According to a 2008 study by SHRM, compensation as a percentage of operating expenses in 2007 of privately owned, for-profit organizations came to 60%. Use the HR That Works Cost Calculator to run the numbers for your company and you’ll find that there’s at least a 10% variance related to these dollars. In other words, if your payroll is $1 million, the variance will be at least $100,000. This variance, or cost, consists of poor hires, loss of good employees, non-productivity left on the table every day, lack of team play, Workers Comp claims, EPL claims, and other nonsense.
Chances are that a company with $1 million in payroll overhead devotes less than $30,000 per year assigning a part-time person to be in charge of the HR function. This person usually wears two or three hats, one of which is HR. As a result, that company with its million-dollar payroll is doing very little to proactively work on the HR function, and it pays the price in the process. Here’s the point: Do one proactive thing a month. Have a 90-day game plan and do those things within the 90 days. See the Sample 90-Day Game Plan for an HR executive below. At the end of the year you will have made at least a dozen improvements to the HR function that reduce your cost variable substantially. For example, just making sure you that don’t make a bad hire will add $50,000 to your bottom line. In today’s economy, with revenues constricting, employers have to be ever-more vigilant to make sure they don’t have costs diminishing their bottom line. Survival will require companies to step up their HR acumen.