Strategic H.R. Means Higher Productivity, Lower Turnover

U.S. organizations are starting to reinvest in human resources (H.R.) services and staffing following the economic downturn of the past three years, according to findings included in Bersin & Associates’ “The HR Factbook 2011: Executive Summary.”

Organizations on average spent 1.4 percent more on H.R. programs, services and systems in 2011 than in 2010, with $1,218 spent per employee, according to the March 2011 study, the first of its kind from Bersin & Associates. Some of these funds went to hire additional staff, as H.R. headcount increased an average of 1.8 percent this year. Most organizations focused investments on core services such as compensation, benefits, payroll and employee relations, which accounted for about 60 cents of every H.R. dollar. Approximately one-third of the HR budget went to talent management, as organizations invested more in recruiting and development initiatives.

“The increased spending on human resources shows how businesses around the world are rapidly starting to rebuild their talent pipelines and cores services to engage and retain people,” says Josh Bersin, Bersin’s chief executive officer and president.

On average, only about one in 10 H.R. dollars went to “strategic” H.R. services, which include employee engagement, workforce planning and measurement, and wellness programs. However, organizations with more mature H.R. functions spent two-to-three times as much on these initiatives. The efforts of these more mature H.R. functions pay off. According to Bersin & Associates’ HR Maturity Model, those organizations at the highest maturity level have nearly 40 percent lower turnover — and more than twice the revenue per employee — than those at the lowest maturity level. In addition, these highly mature, “business-integrated” H.R. organizations enjoy 38 percent higher employee engagement than those at lower levels.

“Organizations at all levels are now talent constrained, and business leaders want to re-engage their workforces to drive innovation and execution.” Bersin adds. “Human resources teams are being asked to step up their game: creating more innovative recruiting programs, leveraging the power of social networking for internal and external communications, developing emerging leaders, and helping the organization mobilize talent to take advantage of global business opportunities. These are urgent business problems that require greater investments in H.R.”

The research was based on a study of nearly 300 U.S. H.R. professionals, and included a series of in-depth interviews to better understand key issues and trends.

Bersin & Associates principal analyst Karen O’Leonard says that organizations with mature H.R. functions clearly will emerge from the recession ahead of the game.

“These mature H.R. organizations have strong core services and talent management initiatives, enabling their teams to focus on strategic people issues,” says O’Leonard. “Organizations with such mature H.R. functions will be better able to hire and retain their key talent, expand more quickly, and recover from the recession faster than companies with less mature and effective H.R. teams.”

U.S. organizations are starting to reinvest in human resources (H.R.) services and staffing following the economic downturn of the past three years, according to findings included in Bersin & Associates’ “The HR Factbook 2011: Executive Summary.”

Organizations on average spent 1.4 percent more on H.R. programs, services and systems in 2011 than in 2010, with $1,218 spent per employee, according to the March 2011 study, the first of its kind from Bersin & Associates. Some of these funds went to hire additional staff, as H.R. headcount increased an average of 1.8 percent this year. Most organizations focused investments on core services such as compensation, benefits, payroll and employee relations, which accounted for about 60 cents of every H.R. dollar. Approximately one-third of the HR budget went to talent management, as organizations invested more in recruiting and development initiatives.

“The increased spending on human resources shows how businesses around the world are rapidly starting to rebuild their talent pipelines and cores services to engage and retain people,” says Josh Bersin, Bersin’s chief executive officer and president.

On average, only about one in 10 H.R. dollars went to “strategic” H.R. services, which include employee engagement, workforce planning and measurement, and wellness programs. However, organizations with more mature H.R. functions spent two-to-three times as much on these initiatives. The efforts of these more mature H.R. functions pay off. According to Bersin & Associates’ HR Maturity Model, those organizations at the highest maturity level have nearly 40 percent lower turnover — and more than twice the revenue per employee — than those at the lowest maturity level. In addition, these highly mature, “business-integrated” H.R. organizations enjoy 38 percent higher employee engagement than those at lower levels.

“Organizations at all levels are now talent constrained, and business leaders want to re-engage their workforces to drive innovation and execution.” Bersin adds. “Human resources teams are being asked to step up their game: creating more innovative recruiting programs, leveraging the power of social networking for internal and external communications, developing emerging leaders, and helping the organization mobilize talent to take advantage of global business opportunities. These are urgent business problems that require greater investments in H.R.”

The research was based on a study of nearly 300 U.S. H.R. professionals, and included a series of in-depth interviews to better understand key issues and trends.

Bersin & Associates principal analyst Karen O’Leonard says that organizations with mature H.R. functions clearly will emerge from the recession ahead of the game.

“These mature H.R. organizations have strong core services and talent management initiatives, enabling their teams to focus on strategic people issues,” says O’Leonard. “Organizations with such mature H.R. functions will be better able to hire and retain their key talent, expand more quickly, and recover from the recession faster than companies with less mature and effective H.R. teams.”

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