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2009

Human Resources
Book of Metrics:
Executive Summary

Global Benchmarking Center


September 2009
Dear Colleague:

As executives face incredible pressure in today’s shaky business environment, cost-cutting initiatives become even more crucial than ever.
“Where will I get the most impact without negatively affecting our ability to serve the business?” “Where can I reduce costs without
endangering our ability to rebound quickly when the economy improves and talent needs change?” “Are opportunities in my industry the same
as in other industries?”

Measuring internal strengths and weaknesses — and comparing them against “best-in-class” performance — can help executives in their efforts
to identify and mitigate gaps that have the potential to impair the performance of both the human resources function and the entire business.

To quantify various improvement opportunities, Deloitte has conducted diagnostic studies of core human resources activities:
• Transaction processing
• Rewards administration
• Talent management
• Strategy and program design

We believe that in conducting these studies and by identifying the spend amounts of low-cost performers, we can provide executives relevant
data and practical insights about their competitive positioning.

We hope you find the results of our studies helpful and instructive, and we invite you to contact our specialists for further information about
our research.

Sincerely,

Richard T. Roth
Principal

National Benchmarking Leader


Deloitte Consulting LLP

All study data and statistics referenced and presented in this report, as well as the representations made and opinions expressed, unless specifically described otherwise, pertain only to the
participating organizations and their responses to the Deloitte Global Benchmarking Center study of human resources process performance conducted in 2009.

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see
www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

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Contents

Overview: Why industry matters................................................................. 1

Transaction processing............................................................................... 3

Rewards administration.............................................................................. 5

Talent management.................................................................................... 7

Strategy and program design..................................................................... 9

Study approach and methodology............................................................ 11

2009 Executive Summary Finance diagnostic benchmark study


Overview: Why industry matters

In an environment where the pressure to perform gets higher while the cycle times
for making decisions gets shorter, executives depend on access to data that’s relevant
to them, timely and specific to their industry. “What are my competitors spending, “Executives that use
and where? How does that affect MY spending decisions?”
industry-specific
While the cross-industry performance measures in this executive summary are useful, benchmarking to effect
industry-specific benchmarking can provide executives with the targeted data needed
to guide fast, effective decision making and achieve competitive advantage (Figure cost reductions,
1). Metrics such as cost and FTEs are compared with a defined set of industry median
and low-cost performing peers to identify cost gaps. This analysis is significant; while
operational improvement
a metric is a useful number, a cost gap — measured in pure dollars and specific to and better decision
the company — can help identify opportunities. In other words, companies looking
to reach the level of the study’s median or low-cost performers will see what that
making are more likely to
means to them in dollars. set the pace for their
Executives that use industry-specific benchmarking to effect cost reductions, competition.”
operational improvement and better decision making are more likely to set the pace
for their competition.

Across industries, human resources process-related costs of the low-cost performers


in the study are 28% lower than the median, with much of the savings occurring
in process costs — labor and outsourcing (Figure 2). Examining those process costs
further, the study shows a process cost gap of $592 per employee, with $271 of this
opportunity in labor and outsourcing costs for the rewards administration process Figure 2: HR process cost per employee
category (Figure 3).

$1,520
Figure 1: Total HR cost per employee

$3,585
$928

$2,694
$2,517
$2,189
$1,910
$1,578 $1,578

$893
Cross-industry Cross-industry
median low-cost performer

Cross-industry High-tech Automotive Industrial products Transaction processing Talent management


adminstration
Low-cost performer Median
Reward administration Strategy and program design

1
Low-cost performers in the study allocate 8% less of their costs to outsourcing Figure 4: Labor/outsourcing/technology/other
vendors and deliver HR processes with 31% fewer staff per 1,000 employees. allocation as a percent of total cost
Furthermore, their fully loaded labor rate per staff member is 13% lower than the
median.
100% 100%

Technology is a prominent part of the low-cost performer playbook; they allocate


5.3 times more of their total HR costs to technology than the median (Figure 4).
Furthermore, they’re allocating 16% less to labor and 8% less to outsourcing.
When examining per employee technology costs, these low-cost performers also
spend 3.4 times more than the median.

Such gaps point to significant potential for cost reductions, not only for short-term
relief during this economic downturn, but also for the long-term process efficiencies
needed to jump start growth upon recovery.

By comparing their organization’s performance against measures like these,


executives can get help in making fast, effective decisions based on relevant,
objective information — not anecdotal experience or gut reactions. The answer
isn’t always to be best in class; rather, the goal should be to find the position
that makes the most sense for the organization’s overall business strategy. At the
same time, cost-cutting initiatives should not necessarily be aimed at reaching Cross-industry Cross-industry
the low-cost performer level. Organizations should determine what percentage is median low-cost performer
achievable and what tactics could potentially reduce the opportunity gap. Labor Technology
Outsourcing Other
Figure 3: HR process cost gap per employee from median to
low-cost performer

$271

$162

$115

$45

Transaction processing Rewards administration


Talent management administration Strategy and program design

2009 Executive Summary Human resources book of metrics 2


Transaction processing

Low-cost performers spend 13% less in transaction processing costs than the Figure 5: Transaction processing staff per 1,000
median employees

Low-cost performers have the same staff as the median, yet our study finds that
3.2 3.2
they still achieve 13% more efficient transaction processing administration —
primarily due to common processes and their high use of self-service (Figures 5-6).

Effective transaction processing practices are often supported by a strong level of


automation and system integration, as well as centralized common and non-strategic
services, such as payroll, time and attendance processing (Figure 7).

For example, based on our research, effective HR organizations invest in operations


infrastructure that can vastly improve back-office efficiency and move controls to the
beginning of a process instead of relying on downstream processes to catch errors.
Cross-industry Cross-industry
median low-cost
performer

Figure 6: Transaction processing process cost


per employee

$340
$295

Cross-industry Cross-industry
median low-cost
performer

3
Figure 7: Automation and system integration support transaction processing improvements

Enablers Effective Practice Attributes

• Tools are fully automated, standardized, and consistently developed with


one common and global HR data warehouse
Systems & • Management information system is fully integrated and automated, with
Information
system validation checks and edits
• Employee self-service tools (ESS), both PC and interactive voice response
systems (IVR), are highly utilized

• Outsourced/shared services operations are used when practical and cost


effective
Organization & • “Centralized” operations effectively execute transactions and align with
Talent organization needs
• Staff is knowledgeable, continually trained, and able to quickly identify
business requirements and anticipate future needs

• Transaction policies and processes are defined, efficient, customizable, and


continuously developed and improved
Policy &
Process • Standardization and automated data sharing is paramount for transaction
processing, and top organizations demonstrate a well documented,
referenced policy manual

2009 Executive Summary Human resources book of metrics 4


Rewards administration

Low-cost performers’ rewards administration cost is 59% lower than the Figure 8: Rewards administration process cost
median per employee

When it comes to rewards administration services, low-cost performers in our study


$463
deliver at a lower cost and with fewer staff than the median. They spend 59% less on
rewards administration than the median (Figure 8), and they also allocate 30% less of
their process costs in this area. 53% fewer staff adds to their savings (Figure 9).

By leveraging outsourcing and shared services, low-cost performers can efficiently


deliver Tier 1 and specialized services. Many in our study utilize centers of excellence
$192
to deliver Tier 2 and 3 services to keep costs in line without sacrificing value. Other
practices that they believe provide a competitive edge include the implementation of
self-service tools, use of common global processes, and reduction in the number of
benefits and compensation plans (Figure 10).

Cross-industry Cross-industry
median low-cost
performer

Figure 9: Rewards administration staff

3.2

1.5

Cross-industry Cross-industry
median low-cost
performer

5
Figure 10: Performance-based compensation plans earn favor over entitlement programs

Enablers Effective Practice Attributes

• Employee self-service tools (ESS) and manager self service (MSS) play a
significant role
Systems & • Electronic and/or interactive voice response units are utilized for open enrollment
Information
and data changes
• Benefit usage is tracked, and employees are surveyed to understand their
opinions about what programs are most beneficial; offerings are then tailored
based on feedback
• Asset/liability modeling is used to find an investment mix that best aligns with
funding goals for defined benefit pension plans

• Outsourcing is highly utilized for Tier 1 and specialized services


• Tier 2 and 3 services are delivered by centers of excellence
Organization &
Talent • Compensation process is standardized to a single, company-wide process,
while decision making, communication and administration components are
decentralized

• Depending on organization goals, entitlement programs are replaced by


performance-based compensation programs (i.e., employee stock ownership
Policy &
programs, profit sharing)
Process
• Defined benefit health plans are replaced by defined contribution plans,
with cost management and a decreased employer role making them a more
attractive option

2009 Executive Summary Human resources book of metrics 6


Talent management
administration
Low-cost performers spend 28% less than the Based on our research, well-conceived technology
median on talent management administration solutions and outsourcing agreements can drive
common processes, reduce labor costs, and increase
In our study, talent management administration is process efficiency and effectiveness. Outsourcing can
another area where low-cost performers deliver be particularly successful in lowering staffing costs, as
services at a lower cost and with fewer staff. Low-cost it can help scale process expenditures to the business
performers spend 28% less than the median (Figure need (Figure 13).
11) and with a more prolific use of common processes,
centers of excellence and outsourcing, they utilize
33% fewer staff than the median (Figure 12). A
more efficient use of ESS and MSS — as well as more
integrated technology systems — also helps them keep
costs in line.

Figure 11: Talent management administration Figure 12: Talent management administration
process cost per employee staff per 1,000 employees

$408 3.9

$293
2.6

Cross-industry Cross-industry Cross-industry Cross-industry


median low-cost median low-cost
performer performer

7
Figure 13: Aligning with organizational strategy helps maximize talent management
administration effectiveness

Enablers Effective Practice Attributes

• Web-based training is blended with instructor-led training to maximize


Systems & on-the-job time
Information • Job description formats and terminology are standardized and kept
up-to-date

• Professional development programs are aligned with organizational


Organization & strategies
Talent • Internal candidates are identified whenever possible

• Learning vendor costs are managed with an approved vendor list, formal
vendor selection process and managing long-term agreements with SLAs
Policy & and performance agreements
Process • Recruiters are integrated into the upfront forecasting and planning process
to discuss growth goals, anticipated attrition and critical skill requirements

2009 Executive Summary Human resources book of metrics 8


Strategy and program design

Low-cost performers spend 52% less than the Figure 14: Strategy and program design
median on strategy and program design process cost per employee

A clearly defined strategy — properly aligned with the


$309
overall business strategy — can make a huge difference
when creating a high-value workforce that best serves
both present and future needs.

Our study shows that low-cost performers spend 52%


less on strategy and program design than the median $147
(Figure 14) while allocating the same percentage of
FTEs (13%) (Figure 15).

Some of the practices that help low-cost performers


gain an edge over their median counterparts are the
use of HR staff with strong business knowledge to Cross-industry Cross-industry
partner with business leaders in designing strategy, median low-cost
performer
as well as the use of centers of expertise to create
common business-oriented programs (Figure 16).

Figure 15: Percent of HR FTEs allocated to the


strategy and program design process

13% 13%

Cross-industry Cross-industry
median low-cost
performer

9
Figure 16: Shared services moves beyond administrative support to
generate more value from business partners

Enablers Effective Practice Attributes

• Common global processes, shared services centers and ESS/MSS are


Systems & implemented to deliver processes effectively
Information
• Shared services use extends into decision-making roles, allows business partners
to spend more time on strategy as opposed to administrative activities

• HR business partners have a primary role of providing strategic HR direction to


Organization & business leaders
Talent • Strategic partners provide specialized knowledge, as needed
• Business-savvy HR generalists and specialists are employed in the organization

• Administrative HR resources are reduced and realigned to elevate the role of


Policy & business partners as advisors to line management
Process

2009 Executive Summary Human resources book of metrics 10


Study approach and methodology

Methodology

This report is the result of a Deloitte Global 13 processes in four process categories. By following
Benchmarking Center study of human resources process a strict taxonomy, the researchers generated apples-
performance. We gathered one year of data across to-apples comparisons necessary for meaningful
performance measures:

Transaction Processing Rewards Administration Talent Management Strategy and Program Design

• Employee data administration • Health and welfare benefits • Career development • HR strategy
• Payroll, time and attendance administration administration • HR program design
• Compensation administration • Global mobility administration
• Defined benefit plan • Employee relations
administration administration
• Defined contribution plan • Learning administration
administration • Staffing administration

Key definitions Profile of participants

Low-cost performers: Partcipating companies in the Participants in this study represent a cross-section of
first quartile of the four process categories* various sectors:
Median: Midpoint value of participants
Total HR cost at the companies in the study:
Min 1st Quartile Median 3rd Quartile Max
Labor: Fully loaded labor cost (compensation and
benefits) of employees, contractors and temporaries
Outsourcing: Services provided by third-party Revenues
vendors $30.1M $670.8M $1.9B $3.9B $20.2B
Technology: Hardware, software, license fees, and
3 Year Revenue CAGR
the related support
-12.0% 2.2% 8.9% 15.3% 132.0%
Other: Facilities, supplies, travel, training
Process cost: Cost of labor plus outsourcing at the Employees
companies in the study 132 1,750 4,099 7,914 71,853

Countries
*Low-cost performers are not necessarily “best in class” along other
meaningful dimensions, such as quality, innovation, or customer/ 1 1 3 21 80
employee satisfaction. The benchmarks in this study suggest
possible cost-reduction opportunities, which must be balanced Legal Entitles
against growth strategies.
1 1 3 21 80

All study data and statistics referenced and presented in this report, as well as the representations made and opinions expressed, unless specifically described otherwise, pertain only to the
participating organizations and their responses to the Deloitte Global Benchmarking Center study of human resources process performance conducted in 2009.

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Partial participant list

Accuride Corporation NetApp, Inc.


AFLAC Incorporated North American Lighting, Inc.
Aisin Holdings Of America, Inc Novo Nordisk A/S
Allegheny Energy, Inc. NTN USA Corporation
Applied Materials, Inc. NVIDIA Corporation
Autodesk, Inc. Old World Industries, Inc.
Ball Corporation Omnicell, Inc.
Bayer Corporation Omron Automotive Electronics, Inc
CIGNA Corporation Oshkosh Corporation
Cleaver-Brooks, Inc. Polaris Industries Inc.
Convergys Corporation Rexnord Holdings, Inc.
Crane Plastics Manufacturing Ltd. Rockwell Automation, Inc.
Flowserve Canada Corp RTI International Metals, Inc.
Gardner Denver, Inc. SanDisk Corporation
Genentech, Inc. SAP America, Inc.
Gilead Sciences, Inc. SunPower Corporation
Graybar Electric Company, Inc. Synopsys, Inc.
Harley-Davidson, Inc. Textron Inc.
Hitachi Automotive Products (USA) Inc. The Manitowoc Company, Inc.
JDS Uniphase Corporation Tokico (USA) Inc.
Johnson Controls, Inc. Tower Automotive Inc.
Juniper Networks, Inc. Ts Tech North America, Inc
Keihin Indiana Precision Technology, Inc. United Technologies Corporation
Kyb Manufacturing North America Inc US Foodservice, Inc.
Lexmark International, Inc. Valmont Industries, Inc.
Mine Safety Appliances Company Varian, Inc.
Modine Manufacturing Company Verigy Us, Inc.
M-Tek Inc. Wabash National Corporation
National Semiconductor Corporation Winnebago Industries, Inc
Yamaha Motor Corporation, U.S.A.

2009 Executive Summary Human resources book of metrics 12


About the
Global Benchmarking Center

Deloitte’s Global Benchmarking Center (GBC) was established to provide executives with industry-relevant metrics
and insight. The GBC delivers this information through ongoing benchmark studies in areas such as sales, general
and administrative (SG&A), finance and accounting, supply chain, information technology, human resources, and
operations. The GBC has conducted studies in more than 500 global organizations since 2005. These studies are
uniquely designed to provide industry-specific insight relevant to multiple sectors.

Industry Function

• Consumer and Industrial Products • Life Sciences and Health Care • Finance
-- Aerospace and Defense -- Health Care Providers • Information Technology
-- Automotive -- Health Plans • Human Resources
-- Consumer Products -- Life Sciences • Sales and Marketing
-- Process and Industrial Products • Government
• Indirect Materials
-- Retail -- Federal Government
• Corporate Services
-- Tourism, Hospitality and Leisure -- State Government
-- Local • Legal
• Financial Services
-- Banking • Technology, Media, and Telecom • Corporate Real Estate
-- Securities -- Media & Entertainment • Supply Chain
-- Insurance -- Technology • Operations
• Energy and Resources -- Telecommunications • Product Development
-- Oil and Gas
-- Power and Utilities

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Authors
Richard T. Roth
Principal
National Benchmarking Practice Leader
Deloitte Consulting LLP
Atlanta, GA
+1 404 942 6719
riroth@deloitte.com

Contributors
Greg des Groseillers
Global Benchmarking Center
Deloitte Consulting LLP
Philadelphia, PA
+1 484 406 0360
gdesgroseilliers@deloitte.com

Participation in our studies is open to all companies. For information about participating in a human resources
study, contact:

Global Benchmarking Center


Deloitte Consulting LLP
+1 866 897 4413
benchmarking@deloitte.com

2009 Executive Summary Human resources book of metrics 14


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Copyright © 2009 Deloitte Development LLC. All rights reserved.


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