nds productivity tool a summary report for 2012/2013 ... · at 0.4% of turnover and a median $365...
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NDS PRODUCTIVITY TOOL A SUMMARY REPORT FOR 2012/2013 FINANCIAL YEAR
National Disability Services January 2015
Contact
Ken Baker NDS Chief Executive 02 6283 3200 0409 606 240 [email protected]
About National Disability Services
National Disability Services is the peak body for non-government disability services. Its purpose is to promote quality service provision and life opportunities for people with disability. NDS’s Australia-wide membership includes more than 900 non-government organisations, which support people with all forms of disability. NDS provides information and networking opportunities to its members and policy advice to state, territory and federal governments.
Acknowledgements
The development of the NDS Productivity Tool was funded by the NSW Department of Family and Community Services, Ageing, Disability and Home Care through the NSW Industry Development Fund.
CONTENTS
1 Executive summary 3
2 About the NDS Productivity Tool 5
About the online tool 5
Benefits of back-of-house benchmarking 5
How benchmarks are calculated and presented 6
3 Profile of participating organisations 7
4 Benchmark results 9
Overall benchmark results 9
Facilities 10
General administration 12
Fleet 14
Finance 17
Human Resources 20
Information and communications technology 25
Payroll 27
5 Important qualifiers and limitations about the information in this report 30
3
1 EXECUTIVE SUMMARY
The NDS Productivity Tool was developed by National Disability Services (NDS) in conjunction with representatives from the NSW disability sector. The development of the tool was funded by the Industry Development Fund (IDF) and NSW Department of Family and Community Services, Ageing, Disability and Home Care (ADHC).
The NDS Productivity Tool is an online resource to assess a disability service provider’s back-of-house services, benchmark these with similar organisations and share appropriate good practice ideas to improve productivity. This report provides information derived from data provided by 21 disability service providers who participated in the 2012/2013 round of benchmarking.
To calculate overall figures, the data of 13 organisations was used from a total of 21 organisations that participated. These organisations provided data in more than 6 categories – the majority of these organisations were medium size organisations. In reporting, medians are used to gain a more accurate picture of organisation position and reduce the effect of skewed data.
The overall spend on back-of-house costs as a proportion of annual turnover was a median of 17.6%, within a range of 12.2% to 23.8%.
Back of house costs included in the Productivity Tool include; ICT, Fleet, HR, Payroll, Finance, Facilities and Admin. The tool does not include all business areas such as; Executive, Marketing, Quality, Compliance, etc.
It should be noted that not all questions and back of house function sections in the NDS Productivity Tool are compulsory. As a consequence some figures in this report are not calculated from data derived from all 21 organisations.
Note: Back-of-house services measured in the NDS Productivity Tool include; facilities, general administration, fleet, finance, HR, ICT and payroll. Organisations may also incur other back-of-house costs such as executive costs, compliance, marketing, etc. that are not considered in this tool.
Figure 1: Median investment in each back-of-house function per FTE
Note: the dots/points on the above figures represent the median across all organisations which provided data for that functional area. The dashed bar shows the spread between the highest and lowest sub-sample medians of those organisations grouped by size. A longer dashed bar indicates greater variability between organisations of different sizes.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Fleet
Facili
ties
Finan
ce HR
Admini
strati
on ICTPa
yroll
$2,974
$2,500
$1,708
$1,402 $1,310$1,030
$365
Spen
d pe
r FTE
4
Facilities
• Investment in facilities services represents 3.4% of turnover and $2,500 per FTE and is the largest area of investment in back-of-house services.• Metropolitan organisations showed a higher expenditure per area at $137 per square metre compared with $86 per square metre for regionally based organisations.
General administration
• General administration represents 2.1% of turnover and $1,310 per FTE.• Small organisations spent the highest proportion of turnover at 3.2% compared with only 1.4% and 2.1% for medium and large organisations.• Small and large organisations spent the highest proportion of admin expenditure on office coordination and support, whereas medium organisations spread the cost of their admin services more evenly.
Fleet
• The median cost to provide fleet was $2,974 per FTE and $8,549 per vehicle, with a median running cost of 59 cents per kilometre.• Vehicle ownership costs were the highest component of fleet expenditure for all organisations, followed by petrol costs.• No significant differences in fleet costs were seen across organisation size or organisation location.
Finance
• The median cost of the finance function is $1,708 per FTE and represented a median 1.7% of turnover.• No significant difference between organisation size was observed, but regionally based organisations spent a higher proportion of revenue on finance than metropolitan based organisations (2.8% compared to 1.6%).• Large organisations spread finance service costs relatively evenly, where as medium sized organisations spent relatively more on Management and financial accounting.
HR
• Investment in HR represented a median 1.6% of turnover and a median $1,402 per FTE.• Small organisations spent a higher proportion on management services and recruitment and selection than medium and large organisations. Small organisations also experienced lower staff turnover rates. This was also observed for regionally based organisations compared to metropolitan based organisations.• Large organisations were more likely to fill vacant roles internally than medium and small organisations.
ICT
• Median ICT expenditure was 1.1% of turnover and benchmarked at a median $1,030 per FTE.• Large and metropolitan organisations were most likely to invest a higher proportion of revenue in ICT compared to small, medium or regionally based organisations.
Payroll
• Payroll represented the smallest component of back-of-house expenditure at 0.4% of turnover and a median $365 cost per FTE.• Medium sized organisations experienced the highest cost per headcount and had the highest proportion of casual staff relative to small and large organisations.
Analysis of the benchmarking data and associated context information showed that:
5
2 ABOUT THE NDS PRODUCTIVITY TOOL
About the online tool
The NDS Productivity Tool and associated good practice information around back-of-house service delivery is accessible online.
The tool is open to (and free to use) for ADHC-funded disability service providers in NSW. The tool has been designed for the use and benefit of small, medium and large disability service providers across both metropolitan and regional locations.
Through the online tool, disability service providers are able to submit an organisational profile and benchmarking data for seven back-of-house functions: human resources; payroll; fleet; information and communications technology (ICT); finance; facilities; and general administration. Providers are able to submit data for one or more of these seven areas, with a minimum set of questions required to be completed in each area.
Good practice guides for each area of the seven back-of-house areas are also available to help organisations interpret the implications of the benchmarking tool’s output, identify improvement strategies and share sector knowledge around good practice.
All data submitted into the NDS Productivity Tool remains confidential and all results are presented in aggregate form in order to ensure individual service providers cannot be directly or indirectly identified. Further information about the tool, including the terms and conditions of participation and frequently asked questions, are available online on the tool’s website.
Benefits of back-of-house benchmarking
Organisations that are able to operate efficiently and reduce their back-of-house costs will be in a stronger position to deliver quality, person-centred services to people with disability. The tool enables organisations to monitor and benchmark back-of-house costs against similar organisations in the disability sector, allowing organisations to identify areas where there are opportunities to reduce costs or areas where more investment is required. Within organisations, benchmarking has the potential to improve service delivery and can flow through to improved client outcomes.
Benchmarking also has the potential to benefit the sector as a whole through the sharing of knowledge, the identification of opportunities for sector-wide collaboration and collective improvement and the setting of higher sector standards. The establishment of a service measurement framework and appropriate disciplines signals to clients, stakeholders and donors that the disability sector is committed to maximising value for money.
As the disability sector transitions to the NDIS, the tool will enable organisations to monitor the changes in back-of-house operations. Under the NDIS there will be increased pressure on organisations to reduce costs and increase productivity and efficiency. Identifying areas of an organisation where there are opportunities to reduce costs will be increasingly important in preparation for and during the transition to the NDIS.
6
How benchmarks are calculated and presented
All data in this report relates to the 2012-2013 financial year. Insights and conclusions have been included where possible, but in some instances reasons for data trends were unclear. The following business rules have been applied in the calculation and presentation of benchmarks in this report (and also apply to all benchmarks outputs through the NDS Productivity Tool):
• A minimum pool size of five (per category and sub-category) must be met for a valid benchmark result to be produced. Note that fewer large organisations (four) participated in this round compared to last round. Their aggregate benchmarks are still included in the overall results of this report; however, the validity of the data presented for this sub-sample is low due to the small sample size and no context data has been presented that would allow these providers to be identified. In the areas of fleet and facilities, only three large organisations submitted valid data. As a result, comparisons are not able to made against large organisations in these areas.
• Although seven small organisations entered data for the 2012 – 2013 financial year, there was not a minimum of five organisations that submitted data in fleet, ICT, finance and facilities so comparisons in size for these areas do not include small organisations.
• For the presentation of benchmark data, the median is used (where appropriate) rather than the mean. This avoids skewed data from very large or very small data points.
• The number of full-time equivalent staff (FTE) is used as the measure of scale for small, medium and large service providers when presenting comparisons. This is because FTE is a measure often closely related to (and a determinant of) the size of most back-of-house functions. The FTE thresholds used for small, medium and large are outlined in the following section.
Important note: each back-of-house survey in the NDS Productivity Tool consists of a minimum set of mandatory questions and a broader range of optional questions. Mandatory questions generally consisted of high-level total cost and effort associated with a particular back-of-house service delivery (e.g. total HR effort and cost), whereas optional questions consist of detailed breakdowns of the cost and effort (e.g. training effort, training cost, recruitment effort, recruitment cost etc.) and context information (e.g. staff turnover). This approach was adopted to ensure organisations had flexibility in the amount of data to submit and to reduce the burden of participation on small organisations.
As not all organisations who submitted survey data for a particular back-of-house area completed all optional questions, there are instances where no or partial, detailed cost and effort data by area is available. Therefore, detailed service information is based on data provided by a smaller subset of participating organisations (most of whom were larger organisations) and should be taken as indicative only. Furthermore, all information in this report should be considered in light of the qualifiers and limitations outlined in Section 5.
7
3 PROFILE OF PARTICIPATING ORGANISATIONS
Twenty-one organisations entered valid data for the 2012 – 2013 financial year. Whilst organisations were not required to provide data for each back-of-house area, and many chose only to answer the minimum set of questions in each area, a sufficient number of organisations submitted data in each area to generate benchmarks for each back-of-house function.
For comparison, organisations have been classified into small, medium or large providers, based on the number of full-time equivalent staff (FTE). The profile of organisations in each category and across the pool is outlined in Table 1 below.
Table 1: Profile of organisations by size
Small Medium Large
Actual FTE1 < 50 50 – 249 ≥ 250
Number of organisations
7 10 4
Metro2 4 7 4
Regional 3 3 0
Turnover $350k – $4.9m $4.1m – 19.1m $40m – $91m
____________________________________
1 Organisations were asked to specify their actual full-time equivalent staff, excluding any vacancies and volunteers.2 Includes multi-state and state-wide organisations. Organisations were asked to specify the primary location where disability services are delivered.
Participating organisations were also asked to specify the types of services they delivered. Almost all organisations that contributed to the data set provided more than one type of service. Community Access and Respite were the most common types of services delivered by organisations (both were delivered by 90% of organisations). All other service types apart from Targeted Employment Support (provided by 29% of all organisations) were delivered by 38% to 52% of organisations.
The proportion of participating organisations that provided each type of service is presented in Figure 2 on the next page.
8
Figure 2: Service information
Accommodation
Accommodation Support
10% 20% 40%30%0%
Early intervention
Therapy Services
Respite
Community Access
Employment Services
50% 60% 70% 80% 90% 100%
% of total revenue
Targeted Emp. Services
Advocacy
Other
45%
50%
41%
45%
86%
86%
36%
27%
41%
55%
9
4 BENCHMARK RESULTS
OVERALL BENCHMARK RESULTS
Responding disability service providers spent a median total of $11,179 per FTE on back-of-house services, which represented 13% of total revenue (Figure 3 below). On average, responding organisations reported facilities and fleet as the back-of-house area that accounted for the highest cost as a proportion of total revenue (3.4% and 3.0% respectively). This was followed by administration (2.1%), finance (1.6%), HR (1.5%), ICT (1.1%) and payroll (0.4%).
Figure 3: Total spend on back-of house functions as percentage of revenue (green) – median for all responding organisations
Overall benchmark results by organisation size and location
There was considerable difference in the proportion of total revenue spent on facilities by organisation size. For small organisations, spend on facilities accounted for only 1.1% of total revenue, which was substantially below that of medium (4.8%) and large (5.8%) sized organisations.
In contrast, small organisations spent a larger proportion of their total revenue on administration (2.9%) compared with large (1.5%) and medium (1.2%) sized organisations. Smaller organisations also spent a slightly larger proportion of their total revenue on finance (2.2%) compared with large organisations (1.1%).
Organisations that provided services exclusively in regional areas had proportionally higher administration costs compared with metropolitan and/or state-wide organisations (3.2% and 1.4% respectively). No other back-of-house functions had a considerable difference in costs between location.
0%
1%
2%
3%
4%
Facili
ties
Fleet
Admini
strati
on
Finan
ce HR ICTPa
yroll
3.4%
% o
f tot
al re
venu
e
3.0%2.1% 1.7% 1.6% 1.1% 0.4%
10
FACILITIES
Investment in facilities represented 3.4% of total revenue across all responding organisations and was measured as the highest median back-of-house service expenditure area as a proportion of total revenue. The median total spend on the facilities function across all responding organisations was $2,500 per FTE. The median facilities cost per area across all responding organisations was $112/m2. These facilities benchmarks are summarised in Table 3.
Facilities function results by location
Responding organisations providing services exclusively in regional areas spent proportionally the same amount of revenue on facilities as organisations based in metropolitan areas. Interestingly however, regional organisations spend significantly less per square metre on their facilities than metropolitan and/or multi-state providers ($86 compared with $137 respectively), suggesting that regionally based organisations were likely to have larger facilities than metropolitan based organisations.
Table 3: Facilities function results across all organisations
All organisations
Facilities expense as a % of total revenue 3.4%
Facilities expense per FTE $2,500
Total facilities cost per square metre $112
Figure 6: Facilities expenditure as a proportion of total revenue (by location)
Figure 6 above shows that there was no difference in facilities spending as a proportion of total revenue between metropolitan and regional organisations.
0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Metro
Regio
nal
3.3%
% o
f tot
al re
venu
e
3.5%4.0%
3.4% All Organisations
11
Figure 7: Total facilities cost per square metre (by location)
Figure 8: Facilities service cost per square metre (by location)
Figure 8 above provide a breakdown of facilities costs per square metre across the different service areas of the facilities function. Exclusively regional providers spent a lower proportion of their facilities budget on rent, but a higher proportion on major works and refurbishments. Similarly, the rent expense per leased square metre was lower in regional providers, at $105 compared with $146 per square metre for metropolitan and/or multi-state providers (see Table 4 on the next page).
$0
$20
$40
$60
$80
$100
$120
$140
Metro
Regio
nal
$137
Cost
per
m2 $86
$160
$112 All Organisations
Other
Property management
Fire safety & inspections
Major works & refurbishments
Depreciation expense
Utilities
Repairs & maintenance
Rent
10% 20% 40%30%
Metro
Regional
0%
12
Metro organisations Regional organisations
Rent expense per leased square metre (per annum) $146 $105
Table 4: Rental costs by location
GENERAL ADMINISTRATION
General administration is an important function to enable the effective and efficient operation of any organisation. The scope of work performed by administrative staff often varies widely; however, in most cases, administrative staff handle general enquiries, support frontline and executive staff and allow them to focus on their core functions and ensure the organisation runs smoothly on a day-to-day basis.
Investment in administration services represents 2.1% as a proportion of total revenue. The median cost across all responding organisations to provide general administration was $1,310 per FTE. These benchmarks are summarised in Table 5.
Table 5: General administration function results across all organisations
Figure 9 and Figure 10 (on the next page) show administration expenditure as a proportion of total revenue. By organisational size, administration costs were highest for small organisations (3.2%), while medium and large organisations were somewhat lower, at a median of 1.4% and 2.1 % respectively. From a regional perspective, responding organisations that were exclusively regional spent a median of 3.2% of their total revenue on administration, more than double the median for metropolitan and/or multi-state organisations.
All organisations
Administration expense as a % of total revenue 2.1%
Administration expense per FTE $1,310
Figure 9: General Administration service cost as a proportion of total revenue (by size)
0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Small
Medium
3.2%
% o
f tot
al re
venu
e
1.4%
4.0%
2.1% All Organisations
Large
13
Figure 10: General Administration service cost as a proportion of total revenue (by location)
0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Metro
Regio
nal
1.4%
% o
f tot
al re
venu
e
3.2%
4.0%
2.1% All Organisations
General administration function results by organisation size and location
Analysis of service data in Figure 11 and Figure 12 below showed that responding large organisations spent a lower proportion of their administration costs on rostering, but a higher proportion on office coordination and support. Meanwhile, rostering and office coordination and support accounted for a higher proportion of the administration budget among responding organisations that provided services exclusively in regional areas.
Figure 11: General administration service costs per FTE (by size)
Other
Mail & courier services
20% 40% 80%60%
Small
Medium
0%
Office coordination & support
Rostering
Office reception
Executive assistanceLarge
14
Figure 12: General administration service costs per FTE (by location)
FLEET
Fleet can be a considerable cost, particularly for those disability service providers that deliver services across broad geographical areas. The fleet function is also important for those disability service providers that provide community access services and those that deliver critical services to the client’s home. Analysis of the median fleet size and type of fleet illustrates the importance of fleet to disability service providers and demonstrates the considerable proportion of specialist vehicles, which may impact the costs of acquisition and ongoing servicing.
Table 6 below displays fleet benchmarks across all organisations. Investment in back-of-house fleet services represented a median of 3.0% of turnover for responding disability service providers, while the median investment in fleet services was $2,974 per FTE. The median cost to provide the fleet function per vehicle was $8,549, with a median fleet running cost of 59 cents per kilometre.
Table 6: Fleet function results across all organisations
All organisations
Fleet expense as a % of turnover 3.0%
Fleet expense per FTE $2,974
Fleet running cost per vehicle $8,549
Fleet running cost per km $0.59
Fleet function results by location
Analysis of fleet services by location reveals there was no considerable difference of cost as a proportion of total revenue between metropolitan and/or multi-state providers (2.9%) and regional providers (3.2%). These results are presented in Figure 13 on the next page.
Other
Mail & courier services
Rostering
Executive assistance
10% 20% 40%30%
Metro
Regional
0% 50%
Office coordination & support
Office reception
15
Figure 13: Fleet service cost as a proportion of total revenue (by location)
0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Metro
Regio
nal
2.9%
% o
f tot
al re
venu
e
3.2%
4.0%
3.0% All Organisations
Metropolitan and/or multi-state service providers had a higher cost of fleet per vehicle ($12,796) compared with regional providers ($7,160). This discrepancy between metropolitan and regionally based organisations is not clear, but the difference may be able to be attributed to higher maintenance costs in metropolitan areas and higher incidental costs than reported for regionally based organisations. There was no significant difference in the cost of fleet per kilometre by location. The proportion of fleet running costs per vehicle and per kilometre by location in Figure 14 below and Figure 15 on the next page.
Figure 14: Fleet running costs per vehicle (by location)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
Metro
Regio
nal
$12,796
Cost
per
veh
icle
$7,160$8,549 All Organisations
16
Figure 15: Fleet running costs per kilometre (by location)
Disability service providers reported a median of 33 vehicles across all organisations. Analysis of fleet size and composition below in Table 7: Fleet composition and size (by location), shows the median total fleet size and number of specialist vehicles by location. Overall, 26% of the total fleet were specialist vehicles, and this was higher among metropolitan organisations (52%).
Table 7: Fleet composition and size (by location)
All responding organisations
Metropolitan Regional
Median number of specialist vehicles 8.5 17 6.5
Median total fleet size 33 33 37.5
% of specialist vehicles of total fleet 26% 52% 17%
Costs associated with fleet services by location of organisation are shown in Figure 16 on the next page. Insurance accounted for a higher proportion of fleet running costs for exclusively regional providers. The two highest costs for all organisations, regardless of location are vehicle ownership and petrol.
$0
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
Metro
Regio
nal
$0.61Co
st p
er K
M
$0.59 $0.59 All Organisations
17
Figure 16: Fleet running costs by service type (by location)
Overall, all responding organisations reported a median mileage of 22,832 km per vehicle per year. For all responding organisations, the average fleet age was a median of 4 years. By location, the median average age for exclusively regional providers was 2 years, compared with 4 years for metropolitan and/or multi-state providers.
FINANCE
The finance function is fundamental to the day-to-day operations of all disability service providers. Developing appropriate budgets, processing accounts, financial reporting and managing organisation’s financial resources need to be done efficiently and effectively. As revenue composition changes and becomes more volatile in a person-centred service environment, invoicing and accounts receivable activities will also become increasingly important.
Investment in finance services represented 1.7% of total revenue across all organisations. The median total spend on the finance function across all organisations was $1,708 per FTE. These finance benchmarks are summarised in Table 8 below.
Other
Private contributions
Fringe Benefit Tax
Out-sourced fleet management
Facilities (car parking)
Repairs (from accidents)
Private mileage claims
Fleet management & admin staff
10% 20% 40%30%
Metro
Regional
0%
Insurance
Petrol
Vehicle ownership
Maintenance
Table 8: Facilities function results across all organisations
All organisations
Finance expense as a % of total revenue 1.7%
Finance expense per FTE $1,708
18
Figure 17: Finance expenditure as a proportion of revenue (by size)
There was no significant difference seen between medium and large organisations for finance expenditure as a proportion of total revenue by organisational size. Please note that the minimum number of small organisations that submitted data for the finance function was not reached and comparisons against small organisations cannot be made.
Regional organisations did report a higher proportional spend relative to metropolitan based organisations.
Figure 18: Finance expenditure as a proportion of revenue (by location)
0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Metro
Regio
nal
1.6%
% o
f tot
al re
venu
e
2.8%
1.7% All Organisations
0%
0.5%
1.0%
1.5%
2.0%
2.5%
Small
Medium
% o
f tot
al re
venu
e
1.5% 1.6% All Organisations
Large
1.4%
19Figure 20: Finance service costs per FTE (by location)
Figure 19: Finance service costs per FTE (by size)
Tax, asset management & other
Grant & donation management
Financial accounting
Management accounting
10% 20% 40%30%0% 50%
External reporting & financial governance
Tax, asset management & other
Grant & donation management
Financial accounting
Management accounting
10% 20% 40%30%
Metro
Regional
0% 50%
External reporting & financial governance
Figure 20 above provides a breakdown of finance service costs per FTE across the different service areas of the finance function, compared by location. Financial and management accounting together comprise the great proportion of finance costs across organisations of all sizes
Some key insights from the data and some potential explanations are:
• Large organisations spent a significantly higher amount on tax, asset management and other (16%) relative to medium (6%) organisations. This is likely due to the comparatively larger balance sheet of large organisations.
• Medium organisations spent a higher proportion on grant and donation management than large organisations. This could be due to the fact that this is a more crucial source of income for them (larger organisations are likely to have more diversified sources of income) and hence it is reasonable to see proportionately higher effort into this service area.
• Context information provided by organisations on their financial accounting service showed that medium organisations had a lower median proportion of payments made through EFT (75%) compared to large organisations (90%). These payments were instead made by cheque. This could account for some of the additional cost, due to the increased handling associated with cheque-writing compared with partially-automated bulk EFT payments.
Small
Medium
Large
20
HUMAN RESOURCES
Disability service organisations are faced with significant opportunities and challenges when it comes to managing their workforce. Organisations will need to attract, retain and develop their workforce given the expected growth in jobs in the sector over the next several years. Flexible and adaptable working arrangements will become increasingly important in a person-centred environment. Organisations will also need to utilise best practice people management to effectively deliver services and become an employer of choice, to increasingly retain and attract their workforce.
Investment in human resources (HR) services represented a median of 1.6% of total revenue across all organisations. The median total spend on the HR function across all organisations was $1,402 per FTE. A subset of organisations provided information on training; these organisations spent a median of $650 on training per FTE. These HR benchmarks are summarised in Table 9 below.
Table 9: HR function results across all organisations
All responding organisations
HR expense as a % of total revenue 1.6%
HR expense per FTE $1,402
Investment in training per FTE $650
Figure 21: HR expenditure as a proportion of revenue (by size)
0%
0.5%
1.0%
1.5%
2.0%
2.5%
Small
Medium
2.3%
% o
f tot
al re
venu
e
1.5% 1.6% All Organisations
Large
1.4%
21
Figure 22: HR expenditure as a proportion of revenue (by location)
Figure 21 and Figure 22 compares HR expenditure as a proportion of total revenue by size and by location. Proportionate HR expenditure did not vary greatly between organisations of different sizes. Similarly, organisations operating in different locations did not differ in the proportion of total revenue they spent on HR.
HR function results (per headcount) by organisation size and location
Figure 23 and Figure 24 below benchmark the HR expense per headcount by size and location. Note that in this function headcount is used instead of FTE as it is more closely related to HR costs (for example, recruitment will need to incur for each individual employee, regardless of whether they are a full-time equivalent or not).
A significant difference in investment in HR was seen when comparing small organisations to medium and large organisations. Small organisations spent $2,966 per headcount on HR compared to $743 per headcount for medium organisations and $1,119 per headcount for large organisations. This may be an effect due to economies of scale, but as organisations grow to be large, complex organisations, the HR function needs to proportionally grow to accommodate the increased complexity.
0%
0.5%
1.0%
1.5%
2.0%
2.5%
Metro
Regio
nal
1.6%
% o
f tot
al re
venu
e
2.8%
1.6% All Organisations
Figure 23: HR expense per headcount (by size)
$0
$500
$1,000
$1,500
$2,000
$2,500
Small
Medium
$2,966
Cost
per
hea
dcou
nt
$743 $963 All Organisations
Large
$3,000
$3,500
$1,119
22
Figure 24: HR expense per headcount (by location)
Figure 25: HR service costs per headcount (by size)
$0
$200
$400
$600
$800
$1,000
Metro
Regio
nal
$1,007%
of t
otal
reve
nue
$747$963 All Organisations
$1,200
Other
Performance management
10% 20% 40%30%
Small
Medium
0%
Recruitment & selection
WHS
Training
Workplace assistance
Large
Management services (excl. rostering)
23
Figure 26: HR service costs per headcount (by location)
Other
WHS
Workplace assistance
Training
5% 10% 20%15%
Metro
Regional
0%
Performance management
Recruitment & selection
Management services (excl. rostering)
25%
HR service costs are broken down into different service areas according to size in Figure 25 on the previous page and region in Figure 26 above. For the most part medium and large organisations spread the cost and effort evenly across all HR services. Some exceptions were present, with the cost of management services significantly higher for large organisations (24%) than medium organisations (13%). Interestingly small organisations structured and prioritised HR service investment differently to medium and large organisations, with proportionally a higher focus on management services and recruitment and selection.
Some key insights from the HR data above and from additional context data provided through the tool are:
• Correlations between staff turnover rates (12%, 15% and 21% for small, medium and large organisations respectively), spending on recruitment and selection (29%, 13% and 11% respectively for small, medium and large organisations) and proportion of new starters (5%, 14% and 11% for small, medium and large organisations respectively) showed small organisations spend proportionally the most on recruitment and selection despite having the smallest amount of new starters to the organisation over the last 12 months. Small organisations also had the lowest staff turnover suggesting that the increased short term investment in recruitment and selection bears long term reward.
• Metropolitan organisations also had significantly higher staff turnover rate relative to regional organisations (18% for metropolitan organisations compared to 7% for regional organisations). Regional organisations also spent significantly more on training as a percentage of HR revenue spend (25%) than metropolitan organisations (14%). This suggests that there may be more job opportunities for staff and more applicants per vacant position available for organisations based in metropolitan areas than regional areas. It also suggests that there is a requirement for regionally based organisations to skill their existing staff as opposed to recruit people from outside the organisation for higher skilled positions.
• Disability service providers largely filled vacant positions externally. This was the case particularly for small and medium (72% and 93% of vacant positions filled externally, respectively) than large organisations (60%) which were the most likely to fill vacant positions from within the organisation.
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Training costs by organisation size and location
A subset of organisations that submitted HR data reported investment in professional development and training. Small organisations spent proportionally less on training than medium and large organisations ($335 per FTE for small organisations compared to $701 and $737 for medium and large organisations proportionally)
Metropolitan organisations invested almost twice the amount in training than organisations based regionally ($650 per FTE compared to $377 per FTE respectively). This may be reflective of the relative scarcity of training providers and programs in regional areas compared to metropolitan areas.
Figure 28: Investment in training per FTE (by location)
Figure 27: Investment in training per FTE (by size)
$0
$100
$200
$300
$400
$500
Small
Medium
$335
Spen
d pe
r FTE
$701
$650 All Organisations
Large
$600
$700
$737$800
$0
$100
$200
$300
$400
$500
Metro
Regio
nal
$650
Spen
d pe
r FTE
$377
$650 All Organisations$600
$700
25
An analysis of context information provided around training revealed that:
• The preferred method of all organisations regardless of size or location to deliver training was via classroom training sessions (80%).
• Although small organisations invested the least per FTE in training, they delivered the highest hours of training to new staff (42 hours per staff member) relative to medium and large organisations (14 and 7 hours per staff member respectively). Regional organisations were also more likely to deliver more hours of training to staff (19 hours) than metropolitan organisations (9 hours) despite investing less than metropolitan organisations per FTE.
INFORMATION AND COMMUNICATIONS TECHNOLOGY
High quality ICT provides staff with valuable client information when they need it, can support service planning and improve efficiency. Low quality ICT support leaves staff without the information they require, reduces efficiency and limits organisational effectiveness because senior management do not have the information required to proactively manage the organisation or service delivery. As disability service organisation transition to the NDIS, information and communications technology will become increasingly important.
Investment in information and communications technology (ICT) represented 1.1% of total revenue across all organisations. The median total spend on the ICT function across all organisations was $1,030 per FTE. No significant difference was seen in ICT expenditure as a proportion of total revenue between metropolitan (1.4%) and regional services (0.8%) as indicated in Figure 29.
Figure 29: ICT expenditure as a proportion of revenue (by location)
0%
0.5%
1.0%
Metro
Regio
nal
1.4%
% 0
f tot
al re
venu
e
0.8% 1.1% All Organisations
1.5%
26
ICT function results by organisation size and location
Figure 30 below benchmarks the ICT expenditure per FTE between small, medium and large organisations. Large organisations spent the highest amount on ICT per FTE ($2,391) by a considerable margin with medium organisations spending $1,188 per FTE (please note that the minimum number of small organisations was not met for comparison). An analysis of the context data provided in the ICT surveys and from discussions with service providers suggests the following possible explanations for these results:
• It is possible that medium organisations utilise simple and ‘off-the-shelf’ ICT systems and products, accounting for the lower ICT spend per FTE. As organisations expand their size and operations, a ‘tipping point’ is reached whereby additional investment and a significant upgrade of the ICT function to an enterprise-level configuration is required. This often involves not only an upgrade in hardware and software, but also deployment of ICT across the organisation and in frontline service delivery. This can be accompanied by significant back-of-house investment to support this functionality.
• Medium-sized organisations were more likely to utilise contractors for their ICT effort (20% of total ICT personnel) and it is possible that these contractors are only employed on an ‘as-needs’ basis (i.e. to respond to incidents or on specific projects). Larger organisations, on the other hand, used a smaller proportion of contractors (3.29% of total ICT personnel) and are therefore likely employing (and require) full-time staff, contributing to their higher overall ICT cost.
Figure 30: ICT service expenses per FTE (by size)
0%
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Small
Medium
$2,391
Spen
d pe
r FTE
$1,188 $1,300 All Organisations
Large
Figure 31 on the next page shows the relative expenditure across the different service components of ICT by organisation size. Large organisations invest more in all areas of ICT than medium organisations, suggesting that the ICT systems required for a large organisation are likely to be more complex than those implemented by medium organisations. The only area where this was not observed was under communications services, where there may be an economies of scale effect in place. No significant difference was observed between regional or metropolitan based organisations.
Some additional insights from the ICT data above and from additional context data provided through the tool are:
• Within applications support, operations and maintenance, the largest areas of expenditure were on the finance system & CRM system. Large organisations also reported fundraising applications as a relatively significant area of expenditure; small and medium organisations by and large did not invest much in fundraising applications.
• Large organisations undertook the highest volume of projects to upgrade or significantly enhance ICT capability over the course of the financial year. Large organisations reported a median of eight projects over the year, whereas medium organisations reported a median of only two per year.
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Figure 31: ICT service expenses per FTE (by size)
Other
Applications support, operations & maintenance
Base IT environment
Communications services
0.2 0.4 0.80.60
New/significantly enhancing existing ICT capability
PAYROLL
Payroll is a critical back-of-house function for all organisations. For disability service providers, salary costs are the largest and most significant proportion of the budget, making payroll services critically important in back-of-house costs.
Investment in payroll services was a median of 0.4% of total revenue across all organisations, representing the lowest back-of-house service expenditure area. The median total spend on the payroll function across all organisations was $365 per FTE and $228 per headcount. For a subset of organisations that provided salary packaging services, and provided data on this through the tool, the median salary packaging cost was $229 per staff member that utilised salary packaging.
Payroll function results by organisation size and location
The cost per payslip per headcount was most expensive for medium sized organisations ($277 per headcount). The increase in cost per payslip from small to medium sized organisations may indicate an increase in the diversity of services provided, or an increase in changes in rostering as organisation size increases. As organisations increase their staff numbers enough to be classified as large organisations, some economies of scale may apply to reduce the cost per headcount.
Small
Medium
Large
28
Figure 32: General payroll cost per headcount (by size)
Organisations based in metropolitan areas saw a higher cost per headcount relative to regionally based organisations. This may suggest more stability week to week in rosters in regional areas.
Figure 33: General payroll cost per headcount (by location)
Context data around payroll revealed that:
• The number of staff who submit timesheets to payroll could be driver of cost, particularly for medium organisations. Small organisations reported a median of 55% of staff submitting timesheets to payroll, with medium organisations having 90% of staff submitting timesheets to payroll. Comparatively, large organisations reported a median of 15% of staff submitting timesheets to payroll.
• Medium organisations had the highest proportion of casual employees with 30% of staff classified as causal and 42% of staff classified as rostered. This compares to small organisations with 14% of staff classified as casual and 86% of staff classified as on a basic salary and large organisations with 9% of staff classified as casual and 37% of staff on rosters. Large organisations were the only category to employ staff under the classification of ‘other’ at 29% of staff (this includes contract staff). The median staff breakdown by payroll category is provided in Table 10 on the next page:
$0
$50
$100
$150
$200
$250
Small
Medium
$173
Cost
per
hea
dcou
nt$277
$228 All Organisations
Large
$300
$184
$0
$50
$100
$150
$200
$250
Metro
Regio
nal
$243
Cost
per
hea
dcou
nt
$139
$228 All Organisations
$300
29
Table 10: Headcount of staff in different payroll categories
All Small Medium Large Metro Regional
Basic salary 30% 86% 28% 25% 28% 37%
Casual 25% 14% 30% 9% 31% 15%
Rosters 44% 0% 42% 37% 41% 48%
Other 0% 0% 0% 29% 0% 0%
Salary packaging services were more commonly utilised by staff in metropolitan and/or multi-state providers. The median number and proportion of staff that use salary packaging by organisation size and location is presented below in Table 11.
This is a significant shortfall, particularly in regional areas where the potential workforce pool is smaller than what is available in metropolitan areas and can be used as an attraction strategy for new staff.
Table 11: Utilisation of salary packaging services
All Small Medium Large Metro Regional
Number of staff who use salary packaging
98 25 98 441 107 43
% fortnightly payroll
69% 79% 52% 52% 84% 30%
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5 IMPORTANT QUALIFIERS AND LIMITATIONS ABOUT THE INFORMATION IN THIS REPORT
The majority of organisations provided data for all or most of the back-of-house services benchmarked through the NDS Productivity Tool. In some cases though, organisations were unable to collect the required data to an acceptable level of quality or within the specified period of time. In a few cases, certain back-of-house functions were not relevant to an organisation (e.g. the organisation did not operate a fleet). In these instances, organisations did not submit data for particular functions. It is expected that familiarity with the tool and improvements in reporting and data collection will increase the quality and quantity of data submitted in future years.
When considering the benchmarking results presented in this report and throughout the NDS Productivity Tool, it is important to remember that:
• The results presented are medians of the pool and of the small, medium and large sub-sets of the pool.
• Staff costs include gross salary only. For example, whilst workers compensation insurance costs are included within the HR functional area, the cost of providing staff with technology support is included in ICT. This reduced the effort required by participating organisations to collect the data and still enabled valuable comparison between organisations.
• Some figures have been estimated. Whilst reasonable effort has been made by participating organisations and NDS to ensure the validity of the data provided, it is unlikely to be 100% accurate. As measurement systems and processes improve over time, data quality and accuracy is expected to improve.
• Good back-of-house services enable staff to deliver quality, efficient front-of-house services. It is difficult to measure the contribution back-of-house services makes to staff efficiency and organisational effectiveness. Although cost KPIs are easier to measure, readers are advised not to focus too heavily on cost or staff may end up burdened with ineffective back-of-house services, become less efficient and be impeded in their service delivery to clients.
• Low cost does not necessarily equate to good practice. It is possible for organisations to provide low cost services by using equipment which is beyond end-of-life and making do with limited staff numbers. In some circumstances this is not necessarily good practice.
• Results have not been adjusted to consider an organisations context and practice – i.e. there is no ‘difficulty’ or ‘complexity’ weighting for delivering back-of-house services in each organisation to take into consideration factors such as the number of sites, size (which often provides efficiencies of scale) or service complexity (number of roster staff, types and number of services provided, etc.). No two organisations are alike; the results should be interpreted with professional judgement.
• Only the effort of HR staff was captured. It would be difficult and overly time consuming to measure the time and effort of non-HR staff across each HR/training service. For example:
– The effort of program managers interviewing candidates, reviewing CVs, etc.
– Attending a WH&S committee meeting.
• Organisations that use non-HR staff to undertake HR activities will therefore have lower HR costs and efforts than organisations that have a HR team that performs the majority of HR activities.
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• Some data points are missing – not all organisations provided data for all data points. If no result is provided for a particular benchmark, this does not imply zero cost or quality, but rather that the minimum sample size to generate a valid result was not met, or that organisations were unable to provide the required information for benchmarking.
• Economies of scale are generally available to larger organisations (at least in transactional services). Areas where larger organisations costs benchmarked higher may indicate differences in context and practice, rather than a lack of economies of scale.
• Smaller back-of-house services have a higher margin of error. For example, if an organisation spends just 0.2 FTE on financial reporting, payroll or helpdesk services, and there is little other cost, an increase or decrease of 0.1 FTE would adjust the cost up or down by 50% – a significant difference in service cost KPIs.
NDS would like to thank all organisations that participated in the NDS Productivity Tool for the 2012/2013 financial year.
