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.