Bloomberg BNA Releases The HR Department Benchmarks and Analysis 2015-2016 Report
On October 21st, 2015, Bloomberg BNA announced the release of its HR Department Benchmarks and Analysis 2015-2016 report. The report – which has been released annually since its inception in 1978 – is considered an invaluable resource for HR executives and professionals. This is because it typically contains the latest research and analysis on key HR department aspects such as HR roles and responsibilities, expenditures /budgeting, staffing, strategic planning and outsourcing.
The 2015 – 2016 report was based on a survey carried out on 348 HR professionals. The respondents were HR executives representing a broad spectrum of US employers. According to the report, most of the respondents were “at or near the top of the HR profession heading up the human resources function in their organization, division or facility.”
The respondents were asked for their views, insights and experiences across a broad spectrum of HR departmental issues. These included the use of metrics and benchmarks in HR decision making; key practices like recruitment, hiring and retention; as well as the strategic position of HR officers and departments. Their responses were compiled, analyzed and organized.
In-Depth Historical Analysis
Besides the responses from HR executives, the researchers also conducted in-depth historical analysis. This analysis focused on aspects which are vital to understanding the HR function. For instance, the evolution of HR department autonomy and responsibilities was examined over the last two decades. Similarly, the changing demographic patterns in HR staff ratios, and change in human resources staffing relative to employee population were tracked over the last decade.
The HR Department Benchmarks and Analysis 2015-2016 report, therefore, contains a combination of two important types of information. On the one hand, it contains the views, insights and experiences of high level HR executives and professionals working in a broad spectrum of US companies. This is accentuated with in-depth historical analysis of key HR departmental issues. This combination makes it invaluable for anyone who is seeking for a holistic understanding of the HR department.
The key findings detailed in 2015-2016 report (which is over 175 pages long) can be broadly divided into five categories. These are: HR department staffing, HR expenditures and budgets; HR metrics, strategic planning & priorities; HR activities, and Outsourcing. Below is a quick summary of the findings in each of these categories.
HR Department Staffing
The proportion of human resources staffing relative to the workforce fell slightly in comparison with the 2013 and 2014 levels. In 2015 the median ratio of HR staff to employee headcount was 1.1 full time HR members for every 100 employees. This is a drop from the all-time highs of 1.3 HR staff members per 100 employees which was recorded in both 2013 and 2014.
The decline in HR staff ratios was attributed to the growth in workforce over the past year. Of the organizations surveyed, 65% reported an increase in total headcount over the previous year. Conversely, only 12% reported a decrease in employee headcount. Some 12% of the organizations also reported reductions in the HR staff.
Despite the dip in staffing ratio, the trend over the past decades indicates a steady upward shift in the ratio. In fact, the ratio last went below 1 HR staff for every 100 employees in 2002. Over the past 11 years (2004 to 2015), the ratio has been 1.1 or higher on 9 occasions.
The composition of HR staff remains dependent on the size of the organization. In organizations with less than 250 employees, managers and supervisors make up almost half of the HR staff. In organizations with 2,500 employees or more, they make up only one-third. Still, on average, managers and supervisors make up 41% of HR staff. Professionals and technical contingents make up 37%. Secretaries and administrative assistants make up 21%.
The impact of economies of scale in HR department staffing remains consistent and substantial. On a per capita basis, organizations with less than 250 employees spend an average of $3,372 per employee. Comparatively, organizations with more than 2,500 employees spend an average of $816 per employee.
HR Expenditures and Budgets
The median change in HR department budget appropriations is 4.2 percent. When compared to the last three years (2012 to 2014) the change is slight. The budget changes in each of those three years was +3.6% in 2012, +3.8% in 2013 and +3.9% in 2014.
When compared to the recession years (2009 to 2011), the median budget change in 2015 is significant. During the recession years, the change in HR department budgets averaged at only 2%. As such, a 4.2% median change seems significant.
However, when compared to the pre-recession years (i.e. 2008 and earlier), the median budget change is still lower. During pre-recession years, HR department budgets changed at an average of 5%. In peak years (e.g. 2006 and 2007), the median change in HR budget appropriations was as high as 7%.
The median per capita budgeted expenditure for human resources activities is $1,375 per employee. This is a 6% drop in the median expenditure for 2014 (which was $1,465 per employee). On average, for profits still spend much higher on HR activities per employee when compared to nonprofits.
HR Metrics, Strategic Planning and Priorities
Compensation and benefits programs are the top of most organizations HR strategic planning activities. 89% of organizations are involved in some form of pay and benefits analysis/strategic planning. Also, 65% of organizations conduct regular examination of their salary, wage and benefits systems.
In terms of metrics, the use of measurement standards has grown in some HR areas over the last decade. In other areas, the use of metrics has ebbed or even languished. The greatest inroads have been in recruitment and selection. In 2015, 48% of HR executives reported routinely using metrics when recruiting or selecting. This is a significant increase from the 36% who reported using metrics in 2005.
In terms of HR department priorities, most respondents placed recruitment and retention at the top of their to-do lists. 85% of HR professionals described “attracting and retaining talented employees” as “extremely important” or “very important.” Comparatively, 73% ranked “controlling health benefits costs” among their top priorities for 2015. This is a reversal of the situation four years ago (2011) when 86% of HR professionals ranked controlling health benefit costs as their number one priority.
HR Activities
Among the HR executives interviewed, 29% reported some change in their duties or functions over the past 12 months. This is a slight increase from the 27% of those who reported changes in 2014.
Even then, this minuscule when compared to other years over the past decade. For instance, in both 2004 and 2005, 42% of HR executives reported changes in their duties or functions. However, the peak was in 2006 and 2007 when 50% of executives reported changes.
On the whole, HR activity “changes” are more likely to be an addition of responsibilities or tasks rather than a removal. For instance, 23% of the respondents reported having received new roles, tasks or duties over the previous 12 months. Only 9% reported a reduction in roles, tasks or duties.
Outsourcing
Of all the employers surveyed in 2015, 65% reported having outsourced at least one HR activity. This is a slight increase from 62% who reported having outsourced in 2014. However, it is still much lower than the all-time high of 79% from a decade ago (in 2005).
In terms of outsourcing decisions, 64% of respondents reported that the decision to outsource was made by the HR. 6% reported that the outsourcing decision was made by the CEO, 6% credited the CFO for the decision and 5% reported that the decision came from the financial department.
Among the reasons cited for outsourcing, 74% reported the desire for expertise as the main reason for outsourcing. Seventy-two percent reported wanting quality service as the main reason for outsourcing. Only 38% reported cost savings as the motivation for outsourcing.
In a nutshell, those are the highlights of the findings from The HR Department Benchmarks and Analysis 2015-2016 report. Whoever desires a more detailed look at the highlights can check out the executive summary prepared by Bloomberg BNA from here.
Those who would prefer to access the full report can visit the Bloomberg BNA website and place their order. Details of how to purchase the report can be found here.
Update 8-1-16
HR Benchmarks For Q4 of 2016
As the Fourth Quarter of 2016 quickly approaches, there is no better time to reflect on the predictions made by BNS back in October 2016. How do those predictions stack up against current human resource industry realities? Do they still provide a solid basis on which HR professionals can base those decisions?
Unfortunately, no study has been carried out which can enable us to make a step-by-step examination of the 5 categories mentioned in the BNS report i.e. HR department staffing, expenditures & budgets; strategic planning & priorities, HR activities, metrics, and outsourcing.
Even then, based on recent studies released e.g. CareerBuilder 2016 Mid-Year Jobs Forecast, and the Emerging Workforce Study (EWS); as well as current market realities, the following are the HR benchmarks for Q4 of 2016.
Staffing
According to the CareerBuilder Mid-Year Jobs Forecast, 23% of US workers intend to change jobs by the end of the year. This means that HR departments will have get hiring in order to replace the departing employees. The EWS states the main reasons why workers will switch jobs as looking for more benefits & compensation; seeking opportunities for career growth & development, and feeling unappreciated by their current employer.
In order to contend with the departures, employers intend to boost recruitment in Q4 of 2016. According to the CareerBuilder forecast, 50% of employers plan to hire full-time employees, 29 percent plan to hire part-time and 32% of employers intend to hire temporary workers.
The top three industries which will report the highest rate of new hires include Information Technology, Health Care, Financial Services and Manufacturing. More than two thirds (68%) of employers in the IT industry plan to hire permanent employees. Similarly, 65% of employers in the Health Care Industry, 56% in the Financial Services Industry and 51% in the Manufacturing Industry plan to hire permanent staff.
Compensation
Compensation is emerging as one of the major points of competition among employers as they source for top talent. This is because the jobs market is having a relative scarcity of top talent. This reality isn’t lost on employees. The EWS study found that 51% of workers believe that the current jobs market gives them leverage to demand higher compensation.
Employers are also upping their game in a bid to outdo their rivals. According to the CareerBuilder forecast, 70% of employers plan to increase wages in the second-half of 2016. These increases will move right into Q4 of 2016 – with 39% of employers planning to offer higher starting salaries for new employees, and 53% planning to increase wages for current employees. More than one-fifth of employers (21%) plan to increase wages by 5% or more.
The upward growth of compensation may become a source of worry for some employers. The EWS reported that 62% of employers know the importance of increasing wages and want to increase them, but cannot afford to. Another 44% said that increasing wages will negatively impact their bottom line. This is likely to continue into the Q4 of 2016.
Ultimately, in Q4 of 2016, HR professionals will have to contend with replacing departing staff. Given the increased competitiveness for top talent, they may have to increase their offers in order to attract top talent. Those unable to significantly raise their wages may not only suffer to attract top talent but may also be unable to keep their top talent from leaving.
