Total cost to perform the HR function per FTE that performs the process group "develop and manage HR planning, policies, and strategies"

This measure calculates the total cost for the human resources (HR) function per full-time equivalent (FTE) employee that performs the process group "develop and manage HR planning, policies, and strategies." These FTEs focus on activities like workforce planning, compensation planning, succession planning, employee diversity, program design, policy administration, and policy development. The HR function consists of developing and managing HR strategies, plans and policies; sourcing talent; deploying the workforce; managing employment relationships; planning/delivering employee learning and development; and providing HR information management. This measure is part of a set of Cost Effectiveness measures that help companies understand all cost expenditures related to the process "develop and manage human capital."

Benchmark Data

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Measure Category:
Cost Effectiveness
Measure Id:
103563
Total Sample Size:
1,142 All Companies
Performers:
25th
Median
75th
Key Performance
Indicator:
Yes

Compute this Measure

Units for this measure are dollars.

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Total cost to perform the function "develop and manage human capital" / Number of FTEs who perform the process group "develop and manage human resources (HR) planning, policies, and strategies"

Key Terms

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Process Cost Components

Total cost for a process, process group, or function consists of the following five components.

Internal/In-house operating cost consists of the first four components (personnel, systems, overhead, and other).

Personnel Cost

Personnel cost is the cost associated with personnel compensation and fringe benefits of employees (i.e., those classified as FTEs which includes both full-time and salaried/hourly employees) contributing to each respective process. Personnel cost should include all of the following costs.

Employee Compensation: Includes salaries and wages, bonuses, overtime and benefits.

Fringe: Includes contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, and stock purchase plans. This should also include special allowances, such as relocation expenses and car allowances.

Systems Cost

Systems costs include all expenses, paid or incurred, in conjunction with:
Computer hardware or computer software acquired by the organization or provided to the organization through service contracts.

Any related costs to process, service and maintain computer hardware or computer software. The costs of providing and maintaining services for each applicable process (e.g., computer system(s) processing (CPU) time, network/system communication charges, maintenance costs for applications and data storage). This includes the costs related to LANs, WANs, etc. This does not include one-time costs for major new systems developments/replacements. Consultant fees should not be included in depreciation of new system implementations. Include only those costs that occur more than six (6) months after implementation, as normal system maintenance costs. Any systems cost (e.g., maintenance) which is outsourced to a third party supplier should be captured in the separate cost category labeled outsourced cost.

Systems cost should include all salaries, overtime, employee benefits, bonuses or fees paid to full-time, part-time or temporary employees or independent contractors who perform services relating to computer hardware, computer software, processing or systems support.

Overhead Costs

For the purpose of this study, provide the total actual overhead costs for the year related to the specified process. These are costs that cannot be identified as a direct cost of providing a product or a service. Include the primary allocated costs such as occupancy, facilities, utilities, maintenance costs, and other major costs allocated to the consuming departments. Exclude systems costs that are allocated, since these will be captured separately as systems cost.

Other Cost

Other costs are costs associated with the specified process, but not specifically covered in personnel cost, systems cost, overhead cost and outsourced cost in this questionnaire. These other costs include costs for supplies and office equipment, travel, training and seminars. Include the cost of telephones, except for that portion captured in systems cost.

External/Outsourced Cost

In determining outsourced cost, include the total cost of outsourcing all aspects of the specified process to a third-party supplier. Exclude one-time charges for any type of restructuring or reorganization. Outsourced costs should also include costs for intracompany outsourcing (i.e., reliance on a shared services center or other business entity).

FTE - (full-time equivalent employee)

To calculate the number of full-time equivalents employed during the year for each respective process or activity, you must prorate the number of employees and the hours spent performing each process/activity. Assume that a full-time worker represents 40 hours per week. Provide the average number of full-time equivalents employed during the year for each respective process. Include full-time employees, part-time employees, and temporary workers hired during peak demand periods. Allocate only the portion of the employee's time that relates to or supports the activities identified for an applicable process. Prorate management and secretarial time by estimating the level of effort in support of each activity, by process.

For example, a part-time secretary in the finance department for XYZ, Inc. charges all of his time to finance department activities. He works 20 hours per week. The secretary splits his time evenly supporting employees working in the general accounting process and the financial reporting process. Thus, his time should be allocated by process. So, if he works throughout the year and supports these two processes, his time would be split evenly as:

20hrs/40hrs = .5FTE * 50% for general accounting = .25FTE for general accounting

20hrs/40hrs = .5FTE * 50% for financial reporting = .25FTE for financial reporting

Cost Effectiveness

Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.

Median

The metric value which represents the 50th percentile of a peer group. This could also be communicated as the metric value where half of the peer group sample shows lower performance than the expressed metric value or half of the peer group sample shows higher performance than the expressed metric value.

Measure Scope

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Cross Industry (6.0.0)

  • 6.1.1 - Develop human resources strategy (10415)
    • 6.1.1.1 - Identify strategic HR needs (10418) - Strategically defining the current and future needs for developing an efficient HR strategy.
    • 6.1.1.2 - Define HR and business function roles and accountability (10419) - Outlining the charge and duty of the HR function by defining its responsibility areas, as well as ensuring its accountability. Establish the HR function by laying out the roles and responsibilities for this function and the rules and regulations guiding HR. Define the goals and objectives of the HR, as well as a mission and vision for this function. Create a mechanism involving a set of policies, code of conduct, and institutional procedure to ensure HR accountability.
    • 6.1.1.3 - Determine HR costs (10420) - Ascertaining the costs and expenses of the HR function. Identify and report HR investments using, for example, a cost approach or a present value of future earnings approach.
    • 6.1.1.4 - Establish HR measures (10421) - Evaluating the performance of HR function. Lay out the course of HR procedures that would formulate a plan of action needed to fulfill strategic HR needs. Deploy measures such as hiring policies, leave management, internal code of conducts, and compensation structure.
    • 6.1.1.5 - Communicate HR strategies (10422) - Conveying the strategies of HR function to employees and management. Effectively explain the vision, plans, and anticipated benefits of the HR strategy employees, as well as the public. Develop statements and messages that are easy to read, informative, and relevant to the audience.
  • 6.1.2 - Develop and implement human resources plans (10416)
    • 6.1.2.1 - Gather skill requirements according to corporate strategy and market environment (10423) - Evaluating the current and future skill requirements of the organization with regard to the overall corporate strategy of the organization and market conditions. Identify and establish the minimum skills needed for the requisite HR needs.
    • 6.1.2.2 - Plan employee resourcing requirements per unit/organization (10424) - Determining the requirements for employees and the need for employee resourcing for each every unit/function. Lay out a plan detailing employee resourcing requirements of individual functions and the organization as a whole.
    • 6.1.2.3 - Develop compensation plan (10425) - Designing a plan that specifies the combination of wages, salaries, and benefits the employees receive in exchange for work. Define the total amount of compensation, in addition to the manner in which the compensation is paid and the purposes for which employees can receive bonuses, salary increases, and incentives.
    • 6.1.2.4 - Develop succession plan (10426) - Creating and implementing the plan for continuation of key positions within the organization. Identify internal people with the potential to fill key business leadership positions. Provide critical development experiences to employees who can move into important roles. Engage leaders to support the development of high-potential leaders.
    • 6.1.2.5 - Develop employee diversity plan (10427) - Creating and implementing the plan for ensuring a diverse work force. Develop and hire employees with varying characteristics including, but not limited to, religious and political beliefs, gender, ethnicity, education, socioeconomic background, sexual orientation, and geographic location.
    • 6.1.2.6 - Develop other HR programs (10428) - Creating HR programs and services such as employee engagements programs to promote positive employee behavior. Create a variety of programs and services to support employees' professional and personal needs at work and at home.
    • 6.1.2.7 - Develop HR policies (10429) - Creating rules and regulations that govern the HR function. Develop a policy plan that serves as a guideline for setting rules and regulations that help in achieving the HR goals and objectives.
    • 6.1.2.8 - Administer HR policies (10430) - Ensuring rules and regulations are followed and are flexible enough to accommodate indispensable deviations.
    • 6.1.2.9 - Plan employee benefits (10431) - Planning benefits in kind (also called fringe benefits, perquisites, or perks). Include various types of non-wage compensations provided to employees in addition to normal wages or salaries.
    • 6.1.2.10 - Develop strategy for HR systems/technologies/tools (10432) - Creating a strategy for the use of systems/technologies/tools in operating the HR function. Create a strategy concerning the use and utility of HR support tools and technologies. Decide what specific tools to use and in what quantity. Determine the levels of technology required for the HR management.
    • 6.1.2.11 - Develop work force strategy models (10433) - Creating and implementing models for effectively strategizing the work force of the organization. Develop a model that specifies the organization's overall approach for maximizing the performance of its work force by defining the goals, objectives, and expectations of the work force. Manage all aspects of performance required for the work force to function, including recruitment, selection, retention, and professional development.
  • 6.1.3 - Monitor and update plans (10417) - Supervising the HR strategy, plans, and policies in order to refurbish them whenever needed. Determine the performance of HR plans and policies by measuring the objective achievement rate and its contribution to the overall business strategy. Ensure that information about these plans and strategies is effectively communicated to various stakeholders. Incorporate any suggestions by these stakeholders when revising HR plans and policies.
    • 6.1.3.1 - Measure realization of objectives (10434) - Determining the accomplishment of HR goals and objectives. Evaluate the effectiveness of the HR function by estimating the present rate of achievement of the established objectives. Use metrics to determine if the objectives are being realized. Leverage measures such as turnover, training, return on human capital, costs of labor, and expenses per employee.
    • 6.1.3.2 - Measure contribution to business strategy (10435) - Determining the role of HR function in implementing the organizational strategy. Measure the correlation between the HR performance and the overall business strategy. Calculate the amount of contribution of the HR function to the overall business growth.
    • 6.1.3.3 - Communicate plans and provide updates to stakeholders (10436) - Conveying the plans for HR function to stakeholders. Ensure that the HR plans and strategy are effectively communicated to the people who can affect or be affected by the organization's actions, objectives, and policies such as the creditors, shareholders, employees, and suppliers. Provide regular updates to these stakeholders to ensure effective communication.
    • 6.1.3.4 - Determine value added from HR function (10437)
    • 6.1.3.5 - Review and revise HR plans (10438) - Reassessing the strategies, plans, and policies of the HR function, with the objective of revising them. Revisit the schematic plans for the HR function. Taking stock of any suggestions or feedback from the stakeholders, revamp the blueprint of HR strategies and plans.