HR Costs Increase 6 Percent a Year

Most Fortune 500 companies don't realize how much time and money they're spending on human resources, according to Hewitt Associates,a global human resources services firm.

A new report from Hewitt shows that HR costs have grown an average of 6 percent a year for the last five years, and are currently $2,436 per full-time employee. This amounts to more than $100 million a year in HR expenses for an average Fortune 500 company. In addition, HR is now spending nearly half of its time (43 percent) on administration and service.

Hewitt’s survey of 129 major U.S. companies shows that although they rely heavily on performance plans to determine employee pay increases (66 percent) and bonuses (47 percent), few organizations measure whether these performance plans are positively impacting their business. (Read more Profit Per Employee - Can HR Be Trusted By Management to Get The Job Done.)

Instead, many organizations simply measure their success by tracking whether paperwork is submitted on time (44 percent) or if their employees are satisfied with the program (36 percent). Meanwhile, nearly a third (30 percent) don’t measure the success of these programs at all.

Hewitt’s study also shows that as many as 84 percent of companies don’t believe their employee goals are fully aligned with their business goals. Organizations say improved managerial competency is critical in enhancing this connection. In fact, nearly three-fourths of companies believe their managers’ ability to coach employees toward goals requires the greatest improvement (73 percent), followed by their ability to have effective performance-based discussions and make related decisions (72 percent). Moreover, 67 percent of companies say their managers do a bad job handling poor performance, and another 73 percent believe their managers are not skilled at building high-performing teams.

Comments

[Randy Pennington]

You hit the nail on the head with your comment about a manager's ability to hold coaching and performance discussions being critical to achieving alignment. This is one area where the move to adopt e-learning approaches has hurt organizational performance. Learning about coaching is not the same as learning coaching skills. You have to practice face-to-face with people. Likewise, most companies have an antiquated system for addressing poor performance. They invest a great deal of time on the appraisal aspects of performance management, pay lip service to the need for effective goal setting, and completely ignore an emphasis on daily performance management activities of coaching, recognition, and addressing poor performance.

Randy Pennington
http://www.resultsrule.com