hr department benchmarks and analysis - bna.com€¦ · since 1978, bloomberg law has published an...

2018

HR Department Benchmarks and Analysis

�2018 The Bureau of National Affairs, Inc. • Arlington, Virginia

HR Department Benchmarks and Analysis 2018

ISBN 978-1-63359-250-6ISSN: 1540-2711

"This publication is designed to provide accurate and authoritative information inregard to the subject matter covered. It is sold with the understanding that the publisheris not engaged in rendering legal, accounting or other professional service. If legaladvice or other expert assistance is required, the services of a competent professionalperson should be sought." − From a Declaration of Principles, jointly adopted by aCommittee of the American Bar Association and a Committee of Publishers andAssociations.

For inquiries about purchasing multiple copies of this report,please contact:

Gail Moorstein, Editorial Director([email protected])

s Table of Contents

Acknowledgements

About the Authors

Infographic Summary

Executive Summary

Introduction and Guide to Using This Report

Introduction

Frequently Used Terms

Design, Methodology, and Presentation

Profile of Participating Employers

Chapter 1—HR Department Staffing

Infographic Overview

How It’s Presented: HR Staff Ratios in Charts and Graphs

HR Staffing

How It’s Measured: The HR Staff Ratio

Chapter 2—HR Department Budgets and Expenditures


How It’s Measured: HR Budget and Expenditures

How It’s Presented: HR Expenses per Capita in Charts and Graphs

Budgeted Changes in HR Expenditures

How It’s Measured: HR Budgets as a Percentage of Operating Costs

HR Budgets and Total Operating Costs

Benchmarking HR Expenditures: Factors to Consider

How It’s Measured: HR Salaries as a Percentage of Payroll (HR Salary Ratio)

HR Staff Salaries

HR Budget Breakdown

�2018 The Bureau of National Affairs, Inc. • Arlington, Virginia iii

Chapter 3—HR Priorities, Policy, and Influence


HR Priorities, Policy, and Influence

Chapter 4—Performance Management


Performance Management

Chapter 5—HR Metrics and Strategy


HR Metrics and Strategy

Chapter 6— HR Activities and Outsourcing


HR Activites and Outsourcing

Appendix

Guide to Using The Appendices

Demographics

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6


iv � 2018 The Bureau of National Affairs, Inc. • Arlington, Virginia

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s Acknowledgements

We wish to extend our heartfelt thanks to the many human resources professionals who participated in this year’s HR Department Benchmarks and Analysis survey. This report would not be possible without their willingness to complete the extensive survey questionnaire, despite their considerable duties and obligations. We are most grateful for their participation. As always, we are deeply indebted to Fonda Jarrett and Carol Kocian of Bloomberg Law for their diligent, conscientiousness, and professional work in designing, laying out, and publishing this report.

�2018 The Bureau of National Affairs, Inc. • Arlington, Virginia v

s About the Authors

The following individuals contributed to the research and questionnaire design, datacollection and tabulation, analysis, and interpretation of survey findings, writing, copy editing,and organization of this report.

Gail C. MoorsteinEditorial Director

Molly HuieManager, Surveys and Research Reports

Stefanie ChicksSurvey Research Analyst

Kurt NaaszAssistant Managing Editor

Cordelia D. GaffneyManager, Graphics

Michelle SchneiderDirector, Creative Services


vi � 2018 The Bureau of National Affairs, Inc. • Arlington, Virginia

Executive Summary Overview

2018 HR Benchmarks Report

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

A majority say they have made revisions to policies over the past 12 months.

Nearly four out of 10 HR professionals say their use of metrics and analytics is adequate.

Sta� ratio hits a new high—1.5 HR sta� for every 100 workers.

1.5

1.11.0

1.1 1.1 1.1

1.3 1.3

1.1

1.4 1.4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

HR salary ratio also hit an all-time high, indicating HR sta� continue to make more than the workers they serve.

2.8

1.31.2

1.51.3 1.4

1.8 1.71.4

1.6

2.7

Change

86%

Most of the planned changes relate to data security, ACA, family leave, and work schedules.

Most have updated their performance management programs in the past 3 years.

82%18%

Yes No

Adequate

38%

Those who agree that their usage of metrics and analytics is adequate report notably higher levels of departmental e�ciency, cost savings, and data-driven decision-making.

Disagree Agree

64%

Data-driven decision-making

Improved e�ciency

Notable cost savings

19%

65%

28%

79%

23%

About two-thirds say they have formal performance management programs.

68%

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Data security

ACA

Family leave

Work schedule

37%

34%

32%

31%

s Executive Summary

Since 1978, Bloomberg Law has published an annual report on the state of the human resources function, HR Department Benchmarks and Analysis. Over the years, we’ve consistently enhanced and updated this survey-based report to ensure it is as comprehensive, timely, and enlightening as possible. As a result, HR Department Benchmarks and Analysis has remained a trusted source of authoritative information on HR staffing, expenditures, responsibilities, priorities, and influence for four decades.

We made a number of enhancements last year and can now provide year-over-year comparisons with respect to new metrics we’ve gathered on HR budgets, performance management, and data analytics. On the other hand, we’ve once again omitted questions regarding an exhaustive list of 60+ HR activities, which had been included in our survey for years but yielded less valuable insights.

The body of the report is more streamlined this year, as it was last year, covering the most pertinent and compelling information. However, the report also has an appendix with all the findings, including breakdowns by major demographic categories. This approach allows us to keep the narrative and in-text graphics concise and focused on the main story, while the appendix offers more data for those who want the added detail.

HR Department Benchmarks and Analysis 2018 is based on responses from 589 human resource executives and professionals representing a broad cross section of U.S. employers.(See the ‘‘Profile of Participating Employers’’ infographic for more details on the institutions represented.) Most respondents are at or near the top of the HR profession, heading up the human resources function at their organization, division, or facility. Key findings of this year’s report, organized by major topic, are summarized below.

HR Department Staffing

For seven straight years now, more HR departments have expanded than contracted, and twice as many departments this year report HR staffing increases compared to reports of decreases.

The median HR staff ratio hit a new record high level of 1.5 HR employees for every 100 workers served by the department.

Small employers tend to report higher HR staffing ratios, while economies of scale help large employers maintain a lower ratio of HR staff to total employee headcount.

Median figures on HR department composition show professional and technical employees make up 40 percent of HR staff this year, while managerial employees make up a third. Secretarial/clerical workers lag behind both of these groups, accounting for 23 percent of HR staff.


viii � 2018 The Bureau of National Affairs, Inc. • Arlington, Virginia

Smaller employers tend to have higher concentrations of HR managers, but the compositionof HR departments at larger organizations tilts in favor of professional and technical staff.

HR specialization also hit a new peak this year, with 79 percent of HR departments reporting atleast one specialist on staff. As expected, large organizations are more likely than their smallercounterparts to have HR specialists on staff.

The most common specialty area is benefits, followed by employment/recruitment. However,HR specialists commonly juggle multiple areas of responsibility, especially at smallerorganizations.

HR Expenditures and Budgets

As noted last year, annual adjustments in HR funding have settled into a pattern ofconservative growth characterized by steady expansion.

The median HR funding increase this year is 4.6 percent, up from 3.7 percent in 2017 and 4.2percent in both 2015 and 2016.

Budgeted HR expenditures rose after last year’s 10-year low when expressed as a per capitadollar amount. Across all employers, the median amount allotted to HR departments is $1,140per employee in 2018, up from $1,087 in 2017, but still slightly lower than $1,440 in 2016.

A possible explanation is that total spending on the programs and activities overseen by thesurveyed HR departments continued growing modestly, but expanding employee populationskept per capita costs relatively low. Calculations of HR expenditures on a per-employee basisnaturally fluctuate as a result of swings in the number of workers served by HR.

The median per capita budget figure varies widely across organizations of different sizes,ranging from $559 per employee among employers with 2,500 or more workers to $2,500per employee among establishments with fewer than 250 workers.

The 2018 metric on HR budgets as a share of total operating costs is the second highestrecorded in the past 20 years. The median result shows HR budgets accounting for 2.5percent of total operating costs this year. This is down from an all-time high of 3.1 percent in2017, but almost a percentage point higher than the previous record of 1.6 percent in 2016.

HR salaries are poised for a record high increase in 2018. The median hike in HR’s staff salarybudget is 6.2 percent this year, up two full percentage points from 4.2 percent in 2017 and 4.1in both 2015 and 2016.

The salary budget data also indicate that members of the HR department will be getting amedian of 2.8 percent of responding employers’ total projected wage and salary expendituresfor the year, which suggests a strong earnings advantage for members of the HR departmentas compared with the rest of the employee population.

This year’s survey continues the new content on HR budget breakdowns, and shows that themost prominent line items are benefits, training and development, employment and

�2018 The Bureau of National Affairs, Inc. • Arlington, Virginia ix

recruiting, and compensation. As a percentage of total HR budget, these four areas accountfor 60 percent of HR spending.

HR Priorities, Policy, and Influence

The 2018 results on HR’s strategic influence and involvement once again offer considerableevidence that HR is rarely a bit player.

A majority of the respondents agreed with the statement that one of the ways HR can have amore influential role is to be included as a partner early in the process of all major decisions.Along those lines, nearly three-quarters of HR executives said their departments currently havefull or substantial involvement in key business decisions.

Influence can also be asserted through access to the C-suite, and HR department headstypically have a direct reporting relationship with a top official, such as CEO/president, chiefoperating officer, chief financial officer, or an executive position such as senior vice president.

Judging by this year’s data on HR priorities, the competition for talent is a major concern, as84 percent of the surveyed HR departments identified recruitment and retention of qualifiedemployees as an important priority.

Also ranking high on the list are priorities such as employee satisfaction and morale, trainingand development, compensation competitiveness, and leadership development, all of whichtie in with the basic objectives of keeping employees happy, engaged, and growingprofessionally.

Again this year, we asked a series of questions focusing on HR policy revisions over the past 12months. Similar to last year, the results reveal that this is a dynamic area, with more than eightin 10 HR departments indicating they’ve made at least one policy revision or update recently.

Performance Management

Just over two-thirds of employers have formal performance management systems, and HRexecutives tend to have positive impressions of the programs.

Purposes served by the programs range from clarifying expectations and documentingperformance to identifying professional development needs and gathering information fordecisions on compensation and promotions.

Individual employees’ performance goals tend to be set by line managers or establishedcollaboratively by employees and their direct supervisors.

Existing employees commonly receive formal assessments once a year, but many programsshorten the cycle for new hires or workers on performance improvement plans, morecommonly evaluating performance ‘‘as needed.’’

When employees exceed their goals under formal performance management programs, theyoften receive a bump in base pay, a hike in variable pay, or a bonus increase. However,


x � 2018 The Bureau of National Affairs, Inc. • Arlington, Virginia

rewards aren’t automatically part of the equation; some organizations keep the performancemanagement process separate and distinct from the processes used to determine employeecompensation and rewards.

Eight out of 10 survey respondents indicated that their performance management programshave undergone at least minor revisions within the last three years. Over half of these updatesrelated to simplifying or streamlining the process, while only 25 percent said updates weretotal program revisions.

While further updates are on the horizon for many programs, overall one-third of HRdepartments seem to think the current system is fine and needs no immediate attention.

HR Metrics and Strategy

The practice of tracking HR metrics and analyzing data has become widespread, with morethan nine out of 10 HR departments indicating that they employ data analytics of some kind.

Broad usage is reported for several types of HR metrics and analytics; for example,compensation and benefits analysis is used by 90 percent of HR departments ‘‘at leastoccasionally.’’

The responsibility for analyzing the data that’s collected usually stays within the HRdepartment. In some cases, analytics are handled by a specific person or team within HR, but itis more common for everyone in HR to do some analytics.

There isn’t any single data analysis method or tool that has taken hold across a majority of HRdepartments, but some of the most common types are dashboards, data visualization, andanalysis of central tendency, such as mean and median.

The demands for data analysis skills tend to be more stringent when hiring for positions inother departments, whereas simple analytical skills are often sufficient for HR jobs. However,throughout organizations, HR looks for the ability to interpret data analysis and accuratelyreport results. This may indicate that while HR departments do not necessarily need or requiretheir employees to have more advanced data analysis skills, being able to generallyunderstand data and report on results is a valued ability.

While attitudes about HR metrics and analytics appear generally positive, only 38 percent ofthe surveyed HR departments agree that their use of metrics and analytics is adequate, andjust 15 percent said they have no barriers to the use of HR metrics and analytics.

HR departments that actively analyze the data at their disposal tend to fare better on manypositive business outcomes than HR offices that view their use of data and analytics as lessthan adequate.

HR Responsibilities and Outsourcing

Our findings on overall workload shifts continue to show that HR departments are much morelikely to add new duties and responsibilities than to have anything removed from their plate.

�2018 The Bureau of National Affairs, Inc. • Arlington, Virginia xi

The prevalence of HR outsourcing rebounded from 2016’s all-time low. The 2018 readingshows that 62 percent of HR departments rely on an outside vendor or service provider tohandle at least one program or activity, nearly identical to the 63 percent recorded in 2017.

When handing off programs or activities, most HR departments retain management oroversight of the relationship with the outsourcing vendor.

HR activities or programs seldom return to the organization once they’ve been outsourced.


xii � 2018 The Bureau of National Affairs, Inc. • Arlington, Virginia

Participating Employer Profile

2018 HR Benchmarks Report

Union RepresentationYes . . . . . . . . . . . . . . . . . . . . . . . . . 35%No. . . . . . . . . . . . . . . . . . . . . . . . . . 65%

IndustryManufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19%Basic manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14%Intermediate manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28%Advanced manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48%Other manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11%

Nonmanufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49%Finance, insurance, banking, and real estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16%Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9%Information services, telecommunications, data processing . . . . . . . . . . . . . . . . . . . . . . . . . 14%Retail and wholesale trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16%Business, personal, and miscellaneous services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19%Transportation, warehousing, utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Communications and publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%Other nonmanufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%

Nonbusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33%Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%Health care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%Membership organizations and associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Social services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%Other nonbusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%

Workforce Size(Employee Headcount)

Less than 250 . . . . . . . . . . . . . . . . 41%250–499. . . . . . . . . . . . . . . . . . . . . 15%500–999. . . . . . . . . . . . . . . . . . . . . 14%1,000–2,499. . . . . . . . . . . . . . . . . . 13%2,500 and above . . . . . . . . . . . . . 17%

Annual RevenueLess than $10 million. . . . . . . . . . 18%$10–49 million. . . . . . . . . . . . . . . . 18%$50–99 million . . . . . . . . . . . . . . . 12%$100–499 million . . . . . . . . . . . . . 19%$500–999 million . . . . . . . . . . . . 7%$1–9 billion. . . . . . . . . . . . . . . . . . . 13%$10–24 billion . . . . . . . . . . . . . . . . 4%$25 billion or more . . . . . . . . . . . 2%I am not sure . . . . . . . . . . . . . . . . . 8%

RegionNew England (ME, NH, VT, MA, CT, RI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%Middle Atlantic (NJ, NY, PA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14%East North Central (WI, MI, IL, IN, OH) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22%West North Central (ND, MN, SD, NE, KS, IA, MO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7%South Atlantic (FL, GA, SC, NC, VA, DC, MD, DE, WV, PR, U.S. Virgin Islands) . . . . . . . . . . 23%East South Central (KY, TN, MS, AL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%West South Central (OK, TX, AR, LA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9%Mountain (NM, CO, WY, MT, ID, UT, AZ, NV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7%Pacific (WA, OR, CA, AK, HI, Northern Mariana Islands, Guam, American Samoa) . . . . . . 11%

HR DepartmentsDoes your organization have more than one human resources department?

Yes . . . . . . . . . . . . . . . . . . . . . . . . . 23%No. . . . . . . . . . . . . . . . . . . . . . . . . . 77%

Title/PositionHuman Resources Professional (generalist or specialist). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20%Human Resources Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28%Human Resources Assistant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%Director of Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20%Vice President of Human Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13%Internal HR Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%External HR Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1%Other position within the HR department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1%Other position outside the HR department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12% ©

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For more information on our surveys and reports or other Human Resources products and services, contact your local Bloomberg Law representative, call 800.372.1033, or visit www.bloombergbna.com.

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