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HR Department Benchmarks and Analysis 2007 A comprehensive survey-based report on the state of the human resources function.

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Page 1: Benchmark HR

HR Department Benchmarks and Analysis™ 2007A comprehensive survey-based report on the state of the human resources function.

Page 2: Benchmark HR

HR Department Benchmarksand Analysis™ 2007

Page 3: Benchmark HR

ii

HR Department Benchmarks and Analysis 2007

©2006 The Bureau of National Affairs, Inc. • Washington, DC

n ISSN 1540-2711 n

n ISBN 1-55871-541-X n

For inquiries about purchasing multiple copies of this report, please contact either:

Charles DeFilippo, Director of Business Development ([email protected])

or Joshua Joseph, Research Director([email protected]).

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iii©2006 The Bureau of National Affairs, Inc. • Washington, DC

Table of Contents

List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vi

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

About the Authors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xii

Chapter 1: Guide to Using This Report

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Report Features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Quick Chapter Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Frequently Used Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Study Design, Method, and Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Profile of Participating Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Chapter 2: HR Department Staffing

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

How It’s Measured: The HR Staff Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

How It’s Presented: Staff Ratio Charts and Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Staff Composition of the HR Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

HR Staff Ratios That Exclude Administrative Staff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

How It’s Measured: Nonclerical HR Staff Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Behind the Numbers: Using HR Staff Ratio Benchmarks Effectively . . . . . . . . . . . . . . . . . . 25

Impact of Contingent Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Impact of Activity Load . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

How It’s Measured: HR Activity Load Scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Specialists in Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Global Human Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Additional Trends in HR Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

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Chapter 3: HR Department Expenditures and Budgets

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

How It’s Measured: Per Capita HR Expenditures and Budgets . . . . . . . . . . . . . . . . . . . . . . 40

How It’s Presented: Per Capita HR Expenditures Charts and Tables . . . . . . . . . . . . . . . . . . 41

Budgeted HR Cost Per Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Projected Changes in Total HR Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

How It’s Measured: HR Budget as a Percent of Total Operating Cost . . . . . . . . . . . . . . . . . 50

HR Budgets and Total Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Behind the Numbers: Benchmarking HR Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Other Factors Affecting HR Expenditures and Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

How It’s Measured: HR Salary Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

HR Salaries and Total Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

HR Staff Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Budget Projections for Core HR Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Budgeting for HR Technology and Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Perspective: HR Technology: Getting Full Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Chapter 4: Measurement and Strategic Planning

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

HR Drivers and Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

What Does HR Measure? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

HR Specialists and Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Perspective: The Promise and Challenge of HRIS: Part I . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

HR Measurement and Planning in Aggregate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

How It’s Measured: Measurement and Planning Scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

HR’s Strategic Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Perspective: The Promise and Challenge of HRIS: Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

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Chapter 5: Outsourcing HR Activities and Programs

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Extent of Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

The Other Side of Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Perspective: When Outsourcing Arrangements Go Bad,

Firms Must Negotiate, Find Backup Vendors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Benefits and Employee Services Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Chapter 6: HR Activities

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Changes in HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Employment and Recruiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

Behind the Numbers: Activities and Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Strategic Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Training and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Employee Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

Perspective: Several Factors Drive Decisions on Performing HR Activities. . . . . . . . . . . . . 141

External Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Personnel / HR Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

Appendix

Survey Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

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List of Figures

Chapter 2: HR Department Staffing

Figure 2-1 HR Staff Ratios: 1996-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Figure 2-2a HR Staff Ratios for 2006 by Workforce Size. . . . . . . . . . . . . . . . . . . . . . . 17Figure 2-2b HR Staff Ratios for 2006 by Workforce Size. . . . . . . . . . . . . . . . . . . . . . . 17Figure 2-3a HR Staff Ratios for 2006 by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Figure 2-3b HR Staff Ratios for 2006 by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Figure 2-4 Composition of HR Department Staff. . . . . . . . . . . . . . . . . . . . . . . . . . . 20Figure 2-5 HR Staff Composition by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . 21Figure 2-6 Managerial/Professional HR Staff Ratios by Workforce Size . . . . . . . . . . 23Figure 2-7 Managerial/Professional HR Staff Ratios by Industry . . . . . . . . . . . . . . . 24Figure 2-8 HR’s Role in Hiring Contingent Workers . . . . . . . . . . . . . . . . . . . . . . . . . 27Figure 2-9 Median Staff Ratios by HR’s Role in Hiring Contingent Workers. . . . . . . 27Figure 2-10 HR Activity Load Scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Figure 2-11 Median HR Staff Ratio Adjusted for Activity Load Level . . . . . . . . . . . . . 29Figure 2-12 Prevalence of Human Resource Specialists by Area . . . . . . . . . . . . . . . . 31Figure 2-13 Prevalence of Human Resource Specialists by Workforce Size . . . . . . . . 32Figure 2-14 Locus of Design, Implementation, and Administration of Global HR Policy . . . . . . . . . . . . . . . . . . . . . . . . . 33Figure 2-15 Changes in HR Staff Levels: 2005 - 2006 . . . . . . . . . . . . . . . . . . . . . . . . 34Figure 2-16 Changes in HR Staff Levels: 1996 - 2006. . . . . . . . . . . . . . . . . . . . . . . . . 35

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Chapter 3: HR Department Expenditures and Budgets

Figure 3-1a Per Capita HR Expenditures Budgeted for 2006 by Workforce Size . . . . 43Figure 3-1b Per Capita HR Expenditures Budgeted for 2006 by Workforce Size . . . . 43Figure 3-2a Per Capita HR Expenditures Budgeted for 2006 by Industry . . . . . . . . . 44Figure 3-2b Per Capita HR Expenditures Budgeted for 2006 by Industry . . . . . . . . . 45Figure 3-3 Per Capita HR Expenditures by HR Activity Load. . . . . . . . . . . . . . . . . . . 46Figure 3-4 Median Per Capita HR Expenditures Adjusted for Activity Load Level . . 46Figure 3-5 Median Per Capita HR Expenditures for 2006 by Organization Level . . 47Figure 3-6 Median Budgeted Changes in HR Expenditures: 1996-2006 . . . . . . . . . 48Figure 3-7 Budgeted Changes in Total HR Expenditures: 2005 versus 2006 . . . . . . 49Figure 3-8 Budgeted Changes in Total HR Expenditures: 2005 versus 2006 . . . . . . 49Figure 3-9 HR Budget as a Percentage of Total Operating Costs: 1996-2006 . . . . . 51Figure 3-10a HR Budget as a Percentage of Total Operating Cost by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Figure 3-10b HR Budget as a Percentage of Total Operating Cost by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Figure 3-11a HR Budget as a Percentage of Total Operating Cost by Industry . . . . . . 53Figure 3-11b HR Budget as a Percentage of Total Operating Cost by Industry . . . . . . 54Figure 3-12 HR Budget as a Percent of Total Operating Cost by Reporting Relationship of HR Executive . . . . . . . . . . . . . . . . . . . . . . 56Figure 3-13 Per Capita HR Expenditure by Reporting Relationship of HR Executive . . . . . . . . . . . . . . . . . . . . . . . 57Figure 3-14 Median Per Capita HR Expenditures: “With” versus “Without” Contingent Workers. . . . . . . . . . . . . . . . . . . . 57Figure 3-15 HR Salary Ratio versus HR Staff Ratio: 1996-2006 . . . . . . . . . . . . . . . . . . 59Figure 3-16 HR Staff Salaries as Percentage of Total Salaries . . . . . . . . . . . . . . . . . . . 60Figure 3-17 Change in Median Staff Salaries: 1996-2006 . . . . . . . . . . . . . . . . . . . . . 61Figure 3-18 Projected Changes in 2007 Budget Allocation . . . . . . . . . . . . . . . . . . . . 63Figure 3-19 HR Technology and Budget Allocations by Workforce Size . . . . . . . . . . 65Figure 3-20 HR Technology and Budget Allocations by Industry . . . . . . . . . . . . . . . 65

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Chapter 4: Measurement and Strategic Planning

Figure 4-1 Top Criteria Management Uses to Evaluate HR Performance. . . . . . . . . 74Figure 4-2 Top HR Department Priorities for 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 77Figure 4-3 Frequency of HR Measurement and Planning . . . . . . . . . . . . . . . . . . . . 79Figure 4-4 Frequency of HR Measurement and Planning by Workforce Size. . . . . . 81Figure 4-5 Frequency of HR Measurement and Planning by Industry. . . . . . . . . . . 83Figure 4-6 HR Measurement and Planning: With and Without HRIS Specialists . . . 85Figure 4-7 HR Measurement and Planning Scale: Number of Areas that HR Measures Regularly . . . . . . . . . . . . . . . . . . . . 90Figure 4-8 HR Budget as a Percentage of Total Operating Cost by Areas Regularly Measured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Figure 4-9 Regular Use of HR Measurement Tools by Workforce Size . . . . . . . . . . . 92Figure 4-10 Reporting Relationships for HR Executives . . . . . . . . . . . . . . . . . . . . . . . 93Figure 4-11 Strategic Involvement of HR Departments Within the Organization . . . 94Figure 4-12 Level of Strategic Involvement by HR Reporting Relationship . . . . . . . . 95Figure 4-13 HR Involvement in Strategic Decisions by Number of HR Measurement and Planning Activities . . . . . . . . . . . . 96

Chapter 5: Outsourcing HR Activities and Programs

Figure 5-1 Prevalence of Outsourcing: 1997 - 2006 . . . . . . . . . . . . . . . . . . . . . . . 102Figure 5-2 Prevalence of Outsourcing by Industry Sector . . . . . . . . . . . . . . . . . . . 103Figure 5-3 Most Commonly Outsourced HR Activities . . . . . . . . . . . . . . . . . . . . . 104Figure 5-4 Most Commonly Outsourced Activities by Workforce Size . . . . . . . . . 105Figure 5-5 HR Departments That Have Brought An Outsourced Activity Back in House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106Figure 5-6 Top Motives for Benefits and Employee Services Outsourcing. . . . . . . 111Figure 5-7 Motives for Outsourcing Benefits and Employee Services Activities by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112Figure 5-8 Overall Ratings of Outsourcing Success by Status of Activity Prior to Outsourcing. . . . . . . . . . . . . . . . . . . . . . . 113Figure 5-9 Ratings of Outsourcing Initiatives by Years Outsourced. . . . . . . . . . . . 113Figure 5-10 Favorability of HR Outsourcing Initiatives on Key Criteria . . . . . . . . . . 115Figure 5-11 Outsourcing Initiatives that Involve HR Staff Reductions . . . . . . . . . . . 116Figure 5-12 Who Initiated the Outsourcing Decision. . . . . . . . . . . . . . . . . . . . . . . . 116Figure 5-13 Proportion of Activity Outsourced to Vendor . . . . . . . . . . . . . . . . . . . . 117

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Chapter 6: HR Activities

Figure 6-1 Changes in HR Responsibilities Within the Past Year . . . . . . . . . . . . . . 122Figure 6-2 Changes in HR Responsibilities: 1996-2006 . . . . . . . . . . . . . . . . . . . . . 123Figure 6-3 Employment and Recruiting – Who Handles It?. . . . . . . . . . . . . . . . . . 125Figure 6-4 Employment and Recruiting by Workforce Size . . . . . . . . . . . . . . . . . . 126Figure 6-5 Strategic Planning – Who Handles It?. . . . . . . . . . . . . . . . . . . . . . . . . . 128Figure 6-6 Strategic Planning by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . 129Figure 6-7 Training and Development – Who Handles It?. . . . . . . . . . . . . . . . . . . 130Figure 6-8 Training and Development by Workforce Size . . . . . . . . . . . . . . . . . . . 131Figure 6-9 Compensation – Who Handles It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132Figure 6-10 Compensation by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133Figure 6-11 Benefits – Who Handles It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134Figure 6-12 Benefits by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135Figure 6-13 Employee Services – Who Handles It? . . . . . . . . . . . . . . . . . . . . . . . . . 136Figure 6-14 Employee Services by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . 137Figure 6-15 Employee Relations – Who Handles It? . . . . . . . . . . . . . . . . . . . . . . . . . 139Figure 6-16 Employee Relations by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . 140Figure 6-17 External Relations – Who Handles It? . . . . . . . . . . . . . . . . . . . . . . . . . . 142Figure 6-18 External Relations by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . 143Figure 6-19 Personnel/HR Records – Who Handles It?. . . . . . . . . . . . . . . . . . . . . . . 144Figure 6-20 Personnel/HR Records by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . 145Figure 6-21 Health and Safety – Who Handles It? . . . . . . . . . . . . . . . . . . . . . . . . . . 146Figure 6-22 Health and Safety by Worforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

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Acknowledgements

Thank you to the members of our expert Advisory Group for your time, thoughtful comments, and willingness to collaborate with us on the 2007 HR Department Benchmarks and Analysis Survey and report. Your insights, critiques, and encouragement added substantially to this effort and to the final result.

The data collection effort for the Survey — including programming and Web hosting — was managed and conducted by IntelliSurvey, Inc. They provided the highest level of quality and service, while developing a product that fulfilled all our requirements. A special thanks to Michael Endres and Jonathan Ephram.

Laura Lloyd-Henry of design25 graphics pulled it all together beautifully, designing and laying out the report with patience and thoughtfulness.

And, finally, our special thanks to the HR executives who participated in this survey. It was their cooperation in taking this somewhat lengthy and comprehensive survey, despite their busy schedules, that made this report possible.

Jacqueline M. Blanchard, SPHRPrincipalMHRP Associates

Michael F. Cassidy, Ph.D.Professor, School of BusinessMarymount University

Charles H. Fay, Ph.D.Professor of Human Resource ManagementChair, HRM DepartmentSchool of Management and Labor RelationsRutgers, The State University of New Jersey

David Harvey Jr.HR CounselPublix Super Markets, Inc.

Jay J. JamrogExecutive DirectorHuman Resource Institute

Robert L. Mathis, Ph.D., SPHRProfessor Emeritus of ManagementUniversity of Nebraska at Omaha

Namrata MundhraHuman Resource Management ConsultingBuck Consultants

Howard Risher, Ph.D.Private Consultant on Pay and Performance

David StokesHR ManagerBattelle Memorial Institute

Allison Vaillancourt, Ph.D., SPHRAssociate Vice PresidentHuman ResourcesThe University of Arizona

Lois A. Vitt, Ph.D.DirectorInsitute for Socio-Financial Studies

James WattPresidentEmployee Benefit Solutions, Inc.

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Chapter 1

Guide to Using This Report

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HR Department Benchmarks and Analysis 2007

©�006 The Bureau of National Affairs, Inc. • Washington, DC

Overview

As it has for over two decades, HR Department Benchmarks and Analysis 2007 focuses on both traditional HR functions and emerging issues in HR staffing, expenditures, measurement, outsourcing, and related areas. Beyond providing respected metrics and analysis in these areas, the report identifies factors that are actionably linked to more positive outcomes in HR and organization wide.

Objectives

The report aims to help HR professionals use data more effectively, thereby enhancing contributions to organizational success. To aid in these efforts, metrics are clearly defined, results are rigorously analyzed, and their importance is discussed in the context of other survey findings, examples, and commentary from outside experts.

The analysis and discussion of findings from the 2007 report help to inform important HR decisions and answer practical questions such as:

n What are the normal ranges for key HR staffing and expenditure metrics and how do industry, workforce size, and other factors affect benchmark comparisons?

n How does responsibility for hiring and processing contingent workers affect HR department staffing and budget numbers?

n How can HR departments get greater value from their information systems?

n What do HR executives perceive as managements’ top criteria for evaluating their performance and what are the implications for HR priorities and measurement?

n Under what conditions do organizations bring outsourced activities back in house and what steps should be taken when outsourcing initiatives “go bad?”

To help readers more easily find and use information in this report, the remainder of this chapter summarizes (1) report features, (2) organization of chapters, (3) frequently used terms, (4) the survey methodology, and (5) demographics of participating employers.

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Chapter 1: Guide to Using this Report

�©�006 The Bureau of National Affairs, Inc. • Washington, DC

Report Features

HR Department Benchmarks and Analysis 2007 has a number of features that make the research results both useful and easy to access. These include:

n Accessible metrics. To insure accurate benchmarking to the reports metrics, each chapter has select pages that give the essential details of “How It’s Measured.”

n Clear organization. Each chapter begins with an overview and highlights of key findings. Sidebars and notes in the text identify related information in other chapters.

n Focused perspective articles. Under the guidance of our research staff, seasoned BNA reporters interview experts and thought leaders on topics that complement the survey results. This year’s perspective articles focus on effective benchmarking, getting more out of HRIS technology, and addressing sub-par outsourcing initiatives.

n Demographic profile of participating organizations. To provide added context for the survey results, we summarize the demographics of surveyed employers. Categories include industry, workforce size, annual revenues (or operating budget in the case of nonprofits), geographic region, union representation, and more.

n Complete question set. Unlike many reports, we provide a copy of the full survey used to collect the data. Users of the report can reference the survey instrument to see exactly how questions were asked, allowing greater insight into the results.

n Vetted survey questions and results. The survey questions were reviewed and the report findings were vetted with the help of a volunteer panel of HR experts. The panel consisted of HR vice presidents at leading organizations, respected researchers, heads of HR institutes, and recognized consultants in the field 1.

1 Please see Acknowledgements for a complete list of advisors.

Tips For Using the Report

For an initial overview, skim the remainder of this chapter, including the Study Design, Method, and Presentation (pages 6-7) and Profile of Participating Organizations (pages 8-10).

The Overview and Highlights sections that begin each chapter will help you get oriented. Note that metrics are detailed in the chapter in which they first appear, while cross-references help identify metrics used in more than one chapter. Results can be skimmed by reading the one- or two-sentence bolded headings, which summarize key findings. These are followed by bulleted analysis and, in many cases, relevant charts and tables.

If you prefer a narrative approach, look first at the Perspectives or Behind the Numbers articles, which provide examples and expert commentary on select topics in a chapter.

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HR Department Benchmarks and Analysis 2007

©�006 The Bureau of National Affairs, Inc. • Washington, DC

Quick Chapter Reference

Following this introductory chapter, the 2007 report is organized into five additional chapters that address the following topics:

n Chapter 2 looks at HR department staffing. BNA’s staffing ratio metrics are presented along with current-year data, breakouts by workforce size and industry, and related analyses (e.g., global HR, use of contingent workers). Additional analyses focus on HR staff composition and the use of specialists.

n Chapter 3 examines HR budgets and expenditures. Key budget metrics assess HR costs per employee, HR expenditures as a percentage of total operating costs, HR salary ratios, and more. The chapter also looks at spending on HR technology and how to get more value from these investments.

n Chapter 4 examines the regularity with which HR departments engage in core measurement and planning activities. The results are used to highlight relationships between HR measurement and strategic involvement. Additional analyses address HR’s reporting relationships, the role of HR specialists in measurement, and how to use HRIS systems more effectively.

n Chapter 5 first addresses broad trends in outsourcing and highlights activities that are most often outsourced by HR departments. The remainder of the chapter looks in detail at outsourcing of benefits and employee services activities, factors that affect outsourcing success, and steps to take when outsourcing initiatives sour.

n Chapter 6 examines the core competencies and activities of human resource departments overall and by workforce size.

Each chapter begins with a brief overview and summary of key findings. The results are organized into clearly labeled sections, with major findings always summarized in bold, followed by more detailed descriptions and graphics, where appropriate. We consistently report demographic breakouts by industry and workforce size wherever these results provide meaningful information.

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Chapter 1: Guide to Using this Report

�©�006 The Bureau of National Affairs, Inc. • Washington, DC

Frequently Used Terms

Some terms in the report may not be immediately familiar or may have a specific meaning within the context of this research. These include:

Median

The median is the exact mid-point or middle value within a set of numbers. This means half the numbers in a set will fall above the median and the other half below it. We use the median rather than the mean or average value when reporting most survey findings because it helps ensure that a few extreme responses do not artificially distort the results.

Industry

The three broad industry groups used in this report are manufacturing, services/nonmanufacturing, and nonbusiness.

The manufacturing sector is subdivided into three categories. Manufacturers of “basic goods” include producers of tobacco, textiles, lumber, paper, chemicals, and petroleum; manufacturers of “intermediate goods” include producers of food and beverages, apparel, furniture, rubber and plastics, and fabricated metals; and manufacturers of “advanced” goods include producers of machinery and computer electronic products, electric equipment, and appliance and transportation.

The services/nonmanufacturing sector includes companies involved in transportation and warehousing; utilities; wholesale and retail trade; finance, insurance, banking, and real estate; communications and information; and business, personal, and miscellaneous services.

The nonbusiness sector includes organizations involved in health care, local government, federal and state government, education, social services, and religious causes.

HR Department Level

HR departments can operate at any or all of three levels within an organization. HR departments at the corporate level serve all employees in the organization by developing company-wide HR policies and programs; division-level HR departments serve employees at a divisional, regional, or group level; and HR departments at the facility level serve employees at a single facility within a larger company.

HR Specialist

The survey defines a human resource specialist as a non-clerical employee who works exclusively in one or two areas of human resources that require professional expertise.

Contingent Worker

A contingent worker is a temporary employee, such as contractor, intern, or casual worker, usually working under contract for a fixed period of time or on a specified project. Contingent workers typically do not receive the benefits or job security accorded employees on an organization’s regular payroll.

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HR Department Benchmarks and Analysis 2007

©�006 The Bureau of National Affairs, Inc. • Washington, DC

� See Profile of Participating Organizations for demographic breakout by HR level.� While survey responses sometimes differ by HR level, such differences tend to be highly correlated with workforce size.

Because we consistently report findings by workforce size in the survey, we chose not to report very similar findings by HR level.

Study Design, Method, and Presentation

HR Department Benchmarks and Analysis is a comprehensive survey of human resource departments conducted annually by BNA. The essential details of how the 2007 data were collected and analyzed are summarized below:

n This year’s Web-based survey was conducted between the dates of June 9, 2006 and July 26, 2006. Eligible survey participants were human resource executives and managers

working for organizations with a separate HR function and a minimum headcount of at least 25 employees. A total of 550 respondents completed the survey and provided usable data.

n Respondents to the survey represent a cross section of U.S. employers. The participants were drawn from three primary sources. A sample of 9,367 names from BNA’s existing HR survey panel and subscriber lists was combined with a sample of about 11,000 HR professionals from the member lists of Kennedy Information, a BNA subsidiary. To help ensure a representative sample of participants, a postcard invitation was also sent to a sample of 9,000 HR executives drawn from the Directory of Corporate Affiliations.

n The survey included a series of screening questions to help ensure that only eligible participants — those with substantial familiarity and responsibility for HR department staffing, budgets, and outsourcing decisions — were selected.

n Survey respondents include HR executives from organizations with single HR departments as well as multiple HR departments. In the latter organizations, respondents may represent corporate, division, or facility levels. Results show that only a minority of respondents (16 percent) represents division or facility-level HR departments.2 In all cases, respondents were instructed to provide data pertaining only to activities performed and employees served at their own HR department level.3

n The survey was conducted on a secure site and several reminders were sent over the eight-week survey period. As an incentive to participate, respondents were promised free

access to the survey results.

n Several steps were taken to assure survey participants that their responses would remain confidential. First, as noted above, the survey was hosted on a secure Web site to make sure that information submitted by respondents — particularly sensitive information — could not be observed by third parties while in transit. Respondents were also assured that no information identifying individual respondents or their organizations would be used. Only aggregate data were analyzed and reported in the survey results.

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Chapter 1: Guide to Using this Report

�©�006 The Bureau of National Affairs, Inc. • Washington, DC

n The number respondents reported in the analysis in different sections of the report does not always equal the total of 550. The main reason is that some respondents were not eligible to complete particular sections. For example, only HR departments with separate budgets answered the HR expenditures questions (Chapter 3), while only those that outsourced particular activities answered the outsourcing questions (Chapter 5). Finally, because the survey is comprehensive and time consuming, some participants completed most but not all sections.

n To simplify the presentation of figures in this report, we typically show only the overall number of respondents (N) that provided data for each of survey sections. For some analyses shown in the report, the actual number of valid responses will be smaller than the stated N due to missing data or skip patterns in the survey. Additionally, the percentages for figures in the report do not always add up to 100 percent due to rounding.

n Because many of the questions asked in this year’s survey were also asked in previous years, comparisons to survey findings from prior years are presented where appropriate throughout this report.

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HR Department Benchmarks and Analysis 2007

©�006 The Bureau of National Affairs, Inc. • Washington, DC

Profile Of Participating Organizations

Workforce size, industry, and various other factors can affect how HR departments operate and approach their responsibilities. The summary profile of participating organizations presented below provides added context for interpreting the survey results.

Industry

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . 25%

Basic manufacturing . . . . . . . . . . . . . . . . . . . .6%

Intermediate manufacturing . . . . . . . . . . . . . .9%

Advanced manufacturing . . . . . . . . . . . . . . . .9%

Other manufacturing. . . . . . . . . . . . . . . . . . . .1%

Services/Nonmanufacturing .. .. .. .. .. .. .. .. .. .. .. .. 42%Retail and wholesale trade. . . . . . . . . . . . . . . .�%

Finance, insurance, banking

and real estate . . . . . . . . . . . . . . . . . . . . . . .11%

Business, personal and miscellaneous services . . . . . . . . . . . . .11%

Communications and information services . . .�%

Transportation, warehousing and utilities . . .�%

Other Services . . . . . . . . . . . . . . . . . . . . . . . . .�%

Nonbusiness . . . . . . . . . . . . . . . . . . . . . . . . . 33%Health care. . . . . . . . . . . . . . . . . . . . . . . . . . .1�%

Government . . . . . . . . . . . . . . . . . . . . . . . . . . .�%

Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . .�%

Associations, social services

and other nonprofits . . . . . . . . . . . . . . . . . . .�%

Other nonbusiness . . . . . . . . . . . . . . . . . . . . .1%

Total Workforce Size

Less than 100 . . . . . . . . . . . . . . . . . . . . . . . . . .1�%100 - ��9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19%

��0 - �99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19%

�00 - 999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1�%

1,000 - �,�99. . . . . . . . . . . . . . . . . . . . . . . . . . .1�%

�,�00 - �,999. . . . . . . . . . . . . . . . . . . . . . . . . . . .�%�,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . .�%

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Chapter 1: Guide to Using this Report

9©�006 The Bureau of National Affairs, Inc. • Washington, DC

Total Annual Organization Revenue(Nonprofits reported total operating budget)

Less than $10 million . . . . . . . . . . . . . . . . . . . .11%

$10 million - $�9 million . . . . . . . . . . . . . . . . . .�6%

$�0 million - $99 million. . . . . . . . . . . . . . . . . .1�%

$100 million - $�99 million . . . . . . . . . . . . . . .��%

$�00 million - $999 million . . . . . . . . . . . . . . . .�%

$1 billion or more . . . . . . . . . . . . . . . . . . . . . . .1�%

Regional Distribution of HR Departments

New England (ME, NH, VT, MA, CT, RI) . . . . . . . . .�%

Middle Atlantic (NJ, NY, PA) . . . . . . . . . . . . . . . .16%

East North Central (WI, MI, IL, IN, OH) . . . . . . . .1�%

West North Central (ND, MN, SD, NE, KS, IA, MO) . . . . . 11%

South Atlantic (FL, GA, SC, NC, VA, DC, MD, DE, WV). . . . .19%

East South Central (KY, TN, MS, AL) . . . . . . . . . . .�%

West South Central (OK, TX, AR, LA) . . . . . . . . . . .�%

Mountain (NM, CO, WY, MT, ID, UT, AZ, NV) . . . . . . . . .6%

Pacific (WA, OR, CA, AK, HI) . . . . . . . . . . . . . . . . .1�%

More Than One HR Department

Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .��%

No . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .��%

Level of HR Department

Corporate level . . . . . . . . . . . . . . . . . . . . . . . . .��%

Single HR department. . . . . . . . . . . . . . . . .6�%

Multiple HR departments . . . . . . . . . . . . . .1�%

Division level . . . . . . . . . . . . . . . . . . . . . . . . . . . .�%

Facility level . . . . . . . . . . . . . . . . . . . . . . . . . . . . .�%

Other level. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .�%

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HR Department Benchmarks and Analysis 2007

©�006 The Bureau of National Affairs, Inc. • Washington, DC

Union Representation

Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .�6%

No . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .��%

Transition Within Last Two Years(Organization merger, acquisition, or restructuring)

Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .��%

No . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6�%

Did Transition Result in a Reduction in Force?

Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .�9%

No . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .�1%

Is your organization a government contractor covered by OFCCP (Office of Federal Contract Compliance Programs) enforcement?

Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .��%

No . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .��%

Don’t know . . . . . . . . . . . . . . . . . . . . . . . . . . . . .�%

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