The best-performing HR departments spend 26% less than their peers and have 32% fewer staff, according to The Hackett Group, a management consulting firm. These departments are also more likely to deploy HR automation and use it effectively.
This is an elite group, according to a new study by Hackett. They only account for 10% of the firms Hackett studied in its benchmark.
These top-ranked firms pay attention to the basics -- operation and administration, in particular, said Tony DiRomualdo, senior director of Hackett's HR executive advisory.
Top HR departments simplify through HR automation
"They will be rigorous around standardization of processes," DiRomualdo said. "That's a big driver of cost efficiency." These firms will try to simplify as much as possible, which means minimizing customizations and deploying HR automation. They adopt cloud-based HR systems and understand how to utilize these technologies effectively, DiRomualdo said.
Tony DiRomualdosenior director of HR executive advisory, The Hackett Group
The Hackett report also found that top-performing HR departments are more likely to use some form of outsourcing services, a trend that another research group notes is on the rise.
Everest Group, an outsourcing consultancy and research group, said outsourcing in HR is growing at 4% to 5% a year, according to its survey data. Outsourcing by HR is used mostly for transactional processes such as employee data management and the administration portions of payroll, benefits, recruitment and learning, according to Arkadev Basak, vice president at the company. Everest put the savings due to HR offshoring at 30% to 35%.
Pace Center embodies top-performing practices
One firm that was not part of the Hackett HR benchmark, but believes it would rank high among its peers, is Pace Center for Girls, a Florida-based nonprofit that provides advocacy for youth and education for girls who are at risk.
"I think we are a top-performing organization," said Yessica Cancel, COO of Pace Center, which employs more than 500 full-time workers in the state and relies heavily on HR automation.
Pace installed Ultimate Software's UltiPro HR suite a few years ago and now has enough experience on it to have clear metrics about its performance.
A focus on high-touch HR services
HR automation has allowed Pace Center to automate recruiting and go paperless in all of its HR functions. Before putting in the UltiPro system, the HR staff spent about 80% of its time on transactional processes. HR workers now spend about 77% of their time in "value added" roles, running data analytics and providing "high-touch" services, Cancel said.
A high-touch approach, when applied to employee onboarding for instance, means making sure the employee "on day one is completely set up, that they have access to all of their systems and that we've tested those systems," Cancel said.
These improved HR services have helped Pace Center with turnover. Its legacy system was difficult to work with and errors, such as incorrect paychecks, were not uncommon. These problems impacted turnover.
An unreliable back office undermines employee experience and confidence, Cancel said. "From a building trust perspective, that was significant," she said. The company's turnover rate has declined from 60% to 27% annually and Pace estimates it has saved more than $2 million in turnover costs.
Relations with upper management strong
Hackett doesn't release the exact number of the firms in its ongoing benchmarking, which began in 1991. But the firm said it has evaluated more than 5,300 firms globally since that time. Hackett employs more than 1,100, and its advisory council includes officials from FedEx; American Electric Power; Newell Brands, which makes Rubbermaid, Coleman, Mr. Coffee and many other products; Glaxosmithkline, a pharmaceutical company; Citi; and Intercontinental Hotels Group.
Along with making good use of HR technology, the Hackett study found, HR leaders in the top-performing firms have strong relations with upper management, including the CEO. "Typically, [top-performing firms] are doing many things well," DiRomualdo said.