower).

More information on The Hackett Group's 2004 HR Book of Numbers Series is available: by phone at (404) 682-2500; by e-mail at info@thehackettgroup.com; or on the Web at www.thehackettgroup.com.