Many HR departments find themselves in a difficult situation: budgets are not increasing as fast as their workloads. TechTarget reports that HR budgets and headcounts are even contracting slightly (0.2% to 0.4%) at some organizations, while HR workloads are increasing by an average of 9%. This creates a Catch-22 situation: HR departments must increase spending in order to meet growing mandates, but they are simultaneously expected to pinch pennies when it comes to spending. How can HR departments thread this needle?
This is both a no-brainer and also obviously easier said than done, but budget-setting for HR teams often isn’t realistic. External factors like COVID-19 can outright necessitate increased expenditures, and changes within the company – like growth in employee count – can also justify higher spending on HR. As Ben Brooks, the founder, and CEO of the career development platform PILOT, writes for Human Resource Executive: “When we use a prior year’s budget and keep it flat, or only increase it by a few percentage points, then we’re not doing what the best CFOs insist upon zero-basing budgets to build, from the bottom-up, what’s truly needed for the current reality.”
We talk about how HR is a value driver, but if the budget-setting process treats HR like just another cost-center instead of an investment and consequently underfund (i.e., undervalue) HR, you create a setup-to-fail scenario where the HR function will be unable to meet its obligations and can’t drive value.
According to advisory firm The Hackett Group, midsize and large firms are investing heavily in automation so that existing personnel don’t have to spend as much time on time-consuming tasks. For example, chatbots can often relieve HR personnel from losing hours to routine and repetitive interactions, escalating only the most important and necessary to human interaction.
Small and midsize organizations in particular can benefit from leveraging the economy-of-scale pricing available through vendors like Professional Employer Organizations. PEOs and similar groups can deliver enterprise-grade services, benefits, and HR services at a fraction of the cost of what the business would have to spend to handle the same level of service internally.
A surprising number of HR initiatives are typically based on raw guesswork and assumptions, but world-class HR organizations use data to solve problems. Workforce analytics can transform uncertainty into clarity and focus HR’s efforts on only the most effective and most successful programs. For example, workforce analytics can help accurately gauge employee flight risk so the organization can take steps to reduce turnover, and that’s only the tip of the iceberg. In other words, workforce analytics can help HR teams be more successful without wasting a single cent.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.