HR Struggles To Evaluate Cost Saving Measures

February 17, 2004 ( - Human resource departments are struggling to find ways to measure cost savings, even though more than three-quarters (76%) are seeing increased pressure from the top to reduce costs in 2004.

The cost reductions are coming in the form of budget cuts for most HR departments. More than eight out 10 (84%) of HR budgets in 2004 have been reduced or remain the same as 2003. This comes after 80% of HR departments had budget cuts or freezes in 2003, according to Hewitt Associates’ Strategies for Cost Management of the HR Function study.

“Cost pressures on HR are coming primarily from corporate-wide initiatives, which are the result of ongoing company efforts to increase competitiveness,” Dick Rison, global content leader for HR effectiveness at Hewitt said in a news release. “Specifically, HR is feeling the greatest pressure to reduce costs in its operating budget and headcount.”

To save money, HR heads are implementing a number of cost saving initiatives, such as increasing the use of/implementing new technologies (61%), redesigning specific HR processes (56%) and developing/expanding benefits-related self-service initiatives (54%). Going forward, companies are also looking for budget savings to come from greater use of technology (72%) and self-service (70%), and process redesign (68%).

However, even though the initiatives have been put into place,Hewitt found that few HR organizations actually measure cost-effectiveness and return on investment (ROI) throughout the entire HR function. As evidence of this trend, the study points to 88% of organizations measuring health-care costs per employee and 77% monitor employee separation rates, yet only 13% measure the ROI of HR outsourcing. Additionally, less than a third (27%) track the ROI for HR technology and only 30% monitor the costs associated with employee turnover.

Copies of the Hewitt studyare available by calling the Hewitt Associates Publications Desk at (847) 295-5000.