Why HR Spending Is Up And What You Can Do About It

Human resources are integral to the success of practically every business on the planet. It’s how companies organize the thing that is most valuable to them: their people. But spending in recent years has gotten out of control in a lot of businesses. Here’s why spending is up and what they should do instead.

Failing To Recruit And Retain Staff

There’s a lot of evidence that companies are failing to recruit the right staff and retain the staff that they have. This is costing them money on many fronts. For starters, they’re losing important talent in their companies at a regular clip. But they also have to spend a lot of money advertising new positions.

While it’s true that the world of work has changed, some companies could be performing better. The majority of CEOs put retaining talent at the top of their agenda. So what can HR departments do to improve their performance?

Perhaps the best solution is to get some training from companies like Mark Ellis. You need to find out where your processes are going wrong and why you’re not able to find or retain valuable staff. Finding talent might be a global problem right now. But there’s no reason your company can’t be ahead of the curve when it comes to finding a solution.

Failing To Make Use Of New Software

The market for HR tools and software is growing at a healthy annual rate. Right now the HR software market is approaching the £10 billion globally. And it’s set to expand continuously up until 2020. Companies that are up to date with the most recent software are running more efficient HR departments. Though they’re spending on the order of 10 percent of their budget on software, it more than pays for itself. Companies that aren’t using software are falling behind.

There are a couple of important reasons why companies have made the shift to software. For starters, it helps to improve employee engagement. Managing employee feedback is a lot easier when you have intelligent software that can distil all the data. But software is also proving to be an essential tool for training and recruitment. This is pushing down costs still further.

Failing To Adjust Their Operating Model

Many human resources departments are operating on an outdated model. And this, just like a lack of technology, is hampering their effectiveness.

There’s a huge difference between best- and worst-practice HR departments. Best practice HR departments are those that are business-integrated. Their HR department is a part of their business strategy and drives business decisions. This contrasts with the compliance-driven model where the personnel function of the business is separate. Those who are compliance driven spend about $4,434 per employee over the course of a year. But those firms that integrate HR departments spend a lot less: around $2,112. What’s more, they tend to get far better outcomes. Best-practice HR departments see about 30 percent less turnover than their failing counterparts.

The message here is clear. Businesses need to integrate HR with the rest of their businesses to remain competitive.