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Survey: Companies can reduce HR costs by cutting complexity in key processes, programs
July 21, 2005
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Atlanta -- Executives can significantly reduce the cost of HR by reducing the complexity of key HR processes, programs, and technology, according to Book of Numbers research from The Hackett Group.

Complexity reduction is a major focus of world-class HR organizations, which spend 27 percent less per employee on HR than their peers, operate with 35 percent fewer HR staff, and also demonstrate improved effectiveness with fewer voluntary terminations and the ability to fill positions more quickly, according to Hackett. Hackett's research found that world-class HR executives do a much better job of identifying and targeting the specific areas where complexity reduction can have the greatest business impact. For example, world-class HR organizations are 87 percent more likely than their peers to have deployed a common HR application, and also show reduced complexity with 69 percent fewer health & welfare plans, 91 percent fewer savings plans, and 45 percent fewer compensation plans, resulting in reduced resource requirements for benefits administration costs.

"It's pretty obvious to most HR executives that complexity increases costs. World-class HR executives are simply more effective at targeting areas where complexity reduction offers the greatest impact," said Hackett HR Practice Leader Stephen Joyce. "This focus on complexity reduction is a significant factor in how they cut costs, operate with significantly fewer staff, yet provide more strategic benefit to their companies."

According to Hackett, 71 percent of all world-class HR organizations have deployed common HR applications on a global basis, while only 38 percent of typical companies make the same claim. This makes world-class companies 87 percent more likely than their peers to take this approach. To leverage this practice, top companies typically re-examine their HR application development process. Typical companies begin with the development of their "unique" requirements and then build or purchase and customize an application to meet their internal requirements. In contrast, world-class companies find the application with the closest fit to their requirements, then map their business processes to the selected application. Solid business cases are required to justify all customizations.

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