Market Overview

Hackett: HR Organizations are Forging a Digital Path to World-Class

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World-Class HR Organizations Now Spend 26 Percent Less, And Have 32
Percent Fewer Staff, While Driving Higher Effectiveness Levels

World-class HR organizations now spend 26 percent less than peers on HR
and operate with 32 percent fewer staff while driving dramatically
higher levels of effectiveness, according to the latest analysis of
benchmark data from The
Hackett Group
, Inc. (NASDAQ:HCKT).

Digital transformation is one key strategy that world-class HR
organizations deploy to raise the performance bar, investing in
cloud-based HR applications and services that are enabling them to more
effectively: design and deliver services around customer experience;
shift resources from low- to high-value activities; build and deploy
sophisticated analytics capabilities; and provide high-value tools,
expertise and insights to business leaders.

A public version of the research, "Forging a Digital Path to World-Class
HR," is available on a complimentary basis, with registration, at this
link: http://go.poweredbyhackett.com/wchr1806sm.

World-class HR organizations now spend 28 percent less on labor and 29
percent less on outsourcing per employee than typical companies, the
research found. They make more effective use of outsourcing, often
selectively outsourcing areas such as compensation and benefits
administration, employee relations and talent acquisition. While they
spend less on technology, they actually commit a larger percentage of
their overall HR spend in this area.

While world-class HR organizations have fewer staff in every staffing
category, the majority of the gap is accounted for by 33 percent fewer
transactional employees and 34 percent fewer staff dedicated to employee
lifecycle activities. Furthermore, the research found that they make
better use of their staff to perform higher-value talent management and
strategic planning activities.

World-class HR organizations also operate and deliver services much more
effectively than peers, the research found. They see transaction error
rates that are two to five times lower. The high number of transactions
for some processes and the cost to correct errors translates into a
total cost difference between the two groups that can reach into the
millions of dollars. World-class HR organizations fill jobs internally
much more often at all levels of the organization, demonstrating their
superior ability to develop and move people into new roles. Finally,
turnover rates for first- and second-year hires are significantly lower,
which helps sustain high workforce productivity while reducing turnover
costs.

For a typical company with $10 billion in revenue, attaining world-class
performance in HR represents as much as $14 million in potential savings
annually. The Hackett Group's research also quantifies the potential for
typical HR organizations to use digital transformation to substantially
narrow the cost gap seen by world-class HR. Proper implementation of
digital technologies can enable typical HR organizations to cut process
costs by 24 percent, enabling them to virtually match cost levels at
world-class HR organizations. World-class HR organizations can use
digital transformation to reduce their process costs by an additional 21
percent.

Most HR organizations have already started the process of digital
transformation, according to The Hackett Group's research. An analysis
of digital transformation progress in eight key HR areas found that to
date, the majority of projects that have been completed are in
payroll/workforce management and total rewards administration, areas
which are oriented towards transaction processing and already heavily
technology enabled. About a third of all companies in the research have
completed digital transformation initiatives in these areas. In many
cases, these projects involve cloud-based systems.

Digital transformation pilot projects currently underway in HR most
often focus on areas such as data management/reporting/compliance and
staffing services. These frequently aim to take advantage of new
capabilities (including analytics) enabled by cloud-based software and
service providers.

"In HR, as in other areas, digital transformation is a multi-year effort
that requires a clear strategy, well-defined targets and a detailed
roadmap of initiatives," said Franco Girimonte, associate principal, The
Hackett Group. "Building the digital capabilities of the HR organization
requires fresh strategies and approaches in four key areas: smart
technology to automate and continuously improve processes; AI-powered
insights to drive decisions; new skills like the ability to analyze and
interpret data for key messages and storylines to advise business
decision-makers; and changes in organization roles and structures to
fully leverage HR brain power."

According to Tony DiRomualdo, senior research director, The Hackett
Group, "Smart automation will take over transactional work, and even
augment HR knowledge work with self-learning systems that can help
identify the characteristics of recruits most likely to be successful in
the roles they're hired for, or the best mix of compensation and
benefits to drive engagement. But, like many other digital
transformation areas, it requires new skills, a clear strategy, a change
in culture, and organizational commitment to succeed."

Max Caldwell, principal and leader, People & HR Transformation Practice,
The Hackett Group, added that "We've reached an inflection point where
world-class HR organizations are moving beyond exploration and adopting
new technology and analytics tools to become leaner, smarter and more
customer focused. It's the next chapter in transforming HR to operate as
a true strategic partner to the business. Making the journey will
require new skills in areas like data science, smart automation and
user-driven design, and is predicated on organizational willingness to
change. But it gives HR leaders a terrific opportunity to rethink and
reinvent the HR function for the future."

World-class HR organizations are those that achieve top-quartile
performance in both efficiency and effectiveness across an array of
weighted metrics in The Hackett Group's comprehensive HR benchmark. The
Hackett Group's world-class HR research is based on an analysis of
results from recent benchmarks, performance studies, and advisory and
transformation engagements at hundreds of large global companies. A
public version of this research is available on a complimentary basis,
with registration, at this link: http://go.poweredbyhackett.com/wchr1806sm.

About The Hackett Group

The
Hackett Group
 (NASDAQ:HCKT) is an intellectual property-based
strategic consultancy and leading enterprise benchmarking and best
practices digital transformation firm to global companies, offering
digital transformation including robotic process automation and
enterprise cloud application implementation. Services include business
transformation, enterprise analytics, working
capital management
 and global
business services
. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information technology,
including its award-winning Oracle and SAP practices.

The Hackett Group has completed more than 15,000 benchmarking studies
with major corporations and government agencies, including 97% of the
Dow Jones Industrials, 89% of the Fortune 100, 87% of the DAX 30 and 59%
of the FTSE 100. These studies drive its Best Practice Intelligence
Center which includes the firm's benchmarking metrics, best
practices repository and best practice configuration guides and process
flows, which enable

The Hackett Group's clients and partners to achieve world-class
performance.

More information on The Hackett Group is available at: www.thehackettgroup.cominfo@thehackettgroup.com,
or by calling (770) 225-3600.

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