HR s Evolving Role in Organizations and Its Impact on Business Strategy

Transcription

1 A Survey Report by the Society for Human Resource Management HR s Evolving Role in Organizations and Its Impact on Business Strategy Linking Critical HR Functions to Organizational Success

2 Project Team Project leader: Project contributors: Amanda Benedict, M.A., survey research specialist Nancy R. Lockwood, M.A., SPHR, GPHR, manager, HR Content Program Evren Esen, manager, Survey Program Steve Williams, Ph.D., SPHR, director, Research External reviewers and contributors: SHRM Organizational Development Special Expertise Panel: Libby Anderson, M.S., SPHR, Fernán R. Cepero, PHR, Tom Darrow, Nancy Gerhardt Davies, Ernest Gundling, Charity Hughes, MSOD, SPHR, John Lewison, SPHR, Colleen Mills, Ph.D., Ken Moore, Maggie Romance, SPHR, Trellis Usher-Mays, Bill Young, SPHR HR Consulting/Outsourcing Special Expertise Panel: Franchette Z. Richards, GPHR, GMS, CRP Copy Editing: Design: Production: Katya Scanlan, copy editor Shirley Raybuck, graphic designer Bonnie Claggett, production traffic coordinator This report is published by the Society for Human Resource Management (SHRM). All content is for informational purposes only and is not to be construed as a guaranteed outcome. The Society for Human Resource Management cannot accept responsibility for any errors or omissions or any liability resulting from the use or misuse of any such information Society for Human Resource Management. All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Society for Human Resource Management, 1800 Duke Street, Alexandria, VA 22314, USA. For more information, please contact: SHRM Research Department 1800 Duke Street, Alexandria, VA 22314, USA Phone: (703) Fax: (703) Web:

3 HR s Evolving Role in Organizations and Its Impact on Business Strategy A Survey Report by the Society for Human Resource Management May 2008 Contents About This Report...1 About SHRM....1 Introduction....2 Methodology...3 Key Findings...4 Survey Results...5 Critical HR Functional Areas...5 HR Responsibility Sourcing...9 In-House HR Responsibilities...12 Partially Outsourced HR Responsibilities...15 Completely Outsourced HR Responsibilities...17 Decisions About Sourcing HR Responsibilities...17 Assignment of HR Responsibilities...20 HR Function/Department Staffing Changes...23 HR s Role Within the Organization...27 Strategic vs. Transactional Role...27 HR Mentoring...31 HR s Impact HR Metrics Tracking Staff Hours...41 Obstacles to HR Effectiveness...42 Conclusions...47 Demographics...48 Appendix...49 Endnotes...51 Recently Published SHRM Survey Products....53

4

5 About This Report In September 2007, the Society for Human Resource Management (SHRM) conducted a survey about how human resource functional areas and responsibilities are approached within organizations. This report presents an analysis of the HR in Organizational Context Survey results and examines differences among organizations by organization staff size and employment sector. In 2007 and 2008, SHRM reviewed existing research to identify differences in how organizations approach human resources. Workforce size has a profound effect on the roles and responsibilities of HR functions within organizations. The results of this review are compiled in a report titled The Varying Roles of HR: A Look at HR by Organization Staff Size. 1 Relevant findings from previous SHRM survey data included in the review are presented in this report to contribute to the understanding of the human resource function within organizations of various sizes. About SHRM The Society for Human Resource Management (SHRM) is the world s largest professional association devoted to human resource management. Our mission is to serve the needs of HR professionals by providing the most current and comprehensive resources and to advance the profession by promoting HR s essential, strategic role. Founded in 1948, SHRM represents more than 225,000 individual members in over 125 countries and has a network of more than 575 affiliated chapters in the United States, as well as offices in China and India. Visit SHRM at 1

6 Introduction How HR Operates Within Organizations Matters to Business Strategy Human resources includes a myriad of functional areas, encompassing responsibilities from recruitment and staffing to compensation and benefits or training and development. The human resource profession has evolved during the past 20 years and continues to change, from the collective demographics of HR professionals and the ways that practitioners enter the profession to the functions and roles served by HR and the value it brings to organizations. 2 HR is increasingly mobilized to offer much more to organizations than record-keeping, payroll and employee benefits administration. In fact, many of the transactional functions that traditionally formed the core of HR departments responsibilities are now often outsourced so that organizations can focus on business strategy through talent management and leadership development activities. Yet, it is argued that HR functions and departments in many organizations are not engaged in strategic roles. What factors contribute to how HR s role is viewed within the organization? Human resource functions and departments are typically bound by a number of organizational factors, not the least of which is the staff size of the organization. How do organizations determine which functional areas are critical to the organizational strategy, the priority of critical functions and how to best develop and assign HR staff to those functions? Understanding how HR is approached in the context of the organization in which it operates is crucial to understanding how HR contributes to business strategies and the value that it is poised to bring to the organization. While organization staff size clearly has an influence on the headcount and budget within the organization s HR function and/or department, there may be other factors contributing to decisions about HR responsibility and functional area staffing. How much control do HR professionals have over the functional areas to which they are assigned and/or the scope of their responsibilities? To what extent are HR professionals receiving mentoring about strategic contributions to the organization, including from organization leaders in non-hr functions? Understanding how HR is approached in the context of the organization in which it operates is crucial to understanding how HR contributes to business strategies and the value that it is poised to bring to the organization. Moreover, it adds to the overall picture of HR professionals career progression expectations as well as non-hr business leaders perceptions of and mentoring involvement with HR. 2

7 Methodology The survey was conducted among HR professionals employed by organizations operating in the United States. The survey instrument included questions regarding organizational practices and HR staffing related to human resource functions within respondents organizations. A sample of HR professionals was randomly selected from SHRM s membership database, which included approximately 225,000 individual members at the time the survey was conducted. Only members who had not participated in a SHRM survey or poll in the previous six months were included in the sampling frame. Members who were students, consultants, academics, located internationally or had no address on file were also excluded from the sampling frame. Beginning in September 2007, an that included a link to the 2007 HR in Organizational Context Survey 3 was sent to 3,000 SHRM members. A total of 2,744 surveys were successfully delivered, and 589 HR professionals responded, yielding a response rate of 21%. The survey was fielded for a period of three weeks. Two reminders and a faxed reminder were sent, and reminder phone calls were made to sample members in an effort to increase the response rate. The sample was representative of the SHRM membership population, although there were some differences by organization staff size, with more HR professionals in this sample from small- and medium-staff-sized organizations and fewer from large-staffsized organizations. HR professionals in this sample were more likely to report that their HR departments had 1 4 employees and less likely to report that their HR departments had larger numbers of employees. Compared with the general SHRM membership, HR professionals in this sample were more likely to be from the service (profit), manufacturing (durable goods) and health industries. 3

8 Key Findings The top three critical HR functional areas that contributed to organizations current business strategies were 1) staffing, employment and recruitment, 2) training and development, and 3) employee benefits. Among HR professionals who indicated that staffing, employment and recruitment was one of their organizations top three critical HR functional areas, more than one-half reported that it was their first priority. The HR responsibilities most likely to be staffed in-house were performance management, employee communication plans/strategies, policy development and/or implementation, and strategic business planning. The HR responsibilities that were most likely to be outsourced were employee assistance/counseling and flexible spending account administration. One-half of HR professionals reported that their organization s business strategy contributed to the decision of whether to staff, outsource or eliminate various HR roles and responsibilities, suggesting an alignment of HR function staffing decisions with business operating plans. The largest percentage of HR professionals from organizations that intended to expand their HR departments in the next 12 months reported that their decision to hire additional HR staff was due to the HR department/function being understaffed for current number of employees within the organization. Slightly less than one-half of HR professionals reported that their organizations had formal (i.e., documented and established) systems and processes in place for collecting HR metrics and/or measurement data. Among these, slightly more than one-half reported formally calculating the impact of HR activities on measurable aspects of business performance. The top three critical HR functional areas that contributed to organizations current business strategies were 1) staffing, employment and recruitment, 2) training and development, and 3) employee benefits. The largest percentages of HR professionals reported that HR s effectiveness was limited by the budget and headcount available for HR initiatives. 4

9 Survey Results Critical HR Functional Areas Although conducting business and managing a workforce involves multiple human resource activities, some HR functional areas are of more importance than others in supporting the organization s business strategies and operating plans. When asked to identify the top three critical HR functional areas contributing to their organization s current business strategy, more than one-half of HR professionals (52%) reported that staffing/employment/recruitment was among the most critical HR functional areas. The next largest percentages of respondents reported that training and development (29%) and employee benefits (29%) were among their top three critical HR functional areas. This indicates that HR is most likely to support the organization s business strategy through human capital-related areas such as building, developing and maintaining the workforce. The smallest percentages of HR professionals reported that EEO/Affirmative Action (3%), international human resource management (HRM) (1%) or research (less than 1%) were critical to their organization s current business strategy. Staffing and employee benefits issues are often intertwined. John Lewison, SPHR, director of human resources for MDRC and SHRM Organizational Development Special Expertise Panel member, offers, Both recruitment and talent retention are key issues for our company. We are a large policy research organization in New York, where attracting and retaining academic-trained experts in the fields of welfare, disability, prison reform and education are key. While we re anticipating that a softer economy may make it easier for us to hire support-related staff in 2008, we re still expecting a competitive market for key researchers and economists. We are constantly examining our benefit programs, not only from a competitive perspective, but in terms of cost-effectiveness. This is especially true for our wellness programs; e.g., medical, hospital and dental plans. With employees in large cities on both coasts, like many companies, we re hostage to the vagaries of escalating medical costs. A while back we shifted to a self-insured model, coupled with stop-loss insurance to better control our costs. So far, this approach seems to be working. We also embarked on several cost-savings initiatives, such as increasing copayments and deductibles. Many companies have taken similar actions, says Lewison. 5

10 Table 1 which HR Functional Areas Are Most Critical to Contributing to the Organization s Current Business Strategy? (n = 582) Staffing/employment/recruitment 52% Training/development 29% Employee benefits 29% Employee relations 27% Strategic planning 27% Administrative/transactional 18% Change management 17% Compensation 15% Organizational development 15% Legal compliance 13% Communications 10% Workforce planning/forecasting 10% Human resource information systems (HRIS) 9% Health, safety, security 8% Diversity 7% Labor/industrial relations 6% HR metrics/measurement data/return on investment 5% EEO/Affirmative Action 3% International HRM 1% Research 0% Other 1% Note: Data sorted in descending order. Percentages do not total 100% due to multiple response options. Table 2 Critical HR Functional Areas Contributing to the Organization s Current Business Strategy (by Organization Staff Size) (n = 582) Small (1 to 99 employees) (n = 142) Medium (100 to 499 employees) (n = 177) Large (500+ employees) (n = 138) Differences by Organization Staff Size Employee benefits 29% 35% 27% 20% Small > large Strategic planning 27% 19% 28% 34% Large > small Administrative/transactional 18% 25% 19% 11% Small > large Legal compliance 13% 19% 11% 7% Small > large Human resource information systems (HRIS) 9% 6% 8% 14% Large > small Diversity 7% 2% 5% 10% Large > small Note: Data sorted in descending order by overall column. Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided. Table includes only response options for which there were significant differences. 6

11 As shown in Table 2, several differences emerged in critical HR functional areas according to organization staff size. HR professionals employed by small-staff-sized organizations (1 to 99 employees) were more likely than HR professionals from largestaff-sized organizations (500 or more employees) to report that employee benefits (35% compared with 20%), administrative/transactional functions (25% compared with 11%) and legal compliance (19% compared with 7%) were among the top three critical HR functional areas that contributed to their organizations business strategies. By contrast, HR professionals from large organizations were more likely than their counterparts employed by small organizations to place strategic planning (34% compared with 19%), HRIS (14% compared with 6%) and diversity (10% compared with 2%) among their organizations top three critical HR functional areas. In addition to reflecting the organization s business strategy, these data may also indicate the organization s philosophy of HR responsibilities as well as the availability of HR staff to undertake selected functional areas and initiatives. Table 3 depicts differences in critical HR functional areas based on organization sector. HR professionals from nonprofit organizations (37%) were more likely to report employee benefits as one of the top three critical HR functional areas than were respondents from publicly owned for-profit organizations (18%). HR professionals from publicly owned forprofit organizations (36%) were more likely than their counterparts from privately owned Related Research SHRM recently reviewed previously released survey data related to HR roles and responsibilities in order to identify differences in how HR is approached by organizations of various staff sizes. 4 What emerged was a picture of HR professionals level of engagement in various HR and other functional areas within organizations, differences in challenges experienced in supporting HR functions and the varying ways in which HR professionals bring value to organizations of different workforce sizes. Although HR functional areas support organizational functions, there are variations in the extent to which HR departments feel that they contribute strategically through performing these responsibilities. HR professionals from medium organizations (97%) were more likely than those from small organizations (88%) to report that their HR department strategically contributed to some extent or to a large extent to the organization s recruitment and selection processes. HR professionals in medium organizations may be able to more immediately see the impact of their activities on organization functions compared with their counterparts from large organizations and may be more likely than those in small organizations to feel that HR activities are an integral part of organization functions. Extent to Which HR Department Strategically Contributes to Organization Functions (by Organization Staff Size) (n = 419) Small (1-99 employees) (n = 111) Medium ( employees) (n = 174) Large (500+ employees) (n = 120) Differences by Organization Staff Size Recruitment and selection processes 94% 88% 97% 95% Medium > small Note: Table includes only response options for which there were significant differences between organization staff-size categories. Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided. Percentages include responses of to some extent and to a large extent. HR professionals who responded not sure or not applicable were excluded from this analysis. Source: SHRM 2006 Strategic HR Management Survey Report 7

12 for-profit organizations (21%) to report that strategic planning was among the top three critical HR functional areas contributing to their organizations business strategy. Labor and industrial relations were more likely to be among the top three critical HR functional areas for government agencies (24%) than for publicly owned for-profit organizations (3%) or privately owned for-profit organizations (3%). Table 3 Critical HR Functional Areas Contributing to the Organization s Current Business Strategy (by Organization Sector) (n = 582) Publicly Owned For-Profit (n = 114) Privately Owned For-Profit (n = 235) Nonprofit (n = 71) Government (n = 42) Differences by Organization Staff Size Employee benefits 29% 18% 31% 37% 14% Nonprofit > publicly owned for-profit Strategic planning 27% 36% 21% 30% 29% Publicly owned for-profit > privately owned for-profit Labor/industrial relations 6% 3% 3% 6% 24% Government > publicly owned for-profit, privately owned for-profit, nonprofit Note: Data sorted in descending order by overall column. Excludes other organization sectors. Sample size is based on the actual number of respondents by organization sector who answered this question using the response options provided. Table includes only response options for which there were significant differences. Table 4 priority Ratings of Critical HR Functional Areas Contributing to the Organization s Current Business Strategy First Second Third Staffing/employment/recruitment (n = 266) 57% 23% 20% Training/development (n = 144) 18% 44% 38% Employee benefits (n = 138) 18% 39% 43% Strategic planning (n = 135) 56% 25% 19% Employee relations (n = 134) 26% 37% 37% Administrative/transactional (n =92) 23% 28% 49% Change management (n = 83) 36% 33% 31% Compensation (n = 77) 31% 44% 25% Organizational development (n = 77) 26% 39% 35% Legal compliance (n = 60) 50% 38% 12% Communications (n = 53) 30% 36% 34% Workforce planning/forecasting (n = 51) 24% 33% 43% Human resource information systems (HRIS) (n = 45) 22% 36% 42% Health, safety, security (n = 35) 37% 37% 26% Diversity (n = 35) 37% 31% 31% Labor/industrial relations (n = 29) 28% 24% 48% HR metrics/measurement data/return on investment (n = 26) 12% 27% 62% Note: Data sorted in descending order by number of respondents who indicated that each HR functional area was among the top three areas critical to their organization s current business strategy. Rankings for each of the HR functional areas include only respondents who indicated that it was a top critical HR functional area contributing to the organization s business strategy. Only critical functional areas that at least 25 respondents selected as a top priority are included in table. Row percentages may not total 100% due to rounding. 8

13 HR professionals were asked to rank the priority of their organizations top three critical HR functional areas. Of the respondents who indicated that staffing/employment/ recruitment was a critical HR functional area, more than one-half (57%) reported that it was the top-ranked priority for their organizations. More than one-half of respondents (56%) who selected strategic planning as a critical HR functional area ranked it as the top priority for their organizations. One-half of HR professionals (50%) who indicated that legal compliance was one of their organizations top three critical HR functional areas rated it as the first priority. Among those who identified training and development as a critical HR functional area, the largest percentage of HR professionals (44%) reported that it was the second priority for their organizations. Of the HR professionals who indicated employee benefits as a critical HR functional area, 43% responded that it was the third-ranked priority within their organizations. These data and others depicted in Table 4 reflect organizations workforce development philosophies as well as the predominant HR functional areas to which organizational resources may be allocated. SHRM Organizational Development Special Expertise Panel member Fernán Cepero, PHR, vice president of human resources for YMCA of Greater Rochester, offers, The results are indicative of a Generation Y trend that is intertwined. Allow me to explain: The first critical area confirms the challenge HR professionals have in recruiting and retaining Generation Y employees. The decision to accept a job offer involves many factors for Generation Y. A good job is no longer defined by monetary gains alone. Gen Y employees take a job because they want to work somewhere, not because they have to. The second critical area validates the first point in that training and development initiatives must appeal Generation Y s desire to learn and involve the application of high-technology mediums, such as online media (i.e., webcasts, videos, podcasts, blogs, instant messaging). Recruiting efforts must now highlight paid training and skill development. The third and final benefits requires HR to attract/sell Generation Y on benefits such as flexible schedules, telecommuting and full tuition reimbursement. While all employees think the benefits they receive as a part of their compensation packages are an important factor in rating job satisfaction, what type of benefit they value is entirely different. Gen Y employees don t necessarily plan to stay at a company very long, and both Gen Y and Gen X employees grew up without expectations of job security, so HR professionals do not expect to win their loyalty by talking about traditional benefits such as pension vesting or funeral leaves. To motivate these generations, focus more on the benefits they value most flexibility to balance work and life. HR Responsibility Sourcing Which HR responsibilities are carried out in-house and which are outsourced, either partially or completely? Table 5 depicts the sourcing of common HR responsibilities. The vast majority of organizations that carry out performance management (94%), employee communication plans/strategies (93%), policy development and/or implementation (91%), strategic business planning (90%) and compensation and/ 9

14 or incentive plans administration (85%) staff these HR responsibilities within their organizations. This finding suggests that organizations strongly prefer to maintain control over these HR responsibilities rather than to entrust them to a third party by outsourcing. These may also be the HR responsibilities that require the most in-depth understanding of the organization s workforce and would be most difficult for a third party to competently perform on the organization s behalf. Table 5 Sourcing of HR Responsibilities Completely In-House Outsource Partially Outsource Completely Performance management (n = 482) 94% 5% 1% Employee communication plans/strategies (n = 477) 93% 6% 1% Policy development and/or implementation (n = 495) 91% 8% 1% Strategic business planning (n = 463) 90% 8% 2% Compensation and/or incentive plans administration (n = 489) 85% 13% 2% HR metrics/measurement data/return on investment (n = 353) 82% 12% 6% Organization development (n = 461) 78% 21% 1% Recruitment/staffing of employees (nonexecutives) (n = 507) 78% 21% 1% Affirmative Action Plans/EEO-1 filing (n = 382) 76% 20% 4% Learning management system (n = 411) 61% 33% 7% Human resource information systems (HRIS) development (n = 435) 59% 30% 11% Payroll administration (n = 504) 59% 31% 10% Employee relocation (n = 292) 57% 26% 18% Expatriate administration (n = 178) 54% 36% 10% Recruitment/staffing of executives (n = 492) 54% 40% 6% Training and development programs (n = 480) 54% 42% 4% Work/life balance benefits administration (n = 337) 53% 31% 17% Wellness programs (n = 376) 40% 38% 22% Consolidated Omnibus Budget Reconciliation Act (COBRA) (n = 491) 36% 18% 46% Executive development and coaching (n = 407) 36% 50% 14% Risk management/worker s compensation (n = 484) 34% 46% 21% Health care benefits administration (n = 504) 33% 40% 27% Temporary staffing (n = 448) 30% 45% 25% Background/criminal background checks (n = 462) 26% 22% 52% Retirement benefits administration (n = 452) 25% 45% 31% Pension benefits administration (n = 422) 24% 44% 33% Retirement planning (n = 432) 23% 49% 28% Employee assistance/counseling (n = 425) 17% 21% 62% Flexible spending account administration (n = 411) 15% 25% 60% Note: Data sorted in descending order by completely in-house column. HR professionals who responded not applicable were excluded from analysis. Row percentages may not total 100% due to rounding. 10

15 By contrast, more than one-half of organizations completely outsource employee assistance/counseling (62%), flexible spending account administration (60%) and background/criminal background checks (52%). Retirement benefits-related responsibilities were among the HR responsibilities that the largest proportions of organizations partially or completely outsourced, including retirement planning (77%), pension benefits administration (76%) and retirement benefits administration (75%). Retiree benefits are an area where many companies have recently made changes, including freezing plans and changing from defined benefits plans to defined contribution plans. Many organizations may find it more efficient and cost effective to outsource the administration of their retiree benefits to firms that are highly knowledgeable about the financial regulations involved with these types of plans and benefits rather than to staff that specialization in-house. Views of HR s role within the organization may also influence which functions are outsourced. Comments Franchette Richards, GPHR, GMS, CRP, member of SHRM s HR Consulting/Outsourcing Special Expertise Panel, Human resource functions Top 5 Insourced HR Responsibilities 1) Performance management 2) Employee communication plans/ strategies 3) Policy development and/or implementation 4) Strategic business planning 5) Compensation and/or incentive plans administration Related Research Although critical HR functional areas may be clearly aligned with and prioritized according to the organization s business strategy, HR professionals perceptions of the extent to which various HR functional areas add value to the organization s business strategy may be linked to the size of the organization. The results of the 2007 Human Resource Competency Study yielded numerous differences by organization staff size in HR professionals perceptions of how various HR practices add value to the business. 5 Compared with HR professionals from large organizations, HR professionals from small organizations reported to a greater average extent that training and development added value to the business. Compared with HR professionals from large organizations, HR professionals from medium organizations reported to a greater average extent that performance appraisal, internal communication, organization structure, workplace policies and work process design add value to the business. These findings may reflect HR professionals general observation of immediate or lasting impact to the organization as a result of HR practices. Average Degree That Various HR Practices Add Value to the Business (by Organization Staff Size) Small (1-99 employees) (n = 26) Medium ( employees) (n = 36) Large (500+ employees) (n = 381) Differences by Organization Staff Size Training and development Small > large Performance appraisal Medium > large Internal communication Medium > large Organization structure Medium > large Workplace policies Medium > large Work process design Medium > large Note: Based on a scale where 1 = to a very little extent and 5 = to a very large extent. Greater numbers indicate greater average degrees that various HR practices add value to the business. Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided. Source: RBL Group, University of Michigan Ross School of Business, SHRM, IAE School of Business, IMI, Tsinghua University, AHRI, and the National HRD Network Human Resource Competency Study [unpublished data] 11

16 that affect a company s strategy, the overarching company culture or the organization as a whole typically remain seated at the center of HR leadership. True organizational effectiveness is not measured by the successful execution of a company s employee assistance program nor how it administers its flexible spending accounts. While these are very important HR functions that clearly serve an organization s employees, these functions are more tactical in nature and not, in a strategic sense, impactful to the achievement of business goals and objectives. In short, transactional excellence is necessary but no longer sufficient for HR today. From evaluating the survey results and reviewing ongoing commentary in the HR and business media, it has become clearer that HR functions that are viewed as tactical are some of the first components to be outsourced. There are exceptions areas that are so key, so strategic (such as leadership development/executive coaching, succession planning, employee relations) that they must remain in-house. However, the key differentiator for HR will be whether they are viewed as tactical or strategic. Numerous differences emerged in the sourcing of HR responsibilities when the data were analyzed by organization staff size and organization sector. These findings are shown in Table 6 through Table 11. Top 5 Completely Outsourced HR Responsibilities 1) Employee assistance/counseling 2) Flexible spending account administration 3) Background/criminal background checks 4) Consolidated Omnibus Budget Reconciliation Act (COBRA) 5) Pension benefits administration In-House HR Responsibilities As illustrated in Table 6, HR professionals employed by small-staff-sized organizations were more likely to report in-house staffing of a number of HR responsibilities. Compared with HR professionals from large-staff-sized organizations, HR professionals Table 6 hr Responsibilities Staffed Completely In-House (by Organization Staff Size) Small (1 to 99 employees) Medium (100 to 499 employees) Large (500+ employees) Differences by Organization Staff Size Policy development and/or implementation (n = 451) 91% 84% 93% 96% Medium, large > small Strategic business planning (n = 415) 90% 95% 89% 83% Small > large Organization development (n = 360) 78% 85% 80% 71% Small > large Payroll administration (n = 298) 59% 50% 54% 73% Large > small, medium Employee relocation (n = 165) 56% 78% 56% 46% Small > medium, large Recruitment/staffing of executives (n = 264) 54% 63% 51% 41% Small > large Executive development and coaching (n = 148) 36% 50% 33% 28% Small > medium, large Health care benefits administration (n = 168) 33% 44% 32% 26% Small > large Temporary staffing (n = 136) 30% 39% 29% 22% Small > large Retirement planning (i.e., educating employees) (n = 98) 23% 20% 30% 15% Medium > large Employee assistance/counseling (n = 73) 17% 29% 13% 11% Small > medium, large Note: Data sorted in descending order by overall column. Table includes only response options for which there were significant differences. Sample size is based on the actual number of respondents who indicated that their organization supported each HR responsibility. 12

17 working at small-staff-sized organizations were more likely to report in-house staffing of strategic business planning, organization development, recruitment/staffing of executives, health care benefits administration and temporary staffing. Small-staffsized organizations were also more likely than either medium- or large-staff-sized organizations to provide in-house staffing of employee relocation (78% compared with 56% and 46%), executive development and coaching (50% compared with 33% and 28%) and employee assistance/counseling (29% compared with 13% and 11%). Retirement planning (i.e., educating employees) was more likely to be staffed in-house by medium-staff-sized firms (30%) than by large-staff-sized organizations (15%). Both large (96%) and medium organizations (93%) were more likely than small organizations (84%) to report that policy development and/or implementation was staffed in-house. By contrast, large organizations (73%) were more likely than either medium (54%) or small organizations (50%) to report carrying out payroll administration in-house. Several differences were identified when the in-house HR responsibility data were analyzed by employment sector. The HR responsibilities that differed by organization sector in the percentages of organizations that staffed them in-house were payroll administration, employee relocation, recruitment/staffing of executives, recruitment/staffing of employees (nonexecutives), work/life balance benefits administration, wellness programs, COBRA, health care benefits administration, temporary staffing and background/criminal background checks. Respondents from government agencies (76%) were more likely than those from privately owned for-profit organizations (53%) to report in-house staffing of payroll administration. HR professionals from publicly owned for-profit organizations (36%) were less likely than those from government agencies (87%), nonprofit organizations (76%) or privately owned for-profit organizations (65%) to report in-house staffing of employee relocation activities. HR professionals from nonprofit organizations (90%) were more likely than those from privately owned for-profit organizations (75%) or publicly owned for-profit organizations (74%) to report that staffing recruitment of nonexecutive employees was conducted in-house, whereas respondents from nonprofit organizations (61%) and privately owned for-profit organizations (56%) were more likely than those from publicly owned for-profit organizations (38%) to report that recruitment/staffing of executives was conducted in-house. Work/life balance benefits administration was more likely to be conducted in-house by nonprofit organizations (67%) than by publicly owned for-profit organizations (43%). Wellness programs were more likely to be staffed in-house by nonprofit organizations (64%) than by privately owned for-profit organizations (39%), government agencies (34%) or publicly owned for-profit organizations (28%). HR professionals from government agencies (56%) and nonprofit organizations (51%) were more likely than those from publicly owned for-profit organizations (31%) or privately owned for-profit organizations (31%) to report in-house staffing of responsibilities related to COBRA. Respondents from nonprofit organizations (43%) and privately owned forprofit organizations (38%) were more likely than those from publicly owned for-profit organizations (23%) to report that health care benefits administration was staffed in-house. HR professionals from nonprofit organizations and government agencies were more likely than those from publicly owned for-profit organizations to report in-house staffing of duties related to temporary staffing and performing background/criminal background checks. These data are shown in Table 7. 13

18 Table 7 HR Responsibilities Staffed Completely In-House (by Organization Sector) Publicly Owned For-Profit Privately Owned For-Profit Nonprofit Government Differences by Organization Sector Payroll administration (n = 298) 59% 60% 53% 62% 76% Government > privately owned for-profit Employee relocation (n = 165) 57% 36% 65% 76% 87% Privately owned for-profit, nonprofit, government > publicly owned for-profit Recruitment/staffing of executives (n = 264) Recruitment/staffing of employees (nonexecutives) (n = 397) Work/life balance benefits administration (n = 177) 54% 38% 56% 61% 61% Privately owned for-profit, nonprofit > publicly owned for-profit 54% 74% 75% 90% 86% Nonprofit > publicly owned for-profit, privately owned for-profit 53% 43% 54% 67% 44% Nonprofit > publicly owned for-profit Wellness programs (n = 149) 40% 28% 39% 64% 34% Nonprofit > publicly owned for-profit, privately owned for-profit, government Consolidated Omnibus Budget Reconciliation Act (COBRA) (n = 175) Health care benefits administration (n = 168) 36% 31% 31% 51% 56% Nonprofit > publicly owned for-profit, privately owned for-profit Government > publicly owned for-profit, privately owned for-profit 33% 23% 38% 43% 25% Privately owned for-profit, nonprofit > publicly owned for-profit Temporary staffing (n = 136) 30% 19% 30% 45% 45% Nonprofit, government > publicly owned for-profit Background/criminal background checks (n = 120) 26% 15% 25% 38% 43% Nonprofit, government > publicly owned for-profit Note: Data sorted in descending order by overall column. Excludes other organization sectors. Table includes only response options for which there were significant differences. Sample size is based on the actual number of respondents who indicated that their organization supported each HR responsibility. Table 8 HR Responsibilities Outsourced Partially (by Organization Staff Size) Small (1 to 99 employees) Medium (100 to 499 employees) Large (500+ employees) Differences by Organization Staff Size Executive development and coaching (n = 203) Risk management/worker s compensation (n = 221) Health care benefits administration (n = 201) Recruitment/staffing of executives (n = 199) Policy development and/or implementation (n = 40) Strategic business planning (n = 39) 50% 36% 50% 60% Large > small 46% 37% 49% 52% Large > small 40% 32% 46% 41% Medium > small 40% 32% 41% 53% Large > small 8% 14% 6% 4% Small > large 8% 2% 10% 14% Medium, large > small Note: Data sorted in descending order by overall column. Table includes only response options for which there were significant differences. Sample size is based on the actual number of respondents who indicated that their organization supported each HR responsibility. 14

19 Partially Outsourced HR Responsibilities Table 8 depicts the differences by organization staff size in the percentages of organizations that partially outsourced various HR responsibilities. According to HR professionals, large-staff-sized organizations were more likely than small-staff-sized organizations to have partially outsourced executive development and coaching (60% compared with 36%), risk management/worker s compensation (52% compared with 37%), recruitment/staffing of executives (53% compared with 32%) and strategic business planning (14% compared with 2%). Medium organizations were more likely than small organizations to report partially outsourcing health care benefits administration (46% compared with 32%) and strategic business planning (10% compared with 2%). By contrast, HR professionals from small organizations (14%) were more likely than their counterparts at large organizations (4%) to report that policy development and/or implementation was partially outsourced. As shown in Table 9, differences emerged among organization sectors for HR responsibilities that were partially outsourced. HR professionals from government agencies (50%) were more likely than their counterparts at privately owned for-profit organizations (26%) to report that their human resource information systems (HRIS) development was partially outsourced. According to HR professionals, pension benefits administration was more likely to be partially outsourced by privately owned for-profit organizations (51%) than by publicly owned for-profit organizations (32%). Partial outsourcing of recruitment/staffing of executives and wellness programs was more likely to be reported by HR professionals from publicly owned for-profit organizations (54% and 47%, respectively) than by HR professionals from nonprofit organizations Table 9 HR Responsibilities Outsourced Partially (by Organization Sector) Publicly Owned For-Profit Privately Owned For-Profit Nonprofit Government Differences by Organization Sector Pension benefits administration (n = 184) Recruitment/staffing of executives (n = 199) Wellness programs (n = 144) Human resource information systems (HRIS) development (i.e., software selection and implementation) (n = 131) Employee relocation (n = 75) Recruitment/staffing of employees (nonexecutives) (n = 104) 44% 32% 51% 48% 32% Privately owned for-profit > publicly owned for-profit 40% 54% 39% 31% 37% Publicly owned for-profit > nonprofit 38% 47% 39% 21% 44% Publicly owned for-profit > nonprofit 30% 33% 26% 24% 50% Government > privately owned for-profit 26% 35% 19% 24% 13% Publicly owned for-profit > privately owned for-profit 21% 25% 24% 9% 14% Publicly owned for-profit, privately owned for-profit > nonprofit Note: Data sorted in descending order by overall column. Excludes other organization sectors. Table includes only response options for which there were significant differences. Sample size is based on the actual number of respondents who indicated that their organization supported each HR responsibility. 15

20 (31% and 21%, respectively). Respondents from publicly owned for-profit organizations (35%) were more likely than those from privately owned for-profit organizations (19%) to report partially outsourcing responsibilities related to employee relocation. HR professionals from publicly owned for-profit organizations (25%) and privately owned forprofit organizations (24%) were more likely than those from nonprofit organizations (9%) to report that recruitment/staffing of nonexecutive employees was partially outsourced. Table 10 HR Responsibilities Outsourced Completely (by Organization Staff Size) Small (1 to 99 employees) Medium (100 to 499 employees) Large (500+ employees) Differences by Organization Staff Size Employee assistance/counseling (n = 263) 62% 49% 65% 70% Medium, large > small Flexible spending account administration (n = 248) 60% 51% 62% 68% Large > small Temporary staffing (n = 112) 25% 20% 21% 37% Large > small, medium Employee relocation (n = 52) 18% 5% 19% 26% Medium, large > small Payroll administration (n = 48) 10% 14% 10% 2% Small, medium > large Note: Data sorted in descending order by overall column. Table includes only response options for which there were significant differences. Sample size is based on the actual number of respondents who indicated that their organization supported each HR responsibility. Table 11 HR Responsibilities Outsourced Completely (by Organization Sector) Publicly Owned For-Profit Privately Owned For-Profit Nonprofit Government Differences by Organization Sector Background/criminal background checks (n = 240) Consolidated Omnibus Budget Reconciliation Act (COBRA) (n = 228) Pension benefits administration (n = 138) Health care benefits administration (n = 135) 52% 64% 55% 45% 19% Publicly owned for-profit > government Privately owned for-profit > government Nonprofit > government 46% 48% 52% 33% 28% Privately owned for-profit > nonprofit, government 33% 44% 29% 23% 37% Publicly owned for-profit > nonprofit 27% 39% 24% 11% 35% Publicly owned for-profit > privately owned for-profit, nonprofit Government > nonprofit Temporary staffing (n = 112) 25% 39% 23% 15% 18% Publicly owned for-profit > privately owned for-profit, nonprofit Employee relocation (n = 52) 18% 29% 15% 0% 0% Publicly owned for-profit > privately owned for-profit Note: Data sorted in descending order by overall column. Excludes other organization sectors. Table includes only response options for which there were significant differences. Sample size is based on the actual number of respondents who indicated that their organization supported each HR responsibility. 16

21 Completely Outsourced HR Responsibilities Table 10 shows the differences in the percentages of organizations by staff size that reported completely outsourcing various HR responsibilities. HR professionals from large- and medium-staff-sized organizations were more likely than those from smallstaff-sized organizations to report completely outsourcing employee assistance/ counseling (70% and 65% compared with 49%, respectively) and employee relocation (26% and 19% compared with 5%). Large organizations (68%) were more likely than small organizations (51%) to report completely outsourcing flexible spending account administration and were also more likely than either medium or small organizations (37% compared with 21% and 20%, respectively) to report completely outsourcing temporary staffing. By contrast, HR professionals at small organizations (14%) and medium organizations (10%) were more likely than their counterparts at large organizations (2%) to report completely outsourcing payroll administration. HR professionals from publicly owned for-profit organizations (64%), privately owned for-profit organizations (55%) and nonprofit organizations (45%) were more likely than their counterparts at government agencies (19%) to report completely outsourcing background/criminal background checks. Respondents from privately owned for-profit organizations (52%) were more likely than those from nonprofit organizations (33%) or government agencies (28%) to report completely outsourcing responsibilities related to COBRA. HR professionals from publicly owned for-profit organizations (44%) were more likely than those from nonprofit organizations (23%) to report completely outsourcing pension benefits administration. Employee relocation was more likely to be completely outsourced by publicly owned for-profit organizations (29%) than by privately owned for-profit organizations (15%). HR professionals from publicly owned for-profit organizations (39%) were more likely than those from privately owned forprofit organizations (24%) and those from publicly owned for-profit organizations and government agencies (both 35%) were more likely than their counterparts at nonprofit organizations (11%) to report completely outsourcing health care benefits administration. According to HR professionals, temporary staffing was more likely to be completely outsourced by publicly owned for-profit organizations (39%) than by privately owned for-profit organizations (23%) or nonprofit agencies (15%). These data are shown in Table 11. Decisions About Sourcing HR Responsibilities Given the myriad HR functional areas and the limits to most organizations HR department/function headcount, what factors contribute to decisions about sourcing HR responsibilities? When asked how their organizations determine which HR roles and/or responsibilities will be staffed within the organization rather than outsourced or eliminated, the largest percentage of HR professionals (50%) reported that the organization s business strategy contributes to the decision. These data are shown Figure 1. This suggests that for a substantial percentage of organizations, HR function staffing decisions are aligned with business operating plans, providing support for a strategic partnership between HR and the organization as a whole. The next two largest percentages of HR professionals reported that competencies of HR staff (45%) and the organization s workforce management needs (40%) determined which specific HR roles 17

22 and/or responsibilities would be staffed, outsourced or eliminated. Only one out of 10 HR professionals responded that their organization made decisions about sourcing HR roles and/or functional areas based on HR consultant evaluations and/or advice (11%) or employee feedback and requests (11%), indicating that few organizations make HR staffing or outsourcing decisions based on input from outside of the organization or from the bottom up. Trellis Usher-Mays, founder and chief people strategist, T.R. Ellis Group LLC, and member of SHRM s Organizational Development Special Expertise Panel, comments, Corporate leaders and HR practitioners are wising up to the fact that the HR function is critical to driving sustainable business results. As HR continues to transform itself from a transactional to a strategic partner, it becomes even more important to make sure that practitioners are building skills that enable them to think strategically and systemically, build and manage relationships and thoroughly analyze organizational issues. Part of HR s value proposition has to be our intimate knowledge of our internal Figure 1 How Do Organizations Decide Which HR Roles and/or Functional Areas Will Be Staffed? Organization s business strategy 50% Competencies of HR staff 45% Organization s workforce management needs 40% HR department staffing budget 36% Ongoing established staffing of the role and/or responsibility 23% Internal audit or review of HR processes 20% Employee feedback and requests 11% HR consultant evaluations and/or advice 11% (n = 509) Note: Percentages do not total 100% due to multiple response options. 18