A Breed Apart
Bersin by Deloitte report shows big differences between companies with high-impact HR organizations and those without.
By Karen O'Leonard
As HR executives plan their investments for the coming year, they should look to leading organizations for some tips. As Bersin by Deloitte's latest HR benchmarking study reveals, there are stark differences between the spending and staffing models of high-impact HR organizations and their peers.
What constitutes high-impact HR organizations, you might ask? For one, as the study finds, these organizations typically spend more and have higher-touch staffing models, but the investment pays off in better talent outcomes.
The research-conducted by Bersin by Deloitte, in collaboration with Human Resource Executive ®-includes 215 HR organizations. Some of its key findings follow.
In a time of fiscal conservatism, HR leaders want to spend their dollars wisely. Our research shows that HR budgets increased a modest 4 percent, on average, to $2,936 per employee in 2014. Much of the increased funding went to technology investments and initiatives to better attract and retain talent.
When comparing your HR spending to other firms, be careful to look at the maturity of the HR organization. As human resource organizations mature, they offer more sophisticated (and effective) programs and services. These come at a cost. Organizations at the highest level of maturity (what we call "high-impact" or "business-integrated" HR functions) spend $4,434 per employee, on average, compared with just $2,112 among those at the lowest level of maturity. (See Figure 1.)
These high-impact organizations are a breed apart from their peers. They are typically led by bold, innovative HR executives who are not afraid of experimentation. Their HR staff are skilled at assisting line managers in attracting, building, engaging and retaining talent. And they can adapt more quickly to business needs and respond to new trends in analytics, workforce patterns and globalization.
These efforts demand a different staffing model than that found in most other HR functions. High-impact HR teams have one staff person to every 64 employees, on average-more than twice the staff as the least mature HR functions. In high-impact organizations, more HR staff are integrated with the local business units to better align HR and business needs. This structure enables HR to support local design and delivery of key programs, a key pillar of high-impact HR (see Figure 2.) In addition, this structure enables rapid decision-making for both frontline managers and HR business partners.
Furthermore, these high-impact teams employ a higher percentage of HR specialists than less mature organizations. They have deeper levels of expertise in data analytics, technology and talent practices. Long-term, these teams focus on continually building internal HR knowledge and skill sets to meet new demands.
The efforts of these high-impact HR organizations pay off in better talent outcomes. For the most part, they have lower involuntary turnover compared to their less mature peers, and every percentage point drop in turnover can be worth millions to a large organization.
This is particularly important as turnover threatens to become an even bigger problem in the economic recovery. Our study found that total U.S. turnover (including both voluntary and involuntary attrition) averaged 20 percent in 2013, up from 17 percent in 2010.
With the possibility of greater attrition on the horizon, companies need to rethink how they approach employee engagement. High-impact HR organizations realize that engaging workers means connecting with them-more often than once a year through an annual engagement survey. Engaging employees is a continuous process of identifying what motivates and energizes people, and using that information to help them develop and grow.
Promotions Fuel Talent Pipelines
Another positive talent outcome for high-impact HR organizations is their ability to promote talent from within. At these organizations, 18 percent of employees received promotions in 2013, on average, compared with 13 percent of employees within the least mature organizations. High-impact teams are able to more effectively identify, develop and promote high-potentials and current leaders at all levels.
Identifying and promoting succession candidates is important to the long-term health of the organization. In most companies, the overall pipeline for leaders is weak. In fact, according to our Leadership Development Factbook 2014, within U.S. large businesses, just one in five of mid-level leaders have successors identified, on average, and only one in four of senior-level leaders have successors identified.
High-impact HR organizations take a structured and analytics-driven approach to succession management. In doing so, they can build bench strength and promote talent from within.
Clearly, these improved talent outcomes demonstrate the benefits of building a mature, business-integrated HR function. For more information on high-impact HR teams and benchmarking your team against these leading organizations, read Bersin's complimentary WhatWorks brief here.
Karen O' Leonard is the vice president of analytics and benchmarking research at Bersin by Deloitte. Send questions or comments about this article to firstname.lastname@example.org.