hr's evolving role in organizations
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Linking Critical HR Functions to Organizational Success
HR’s Evolving Role in Organizationsand Its Impact on Business Strategy
A Survey Reportby the Society forHuman ResourceManagement
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PROJECT TEAM
Project leader: Amanda Benedict, M.A., survey research specialist
Project contributors: Nancy R. Lockwood, M.A., SPHR, GPHR, manager, HR Content Program
Evren Esen, manager, Survey Program
Steve Williams, Ph.D., SPHR, director, Research
External reviewers and contributors: SHRM Organizational Development Special Expertise Panel: Libby Anderson, M.S.,
SPHR, Fernán R. Cepero, PHR, Tom Darrow, Nancy Gerhardt Davies, Ernest Gundling,
Charity Hughes, MSOD, SPHR, John Lewison, SPHR, Colleen Mills, Ph.D., Ken
Moore, Maggie Romance, SPHR, Trellis Usher-Mays, Bill Young, SPHR
HR Consulting/Outsourcing Special Expertise Panel: Franchette Z. Richards, GPHR,GMS, CRP
Copy Editing: Katya Scanlan, copy editor
Design: Shirley Raybuck, graphic designer
Production: Bonnie Claggett, production traffic coordinator
This report is published by the Society for Human Resource Management (SHRM). All content is for informational purposes
only and is not to be construed as a guaranteed outcome. The Society for Human Resource Management cannot accept
responsibility for any errors or omissions or any liability resulting from the use or misuse of any such information.
© 2008 Society for Human Resource Management. All rights reserved. Printed in the United States of America.
This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any
means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Society for
Human Resource Management, 1800 Duke Street, Alexandria, VA 22314, USA.
For more information, please contact:
SHRM Research Department
1800 Duke Street, Alexandria, VA 22314, USA
Phone: (703) 548-3440 Fax: (703) 535-6432
Web: www.shrm.org/research
08-0280
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CONTENTS
About This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
About SHRM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Critical HR Functional Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
HR Responsibility Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
In-House HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Partially Outsourced HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Completely Outsourced HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Decisions About Sourcing HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Assignment of HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
HR Function/Department Staffing Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
HR’s Role Within the Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Strategic vs. Transactional Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
HR Mentoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
HR’s Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
HR Metrics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Tracking Staff Hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Obstacles to HR Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Recently Published SHRM Survey Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
HR’s Evolving Role in Organizationsand Its Impact on Business Strategy A Survey Report by the Society for Human Resource Management
May 2008
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ABOUT THIS REPORT
In September 2007, the Society for Human Resource Management (SHRM)conducted a survey about how human resource functional areas and responsibilities
are approached within organizations. This report presents an analysis of the HR in
Organizational Context Survey results and examines differences among organizations
by organization staff size and employment sector.
In 2007 and 2008, SHRM reviewed existing research to identify differences in how
organizations approach human resources. Workforce size has a profound effect on
the roles and responsibilities of HR functions within organizations. The results of
this review are compiled in a report titled The Varying Roles of HR: A Look at HR by
Organization Staff Size .1 Relevant findings from previous SHRM survey data included
in the review are presented in this report to contribute to the understanding of the
human resource function within organizations of various sizes.
ABOUT SHRM
The Society for Human Resource Management (SHRM) is the world’s largest
professional association devoted to human resource management. Our mission is to
serve the needs of HR professionals by providing the most current and comprehensive
resources and to advance the profession by promoting HR’s essential, strategic role.
Founded in 1948, SHRM represents more than 225,000 individual members in over
125 countries and has a network of more than 575 affiliated chapters in the United
States, as well as offices in China and India. Visit SHRM at www.shrm.org.
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Introduction
HOW HR OPERATES WITHIN ORGANIZATIONS MATTERS TO BUSINESS
STRATEGYHuman resources includes a myriad of functional areas, encompassing responsibilities
from recruitment and staffing to compensation and benefits or training and
development. The human resource profession has evolved during the past 20 years and
continues to change, from the collective demographics of HR professionals and the
ways that practitioners enter the profession to the functions and roles served by HR and
the value it brings to organizations.2 HR is increasingly mobilized to offer much more
to organizations than record-keeping, payroll and employee benefits administration.
In fact, many of the transactional functions that traditionally formed the core of HR
departments’ responsibilities are now often outsourced so that organizations can focus
on business strategy through talent management and leadership development activities.
Yet, it is argued that HR functions and departments in many organizations are not
engaged in strategic roles. What factors contribute to how HR’s role is viewed within
the organization? Human resource functions and departments are typically bound
by a number of organizational factors, not the least of which is the staff size of the
organization. How do organizations determine which functional areas are critical to the
organizational strategy, the priority of critical functions and how to best develop and
assign HR staff to those functions?
While organization staff size clearly has an influence on the headcount and budget
within the organization’s HR function and/or department, there may be other factors
contributing to decisions about HR responsibility and functional area staffing. How
much control do HR professionals have over the functional areas to which they are
assigned and/or the scope of their responsibilities? To what extent are HR professionals
receiving mentoring about strategic contributions to the organization, including from
organization leaders in non-HR functions?
Understanding how HR is approached in the context of the organization in which it
operates is crucial to understanding how HR contributes to business strategies and
the value that it is poised to bring to the organization. Moreover, it adds to the overall
picture of HR professionals’ career progression expectations as well as non-HR business
leaders’ perceptions of and mentoring involvement with HR.
Understanding how
HR is approachedin the context ofthe organization inwhich it operatesis crucial tounderstanding howHR contributes to
business strategiesand the value thatit is poised to bringto the organization.
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Methodology
The survey was conducted among HR professionals employed by organizations
operating in the United States. The survey instrument included questions regardingorganizational practices and HR staffing related to human resource functions within
respondents’ organizations.
A sample of HR professionals was randomly selected from SHRM’s membership
database, which included approximately 225,000 individual members at the time the
survey was conducted. Only members who had not participated in a SHRM survey or
poll in the previous six months were included in the sampling frame. Members who
were students, consultants, academics, located internationally or had no e-mail address
on file were also excluded from the sampling frame. Beginning in September 2007,
an e-mail that included a link to the 2007 HR in Organizational Context Survey 3 was
sent to 3,000 SHRM members. A total of 2,744 surveys were successfully delivered,
and 589 HR professionals responded, yielding a response rate of 21%. The survey wasfielded for a period of three weeks. Two e-mail reminders and a faxed reminder were
sent, and reminder phone calls were made to sample members in an effort to increase
the response rate.
The sample was representative of the SHRM membership population, although there
were some differences by organization staff size, with more HR professionals in this
sample from small- and medium-staff-sized organizations and fewer from large-staff-
sized organizations. HR professionals in this sample were more likely to report that
their HR departments had 1–4 employees and less likely to report that their HR
departments had larger numbers of employees. Compared with the general SHRM
membership, HR professionals in this sample were more likely to be from the service
(profit), manufacturing (durable goods) and health industries.
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Key Findings
The top three critical HR functional areas that contributed to organizations’ current
business strategies were 1) staffing, employment and recruitment, 2) training anddevelopment, and 3) employee benefits.
Among HR professionals who indicated that staffing, employment and recruitment was
one of their organizations’ top three critical HR functional areas, more than one-half
reported that it was their first priority.
The HR responsibilities most likely to be staffed in-house were performance
management, employee communication plans/strategies, policy development and/or
implementation, and strategic business planning. The HR responsibilities that were
most likely to be outsourced were employee assistance/counseling and flexible spending
account administration.
One-half of HR professionals reported that their organization’s business strategycontributed to the decision of whether to staff, outsource or eliminate various HR roles
and responsibilities, suggesting an alignment of HR function staffing decisions with
business operating plans.
The largest percentage of HR professionals from organizations that intended to expand
their HR departments in the next 12 months reported that their decision to hire
additional HR staff was due to the HR department/function being understaffed for
current number of employees within the organization.
Slightly less than one-half of HR professionals reported that their organizations had
formal (i.e., documented and established) systems and processes in place for collecting
HR metrics and/or measurement data. Among these, slightly more than one-half
reported formally calculating the impact of HR activities on measurable aspects ofbusiness performance.
The largest percentages of HR professionals reported that HR’s effectiveness was
limited by the budget and headcount available for HR initiatives.
The top threecritical HRfunctional areasthat contributedto organizations’current businessstrategies were1) staffing,
employmentand recruitment,2) training anddevelopment,and 3) employeebenefits.
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Survey Results
CRITICAL HR FUNCTIONAL AREAS
Although conducting business and managing a workforce involves multiple humanresource activities, some HR functional areas are of more importance than others in
supporting the organization’s business strategies and operating plans. When asked to
identify the top three critical HR functional areas contributing to their organization’s
current business strategy, more than one-half of HR professionals (52%) reported that
staffing/employment/recruitment was among the most critical HR functional areas.
The next largest percentages of respondents reported that training and development
(29%) and employee benefits (29%) were among their top three critical HR functional
areas. This indicates that HR is most likely to support the organization’s business
strategy through human capital-related areas such as building, developing and
maintaining the workforce. The smallest percentages of HR professionals reported that
EEO/Affirmative Action (3%), international human resource management (HRM)
(1%) or research (less than 1%) were critical to their organization’s current business
strategy.
Staffing and employee benefits issues are often intertwined. John Lewison, SPHR,
director of human resources for MDRC and SHRM Organizational Development
Special Expertise Panel member, offers, “Both recruitment and talent retention are key
issues for our company. We are a large policy research organization in New York, where
attracting and retaining academic-trained experts in the fields of welfare, disability,
prison reform and education are key. While we’re anticipating that a softer economy
may make it easier for us to hire support-related staff in 2008, we’re still expecting a
competitive market for key researchers and economists.”
“We are constantly examining our benefit programs, not only from a competitiveperspective, but in terms of cost-effectiveness. This is especially true for our wellness
programs; e.g., medical, hospital and dental plans. With employees in large cities
on both coasts, like many companies, we’re hostage to the vagaries of escalating
medical costs. A while back we shifted to a self-insured model, coupled with stop-loss
insurance to better control our costs. So far, this approach seems to be working. We
also embarked on several cost-savings initiatives, such as increasing copayments and
deductibles. Many companies have taken similar actions,” says Lewison.
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Table 1 | Which HR Functional Areas Are Most Critical to Contributing
to the Organization’s Current Business Strategy?
Overall
(n = 582)
Staffing/employment/recruitment 52%
Training/development 29%
Employee benefits 29%
Employee relations 27%
Strategic planning 27%
Administrative/transactional 18%
Change management 17%
Compensation 15%
Organizational development 15%
Legal compliance 13%
Communications 10%
Workforce planning/forecasting 10%
Human resource information systems (HRIS) 9%
Health, safety, security 8%
Diversity 7%
Labor/industrial relations 6%
HR metrics/measurement data/return on investment 5%
EEO/Affirmative Action 3%
International HRM 1%
Research 0%
Other 1%
Note: Data sorted in descending order. Percentages do not total 100% due to multiple response options.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Table 2 | Critical HR Functional Areas Contributing to the Organization’s Current Business Strategy (by Organization Staff Size)
Overall
(n = 582)
Small
(1 to 99 employees)
(n = 142)
Medium
(100 to 499 employees)
(n = 177)
Large
(500+ employees)
(n = 138)
Differences by
Organization
Staff Size
Employee benefits 29% 35% 27% 20% Small > large
Strategic planning 27% 19% 28% 34% Large > small
Administrative/transactional 18% 25% 19% 11% Small > large
Legal compliance 13% 19% 11% 7% Small > large
Human resource information systems (HRIS) 9% 6% 8% 14% Large > small
Diversity 7% 2% 5% 10% Large > small
Note: Data sorted in descending order by “overall” column. Sample size is based on the actual number of respondents by organization staff size who answered this questionusing the response options provided.Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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As shown in Table 2, several differences emerged in critical HR functional areas
according to organization staff size. HR professionals employed by small-staff-sized
organizations (1 to 99 employees) were more likely than HR professionals from large-
staff-sized organizations (500 or more employees) to report that employee benefits
(35% compared with 20%), administrative/transactional functions (25% compared
with 11%) and legal compliance (19% compared with 7%) were among the top three
critical HR functional areas that contributed to their organizations’ business strategies.
By contrast, HR professionals from large organizations were more likely than their
counterparts employed by small organizations to place strategic planning (34%
compared with 19%), HRIS (14% compared with 6%) and diversity (10% compared
with 2%) among their organizations’ top three critical HR functional areas. In addition
to reflecting the organization’s business strategy, these data may also indicate the
organization’s philosophy of HR responsibilities as well as the availability of HR staff to
undertake selected functional areas and initiatives.
Table 3 depicts differences in critical HR functional areas based on organization sector.
HR professionals from nonprofit organizations (37%) were more likely to report employee
benefits as one of the top three critical HR functional areas than were respondents from
publicly owned for-profit organizations (18%). HR professionals from publicly owned for-
profit organizations (36%) were more likely than their counterparts from privately owned
Extent to Which HR Department Strategically Contributes to Organization Functions (by Organization Staff Size)
Overall
(n = 419)
Small
(1-99 employees)
(n = 111)
Medium
(100-499 employees)
(n = 174)
Large
(500+ employees)
(n = 120)
Differences by
Organization
Staff Size
Recruitment and selection processes 94% 88% 97% 95% Medium > small
Note: Table includes only response options for which there were significant differences between organization staff-size categories. Sample size is based on the actual number ofrespondents by organization staff size who answered this question using the response options provided. Percentages include responses of “to some extent” and “to a large extent.” HRprofessionals who responded “not sure” or “not applicable” were excluded from this analysis.Source: SHRM 2006 Strategic HR Management Survey Report
SHRM recently reviewed previously
released survey data related to HRroles and responsibilities in order
to identify differences in how HR
is approached by organizations of
various staff sizes.4 What emerged
was a picture of HR professionals’
level of engagement in various HR
and other functional areas within
organizations, differences in chal-
lenges experienced in supporting
HR functions and the varying waysin which HR professionals bring
value to organizations of different
workforce sizes.
Although HR functional areas
support organizational functions,
there are variations in the extent
to which HR departments feel that
they contribute strategically through
performing these responsibilities.HR professionals from medium or-
ganizations (97%) were more likely
than those from small organizations
(88%) to report that their HR de-
partment strategically contributed “to
some extent” or “to a large extent”
to the organization’s recruitment and
selection processes. HR profession-
als in medium organizations may be
able to more immediately see theimpact of their activities on organiza-
tion functions compared with their
counterparts from large organiza-
tions and may be more likely than
those in small organizations to feel
that HR activities are an integral part
of organization functions.
Related Research
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8
for-profit organizations (21%) to report that strategic planning was among the top three
critical HR functional areas contributing to their organizations’ business strategy. Labor
and industrial relations were more likely to be among the top three critical HR functional
areas for government agencies (24%) than for publicly owned for-profit organizations (3%)
or privately owned for-profit organizations (3%).
Table 4 | Priority Ratings of Critical HR Functional Areas Contributing to the Organization’s Current Business Strategy
First Second Third
Staffing/employment/recruitment (n = 266) 57% 23% 20%
Training/development (n = 144) 18% 44% 38%
Employee benefits (n = 138) 18% 39% 43%
Strategic planning (n = 135) 56% 25% 19%
Employee relations (n = 134) 26% 37% 37%
Administrative/transactional (n =92) 23% 28% 49%
Change management (n = 83) 36% 33% 31%
Compensation (n = 77) 31% 44% 25%
Organizational development (n = 77) 26% 39% 35%
Legal compliance (n = 60) 50% 38% 12%
Communications (n = 53) 30% 36% 34%
Workforce planning/forecasting (n = 51) 24% 33% 43%
Human resource information systems (HRIS) (n = 45) 22% 36% 42%
Health, safety, security (n = 35) 37% 37% 26%
Diversity (n = 35) 37% 31% 31%
Labor/industrial relations (n = 29) 28% 24% 48%
HR metrics/measurement data/return on investment (n = 26) 12% 27% 62%
Note: Data sorted in descending order by number of respondents who indicated that each HR functional area was among the top three areas critical to their organization’s current business strategy.Rankings for each of the HR functional areas include only respondents who indicated that it was a top critical HR functional area contributing to the organization’s business strategy. Only criticalfunctional areas that at least 25 respondents selected as a top priority are included in table. Row percentages may not total 100% due to rounding.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Table 3 | Critical HR Functional Areas Contributing to the Organization’s Current Business Strategy (by Organization Sector)
Overall
(n = 582)
Publicly Owned For-Profit
(n = 114)
Privately Owned For-Profit
(n = 235)
Nonprofit
(n = 71)
Government
(n = 42)
Differences by Organization
Staff Size
Employee benefits 29% 18% 31% 37% 14% Nonprofit > publicly owned for-profit
Strategic planning 27% 36% 21% 30% 29% Publicly owned for-profit >
privately owned for-profit
Labor/industrial
relations
6% 3% 3% 6% 24% Government > publicly owned for-profit,
privately owned for-profit, nonprofit
Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Sample size is based on the actual number of respondents by organization sector who answeredthis question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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HR professionals were asked to rank the priority of their organizations’ top three critical
HR functional areas. Of the respondents who indicated that staffing/employment/
recruitment was a critical HR functional area, more than one-half (57%) reported that it
was the top-ranked priority for their organizations. More than one-half of respondents
(56%) who selected strategic planning as a critical HR functional area ranked it as the
top priority for their organizations. One-half of HR professionals (50%) who indicated
that legal compliance was one of their organizations’ top three critical HR functional
areas rated it as the first priority.
Among those who identified training and development as a critical HR functional
area, the largest percentage of HR professionals (44%) reported that it was the second
priority for their organizations. Of the HR professionals who indicated employee
benefits as a critical HR functional area, 43% responded that it was the third-ranked
priority within their organizations. These data and others depicted in Table 4 reflect
organizations’ workforce development philosophies as well as the predominant HR
functional areas to which organizational resources may be allocated.
SHRM Organizational Development Special Expertise Panel member Fernán Cepero,
PHR, vice president of human resources for YMCA of Greater Rochester, offers, “The
results are indicative of a Generation Y trend that is intertwined. Allow me to explain:
“The first critical area confirms the challenge HR professionals have in recruiting and
retaining Generation Y employees. The decision to accept a job offer involves many
factors for Generation Y. A good job is no longer defined by monetary gains alone. Gen Y
employees take a job because they want to work somewhere, not because they have to.
“The second critical area validates the first point in that training and development initiativesmust appeal Generation Y’s desire to learn and involve the application of high-technology
mediums, such as online media (i.e., webcasts, videos, podcasts, blogs, instant messaging).
Recruiting efforts must now highlight paid training and skill development.
“The third and final—benefits—requires HR to attract/sell Generation Y on benefits
such as flexible schedules, telecommuting and full tuition reimbursement. While all
employees think the benefits they receive as a part of their compensation packages are
an important factor in rating job satisfaction, what type of benefit they value is entirely
different. Gen Y employees don’t necessarily plan to stay at a company very long, and
both Gen Y and Gen X employees grew up without expectations of job security, so HR
professionals do not expect to win their loyalty by talking about ‘traditional benefits’
such as pension vesting or funeral leaves. To motivate these generations, focus more onthe benefits they value most—flexibility to balance work and life.”
HR RESPONSIBILITY SOURCING
Which HR responsibilities are carried out in-house and which are outsourced, either
partially or completely? Table 5 depicts the sourcing of common HR responsibilities.
The vast majority of organizations that carry out performance management (94%),
employee communication plans/strategies (93%), policy development and/or
implementation (91%), strategic business planning (90%) and compensation and/
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or incentive plans administration (85%) staff these HR responsibilities within their
organizations. This finding suggests that organizations strongly prefer to maintain
control over these HR responsibilities rather than to entrust them to a third party by
outsourcing. These may also be the HR responsibilities that require the most in-depth
understanding of the organization’s workforce and would be most difficult for a third
party to competently perform on the organization’s behalf.
Table 5 | Sourcing of HR Responsibilities
Completely In-House Outsource Partially Outsource Completely
Performance management (n = 482) 94% 5% 1%
Employee communication plans/strategies (n = 477) 93% 6% 1%
Policy development and/or implementation (n = 495) 91% 8% 1%
Strategic business planning (n = 463) 90% 8% 2%
Compensation and/or incentive plans administration (n = 489) 85% 13% 2%
HR metrics/measurement data/return on investment (n = 353) 82% 12% 6%
Organization development (n = 461) 78% 21% 1%
Recruitment/staffing of employees (nonexecutives) (n = 507) 78% 21% 1%
Affirmative Action Plans/EEO-1 filing (n = 382) 76% 20% 4%
Learning management system (n = 411) 61% 33% 7%
Human resource information systems (HRIS) development (n = 435) 59% 30% 11%
Payroll administration (n = 504) 59% 31% 10%
Employee relocation (n = 292) 57% 26% 18%
Expatriate administration (n = 178) 54% 36% 10%
Recruitment/staffing of executives (n = 492) 54% 40% 6%
Training and development programs (n = 480) 54% 42% 4%
Work/life balance benefits administration (n = 337) 53% 31% 17%
Wellness programs (n = 376) 40% 38% 22%
Consolidated Omnibus Budget Reconciliation Act (COBRA) (n = 491) 36% 18% 46%
Executive development and coaching (n = 407) 36% 50% 14%
Risk management/worker’s compensation (n = 484) 34% 46% 21%
Health care benefits administration (n = 504) 33% 40% 27%
Temporary staffing (n = 448) 30% 45% 25%
Background/criminal background checks (n = 462) 26% 22% 52%
Retirement benefits administration (n = 452) 25% 45% 31%
Pension benefits administration (n = 422) 24% 44% 33%
Retirement planning (n = 432) 23% 49% 28%
Employee assistance/counseling (n = 425) 17% 21% 62%
Flexible spending account administration (n = 411) 15% 25% 60%
Note: Data sorted in descending order by “completely in-house” column. HR professionals who responded “not applicable” were excluded from analysis. Row percentages may not total 100% dueto rounding.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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By contrast, more than one-half of organizations completely outsource employee
assistance/counseling (62%), flexible spending account administration (60%)
and background/criminal background checks (52%). Retirement benefits-related
responsibilities were among the HR responsibilities that the largest proportions of
organizations partially or completely outsourced, including retirement planning
(77%), pension benefits administration (76%) and retirement benefits administration
(75%). Retiree benefits are an area where many companies have recently made
changes, including freezing plans and changing from defined benefits plans to defined
contribution plans. Many organizations may find it more efficient and cost effective
to outsource the administration of their retiree benefits to firms that are highly
knowledgeable about the financial regulations involved with these types of plans and
benefits rather than to staff that specialization in-house.
Views of HR’s role within the organization may also influence which functions are
outsourced. Comments Franchette Richards, GPHR, GMS, CRP, member of SHRM’s
HR Consulting/Outsourcing Special Expertise Panel, “Human resource functions
Top 5 Insourced
HR Responsibilities
1) Performance management
2) Employee communication plans/
strategies
3) Policy development and/or
implementation
4) Strategic business planning
5) Compensation and/or incentive
plans administration
Although critical HR functional
areas may be clearly aligned with
and prioritized according to the
organization’s business strategy,
HR professionals’ perceptions of
the extent to which various HR
functional areas add value to the
organization’s business strategy
may be linked to the size of the or-
ganization. The results of the 2007
Human Resource Competency
Study yielded numerous differences
by organization staff size in HR
professionals’ perceptions of how
various HR practices add value to
the business.5 Compared with HR
professionals from large organiza-
tions, HR professionals from small
organizations reported to a greater
average extent that training and
development added value to the
business. Compared with HR pro-
fessionals from large organizations,
HR professionals from medium
organizations reported to a greater
average extent that performance
appraisal, internal communication,
organization structure, workplace
policies and work process design
add value to the business. These
findings may reflect HR profes-
sionals’ general observation of
immediate or lasting impact to
the organization as a result of HR
practices.
Average Degree That Various HR Practices Add Value to the Business (by Organization Staff Size)
Small
(1-99 employees)
(n = 26)
Medium
(100-499 employees)
(n = 36)
Large
(500+ employees)
(n = 381)
Differences
by Organization
Staff Size
Training and development 4.24 4.11 3.76 Small > large
Performance appraisal 3.72 4.22 3.74 Medium > large
Internal communication 3.72 4.19 3.63 Medium > large
Organization structure 3.44 4.00 3.59 Medium > large
Workplace policies 3.88 4.42 3.87 Medium > large
Work process design 3.24 3.63 3.20 Medium > large
Note: Based on a scale where 1 = “to a very little extent” and 5 = “to a very large extent.” Greater numbers indicate greater average degrees that various HR practices add value to thebusiness. Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided.Source: RBL Group, University of Michigan Ross School of Business, SHRM, IAE School of Business, IMI, Tsinghua University, AHRI, and the National HRD Network. 2007 Human ResourceCompetency Study [unpublished data]
Related Research
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that affect a company’s strategy, the overarching company culture or the organization
as a whole typically remain seated at the center of HR leadership. True organizational
effectiveness is not measured by the successful execution of a company’s employee
assistance program nor how it administers its flexible spending accounts. While these
are very important HR functions that clearly serve an organization’s employees,
these functions are more tactical in nature and not, in a strategic sense, impactful to
the achievement of business goals and objectives. In short, transactional excellence is
necessary—but no longer sufficient—for HR today. From evaluating the survey results
and reviewing ongoing commentary in the HR and business media, it has become
clearer that HR functions that are viewed as tactical are some of the first components
to be outsourced. There are exceptions—areas that are so key, so strategic (such as
leadership development/executive coaching, succession planning, employee relations)
that they must remain in-house. However, the key differentiator for HR will be whether
they are viewed as tactical or strategic.”
Numerous differences emerged in the sourcing of HR responsibilities when the data
were analyzed by organization staff size and organization sector. These findings are
shown in Table 6 through Table 11.
In-House HR Responsibilities
As illustrated in Table 6, HR professionals employed by small-staff-sized organizations
were more likely to report in-house staffing of a number of HR responsibilities.
Compared with HR professionals from large-staff-sized organizations, HR professionals
Table 6 | HR Responsibilities Staffed Completely In-House (by Organization Staff Size)
Overall Small
(1 to 99 employees)
Medium
(100 to 499 employees)
Large
(500+ employees)
Differences
by Organization
Staff Size
Policy development and/or implementation
(n = 451)
91% 84% 93% 96% Medium, large > small
Strategic business planning (n = 415) 90% 95% 89% 83% Small > large
Organization development (n = 360) 78% 85% 80% 71% Small > large
Payroll administration (n = 298) 59% 50% 54% 73% Large > small, medium
Employee relocation (n = 165) 56% 78% 56% 46% Small > medium, large
Recruitment/staffing of executives (n = 264) 54% 63% 51% 41% Small > large
Executive development and coaching(n = 148)
36% 50% 33% 28% Small > medium, large
Health care benefits administration (n = 168) 33% 44% 32% 26% Small > large
Temporary staffing (n = 136) 30% 39% 29% 22% Small > large
Retirement planning (i.e., educating
employees) (n = 98)
23% 20% 30% 15% Medium > large
Employee assistance/counseling (n = 73) 17% 29% 13% 11% Small > medium, large
Note: Data sorted in descending order by “overall” column. Table includes only response options for which there were significant differences. Sample size is based on the actual number ofrespondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Top 5 Completely
Outsourced HRResponsibilities
1) Employee assistance/counseling
2) Flexible spending account
administration
3) Background/criminal background
checks
4) Consolidated Omnibus Budget
Reconciliation Act (COBRA)
5) Pension benefits administration
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working at small-staff-sized organizations were more likely to report in-house staffing
of strategic business planning, organization development, recruitment/staffing of
executives, health care benefits administration and temporary staffing. Small-staff-
sized organizations were also more likely than either medium- or large-staff-sized
organizations to provide in-house staffing of employee relocation (78% compared
with 56% and 46%), executive development and coaching (50% compared with 33%
and 28%) and employee assistance/counseling (29% compared with 13% and 11%).
Retirement planning (i.e., educating employees) was more likely to be staffed in-house
by medium-staff-sized firms (30%) than by large-staff-sized organizations (15%). Both
large (96%) and medium organizations (93%) were more likely than small organizations
(84%) to report that policy development and/or implementation was staffed in-house.
By contrast, large organizations (73%) were more likely than either medium (54%) or
small organizations (50%) to report carrying out payroll administration in-house.
Several differences were identified when the in-house HR responsibility data were analyzed
by employment sector. The HR responsibilities that differed by organization sector in
the percentages of organizations that staffed them in-house were payroll administration,
employee relocation, recruitment/staffing of executives, recruitment/staffing of employees
(nonexecutives), work/life balance benefits administration, wellness programs, COBRA,
health care benefits administration, temporary staffing and background/criminal
background checks. Respondents from government agencies (76%) were more likely than
those from privately owned for-profit organizations (53%) to report in-house staffing of
payroll administration. HR professionals from publicly owned for-profit organizations
(36%) were less likely than those from government agencies (87%), nonprofit organizations
(76%) or privately owned for-profit organizations (65%) to report in-house staffing of
employee relocation activities. HR professionals from nonprofit organizations (90%) weremore likely than those from privately owned for-profit organizations (75%) or publicly
owned for-profit organizations (74%) to report that staffing recruitment of nonexecutive
employees was conducted in-house, whereas respondents from nonprofit organizations
(61%) and privately owned for-profit organizations (56%) were more likely than those
from publicly owned for-profit organizations (38%) to report that recruitment/staffing
of executives was conducted in-house. Work/life balance benefits administration was
more likely to be conducted in-house by nonprofit organizations (67%) than by publicly
owned for-profit organizations (43%). Wellness programs were more likely to be staffed
in-house by nonprofit organizations (64%) than by privately owned for-profit organizations
(39%), government agencies (34%) or publicly owned for-profit organizations (28%). HR
professionals from government agencies (56%) and nonprofit organizations (51%) were
more likely than those from publicly owned for-profit organizations (31%) or privatelyowned for-profit organizations (31%) to report in-house staffing of responsibilities related
to COBRA. Respondents from nonprofit organizations (43%) and privately owned for-
profit organizations (38%) were more likely than those from publicly owned for-profit
organizations (23%) to report that health care benefits administration was staffed in-house.
HR professionals from nonprofit organizations and government agencies were more likely
than those from publicly owned for-profit organizations to report in-house staffing of
duties related to temporary staffing and performing background/criminal background
checks. These data are shown in Table 7.
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Table 8 | HR Responsibilities Outsourced Partially (by Organization Staff Size)
Overall Small
(1 to 99 employees)
Medium
(100 to 499 employees)
Large
(500+ employees)
Differences by Organization
Staff Size
Executive development and
coaching (n = 203)
50% 36% 50% 60% Large > small
Risk management/worker’s
compensation (n = 221)
46% 37% 49% 52% Large > small
Health care benefits
administration (n = 201)
40% 32% 46% 41% Medium > small
Recruitment/staffing of executives
(n = 199)
40% 32% 41% 53% Large > small
Policy development and/or
implementation (n = 40)
8% 14% 6% 4% Small > large
Strategic business planning
(n = 39)
8% 2% 10% 14% Medium, large > small
Note: Data sorted in descending order by “overall” column. Table includes only response options for which there were significant differences. Sample size is based on the actual number ofrespondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Table 7 | HR Responsibilities Staffed Completely In-House (by Organization Sector)
Overall Publicly Owned
For-Profit
Privately Owned
For-Profit
Nonprofit Government Differences by
Organization Sector
Payroll administration (n = 298) 59% 60% 53% 62% 76% Government > privately owned for-profit
Employee relocation (n = 165) 57% 36% 65% 76% 87% Privately owned for-profit, nonprofit,
government > publicly owned for-profit
Recruitment/staffing of executives
(n = 264)
54% 38% 56% 61% 61% Privately owned for-profit, nonprofit >
publicly owned for-profit
Recruitment/staffing of employees
(nonexecutives) (n = 397)
54% 74% 75% 90% 86% Nonprofit > publicly owned for-profit,
privately owned for-profit
Work/life balance benefits
administration (n = 177)
53% 43% 54% 67% 44% Nonprofit > publicly owned for-profit
Wellness programs (n = 149) 40% 28% 39% 64% 34% Nonprofit > publicly owned for-profit,privately owned for-profit, government
Consolidated Omnibus Budget
Reconciliation Act (COBRA)
(n = 175)
36% 31% 31% 51% 56% Nonprofit > publicly owned for-profit,
privately owned for-profit
Government > publicly owned for-profit,
privately owned for-profit
Health care benefits administration
(n = 168)
33% 23% 38% 43% 25% Privately owned for-profit, nonprofit >
publicly owned for-profit
Temporary staffing (n = 136) 30% 19% 30% 45% 45% Nonprofit, government > publicly owned
for-profit
Background/criminal background
checks (n = 120)
26% 15% 25% 38% 43% Nonprofit, government > publicly owned
for-profit
Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Table includes only response options for which there were significant differences. Sample size is
based on the actual number of respondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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Partially Outsourced HR Responsibilities
Table 8 depicts the differences by organization staff size in the percentages of
organizations that partially outsourced various HR responsibilities. According to HR
professionals, large-staff-sized organizations were more likely than small-staff-sized
organizations to have partially outsourced executive development and coaching (60%
compared with 36%), risk management/worker’s compensation (52% compared with
37%), recruitment/staffing of executives (53% compared with 32%) and strategic
business planning (14% compared with 2%). Medium organizations were more
likely than small organizations to report partially outsourcing health care benefits
administration (46% compared with 32%) and strategic business planning (10%
compared with 2%). By contrast, HR professionals from small organizations (14%) were
more likely than their counterparts at large organizations (4%) to report that policy
development and/or implementation was partially outsourced.
As shown in Table 9, differences emerged among organization sectors for HR
responsibilities that were partially outsourced. HR professionals from government
agencies (50%) were more likely than their counterparts at privately owned for-profit
organizations (26%) to report that their human resource information systems (HRIS)
development was partially outsourced. According to HR professionals, pension benefits
administration was more likely to be partially outsourced by privately owned for-profit
organizations (51%) than by publicly owned for-profit organizations (32%). Partial
outsourcing of recruitment/staffing of executives and wellness programs was more
likely to be reported by HR professionals from publicly owned for-profit organizations
(54% and 47%, respectively) than by HR professionals from nonprofit organizations
Table 9 | HR Responsibilities Outsourced Partially (by Organization Sector)
Overall Publicly Owned
For-Profit
Privately Owned
For-Profit
Nonprofit Government Differences by
Organization Sector
Pension benefits administration
(n = 184)
44% 32% 51% 48% 32% Privately owned for-profit >
publicly owned for-profit
Recruitment/staffing of
executives (n = 199)
40% 54% 39% 31% 37% Publicly owned for-profit >
nonprofit
Wellness programs
(n = 144)
38% 47% 39% 21% 44% Publicly owned for-profit >
nonprofit
Human resource information
systems (HRIS) development
(i.e., software selection and
implementation)
(n = 131)
30% 33% 26% 24% 50% Government > privately owned
for-profit
Employee relocation
(n = 75)
26% 35% 19% 24% 13% Publicly owned for-profit >
privately owned for-profit
Recruitment/staffing of
employees (nonexecutives)
(n = 104)
21% 25% 24% 9% 14% Publicly owned for-profit,
privately owned for-profit >
nonprofit
Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Table includes only response options for which there were significant differences. Sample size isbased on the actual number of respondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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(31% and 21%, respectively). Respondents from publicly owned for-profit organizations
(35%) were more likely than those from privately owned for-profit organizations (19%)
to report partially outsourcing responsibilities related to employee relocation. HR
professionals from publicly owned for-profit organizations (25%) and privately owned for-
profit organizations (24%) were more likely than those from nonprofit organizations (9%)
to report that recruitment/staffing of nonexecutive employees was partially outsourced.
Table 10 | HR Responsibilities Outsourced Completely (by Organization Staff Size)
Overall Small
(1 to 99 employees)
Medium
(100 to 499 employees)
Large
(500+ employees)
Differences by
Organization Staff Size
Employee assistance/counseling (n = 263) 62% 49% 65% 70% Medium, large > small
Flexible spending account administration
(n = 248)
60% 51% 62% 68% Large > small
Temporary staffing (n = 112) 25% 20% 21% 37% Large > small, medium
Employee relocation (n = 52) 18% 5% 19% 26% Medium, large > small
Payroll administration (n = 48) 10% 14% 10% 2% Small, medium > large
Note: Data sorted in descending order by “overall” column. Table includes only response options for which there were significant differences. Sample size is based on the actual number ofrespondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Table 11 | HR Responsibilities Outsourced Completely (by Organization Sector)
Overall Publicly Owned
For-Profit
Privately Owned
For-Profit
Nonprofit Government Differences by
Organization Sector
Background/criminal
background checks (n = 240)
52% 64% 55% 45% 19% Publicly owned for-profit >
government
Privately owned for-profit >
government
Nonprofit > government
Consolidated Omnibus Budget
Reconciliation Act (COBRA)
(n = 228)
46% 48% 52% 33% 28% Privately owned for-profit > nonprofit,
government
Pension benefits administration
(n = 138)
33% 44% 29% 23% 37% Publicly owned for-profit > nonprofit
Health care benefits
administration (n = 135)
27% 39% 24% 11% 35% Publicly owned for-profit >
privately owned for-profit, nonprofit
Government > nonprofit
Temporary staffing (n = 112) 25% 39% 23% 15% 18% Publicly owned for-profit > privately
owned for-profit, nonprofit
Employee relocation (n = 52) 18% 29% 15% 0% 0% Publicly owned for-profit > privately
owned for-profit
Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Table includes only response options for which there were significant differences. Sample size isbased on the actual number of respondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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Completely Outsourced HR Responsibilities
Table 10 shows the differences in the percentages of organizations by staff size that
reported completely outsourcing various HR responsibilities. HR professionals from
large- and medium-staff-sized organizations were more likely than those from small-
staff-sized organizations to report completely outsourcing employee assistance/
counseling (70% and 65% compared with 49%, respectively) and employee relocation
(26% and 19% compared with 5%). Large organizations (68%) were more likely than
small organizations (51%) to report completely outsourcing flexible spending account
administration and were also more likely than either medium or small organizations
(37% compared with 21% and 20%, respectively) to report completely outsourcing
temporary staffing. By contrast, HR professionals at small organizations (14%)
and medium organizations (10%) were more likely than their counterparts at large
organizations (2%) to report completely outsourcing payroll administration.
HR professionals from publicly owned for-profit organizations (64%), privately owned
for-profit organizations (55%) and nonprofit organizations (45%) were more likely than
their counterparts at government agencies (19%) to report completely outsourcing
background/criminal background checks. Respondents from privately owned for-profit
organizations (52%) were more likely than those from nonprofit organizations (33%)
or government agencies (28%) to report completely outsourcing responsibilities related
to COBRA. HR professionals from publicly owned for-profit organizations (44%)
were more likely than those from nonprofit organizations (23%) to report completely
outsourcing pension benefits administration. Employee relocation was more likely to
be completely outsourced by publicly owned for-profit organizations (29%) than by
privately owned for-profit organizations (15%). HR professionals from publicly owned
for-profit organizations (39%) were more likely than those from privately owned for-
profit organizations (24%) and those from publicly owned for-profit organizations
and government agencies (both 35%) were more likely than their counterparts at
nonprofit organizations (11%) to report completely outsourcing health care benefits
administration. According to HR professionals, temporary staffing was more likely to
be completely outsourced by publicly owned for-profit organizations (39%) than by
privately owned for-profit organizations (23%) or nonprofit agencies (15%). These data
are shown in Table 11.
Decisions About Sourcing HR Responsibilities
Given the myriad HR functional areas and the limits to most organizations’ HR
department/function headcount, what factors contribute to decisions about sourcing
HR responsibilities? When asked how their organizations determine which HR roles
and/or responsibilities will be staffed within the organization rather than outsourced
or eliminated, the largest percentage of HR professionals (50%) reported that the
organization’s business strategy contributes to the decision. These data are shown
Figure 1. This suggests that for a substantial percentage of organizations, HR function
staffing decisions are aligned with business operating plans, providing support for a
strategic partnership between HR and the organization as a whole. The next two largest
percentages of HR professionals reported that competencies of HR staff (45%) and the
organization’s workforce management needs (40%) determined which specific HR roles
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and/or responsibilities would be staffed, outsourced or eliminated. Only one out of 10
HR professionals responded that their organization made decisions about sourcing HR
roles and/or functional areas based on HR consultant evaluations and/or advice (11%)
or employee feedback and requests (11%), indicating that few organizations make HR
staffing or outsourcing decisions based on input from outside of the organization or from
the bottom up. Trellis Usher-Mays, founder and chief people strategist, T.R. Ellis Group
LLC, and member of SHRM’s Organizational Development Special Expertise Panel,
comments, “Corporate leaders and HR practitioners are wising up to the fact that the HR
function is critical to driving sustainable business results. As HR continues to transform
itself from a transactional to a strategic partner, it becomes even more important to
make sure that practitioners are building skills that enable them to think strategically
and systemically, build and manage relationships and thoroughly analyze organizational
issues. Part of HR’s value proposition has to be our intimate knowledge of our internal
Figure 1 | How Do Organizations Decide Which HR Roles and/or Functional Areas Will Be Staffed?
36%
45%
20%
50%
23%
40%
11%
11%
HR department staffing budget
Competencies of HR staff
Internal audit or review of HR processes
Organization’s business strategy
Ongoing established staffing of the role and/or responsibility
Organization’s workforce management needs
Employee feedback and requests
HR consultant evaluations and/or advice
(n = 509)
Note: Percentages do not total 100% due to multiple response options.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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customers’ business and industry and not simply our functional HR expertise. The more
closely aligned HR is to the organization’s strategic objectives, the more value it can add
and the less we have to worry about being outsourced or eliminated.”
Organization staff size has an impact on factors determining which HR roles and
functional areas will be staffed within the organization. HR professionals from large
organizations (46%) were more likely than their counterparts from small organizations
(25%) to report that the HR department’s staffing budget was a factor in determining
which HR roles/functional areas would be staffed. This finding may be related to the
prevalence of HR specialists versus HR generalists in large organizations compared
with small organizations. In addition, large organizations were more likely than small
organizations or medium organizations to report that an internal audit or review of
HR processes (32% compared with 13% and 16%, respectively) or HR consultant
evaluations and/or advice (19% compared with 8% and 6%, respectively) contributed to
their organizations’ decisions about staffing HR roles and/or functional areas. These
findings are not surprising, given that large organizations may have more of a need as
well as more resources such as time and money to allow them to undertake a formal
internal audit of HR processes or contract the services of HR consultants to review HR
processes. These data are depicted in Table 12.
Organization sector also had an impact on factors determining the HR roles and/or
functional areas to be staffed (Table 13). An organization’s business strategy factored
into decisions about HR role/functional area staffing for 62% of publicly owned for-
profit organizations compared with 45% of privately owned for-profit organizations
and 38% of government agencies. Publicly owned for-profit organizations may be
more likely to expect operating plan alignment across the organization’s divisions
and departments, including human resource functions. More than two-thirds of HRprofessionals from government agencies (69%), compared with only about one-third
of HR professionals from publicly owned for-profit organizations (35%), reported
that competencies of HR staff were a factor in determining staffing of HR roles and/
or functional areas. This suggests that, to a certain extent, HR professionals who are
employed in the government sector may have some degree of influence over the HR
Table 12 | Factors Determining the HR Roles and/or Functional Areas to Be Staffed (by Organization Staff Size)
Overall
(n = 509)
Small
(1 to 99 employees)
(n = 131)
Medium
(100 to 499 employees)
(n = 167)
Large
(500+ employees)
(n = 134)
Differences
by Organization
Staff Size
HR department staffing budget 36% 25% 37% 46% Large > small
Internal audit or review of HR
processes
20% 13% 16% 32% Large > small, medium
HR consultant evaluations and/
or advising
11% 8% 6% 19% Large > small, medium
Note: Data sorted in descending order by “overall” column. Percentages do not total 100% due to multiple response options. Sample size is based on the actual number of respondents byorganization staff size who answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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responsibilities that will be staffed in-house through the experience that they bring to
and/or attain in the position. HR consultant evaluations and/or advice determined
staffing for HR roles and/or functional areas for 18% of publicly owned for-profit
organizations compared with 8% of privately owned for-profit organizations. This
finding may be due in part to publicly owned for-profit organizations having more
resources available to engage the services of HR consultants.
Assignment of HR Responsibilities
How are HR responsibilities distributed amongst HR function and/or department
staff? More than one-quarter of respondents (29%) reported that their organizations
did not have more than one HR staff person, suggesting that all HR roles and/or
responsibilities that were carried out in-house by their organizations were handled
by a single HR function employee. This is logical, given that of the respondents who
reported that their organizations did not have more than one HR staff person, 68%
were from small-staff-sized organizations and 32% were from medium-staff-sized
organizations. Among organizations with multiple HR staff, nearly two-thirds of HR
professionals (63%) indicated that their HR staff simultaneously handled multiple
HR functional areas for the organization, i.e., generalist roles. About one-quarter of
respondents (24%) responded that their organization’s HR staff were hired into and
advanced within single HR functional area tracks based on their experience and/or
education. Just 1% of HR professionals reported that their HR staff had scheduled
rotations among HR functional areas supported by the organization’s HR department/
function. These data, shown in Figure 2, indicate that HR professionals who are
employed as specialists or within limited HR functional areas may have some degree of
flexibility for selecting the responsibilities that they perform.
Both nonprofit (42%) and privately owned for-profit organizations (38%) were morelikely than government agencies (12%) and publicly owned for-profit organizations
(11%) to report that their organizations did not have more than one HR staff person.
Unsurprisingly, small organizations (65%) were more likely than medium organizations
Table 13 | Factors Determining the HR Roles and/or Functional Areas to Be Staffed (by Organization Sector)
Overall
(n = 509)
Publicly Owned
For-Profit
(n = 109)
Privately Owned
For-Profit
(n = 221)
Nonprofit
(n = 65)
Government
(n = 41)
Differences by
Organization Sector
Organization’s business
strategy
50% 62% 45% 52% 38% Publicly owned for-profit >
privately owned for-profit,government
Competencies of HR staff 45% 35% 49% 46% 69% Government > publicly owned
for-profit
HR consultant evaluations
and/or advising
11% 18% 8% 7% 17% Publicly owned for-profit >
privately owned for-profit
Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Percentages do not total 100% due to multiple response options. Sample size is based onthe actual number of respondents by organization sector who answered this question using the response options provided. Table includes only response options for which there were significantdifferences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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(24%) and large organizations (1%), and medium organizations were more likely than
large organizations, to report that their organizations did not have more than one HR
staff person.6
Among organizations with multiple HR staff, differences emerged by organization staff
size in the percentages of organizations that reported that their HR staff simultaneously
handled multiple HR functional areas for the organization (Table 14). Medium
organizations (71%) were more likely than large organizations (57%) to report that their
HR staff held generalist roles. There were no significant differences by organization
sector.
More often than not, among organizations with multiple HR staff, some—if not all—of
these staff operate from a single location. More than two-thirds of HR professionals
from organizations with multiple HR staff (69%) reported that the organization’s HR
department was primarily centralized (Figure 3). Another 21% indicated that they weresplit between corporate headquarters and field offices, and only 10% reported that their
organization’s HR staff were primarily decentralized.
For many organizations, HR departments/functions serve as default owners for
responsibilities that are not directly HR-related but are necessary to operations and do
not have a more suitable department match. In addition to their responsibilities related
1%
24%
63%
3%
9%
HR staff have rotations among HR functional areas
HR staff are hired into single HR functional tracks
HR staff simultaneously handle multiple roles
Other
HR staff may request to switch HR functional area tracks
Figure 2 | How Are HR Staff Roles and/or Responsibilities Assigned?
(n = 361)
Note: Excludes HR professionals who responded, “N/A, my organization does not have more than one HR staff person.”Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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to HR functions, one-half of HR professionals (50%) reported having other non-HR
duties. This may include facilities, IT, administration and other responsibilities.7
HR professionals from small organizations (79%) were more likely than those from
medium (48%) and large organizations (22%), and HR professionals from medium
organizations were more likely than their counterparts from large organizations, to
report that they had non-HR duties in addition to their HR responsibilities (Table 15).
Organizations with fewer staff are more likely to assign cross-functional roles to HR
departments or functions than larger organizations, which can more easily establish
Table 14 | Factors Determining HR Staff Assignments of HR Roles and/or Responsibilities (by Organization Staff Size)
Overall
(n = 361)
Small
(1 to 99 employees)
(n = 50)
Medium
(100 to 499 employees)
(n = 136)
Large
(500+ employees)
(n = 138)
Differences
by Organization
Staff Size
HR staff simultaneously handle
multiple HR functional areas for
the organization (i.e., generalist
roles)
63% 68% 71% 57% Medium > large
Note: Excludes HR professionals who responded, “N/A, my organization does not have more than one HR staff person.” Sample size is based on the actual number of respondents by organizationstaff size who answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Primarily centralized
69%
21%
10%
Split between headquarters
and field offices
Primarily decentralized
Figure 3 | Where Are HR Staff Located Within the Organization?
(n = 345)
Note: Excludes HR professionals who responded, “N/A, my organization does not have more than one HR staff person.”Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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departmental duty boundaries because they are likely to have other, more appropriate
departments with available headcount for handling non-HR duties.
HR professionals from privately owned for-profit organizations (59%) as well as those
from nonprofit organizations (59%) were more likely than those from publicly owned
for-profit organizations (37%) and government agencies (26%) to indicate having
non-HR duties in addition to their HR responsibilities (Table 16). Staff size within the
sectors may have an impact on the likelihood of HR functions or departments being
tasked with non-HR related responsibilities.
HR FUNCTION/DEPARTMENT STAFFING CHANGES
What are organizations’ planned headcount changes for the short-term future?
Although the majority of HR professionals (72%) reported that their HR staff
headcount will most likely remain the same during the next 12 months, one-quarterof respondents (25%) indicated that their HR staff headcount will grow during that
timeframe (Figure 4). Very few organizations—just 3%—expected a decrease in HR
staff numbers. Even in a slowing economy, HR functions or departments may be more
resistant to downsizing due to the essential nature of their responsibilities on behalf of
the organization’s workforce. This may be even more the case for organizations whose
HR departments or functions are comprised of generalist roles and where multiple HR
roles and responsibilities can be assigned to each HR staff person.
Table 15 | HR Staff Have Non-HR Duties (by Organization Staff Size)
Overall
(n = 508)
Small
(1 to 99 employees)
(n = 141)
Medium
(100 to 499 employees)
(n = 172)
Large
(500+ employees)
(n = 138)
Differences
by Organization
Staff Size
HR has non-HR duties 50% 79% 48% 22% Small > medium, large
Medium > large
Note: Excludes HR professionals who responded “not sure” to this item. Sample size is based on the actual number of respondents by organization staff size who answered this question using theresponse options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Table 16 | HR Staff Have Non-HR Duties (by Organization Sector)
Overall
(n = 508)
Publicly Owned
For-Profit
(n = 114)
Privately Owned
For-Profit
(n = 234)
Nonprofit
(n = 71)
Government
(n = 42)
Differences
by Organization Sector
HR has non-HR duties 50% 37% 59% 59% 26% Privately owned for-profit > publicly
owned for-profit, government
Nonprofit > publicly owned
for-profit, government
Note: Excludes HR professionals who responded “not sure” to this item and those from “other” organization sectors. Sample size is based on the actual number of respondents by organization sectorwho answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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HR headcount will increase
25%
72%
3%
HR headcount will remain the same HR headcount will decrease
HR professionals from large organizations (36%) were more likely than those from
medium (21%) or small organizations (16%) to report that their organization’s HR staff
headcount was expected to increase in the 12 months following the survey. Conversely,
small organizations (82%) and medium organizations (76%) were more likely than large
organizations (60%) to report that their organization’s HR headcount was expected to
remain the same in the upcoming 12 months. These data are depicted in Table 17.
Figure 4 | Will the HR Staff Headcount Change in the Next 12 Months?
(n = 430)
Note: Excludes HR professionals who responded “not sure” to this item.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Table 17 | HR Staff Headcount Changes Expected for Next 12 Months (by Organization Staff Size)
Overall
(n = 430)
Small
(1 to 99 employees)
(n = 141)
Medium
(100 to 499 employees)
(n = 172)
Large
(500+ employees)
(n = 138)
Differences
by Organization
Staff Size
HR headcount will increase 25% 16% 21% 36% Large > small, medium
HR headcount will remain the same 72% 82% 76% 60% Small > large
Medium > large
HR headcount will decrease 3% 2% 3% 3%
Note: Excludes HR professionals who responded “not sure” to this item. Sample size is based on the actual number of respondents by organization staff size who answered this question using theresponse options provided.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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As shown in Table 18, there were fewer differences in changes to HR headcount by
organization sector. Although a small percentage of organizations overall expected
a decrease in HR headcount, HR professionals from publicly owned for-profit
organizations (8%) were more likely than those from privately owned for-profit
organizations (1%) to report that their organization’s HR staff headcount was
expected to decrease in the 12 months following the survey. Publicly owned for-profit
organizations may be more sensitive to mergers, acquisitions and large-scale downsizing
efforts that might include HR department staff as well as other line operations within
the organization.
Among HR professionals employed by organizations that expected to increase their
number of HR staff over the next year, the largest percentage (49%) reported that their
decision to hire additional HR staff was due to the HR department/function being
understaffed for current workforce size. This is consistent with the traditional view
of the HR department size as a ratio to the total number of organization employees.
However, more than two of out five HR professionals (44%) that were expanding their
HR functions/departments reported that the organizational business strategy created
new priorities for HR roles and/or functions, requiring the hiring of additional HR
staff. This finding, again, supports the notion that within many organizations, the HR
function/department operations are closely aligned with the organization’s business
operations. These data are illustrated in Figure 5.
Among HR professionals employed by organizations that expected to increase their
HR staff headcount in the next 12 months, those from publicly owned for-profit
organizations (32%) were more likely than those from privately owned for-profit
organizations (6%) to report that a shift in workforce demographics and/or needs
contributed to the decision to hire additional staff (Table 19). The U.S. workforce ischanging through an aging baby boom generation, the work/life balance demands
of younger workers and an increasingly diverse general population. According to
employees, benefits tied with compensation as the top-rated most important aspect
contributing to job satisfaction.8 Further, workers aged 35 and younger and workers
employed by large-staff-sized organizations placed the greatest importance on benefits
Table 18 | HR Staff Headcount Changes Expected for Next 12 Months (by Organization Sector)
Overall
(n = 430)
Publicly Owned
For-Profit
(n = 92)
Privately Owned
For-Profit
(n = 205)
Nonprofit
(n = 63)
Government
(n = 34)
Differences by Organizatio
Sector
HR headcount will increase 25% 27% 25% 22% 18%
HR headcount will remain
the same
72% 65% 74% 76% 82%
HR headcount will
decrease
3% 8% 1% 2% 0% Publicly owned for-profit >
privately owned for-profit
Note: Excludes “other” organization sectors and HR professionals who responded “not sure” to this item. Sample size is based on the actual number of respondents by organization sector whoanswered this question using the response options provided.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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HR department/function is understaffed for current workforce size
Organizational business strategy created new priorities for HR roles and/or functions
HR department/function is expanding in anticipation of increase in workforce
Unaccompplished work projects require adding staff in order to meet business goals
HR department/function is expanding to manage recruitment and hiring needs following
high turnover in workforce
HR department/function needs new or additional staff to manage the technology systems
that support HR functional areas
HR department/function staffing structure requires new or additional managers or
executive-level staff
Shift in workforce demographics and/or needs requires additional HR staff to manage
related programs
Previously outsourced HR functions are being pulled in-house
49%
44%
43%
23%
22%
18%
16%
12%
3%
Table 19 | Factors Contributing to Decision to Hire Additional HR Staff (by Organization Sector)
Overall
(n = 107)
Publicly Owned
For-Profit
(n = 25)
Privately Owned
For-Profit
(n = 52)
Nonprofit
(n = 14)
Government
(n = 6)
Differences
by Organization
Sector
Shift in workforce demographics and/
or needs requires additional HR staff to
manage related programs
12% 32% 6% 7% 0% Publicly owned for-profit >
privately owned for-profit
Note: Includes HR professionals who indicated that their HR staff headcount would increase over the next 12 months. Excludes “other” organization sectors. Sample size is based on the actualnumber of respondents by organization sector who answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
Figure 5 | Hiring Additional HR Staff: Which HR and Organizational Factors Matter?
(n = 107)
Note: Includes HR professionals who indicated that their HR staff headcount would increase over the next 12 months. Percentages do not total 100% due to multiple response options.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)
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as a factor in job satisfaction. Publicly owned for-profit organizations may be under
more pressure to customize their benefits programs to meet the benefits demands of the
workforce, potentially requiring specialized HR staff to manage them.
HR’S ROLE WITHIN THE ORGANIZATION
Strategic vs. Transactional Role
How do HR professionals view their HR function/department’s role within their
organization? As shown in Figure 6, nearly two-thirds of HR professionals (61%)
viewed their HR function/department’s role as equally strategic and transactional. One-
third of respondents (33%) reported that their HR function/department’s role was
primarily transactional, indicating that one out of three HR function/departments serve
a traditional HR role within organizations. Only 6% of HR professionals viewed their
HR function/department’s role within the organization as primarily strategic.
There were differences by both organization sector and organization staff size in HR
professionals’ perceptions of the HR function or department’s role. HR professionals
from publicly owned for-profit organizations (10%) were more likely than their
counterparts from privately owned for-profit organizations (3%) to report that they
viewed their HR function or department as having a primarily strategic role. HR
professionals from small organizations (42%) were more likely than those from large
organizations (26%) to report that they viewed their HR function or department as
having a primarily transactional role within their organization (Table 20). In smaller
organizations, the HR function or department—which may be
top related