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Human Capital - HR Benchmarking Study

VIEWS: 18 PAGES: 86

									SHRM Human Capital Benchmarking Study




                      2005 EXECUTIVE SUMMARY
SHRM Human Capital Benchmarking Study


              2005 EXECUTIVE SUMMARY


              JOHN DOONEY / Manager, Strategic Research


              NOËL SMITH / Strategic Research Specialist




              Also introducing…
               SHRM Customized Human Capital Benchmarking Service


               Database of more than 1,500 organizations


               To order a complete analysis of the results, customized
               to your organization, please see page 55
                                            This report is published by the Society for
                                            Human Resource Management (SHRM).
                                            The interpretations, conclusions and recom-
                                            mendations in this report are those of the
                                            author and do not necessarily represent those
                                            of 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.


                                            © 2005 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) 548-3440 Fax: (703) 535-6432
                                            Web: www.shrm.org/research




2

    SHRM Human Capital Benchmarking Study
CONTENTS    4        Introduction


                7       About the Authors


                8       Acknowledgements


                8       Methodology


            10          Using Benchmarking Data


           14        Key Findings


            15          HR Departments and Expenses


                19      HR-to-Employee Ratios


            22          Employment


            28          Health Care


            31          Compensation


            34          Organizational Data


            36          Profile of Organizations Responding
                        to the Survey


           38        Conclusion


           40        The Future of HR Metrics


           48        Glossary


           55        Special: SHRM Customized Human
                     Capital Benchmarking Service




                                                                                3

                                        SHRM Human Capital Benchmarking Study
INTRODUCTION
The importance of human capital is increasing        Human capital—the collective knowledge, skills
dramatically as the United States and other          and abilities of people that contribute to
industrialized nations rapidly shift to a            organizational performance—is no longer just
knowledge-based economy.                             a cost to be managed. Executives now see
                                                     human capital as an asset to be leveraged; one
                                                     that can be used to drive value and optimize
Key Metrics and Data Collected
(Number of organizations responding = 702)
                                                     firm performance. In 1995, a study
                                                     comprehensively linked systems of high-
Employment
                                                     performance work practices and company
I   Time-to-fill
I   Cost-per-hire                                    performance. The results, based on a national
I   Number of positions filled*                      sample of nearly 1,000 firms, indicated that
                                                     these practices had economically and
HR Departments and Expenses
I   Total HR staff                                   statistically significant impact on both
I   HR-to-employee ratio*                            intermediate employee outcomes (turnover
I   HR expense
                                                     and productivity) and short- and long-term
I   HR expense to operating expense ratio
I   HR expense per FTE*                              measures of corporate financial performance.1

Health Care
I   Health care expense per all employees
I   Health care expense per covered employees*
I   Percentage of premiums organization pays for
    employee-only coverage*
I   Percentage of premiums organization pays
    for employee and dependent coverage*
I   Projected increases in health care expenses*

Compensation
I   Annual salary increases*
I   Annual turnover rate
I   Salaries as a percentage of operating expense*

Organizational Data
I   Revenue
I   Revenue per FTE*
I   Net income
I   Net income per FTE*

*Metrics reported in this executive summary.




                                                                                                                       5

                                                                               SHRM Human Capital Benchmarking Study
                Human capital management is also                   Industries Surveyed
                comprehensive. It includes not only human          I   Agriculture, forestry and fishing
                resource (HR) practices, but also other work       I   Construction and mining
                                                                   I   Educational services
                practices and people management strategies
                                                                   I   Financial services
                that increase organizational performance. The      I   Government
                important distinction is that human capital        I   Health
                                                                   I   High-tech
                extends well beyond the HR function to
                                                                   I   Insurance
                encompass the total people strategy of the         I   Library
                organization. Human capital is owned by all of     I   Manufacturing (durable goods)
                                                                   I   Manufacturing (nondurable goods)
                the business leaders and resides with
                                                                   I   Oil and Gas
                everyone in the organization.2 The advantage       I   Publishing and broadcasting
                of this is that businesses are starting to         I   Real estate
                                                                   I   Service (nonprofit)
                understand what HR professionals have known
                                                                   I   Service (profit)
                for years—that human resource programs and         I   Transportation
                activities contribute to the bottom line.          I   Utilities
                                                                   I   Wholesale/retail trade
                                                                   I   Other
                With this type of attention on human capital,
                HR professionals are in an ideal position to
                work with other business executives to lead the
                way organizations measure their human             The purpose of the SHRM Human Capital
                capital. But before an organization calculates    Benchmarking Study is to provide HR
                metrics, it must first show how its human         professionals with key human capital
                capital and human resource activities logically   measures. In business, where the need to
                flow to support its business strategy. Making     measure is strong, benchmarking can help
                sure that HR links its activities to strategic    identify an organization’s human capital
                outcomes can best be done by mapping the          strengths and weaknesses, create a framework
                relationships between HR practices, HR            for managing change and encourage
                deliverables and business outcomes. Such          employees toward continuous improvement.
                linkages position HR as a strategic asset. They
                provide the organizational logic to transform
                HR from a transaction-oriented function to an
                organizational asset with strategic impact. In
                short, mapping shows “what causes what” in
                the business and how the firm can win in the
                marketplace.3




6

    SHRM Human Capital Benchmarking Study
Yet for some HR professionals, when it comes
                                                     ABOUT THE AUTHORS
to measuring activities around human capital,        John Dooney is the Manager of Strategic
concrete measures can feel elusive. Numbers          Research for SHRM. Mr. Dooney is responsible
that relate to the context of a specific business,   for producing quantitative and qualitative
particularly the same industry, employee size,       research that enables members and other
organizational revenue and geographic                customers to make concrete business
location, are usually difficult to find. But it is   decisions, evaluate how HR can strategically
precisely this organizational profiling that is      contribute to an organization’s objectives and
most beneficial in order to enable similar           develop organizational benchmarks. He also
organizations to compare themselves to               conducts outreach efforts to ensure that SHRM
each other.                                          research has concrete impact on organizations,
                                                     HR departments and other venues that relate
This executive summary contains key metrics          to the HR profession. In addition, he develops
from more than 700 organizations on HR               content material related to HR education and
departments and their expenses, employment,          human capital measurement. Mr. Dooney has
health care, compensation, and organizational        a graduate degree in industrial psychology and
revenue and size. In addition, SHRM’s database       more than 15 years of experience in HR
collection initiative in early 2005 yielded          management roles in the United States, Asia
more than 800 additional organizations for a         and Europe.
combined total of more than 1,500 organizations
that are part of the SHRM Customized Human           Noël Smith is the Strategic Research Specialist
Capital Benchmarking Service, which is detailed      for SHRM. In her role, Ms. Smith designs,
on page 55. This executive summary and the           collects, analyzes and disseminates research
SHRM Customized Benchmarking Service                 that will help HR professionals and other
provide more than 20 human capital metrics for       customers apply qualitative and quantitative
many industries, so that comparisons can be          research to unique situations within their
made, when possible, within a similar industry.      organizations in order to make sound business
                                                     decisions. In addition, she conducts research in
For information about additional metrics,            HR education and develops content related to
please see a sample customized report at the         human capital measurement. She has a
end of this publication. A glossary of metric        graduate degree in psychology from the
terms, definitions and calculations is available     University of Maryland, College Park, and over
on page 48.                                          10 years of research experience.




                                                                                                                       7

                                                                               SHRM Human Capital Benchmarking Study
                ACKNOWLEDGEMENTS                                     METHODOLOGY
                This study represents a collective effort of many    Purpose
                professionals, including SHRM members who            The SHRM Human Capital Benchmarking Study
                provided the rich and detailed data used in this     was conducted in order to collect human capital
                executive summary. Steve Williams, Ph.D.,            metrics across various industries. This survey
                SPHR, Jennifer Schramm, Jessica Collison,            collected data on human resource departments
                SHRM’s Survey Program staff and Katya                and expenses, hiring trends, compensation,
                Scanlan also provided valuable expertise in          and health care options and costs. In addition,
                HR content, survey design, data collection and       organizational data, such as revenue, expenses
                editorial review. Lisa Horn, Mary Mohney and         and employee size, were obtained. Data were
                Angela Terry provided technical guidance on          collected for 2004, along with expectations for
                health care, finance and art design, respectively.   change in 2005.


                A special note of thanks is also extended to         Survey
                members of the SHRM Human Capital                    The survey was created by SHRM’s Strategic
                Measurement/HR Metrics Special Expertise             Research Program and was reviewed by an
                Panel. This team of experts in human capital         internal survey review committee as well as
                measurement and metrics reviewed the survey          by the SHRM Human Capital Measurement/HR
                instrument and provided insights into future         Metrics Special Expertise Panel. The SHRM
                trends of HR metrics, found on page 40.              Human Capital Benchmarking Study was
                                                                     based on a pilot study conducted in December
                                                                     2004, which was undertaken to determine
                                                                     whether the survey accurately yielded the
                                                                     desired data and to gauge the ease at which
                                                                     HR professionals were able to provide
                                                                     information on behalf of their organizations.
                                                                     The results of the pilot study led to minor
                                                                     revisions to the questions asked, as well as
                                                                     to the reformatting of several questions.




8

    SHRM Human Capital Benchmarking Study
Participants                                      Quality Control
SHRM members who were HR managers,                At the completion of data collection, the data
assistant or associate directors, directors,      were checked for duplicate responses. When a
assistant or associate vice presidents, vice      respondent submitted a survey more than
presidents or presidents were included in         once, the survey with the latest time was
the sample. The members had to meet the           retained and all prior submissions were
following criteria: have a valid e-mail address   deleted. The data were then put through a
and business phone number, have not been          rigorous accuracy check process.4 The survey
selected to participate in a survey with SHRM     included many quantitative questions that
in the past six months, and be residents of the   were checked to ensure that they were
United States.                                    understood by respondents and that the data
                                                  submitted were consistent. For example, the
Procedure                                         number of HR full-time equivalent employees
In January 2005, an e-mail that included a        (FTEs) had to equal the sum of the categories
link to the SHRM Human Capital Benchmarking       of HR FTEs; the number of HR FTEs had to be
Study was sent to 5,000 randomly selected         less than the total FTEs in the organization;
SHRM members who were senior HR                   and HR expenses had to be less than the total
professionals. Of these, 3,994 e-mails were       organizational expenses. Overall, there were
successfully delivered, and 702 senior HR         few inconsistencies identified within the data.
professionals responded on behalf of their        When inconsistencies were identified, steps
organizations, yielding a response rate of        were taken to resolve the discrepancy. If the
18%. The survey was accessible for a period       data could not be verified and appeared
of four weeks.                                    inaccurate, they were excluded from the
                                                  analysis. This was done to ensure that the
In an effort to encourage participation in the    highest quality data were included in the study.
study, respondents were informed that they
would be entered in a drawing for a $100 gift
certificate to the SHRMStore. Four e-mail
reminders were sent over a one-month period,
and 2,000 individuals were randomly selected
to receive follow-up telephone calls. Over a
two-week period, 1,661 HR professionals were
contacted.




                                                                                                                    9

                                                                            SHRM Human Capital Benchmarking Study
                 U S I N G B E N C H M A R K I N G D ATA              Benchmarking can also create support and
                 Benchmarking is rapidly becoming an                  momentum for organizational change. For
                 indispensable tool for HR professionals. It is a     example, making changes to existing pay
                 mechanism for measuring processes, practices         practices may be difficult, unless there is
                 and results against the competition in order to      objective benchmarking data that can support
                 improve performance. Used wisely, it can             otherwise. For example, if the HR professional
                 transform a company’s HR and people                  wants to alter an organization’s long-standing
                 management strategies by showing how                 practice of not offering employee bonus plans,
                 human capital practices influence                    making that argument alone, without
                 organizational performance.                          benchmarking data, is very difficult.
                                                                      Benchmarking data can help make the case.
                 HR professionals can use benchmarking data
                 to compare their organization against their          CEOs and board-level executives also depend
                 competitors or other similar organizations. For      on quality benchmarking data to make
                 example, the HR professionals can compare            strategic decisions that affect their
                 their organization’s health care costs with          organizations. In fact, benchmarking is more
                 similar organizations to see if the discrepancy      effective when used as part of an overall
                 is large enough to warrant further analysis.         business strategy. It is less effective, however,
                 Benchmarking also protects areas or programs         when companies use benchmarking only for
                 that are performing well. To illustrate, if line     short-term cost reductions and not as part of a
                 executives want recruiting costs lowered,            long-term strategy. An example of this occurs
                 benchmarking data may show that their                when an organization lowers training budgets
                 current recruiting costs are in line with their      to meet short-term budget goals. While this
                 industry. In fact, to lower costs far below their    may achieve a short-term objective, it has a
                 competitors might actually jeopardize their          negative impact on developing the skills of the
                 organization’s ability to find the right talent to   organization’s workforce. Thus, over the long
                 compete in the market.                               term, the knowledge and skills of its human
                                                                      capital start to lag behind the market, and the
                                                                      organization loses its competitive advantage to
                                                                      successfully compete.




10

     SHRM Human Capital Benchmarking Study
Understanding the Data                           3. The information in this report should be
As you compare your own data against               used as a tool for decision-making rather
the other organizations, keep the following        than an absolute standard. Because
in mind:                                           companies differ in their overall business
                                                   strategy, location, size and other factors, any
1. A deviation between your figure for any         two companies can be well managed, yet
  human capital measure and the comparative        some of their human capital measures may
  figure is not necessarily favorable or           differ greatly. No decision should be made
  unfavorable; it is merely an indication that     solely based on the results of any one study.
  additional analysis may be needed. Human
  capital measures that relate more closely to   Working With the Data
  the context of your organization’s industry,   The information in this report is designed
  revenue size, geographic location and          to be a tool to help you evaluate decisions
  employee size are more descriptive and         and activities that affect your organization’s
  meaningful than information that is more       human capital. When reviewing these data,
  generic in nature, such as all industries      it is important to realize that business strategy,
  combined. The larger the discrepancy           organizational culture, leadership behaviors
  between your figure and those found in this    and industry pressures are just a few of the
  report, the greater the need for additional    many factors that drive various human capital
  scrutiny.                                      measures. For example, an industry that
                                                 generally hires nonskilled labor, such as
2. In cases where you determine that             construction, may have less costly benefit
  potentially serious deviations do exist, it    packages than the high-tech industry that hires
  may be helpful to go back and calculate the    specialized knowledge workers. This is because
  same human capital measure for your            organizations in the high-tech industry may need
  organization over the past several years to    to have richer, more attractive benefit plans to
  identify any trends that may exist.            make themselves more enticing in order to
                                                 attract “hard-to-find” knowledge workers.




                                                                                                                    11

                                                                            SHRM Human Capital Benchmarking Study
                 Absolute measures are not meaningful in           Confidence level and margin of error: A
                 isolation—they should be compared with one        confidence level and margin of error give
                 or more measures to determine whether a           readers some measure of how much they can
                 satisfactory level exists. Other measures, for    rely on survey responses to represent all of
                 example, might be your organization’s past        SHRM member organizations. Given the level
                 results in this area or comparatives based on     of response to the survey, SHRM Research is
                 organizational size, industry or geographic       95% confident that responses given by all
                 location.                                         responding organizations can be generalized to
                                                                   all SHRM member organizations, in general,
                 Notes and Caveats                                 with a margin of error of approximately 4%. For
                 Number of organizations: The number of            example, 73% of the responding organizations
                 organizations (indicated by “n”) is noted in      reported that they were for-profit. With a 4%
                 each table and indicates the number of            margin of error, the reader can be 95%
                 organizations (not individuals) that provided     confident that that between 69% and 77% of
                 data relevant to a particular table. The number   SHRM member organizations are for-profit. It is
                 of organizations varies from table to table       important to know that as the sample size
                 because some organizations did not respond        decreases, the margin of error increases.
                 to all of the questions. Organizations may not
                 have responded to a question on the survey        Minimum respondents for summary
                 because all or some part(s) of the question       calculations: No summary calculations were
                 were not applicable or because the requested      made for items with fewer than 10 responding
                 data was unavailable. This also accounts for      organizations. Tables illustrating 25th percentile,
                 the varying number of responses from one          median and 75th percentile should be
                 table to another or within a table.               interpreted with caution when the number of
                                                                   responding organizations is small.




12

     SHRM Human Capital Benchmarking Study
Extreme values dropped: Due to the nature of    Other categories: In some cases, participating
the data in the current study, data that were   organizations included “other” as a response to
three standard deviations above the average     a survey question. Efforts were made to examine
were excluded. In other words, 0.5% of the      the verbatim content of the “other” responses
data were omitted from the analysis. The        and recategorize them into the categories listed.
extreme outliers or data anomalies can skew     Oftentimes, verbatim content was distinctive
the results, leading to much higher averages    to the organization, making it impossible to
among the measures.                             recategorize.


Table and figure percentages: Where relevant,
data depicted in tables and figures may not
add to exactly 100% due to rounding. In
addition, percentages may exceed 100% due
to multiple response options (i.e., several
organizations may respond to more than one
category for the same question).




                                                                                                                  13

                                                                          SHRM Human Capital Benchmarking Study
KEY FINDINGS
H R D E PA R T M E N T S A N D E X P E N S E S
There is no typical HR department. While external factors such as organization size and industry
type drive the structure, size and scope of activities for the human resource function, internal
factors also play a role. Factors such as organizational culture, leader behaviors, operational and
technological constraints are but a few of the dynamic reasons why HR departments vary from
one organization to another. While the median number of full-time equivalents (FTEs) for the HR
department was three, the average was 12. The large difference between the median and average
values indicates that some HR departments reported a large number of HR staff.


Nineteen percent of the responding organizations expected to hire additional HR staff in 2005. This
number also parallels an overall increase in the employment market for HR professionals. HRJobs,
SHRM’s job board that advertises job openings for HR professionals, noted a 54% jump in the
number of human resource advertisements during the early months of 2005, compared with the
same time period in 2004.


HR department expenses are also on the rise. Of the 50% of firms that expected their HR department
expenses to increase, 11% were manufacturing (durable goods) organizations. However, 9% of
responding organizations projected a decrease in department expenses, and 41% expected their
expenses to remain the same. HR expense per FTE, which represents the amount of HR dollars spent
per FTE in the organization, is shown in Table 1. For all industries, the median for HR expense per
              ,
FTE was $1,077 with the high-tech industry reporting the highest expense at $1,806.




                                                                                                                        15

                                                                                SHRM Human Capital Benchmarking Study
                 Table 1: HR Expense per Number of FTEs (by Industry)


                                        Industry                         n        25th Percentile          Median         75th Percentile
                 All industries                                         418              $612              $1,077               $2,275

                 Educational services                                    21              $363                $495               $1,430
                 Financial services                                      33              $833              $1,333               $3,759
                 Government                                              24              $590                $992               $1,750
                 Health                                                  36              $583                $847               $1,818
                 High-tech                                               26            $1,101              $1,806               $2,304
                 Insurance                                               15              $909              $1,750               $5,294
                 Manufacturing (durable goods)                           54              $600              $1,034               $1,571
                 Manufacturing (nondurable goods)                        21              $875              $1,130               $1,941
                 Service (nonprofit)                                     27              $571              $1,395               $3,488
                 Service (for-profit)                                    36              $571                $773               $1,786
                 Transportation                                          10              $520              $1,256               $3,590
                 Wholesale/retail trade                                  19              $413                $767               $3,497

                 For-profit (all industries)                            283              $636              $1,053               $2,182
                 Nonprofit (all industries)                             134              $571              $1,200               $2,289
                 Note: Industries with less than 10 organizations responding were omitted from the table. They were: agriculture, forestry
                 and fishing; construction and mining; library; oil and gas; publishing and broadcasting; real estate; and utilities.
                 Source: SHRM Human Capital Benchmarking Study




16

     SHRM Human Capital Benchmarking Study
Additional Findings
Hires for recruiting and benefits positions will account for 60% of all HR hiring in 2005. There is no
doubt that growth in the economy and high health care costs are driving organizations to hire HR
professionals with benefits and recruiting expertise. But for many organizations, getting approval
to hire additional HR staff is often a challenge. Sometimes HR positions are not approved because
there is a lack of understanding of the HR function or how additional HR staff can benefit the
organization. Requesting additional staff because there is “too much work to do” is often ineffective.
A potentially successful approach, however, is to show the return on investment that the organization
will gain by hiring additional HR staff. For example, if hiring an HR professional to create retention
programs can reduce turnover costs by $500,000, then additional HR resources are a compelling
investment. HR professionals will find it helpful to use metrics to discuss return on investment when
making the case for additional headcount. Table 2 lists the areas of HR in which hiring was expected
in 2005, as indicated by 19% of organizations that reported plans to hire HR staff.


Table 2: Areas of HR in Which Hiring Is Expected in 2005 (n = 702)


Areas of HR
Recruiting                                                                                                     36%
Benefits                                                                                                       24%
Training                                                                                                       20%
Compensation                                                                                                   16%
Organizational development                                                                                     15%
Generalist                                                                                                     13%
Administrative support                                                                                         10%
Other HR*                                                                                                      19%
*This category included, but was not limited to, employee relations, payroll and executive HR functions. The representation
of each position that fell in the “other” category was too small to include as a separate category.
Note: Percentages do not total 100% as multiple responses were allowed.
Source: SHRM Human Capital Benchmarking Study




                                                                                                                                        17

                                                                                                SHRM Human Capital Benchmarking Study
                                                                Where the Head of HR Reports
                              100%



                               80%



                               60%
                                          54%


                               40%



                               20%
                                                          12%             10%                                           12%
                                                                                           6%              6%

                                0%
                                          CEO*            CFO**         Head of        CHRO***          Head of         Other
                                                                      Operating Unit                  Administration

                    *CEO = Chief Executive Officer
                    **CFO = Chief Financial Officer
                    ***CHRO = Chief Human Resource Officer
                    Note: “Other” category included, but was not limited to, vice presidents, managers and directors.
                    Source: SHRM Human Capital Benchmarking Study



                Fifty-four percent of surveyed HR departments reported to the CEO, COO, president or owner
                of their organizations. HR professionals at the corporate level were more likely to report to the
                CEO/COO/president. HR professionals at the business unit or facility level, however, were more
                likely to report to the chief human resource officer or the head of the operating unit.


                The reporting structure for the head of HR does not impact the type of health care plans the
                organization chooses to offer. This may dispel myths that HR professionals who report to the chief
                financial officer (CFO) may experience undue pressure to choose lower cost health care plans for
                their organizations. Although CFOs may have once doubted the value of human capital, a recent
                survey suggests those days are gone. In a study of CFOs’ perceptions of human capital, many
                indicated that human capital was a central factor in their companies’ abilities to achieve outcomes
                that drove shareholder value. Finance executives also reported that the ideal structure was for
                both finance and HR to report to the CEO and for these functions to work collaboratively.5




18

     SHRM Human Capital Benchmarking Study
H R - T O - E M P L O Y E E R AT I O S
While the median and average number of HR employees in an organization were discussed
previously, a more manageable way to compare HR staffing levels between organizations is to
use the HR-to-employee ratio. This ratio represents the number of HR staff per 100 employees in
an organization supported by HR. The number is calculated by dividing the number of HR FTEs
by the total number of employees (FTEs) in the organization and multiplying the outcome by 100:

                   HR-to-Employee      Total number of HR FTEs
                                  =                               X       100
                        Ratio       Total number of employee FTEs

Table 3 shows how HR-to-employee ratios change by organizational size. The data suggest that
the primary driver in HR-to-employee ratios is organizational size. This ratio can be helpful in
understanding the number of HR FTEs that are typically supporting a specific size organization.


The way to use the HR-to-employee ratios in Table 3 is to first locate the size of the organization
that is being compared and then find the corresponding ratios located in the same row. The ratios
are listed by the 25th, median and 75th percentiles. Although the median ratio will be used in this
example, if the HR department has a larger scope of responsibilities, then using the ratio for the
75th percentile may be considered. Conversely, if the HR department has a narrow scope of
responsibilities, then using the ratio for the 25th percentile may be appropriate.


Here is an example of how to compute the number of HR FTEs for a typical organization with 150
employees. Table 3 indicates that the median HR-to-employee ratio that corresponds to an
organization with 150 employees is 1.26. The actual calculation is as follows:

                        1.26 (median HR-to-employee ratio)
         150 (FTEs) X                                        =     1.89 (HR FTEs)
                                      100



This calculation indicates that for an organization with 150 FTEs the median number of HR FTEs
is 1.89. While this approximates that two HR FTEs may be appropriate for some organizations of
this size, it is not always the case. For example, if the HR department has significant initiatives
to undertake or if the organization must increase its recruiting efforts to hire a large number of
employees, then more HR staff may be required.




                                                                                                                         19

                                                                                 SHRM Human Capital Benchmarking Study
                 Table 3: HR-to-Employee Ratios (by Organizational Size)


                              Organizational Size                n     25th Percentile    Median      75th Percentile
                 All sizes                                       665        0.75            1.22            2.08

                 Fewer than 100                                  191        1.61            2.70            5.00
                 100 to 249                                      163        0.85            1.26            1.74
                 250 to 499                                      113        0.73            1.07            1.41
                 500 to 999                                      79         0.50            0.82            1.26
                 1,000 to 2,499                                  58         0.47            0.79            1.13
                 2,500 to 7,499                                  34         0.27            0.53            1.02
                 7,500 or more                                    27        0.19            0.42            0.70
                 Source: SHRM Human Capital Benchmarking Study



                 As organizations become larger in total employee size, HR-to-employee median ratios become
                 smaller. Although the median ratio is smaller for larger organizations, the actual number of HR
                 FTEs is higher. High HR-to-employee ratios in smaller organizations may be interpreted to mean
                 that it takes a minimum baseline amount of HR FTEs to deliver the primary HR services of recruiting,
                 benefits, employee relations, compensation, etc. But once this baseline is met, the incremental
                 amount of HR staff that is required to support more employees in an organization does not increase
                 at the same rate. This may occur because when there is more staff in HR, there is more flexibility
                 to offset peak work demands in one HR area with staff from another. For example, during the
                 labor-intensive process of performance reviews, if extra help is needed, it is easier to temporarily
                 pull HR FTEs from other functional areas, such as recruiting or benefits, for additional support.




20

     SHRM Human Capital Benchmarking Study
In addition, the roles for HR professionals in firms with large numbers of employees usually have
a higher degree of specialization. For example, in large organizations HR departments not only
have many benefits professionals, but even within the benefits area there may be one FTE solely
dedicated to managing retirement planning. Such role specificity allows for greater efficiency
and economies of scale. From a job analysis perspective, efficiencies are gained when like tasks
are grouped together. But when job responsibilities require many different types of tasks to
be performed, efficiencies are lost. This is because it takes more effort and more time to switch
between tasks that are different from each other.6 The statement “I’m wearing too many hats” is
often heard from HR professionals in smaller departments where they juggle the diverse tasks
of recruiting, benefits and employee relations simultaneously.


The number of HR FTEs for small- to mid-sized organizations may vary widely for several reasons.
This may occur because HR departments in these organizations may not be as well established
as HR departments found in larger organizations. As HR departments evolve, some may assume
a wide variety and scope of responsibilities supporting line organizations, while others may have
little or very narrow involvement. For example in some small- to mid-sized organizations, mentoring
programs and other training initiatives are managed directly by line managers without much
involvement from HR professionals. In these organizations, the number of HR FTEs is usually
lower than in organizations where HR is extensively involved in developing and managing
companywide professional development programs for their employees and management staff.




                                                                                                                      21

                                                                              SHRM Human Capital Benchmarking Study
                 EMPLOYMENT
                 Employee recruitment and retention are important issues for business executives in HR and other
                 disciplines. As the economy rises out of its slumber over the last several years, organizations are
                 now responding with pent-up demand to rebuild themselves with talent. In fact, 36% of
                 responding organizations indicated that recruiting and retaining talent were their top HR
                 challenges in 2005.


                 The SHRM/Rutgers Leading Indicator of National Employment™ (LINE™) also supports this view.
                 Based on monthly feedback from HR professionals, LINE tracks unique indicators, such as difficulty
                 in recruiting and new employment compensation. Both of these indicators have shown to be early
                 predictors of economic activity. Could it be that HR professionals really do have a crystal ball into
                 the economy?


                 Additional Findings
                 Organizations that expected revenue to be higher in 2005 also expected their organizations to
                 hire more people in 2005 than in 2004. Seventy-two percent of the organizations expected to see
                 an increase in revenue in 2005. Of those expecting to see an increase, 47% also expected to see an
                 increase in hiring over 2004.


                 While this relationship holds true when referring to the hiring of all employees, it does not hold
                 true when compared with the hiring of additional HR staff in 2005. There was a strong relationship,
                 however, between the hiring of HR staff in 2005 and the number of employees firms hired during
                 the previous year. Firms that hired many employees in 2004 also indicated that they intended to
                 hire additional HR staff. The hiring lag of HR staff in 2005 may occur because organizations
                 might first take a wait-and-see approach before committing resources to hire regular, full-time
                 HR employees.


                 A possible solution when regular, full-time HR staff cannot be hired is for the organization to
                 bring on board an HR consultant on a temporary basis. This option not only provides HR with the
                 resources required, but also serves as a way to “try out” the consultant in the event a full-time
                 position becomes approved.




22

     SHRM Human Capital Benchmarking Study
Cost-per-hire and time-to-fill data have been collected since the printing of this executive summary.
If you are interested in the median cost-per-hire and time-to-fill information, it is available for free
on SHRM’s Human Capital Benchmarking Service Web site at www.shrm.org/research/benchmarks.


The number of positions filled in 2004 varied by organization and industry type. In Table 4, the
percentage of positions filled represents the number of positions filled as a proportion of total
employees. Filled positions include both internal and external hires. For example, if an organization
of 200 FTEs fills 10 positions, the percentage of positions filled is 5%. When used in combination
with the actual number of positions filled, the data let an organization compare its hiring activity
level with others in its industry. Health, wholesale/retail trade and for-profit service industries had
the top three highest medians for percentage of positions filled in 2004. Health, publishing and
broadcasting and government, however, were the industries with the highest number of actual
hires. For 2005, the top three responding industries that expected to hire more employees in 2005
than in 2004 were high-tech, transportation and for-profit services, as indicated in Table 5.




                                                                                                                          23

                                                                                  SHRM Human Capital Benchmarking Study
                 Table 4: Industry Hiring Activity for 2004


                                                                     Percentage of Positions              Actual Number of Positions
                                  Industry
                                                                          Filled in 2004                         Filled in 2004
                                                                        25th              75th                  25th              75th
                                                                n     Percentile Median Percentile       n    Percentile Median Percentile
                 All industries                               633       6%         16%        29%       651        8         28         85

                 Construction and mining                        11     14%         18%        34%        11       10         15         45
                 Educational services                           24      4%         14%        34%        24       10         50        100
                 Financial services                             50     12%         20%        36%        50       14         31         79
                 Government                                     32      6%         13%        35%        32        9         70        150
                 Health                                         49     15%         24%        35%        49       25        115        252
                 High-tech                                      40      9%         20%        31%        40       10         36         67
                 Insurance                                      25      7%         13%        14%        25        3         20         80
                 Manufacturing (durable goods)                  87      4%          7%        17%        89       10         20         54
                 Manufacturing (nondurable goods)               38      3%          9%        17%        38        6         22         53
                 Publishing and broadcasting                    11      7%         12%        26%        12        8         76        150
                 Service (nonprofit)                            34      8%         15%        29%        34        4         10         30
                 Service (for-profit)                           56      9%         21%        44%        61        4         25         60
                 Transportation                                 12      4%          9%        17%        12       18         54         98
                 Utilities                                      13      5%          8%        24%        13        8         29         57
                 Wholesale/retail trade                         34     14%         22%        58%        37       13         60        287

                 For-profit (all industries)                  460       6%         16%        29%       474        8         26         75
                 Nonprofit (all industries)                   173       7%         16%        29%       177        6         30        115

                 Note: Industries with less than 10 organizations responding were omitted from the table. They were: agriculture, forestry
                 and fishing; library; oil and gas; and real estate.
                 Source: SHRM Human Capital Benchmarking Study




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     SHRM Human Capital Benchmarking Study
Table 5: Industry Hiring Projections for 2005

           Industry             n                                     2005 Hiring Projections

                                                2005 Hiring Projections for All Industries
                                                 Increase                               41%

All industries                 681              Decrease                 18%

                                      Stay about the same                               41%
                                                            0%          20%           40%           60%         80%    100%
                                                                               Percentage of Respondents


                                         2005 Hiring Projections for Construction and Mining
                                                 Increase                18%

Construction and mining         11              Decrease                 18%

                                      Stay about the same                                                 64%

                                                            0%          20%           40%           60%         80%    100%
                                                                               Percentage of Respondents

                                           2005 Hiring Projections for Educational Services
                                                 Increase               15%

Educational services            26              Decrease                        27%

                                      Stay about the same                                            58%
                                                            0%          20%           40%           60%         80%    100%
                                                                               Percentage of Respondents

                                             2005 Hiring Projections for Financial Services
                                                 Increase                                     49%

Financial services              51              Decrease               14%

                                      Stay about the same                             37%
                                                            0%          20%           40%           60%         80%    100%
                                                                               Percentage of Respondents

                                                 2005 Hiring Projections for Government
                                                 Increase                               41%

Government                      32              Decrease         3%

                                      Stay about the same                                           56%
                                                            0%          20%           40%           60%         80%    100%
                                                                               Percentage of Respondents

                                                    2005 Hiring Projections for Health
                                                 Increase                              37%

Health                          51              Decrease                16%

                                      Stay about the same                                     47%
                                                            0%          20%           40%           60%         80%    100%
                                                                               Percentage of Respondents                                          25

                                                                                                          SHRM Human Capital Benchmarking Study
                             Industry           n                                  2005 Hiring Projections

                                                                   2005 Hiring Projections for High-Tech
                                                                  Increase                                          58%

                 High-tech                      43               Decrease                16%

                                                       Stay about the same                      26%
                                                                             0%          20%          40%          60%      80%   100%
                                                                                               Percentage of Respondents

                                                                    2005 Hiring Projections for Insurance
                                                                  Increase                             36%

                 Insurance                      25               Decrease           8%

                                                       Stay about the same                                         56%
                                                                             0%          20%          40%          60%      80%   100%
                                                                                               Percentage of Respondents

                                                      2005 Hiring Projections for Manufacturing (Durable Goods)
                                                                   Increase                                  48%

                 Manufacturing(durable goods)   92                Decrease                     22%

                                                        Stay about the same                          30%
                                                                              0%         20%           40%         60%      80%   100%
                                                                                                Percentage of Respondents

                                                     2005 Hiring Projections for Manufacturing (Nondurable Goods)
                                                                   Increase                20%
                 Manufacturing(nondurable
                                                40                Decrease                           30%
                 goods)
                                                       Stay about the same                                    50%
                                                                              0%         20%           40%         60%      80%   100%
                                                                                                Percentage of Respondents

                                                       2005 Hiring Projections for Publishing and Broadcasting
                                                                  Increase                           33%

                 Publishing and broadcasting    12                Decrease                           33%

                                                       Stay about the same                           33%
                                                                              0%         20%           40%         60%      80%   100%
                                                                                                Percentage of Respondents

                                                              2005 Hiring Projections for Service (Nonprofit)
                                                                  Increase                            34%

                 Service (nonprofit)            35               Decrease                  20%

                                                       Stay about the same                                   46%
                                                                             0%          20%          40%          60%      80%   100%
                                                                                               Percentage of Respondents



26

     SHRM Human Capital Benchmarking Study
            Industry                 n                                    2005 Hiring Projections

                                                        2005 Hiring Projections for Service (Profit)
                                                         Increase                                  50%

Service (for-profit)                 64                  Decrease              20%

                                              Stay about the same                      30%
                                                                    0%       20%          40%            60%     80%     100%
                                                                                    Percentage of Respondents

                                                        2005 Hiring Projections for Transportation
                                                          Increase                                    54%

Transportation                       13                  Decrease                   23%

                                               Stay about the same                  23%
                                                                     0%       20%         40%            60%     80%     100%
                                                                                     Percentage of Respondents
                                                            2005 Hiring Projections for Utilities
                                                          Increase                                 47%

Utilities                            15                  Decrease            13%

                                               Stay about the same                           40%
                                                                     0%       20%         40%            60%     80%     100%
                                                                                     Percentage of Respondents

                                                  2005 Hiring Projections for Wholesale/Retail Trade
                                                          Increase                    29%

Wholesale/retail trade               38                  Decrease                     29%

                                               Stay about the same                              42%

                                                                     0%       20%         40%            60%     80%     100%
                                                                                     Percentage of Respondents


                                                    2005 Hiring Projections for For-Profit Industries
                                                          Increase                              44%

For-profit (all industries)         500                  Decrease              18%

                                               Stay about the same                           38%

                                                                     0%       20%         40%            60%     80%     100%
                                                                                     Percentage of Respondents

                                                    2005 Hiring Projections for Nonprofit Industries
                                                         Increase                      31%

Nonprofit (all industries)          181                  Decrease              19%

                                              Stay about the same                                  49%
                                                                    0%       20%          40%            60%     80%     100%
                                                                               Percentage of Respondents
Note: Industries with less than 10 organizations responding were omitted from the table. They were: agriculture, forestry
and fishing; library; oil and gas; and real estate.
Source: SHRM Human Capital Benchmarking Study
                                                                                                                                                  27

                                                                                                          SHRM Human Capital Benchmarking Study
                 H E A LT H C A R E
                 Employee benefits—and health care specifically—play a key part of the total rewards strategy to
                 attract and retain talent.


                 Yet the future of health care is a concern for many—employers, medical care providers and
                 employees. SHRM’s recently published Workplace Forecast notes that the continuous rise in health
                 care costs is the most important economic trend, as well as the most important overall trend that
                 concerns HR professionals.7 In 2004, the median health care expense per covered employees was
                 $6,000. Eighty-two percent of responding organizations also expected, on average, an 11% increase
                 in health care costs in 2005. Rising health care expenses were cited by the manufacturing industry
                 as one of the main reasons why structural costs in the United States were now outpacing even
                 those of high-wage countries such as Canada and the United Kingdom.


                 If increases in health care continue as expected, bringing with them higher structural costs that
                 undercut U.S. competitiveness, the debate about health care in the political and business arenas
                 could change radically. At the policy level, SHRM’s Governmental Affairs Department is actively
                 representing SHRM members’ concerns to the 109th Congress to help continue the debate on
                 issues affecting health care affordability, access and costs.




28

     SHRM Human Capital Benchmarking Study
Additional Findings
The top three medical plans used by organizations were preferred provider organization (PPO)
(78%), health maintenance organization (HMO) (48%) and point of service (POS) (23%). Organizations
that had 250 or more FTEs offered more health care options than those that were smaller in size.
This may be because an organization with a large workforce usually has a greater diversity of health
care needs. In addition, it also has the organizational size and buying power to offer insurance
companies enough participation to make it cost-effective.


Nonprofit organizations contributed a larger percentage toward employee health care premiums,
compared with for-profit organizations (88% and 78%, respectively). This occured because nonprofits
generally provided lower cash compensation to its employees than did for-profit organizations
(Table 6). By providing benefits at lower costs to its employees, however, nonprofits increased their
success at recruiting and retaining talent in a competitive market. Yet this finding only applied to
employees who elected medical coverage only for themselves. When employees elected to have
coverage for themselves and their dependents, there was no difference in how nonprofit or
for-profit organizations paid for health care premiums.




                                                                                                                        29

                                                                                SHRM Human Capital Benchmarking Study
                 Table 6: Average Percentage of Health Care Premiums Paid by the Company and the Employee


                                  Industry                            Employee Only                       Employee and Dependents
                                                              n      Company         Employee         n     Company           Employee
                 All industries                             568         81%             19%         544        67%               33%

                 Educational services                        22         83%             17%          21        64%               36%
                 Financial services                          40         79%             21%          38        62%               38%
                 Government                                  22         88%             12%          23        72%               28%
                 Health                                      46         83%             17%          44        63%               37%
                 High-tech                                   37         81%             19%          36        67%               33%
                 Insurance                                   22         88%             12%          22        71%               29%
                 Manufacturing (durable goods)                76        79%             21%          73        71%               29%
                 Manufacturing (nondurable goods)            34         80%             20%          36        75%               25%
                 Publishing and broadcasting                 12         79%             21%          12        64%               36%
                 Service (nonprofit)                         33         87%             13%          30        61%               39%
                 Service (for-profit)                        52         75%             25%          45        59%               41%
                 Transportation                              13         87%             13%          13        82%               18%
                 Utilities                                   12         83%             18%          12        72%               28%
                 Wholesale/retail trade                      32         74%             26%          32        64%               36%

                 For-profit (all industries)                406         78%             22%         394        66%               34%
                 Nonprofit (all industries)                 162         88%             13%         150        69%               31%

                 Note: Industries with less than 10 organizations responding were omitted from the table. They were: agriculture, forestry and
                 fishing; construction and mining; library; oil and gas; and real estate.
                 Source: SHRM Human Capital Benchmarking Study




30

     SHRM Human Capital Benchmarking Study
C O M P E N S AT I O N
Well-managed compensation programs strategically connect employee behaviors and performance
to the goals and objectives of the organization. Compensation, the driving component of an
organization’s total rewards strategy, is not only used to motivate and retain productive employees,
but also to attract new employees to the organization.


Compensation programs can also support changes to the corporate culture. For example, Motorola
altered the bonus plans of its senior managers, executives and the CEO as a way to hold them
accountable for developing and retaining women and employees of color.8 The results of this multi-
year effort were dramatic. When the plan first started, there were two women vice presidents and
six vice presidents of color. Nine years later, the company increased its number of women vice
presidents to 43, and the number of vice presidents of color grew to 41.


Compensation programs can also drive specific results at all levels in the organization. For example,
Children’s Hospital in Boston found that it was taking more than 100 days to receive payments after
bills were sent out.9 Determined to improve cash flow by lowering the billing cycle, the hospital’s
accounting manager worked with the human resource department to institute a team-based
incentive program for its accounts receivable staff. The team-based incentive plan was a success.
The average number of days to receive payment dropped from 100 to 65. Such incentive programs
are an excellent way to show employees the link between their work and company success, with
the payoff benefiting both the organization and its employees.




                                                                                                                       31

                                                                               SHRM Human Capital Benchmarking Study
                Additional Findings
                The median expected annual percentage increase for salaries was 3.5% in 2005. Organizations
                with fewer than 1,000 employees reported a slightly higher percentage increase than those with
                more employees. This may have occurred because larger companies usually have more extensive
                compensation, rewards and benefits programs outside of base pay. These may include annual
                bonuses, high-demand skill pay, retention bonuses, pay for performance plans and other incentive
                compensation programs that can be used to attract and retain talent. This often allows larger
                organizations to compete in the market without solely relying on offering higher base salaries.


                 Table 7: 2005 Projected Annual Salary Increases (by Organizational Size)


                    Organizational Size         n         25th Percentile          Median        75th Percentile
                 All sizes                    532                3.0%                3.5%             4.0%

                 Fewer than 100               141                3.0%                4.0%             5.0%
                 100 to 249                   135                3.0%                3.5%             4.0%
                 250 to 499                     90               3.0%                3.5%             4.0%
                 500 to 999                     59               3.0%                3.5%             4.0%
                 1,000 to 2,499                 45               2.5%                3.0%             4.0%
                 2,500 to 7,499                 27               3.0%                3.0%             4.0%
                 7,500 or more                  35               3.0%                3.0%             4.0%
                 Source: SHRM Human Capital Benchmarking Study




32

     SHRM Human Capital Benchmarking Study
Salaries as a percentage of operating expense are related to two important factors that drive
any business. These are the base salary costs associated with human capital and all other costs
that are required to operate the business and keep it running. While operating expenses do
include salary, they also include other expenses, such as parts and supplies, rent, printing, travel
and capital depreciation.


Industries that had a higher proportion of specialized workers and low operating expenses, such as
educational services, high-tech, government and service (for-profit), had the top median percentages
of salaries as a percentage of operating expense. Utilities, manufacturing (nondurable goods) and
manufacturing (durable goods) had the lowest percentages.


Table 8: Salaries as a Percentage of Operating Expense in 2004


                  Industry                            n           25th Percentile         Median          75th Percentile
All industries                                       429                 28%                 40%                 59%

Educational services                                  20                 35%                 54%                 76%
Financial services                                    36                 30%                 42%                 60%
Government                                            23                 38%                 50%                 70%
Health                                                45                 39%                 46%                 59%
High-tech                                             25                 35%                 53%                 61%
Insurance                                             15                 12%                 45%                 60%
Manufacturing (durable goods)                         52                 15%                 30%                 39%
Manufacturing (nondurable goods)                      19                 20%                 32%                 42%
Service (nonprofit)                                   28                 40%                 48%                 62%
Service (for-profit)                                  42                 30%                 50%                 65%
Utilities                                             10                 14%                 17%                 25%
Wholesale/retail trade                                20                 15%                 41%                 60%

For-profit (all industries)                          288                 24%                 39%                 56%
Nonprofit (all industries)                           141                 34%                 46%                 60%
Note: Industries with less than 10 organizations responding were omitted from the table. They were: agriculture, forestry
and fishing; construction and mining; library; oil and gas; publishing and broadcasting; real estate; and transportation.
Source: SHRM Human Capital Benchmarking Study




                                                                                                                                         33

                                                                                                 SHRM Human Capital Benchmarking Study
                 O R G A N I Z AT I O N A L D ATA
                 Revenue and net income are strategic financial indicators of performance for most organizations.
                 When total revenue is divided by total employees (FTEs), the resulting number is a marker of
                 efficiency.10 This ratio, termed revenue per FTE, conceptually links the time and effort associated
                 with the firm’s human capital to its revenue output. To illustrate, for an organization that has $100
                 million in revenues and 300 employees (FTEs), the calculation yields a ratio of $333,333 per FTE.
                 If the revenue-per-FTE ratio increases, it indicates that there is greater efficiency and productivity
                 because more output is being produced per FTE. If the ratio decreases, it indicates there is less
                 efficiency and productivity.


                 Table 9: Revenue per FTE (by Industry)


                                  Industry                                               Revenue per FTE
                                                                  n             25th Percentile           Median           75th Percentile
                 All industries                                  422                 $77,778             $145,455             $241,667

                 Educational services                             19                 $74,667              $94,070             $152,376
                 Financial services                               37                 $53,045             $156,190              $197,878
                 Government                                       19                 $57,692             $109,874              $147,368
                 Health                                           39                 $70,542              $92,000             $140,541
                 High-tech                                        33                $135,545             $167,500             $241,667
                 Insurance                                        19                $154,545             $444,444             $846,407
                 Manufacturing (durable goods)                    55                $107,692             $178,182             $261,250
                 Manufacturing (nondurable goods)                 15                $157,143             $185,328             $278,261
                 Service (nonprofit)                              29                 $58,286              $69,767             $140,500
                 Service (for-profit)                             35                 $40,000             $114,286             $223,100
                 Transportation                                   11                 $81,464             $151,515             $249,558
                 Utilities                                        10                $251,986             $404,444             $554,522
                 Wholesale/retail trade                           24                 $97,902             $333,333             $505,451

                 For-profit (all industries)                     288                 $98,361             $167,939              $317,204
                 Nonprofit (all industries)                      134                 $65,022             $102,179             $159,091
                 Note: Industries with less than 10 organizations responding were omitted from the table. They were: agriculture, forestry
                 and fishing; construction and mining; library; oil and gas; publishing and broadcasting; and real estate.
                 Source: SHRM Human Capital Benchmarking Study




34

     SHRM Human Capital Benchmarking Study
The ratio of net income per FTE also follows a similar logic. It calculates efficiency by taking net
income before taxes, which is the difference between gross revenue and expenses, and divides
that by the number of FTEs. Since net income per FTE comprises two factors, it is best looked
at over time.11 Both metrics, however, are basic measures that look at productivity in terms of
employees and financial performance. Although one isn’t a better indicator than the other, revenue
per FTE is a more sensitive indicator because it consists of only one factor—revenue. Standing
alone, without comparisons within a specific industry, these metrics may not have much value.
But used over time, they are a way for HR professionals to track relationships in operational issues
and financial performance to employee productivity.


The overall median for revenue per FTE was $145,455, and the three industries with the highest
medians for revenue per FTE were insurance, utilities and wholesale/retail trade. Net income per
FTE for all industries was $12,450. Insurance, utilities and wholesale/retail trade were also the
industries with the highest median net income per FTE. Tables 9 and 10 provide a breakdown of
revenue per FTE and net income per FTE for all industries.


Table 10: Net Income Before Taxes per FTE (by Industry)


                 Industry                                     Net Income Before Taxes per FTE
                                                 n             25th Percentile          Median            75th Percentile
All industries                                  346                    $501              $12,450              $45,385

Educational services                             19                    -$19                     0              $6,000
Financial services                               34                  $4,508              $41,557              $54,782
Government                                       17                       0                     0                $333
Health                                           36                       0               $2,613                $7,823
High-tech                                        23                  $8,557              $33,833             $116,267
Insurance                                        18                $28,571               $68,182             $127,726
Manufacturing (durable goods)                    35                   $962               $14,545              $37,358
Manufacturing (nondurable goods)                 13                  $7,096              $21,333              $49,180
Service (nonprofit)                              28                       0               $2,815               $9,869
Service (for-profit)                             24                  $2,452              $18,835              $50,000
Transportation                                   11                     $57               $2,532              $53,649
Utilities                                        10                $29,087               $59,028             $139,796
Wholesale/retail trade                           15                  $7,846              $52,000             $333,497

For-profit (all industries)                     221                 $6,000               $27,273              $60,060
Nonprofit (all industries)                      125                       0               $1,825              $10,761
Note: Industries with less than 10 organizations responding were omitted from the table. They were agriculture, forestry
and fishing; construction and mining; library; oil and gas; publishing and broadcasting; and real estate.
Source: SHRM Human Capital Benchmarking Study




                                                                                                                                         35

                                                                                                 SHRM Human Capital Benchmarking Study
                 P R O F I L E O F O R G A N I Z AT I O N S R E S P O N D I N G T O T H E S U R V E Y
                 The make-up of organizations that responded to the survey varied greatly. Factors such as workforce
                 size, industry, revenue and geographic location all impact the way in which HR departments align
                 their activities to support their particular organization. Tables 11 through 17 provide a breakdown
                 of the range of employers that responded to this survey.


                 Table 11: HR Department Level (n = 700)

                 Corporate (organization-wide)                                                                             66%
                 Business unit/division                                                                                    17%
                 Facility/location                                                                                         15%
                 Other                                                                                                      2%



                 Table 12: Industry (n = 702)

                 Agriculture, forestry and fishing                                                                          1%
                 Construction and mining                                                                                    2%
                 Educational services                                                                                       4%
                 Financial services                                                                                         7%
                 Government                                                                                                 5%
                 Health                                                                                                     8%
                 High-tech                                                                                                  6%
                 Insurance                                                                                                  4%
                 Library                                                                                                   <1%
                 Manufacturing (durable goods)                                                                             13%
                 Manufacturing (nondurable goods)                                                                           6%
                 Oil and gas                                                                                                1%
                 Publishing and broadcasting                                                                                2%
                 Real estate                                                                                                1%
                 Service (nonprofit)                                                                                        5%
                 Service (profit)                                                                                           9%
                 Transportation                                                                                             2%
                 Utilities                                                                                                  2%
                 Wholesale/retail trade                                                                                     6%
                 Other*                                                                                                    17%
                 *This category included, but was not limited to, hospitality, food and beverage, landscaping, zoology, and entertainment.
                 The representation of each industry that fell in the “other” category was too small to include as a separate category.
                 Note: Percentages may not total 100% due to rounding.




36

     SHRM Human Capital Benchmarking Study
Table 13: Number of FTEs for the Organizational Level (n = 702)

Fewer than 100                                                                                      27%
100 to 249                                                                                          23%
250 to 499                                                                                          16%
500 to 999                                                                                          11%
1,000 to 2,499                                                                                       8%
2,500 to 7,499                                                                                       5%
7,500 or more                                                                                        8%
Note: Percentages may not total 100% due to rounding.




Table 14: Organizational Revenue in Fiscal Year 2004 (n = 441)

Under $5 million                                                                                    20%
$5 million to $24.9 million                                                                         29%
$25 million to $99.9 million                                                                        26%
$100 million to $999.9 million                                                                      20%
Over $1 billion                                                                                      5%



Table 15: Region (n = 692)

Pacific West
                                                                                                            15%
(Alaska, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Wyoming)

Southwest Central
                                                                                                            18%
(Arizona, Arkansas, Colorado, Kansas, Louisiana, Missouri, New Mexico, Oklahoma, Texas, Utah)

North Central
                                                                                                            24%
(Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin)
Southeast
(Alabama, District of Columbia, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina,    20%
Tennessee, Virginia, West Virginia)
Northeast
(Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York,                23%
Pennsylvania, Rhode Island, Vermont)
Note: The above regions are based on the SHRM member regions.



Table 16: Organizational Sector (n = 700)

Public/government sector                                                                            22%
Private sector                                                                                      78%



Table 17: Profit Status (n = 700)

For-profit (all industries)                                                                         73%
Nonprofit (all industries)                                                                          27%
                                                                                                                                   37

                                                                                           SHRM Human Capital Benchmarking Study
CONCLUSION
Capturing the value of human capital and measuring how human resource practices affect
firm performance are gaining widespread attention among business executives in HR and other
disciplines. As industrialized nations switch to a knowledge economy, executives realize that the
knowledge, skills and abilities of their employees are their firms’ defining advantage in the market.
Therefore, efforts to measure, quantify and link human capital management practices to financial
performance are occurring at an increasing rate.


More than 20 metrics were collected on topics relating to HR departments and expenses,
employment, health care, compensation, and organizational financial data. The high-quality HR
metrics collected in this study, along with SHRM’s Customized Human Capital Benchmarking
Service, arm HR professionals with important benchmarking data that they can use to compare
their organizations’ human capital measures against similar organizations within the same
industry. When used wisely, benchmarking data can protect programs that are performing well,
create support for organizational change and help executives in HR and other disciplines make
strategic decisions that affect their organizations. Care must be taken, however, not to use
benchmarking data as merely justification for cutting costs. For example, while cutting costs in
recruiting and training will save dollars in the short term, doing so may negatively impact human
capital measures such as quality of hire or workforce skills.


The HR benchmarking metrics discussed in this executive summary represent the first step to
uncovering the links between human capital management practices and firm performance. While
knowing the average cost-per-hire can help benchmark an HR department’s performance against
industry practices, admittedly using this metric alone is not enough. In addition, linking human
capital results to a firm’s business strategy is another step HR professionals must take. Thus,
research on human capital may be helpful in discovering the intermediate operational drivers that
significantly affect a firm’s financial success. Once these are identified, further research can then
focus on the identification and measurement of human capital activities and HR programs that
support these operational drivers.




                                                                                                                        39

                                                                                SHRM Human Capital Benchmarking Study
THE FUTURE
OF HR METRICS
This section reviews key future trends in          Use of HR measurement techniques can
the area of human capital measurement              profoundly affect how organizations view
that will have the biggest impact on the           human capital in the future. In 2005, members
HR profession, as identified by SHRM’s             of SHRM’s Human Capital Measurement/HR
Human Capital Measurement/HR Metrics               Metrics Special Expertise Panel were asked to
Special Expertise Panel. This Panel is             come up with a list of key future trends in the
comprised of SHRM members who are                  area of human capital measurement that they
subject matter experts in the topic of             believed would have the biggest impact on the
human capital measurement and metrics.             HR profession. The panel was asked to
In fact, many of the results from the              consider how these trends would play out in a
SHRM Human Capital Benchmarking                    one-year time frame as well as five years and
Study with regard to staffing and                  beyond. When developing each trend, panel
development, workforce planning and                members were also asked to consider not only
health care support the Panel’s                    the factors that were contributing to the
perspectives. This section gives HR                growth of the trend but also the factors that
professionals an overview of the potential         could actually work against the trend. Finally,
impact that the forces of demographics,            panel members were asked to think about the
globalization, technology and health care          implications the trends they identified had for
will have on the way organizations                 HR professionals, the profession itself and the
measure and value their human capital.             Society for Human Resource Management as
                                                   the leading body advancing the profession and
                                                   serving the human resource professional.
The future of HR metrics is exciting and wide-     Members of the panel were: Melvin L. Asbury,
open. It is anticipated that future HR metrics     SPHR; Philip O. Benham, Jr., Ph.D., SPHR; Don
will not only include benchmarking data that       M. Davis; Virginia C. Hall, SPHR; Keith A.
have already been discussed in this executive      Mason; Steve McElfresh, Ph.D., J.D., SPHR;
summary, but research in human capital                    .
                                                   Brian F Ray; Grant A. Schneider, SPHR; William
measurement will lead to better measures that      D. Young, SPHR; and Steve Williams, Ph.D.,
closely relate HR practices and human capital      SPHR, Panel Leader.
activities to business outcomes. As companies
continue to grasp the financial impact that
human capital has on firm performance and
shareholder value, pressure to find better ways
to measure these intangible assets will grow.
A recent survey indicates that 76% of HR
professionals predict an increase in top-level
executive backing for investing in human capital
measurement over the next three years.12




                                                                                                                     41

                                                                             SHRM Human Capital Benchmarking Study
                 SHRM’s Human Capital Measurement/HR Metrics        1. Staffing and development
                 Special Expertise Panel identified the following   Over the coming year, reliance on testing is
                 key trends in human capital measurement.           expected to increase with a focus on the
                                                                    growing use of personnel assessment, skills
                    1. Staffing and development                     and competency testing in the recruitment and
                                                                    selection process, as well as in the career
                    2. HR outsourcing                               development process. Emphasis will be on
                                                                    measuring quality of hire and improving the
                    3. Medical health care/cost management          sourcing, recruitment and selection processes
                                                                    with an increase in the use of HR metrics to
                    4. Workforce planning                           track progress. Using a structured approach to
                                                                    leadership development to ensure consistency
                    5. Using HR technology                          of organizational philosophy and values
                                                                    throughout the organization will be critical.
                    6. Elevating HR to a decision science           This may involve the use of learning content
                                                                    management systems, corporate universities,
                    7. Educating the HR profession                  etc., if economically feasible.


                                                                    There is also likely to be an increase in the
                                                                    long-term use of independent contractors and/
                                                                    or contingent workers through outsourcing
                                                                    agencies to fill critical positions due to the
                                                                    scarcity of labor with the right skill sets in certain
                                                                    technical and/or professional job categories.
                                                                    However, if the economy is in good shape or if
                                                                    the borders to the United States were opened
                                                                    to allow the free passage of skilled workers
                                                                    back and forth for work across the borders on
                                                                    a daily or weekly basis, this would act counter
                                                                    to this trend.




42

     SHRM Human Capital Benchmarking Study
2. HR outsourcing                                    To ensure a positive customer impact, every
Finding ways to measure business readiness           effort should be made to guarantee a seamless
will be crucial to the ability to make appropriate   transition, i.e., the change should either be
outsourcing decisions. Setting standards and         transparent, or if the change is designed to
measuring success will involve HR practice           result in a significant improvement in service,
leaders establishing baseline standards and          then the employee base should be educated
ensuring periodic follow-up to evaluate              well in advance of the transition. In either
progress; provisions for remedial action             instance, the organization should have a
would be stipulated in the agreement with            measurement system in place to track the
the supplier of the service(s).                      performance of the outsourcing vendor,
                                                     including service level agreements and a
Selecting an outsourcing vendor is a skill           provision for periodic feedback.
HR practice leaders will need to develop.
They are encouraged to research this                 The trend for greater use of outsourcing could
process carefully and/or seek advice from            be challenged by anti-outsourcing legislation
those within the organization with contract          or by the potential strengthening of unions.
administration expertise. A formal request
for proposal (RFP) is recommended, and it
should include a comprehensive requirements
definition to ensure that expectations are
clearly detailed for the vendor of the
service(s) to be performed. Negotiation of
contract terms and the final agreement
require special skill sets and competencies
and should not be entered into lightly.




                                                                                                                        43

                                                                                SHRM Human Capital Benchmarking Study
                 3. Medical health care/cost management                Over the longer term, measuring behavioral
                 Medical health care and cost management               outcomes based on plan design changes will
                 issues will continue to be a primary focus for        grow increasingly important. This will involve
                 organizations, both in the short and long term.       establishing measurement systems to track the
                 This trend will involve the collection of baseline    effects of plan design changes. Although some
                 information on health status and the analysis         progress can be measured with existing systems
                 of medical plan experience based on ICD               in the short term, the number of variables
                 Codes (International Classification of Diseases       involved with plan design changes from year
                 Codes) and/or CPT-10 Codes (Current Procedural        to year and the number of changes in plan
                 Terminology Codes), in conjunction with               participants each year are likely to require
                 census data. As a result of this analysis,            more sophisticated human resource information
                 recommendations regarding the modification            systems (HRIS) support than exists currently.
                 of health care plans and products would be
                 made as a means of influencing employee               Additional factors include employees assuming
                 behavior in relation to positive and/or less costly   more responsibility for making cost-effective
                 health care practices and/or plan options—for         health care choices (consumerism). This, in
                 example, offering preventive care at 100%             turn, requires an ongoing commitment on the
                 coverage, (i.e., no deductible and no copay)          part of employers to educate employees about
                 and providing incentives to individuals with          health care options and what it means to be
                 chronic medical conditions (i.e., diabetes,           a wise consumer. Lastly, designing medical
                 rheumatoid arthritis) to use mail-order               plans to drive employees toward more
                 prescription drug programs for generic                appropriate health care choices, i.e., generic
                 injectibles.                                          prescription drug programs, wellness
                                                                       programs, preferred providers, etc., is another
                                                                       factor to be considered.


                                                                       Alternatively, measuring outcomes could be
                                                                       influenced by intervention from the federal
                                                                       government, i.e., some form of universal
                                                                       health care.




44

     SHRM Human Capital Benchmarking Study
4. Workforce planning                                5. Using HR technology
Workforce planning involves anticipating or          Use of HR technology is likely to focus on
forecasting supply and demand demographics—          several areas:
developing expertise in environmental scanning
as it relates to workforce trends, with special      Gap analysis/workforce readiness—The use
focus on competitors for key human capital           of HR technology to maintain up-to-date
assets and an ability to understand the volatility   information regarding employee competencies,
of the job market as it relates to a specific        skill sets, training records, certifications, etc.,
industry. Another factor involves the measure-       to ensure a comprehensive understanding at
ment of latent capability within organizations.      all times of labor availability and/or shortages
This is achieved through the use of in-house         by job category and industry.
tools (developed and/or purchased) for
identifying candidates with high growth              HR software such as employee satisfaction
potential. These individuals are offered career      indices—Current state-of-the-art HRIS systems
development opportunities within the                 include the capability for employer-developed,
organization and, in turn, their progress is         customized surveys. This capability allows
measured against the business plan.                  employers to poll employees based on key
                                                     issues confronting the organization with
Measuring the linkage with the business plan         increased frequency. Polls can be limited to
to evaluate the short- and long-term workforce       just a few questions at any given time.
planning requirements of the organization,
preparing a gap analysis and making
recommendations and implementing a plan to
bridge gaps, if any, against the business plan
to track and measure progress is, in essence, a
brief summary of workforce planning.


In the future, anticipating population shifts or
forecasting gaps related to training and
development in both the short and long term
and the impact of these gaps on local
businesses may become more important. This
will require an understanding of demographics
(i.e., availability of qualified labor), how they
might change over time and how they will be
influenced by other economic factors,
especially employment levels.




                                                                                                                          45

                                                                                  SHRM Human Capital Benchmarking Study
                 HR self-service/multiple levels (employee,         6. Elevating HR to a decision science
                 supervisory, management)—The use of HR             HR will evolve to become a steward for human
                 technology to allow employees, supervisors         capital assets and will provide the decision
                 and managers direct access to information,         tools to support them. Senior HR practice
                 based on level of authority, will expedite the     leaders will be responsible for working with
                 flow of information for employees and line         senior management to express in both
                 management alike and should relieve HR             quantitative and qualitative terms the value
                 departments of routine transactional work that     of the human capital assets within the
                 can be automated.                                  organization and for designing and developing
                                                                    decision support tools to demonstrate a return
                 Integration of HR systems with enterprisewide      on investment (ROI) in human capital asset
                 systems—The full integration of HR systems         initiatives. This is likely to involve the
                 with enterprisewide systems allows enhanced        development of criteria equivalent to CFO,
                 reporting capability by HR to senior               Financial Accounting Standards Board,
                 management.                                        Marketing, etc. The HR practice leader and
                                                                    senior management will know that this works
                 The use of a Learning Content Management           when HR is elevated to the level of a decision
                 System (LCMS)—Track training and develop-          science, i.e., the criteria for a chief human
                 ment, distance learning, career development        resource officer is akin to that of a CFO, CIO,
                 and related activities for individual employees.   etc. But potential problems, such as erroneous
                                                                    data to support claims of HR as a decision
                 Support human capital decision analysis            science, any scandals surrounding the process,
                 tools—The next generation of HRIS decision         legislative issues that could put the process
                 analysis tools will be designed to support         on hold or a lack of support from the business
                 human capital strategic planning processes         community, could make this a challenge
                 and related initiatives.                           and/or potentially delay this process.


                 Though the need for such systems will
                 probably always exist, they may no longer be
                 called HR technology systems and may be
                 absorbed by another function.




46

     SHRM Human Capital Benchmarking Study
7. Educating the HR profession                        The education of HR practitioners in HR
Educating students, both undergraduate and            metrics may be accomplished through targeted
graduate, may eventually be standardized to           professional development programs, a gradual
include HR metrics, quantitative measures and         shift in the certification process to include more
HR technology. Educating subject matter experts       emphasis on HR metrics, business analytics
in HR as a decision science may become more           and HR technology, the SHRM Speaker’s
critical over the longer term as HR is re-evaluated   Bureau, SHRM Chapter Meetings, SHRM
as a discipline. The focus should be on               conferences, etc. Teaching HR professionals to
elevating HR to the level of a decision science.      be key business leaders may be accomplished
This would require a standardized body of             through the establishment of a new executive-
knowledge with a sharper focus on human               level certification with a greater emphasis on
capital, business analytics and HR technology.        strategic contribution and business analytics.
                                                      For this to happen, the academic community
                                                      must recognize the need to change course
                                                      curriculum, and the HR profession itself must
                                                      be willing to embrace this change—or the
                                                      window of opportunity may, in fact, be lost as
                                                      the business community goes on to find
                                                      alternative ways to resolve their HR challenges
                                                      of the future (i.e., HR/BPO).




                                                                                                                         47

                                                                                 SHRM Human Capital Benchmarking Study
GLOSSARY
S TAT I S T I C A L D E F I N I T I O N S          O R G A N I Z AT I O N A L D ATA
Median (50th percentile)                           FTE
The median is the midpoint of the set of           FTE is an abbreviation for full-time equivalent.
numbers or values arranged in ascending            Full-time equivalents represent the total labor
order. It is recommended that the median is        hours invested. To convert part-time staff into
used as a basis for all interpretations of the     FTEs, divide the total number of hours worked
data when the average and median are               by part-time employees during the work year
discrepant.                                        by the total number of hours in the work year
                                                   (e.g., if the average work week is 37.5 hours,
Average                                            total number of hours in a work year would be
The average is the sum of the responses            37.5 hours/week x 52 weeks = 1,950).
divided by the total number of responses. It is    Converting the number of employees to FTEs
also known as the mean. This measure is            provides a more accurate understanding of the
affected more than the median by the               level of effort being applied in an organization.
occurrence of outliers (extreme values).           For example, if two employees are job-sharing,
                                                   the FTE number is only one.
Percentile
This is the percentage of responses in a group     Revenue
that have values less than or equal to that        In business, revenue is the amount of money
particular value. For example, when data are       that a company actually receives from its
arranged from lowest to highest, the 25th          activities, mostly from sales of products and/or
percentile is the point at which 75% of the data   services to customers. To investors, revenue is
are above and 25% are below it. Conversely,        less important than profit, or income, which is
the 75th percentile is the point at which 25% of   the amount of money the company has earned
the data are above and 75% are below it.           after deducting all of its expenses.


“n”
Letter “n” in tables and figures indicates the
number of respondents to each question.
Therefore, when it is noted that n = 25, it
indicates that the number of respondents
was 25.




                                                                                                                     49

                                                                             SHRM Human Capital Benchmarking Study
                 Revenue per FTE                                        H R D E PA R T M E N T S
                 Revenue per FTE is the total amount of revenue
                                                                        AND EXPENSES
                 received during an organization’s fiscal year          Total HR Staff
                 divided by the number of FTEs. This ratio              Total HR staff is the actual number of
                 conceptually links the time and effort associated      employees supporting the HR function for an
                 with the firm’s human capital to its revenue           organizational level.
                 output. If the revenue-per-FTE ratio increases,
                 it indicates that there is greater efficiency and      HR-to-Employee Ratio
                 productivity because more output is being              The HR-to-employee ratio provides a more
                 produced per FTE. If the ratio decreases, it           manageable way to compare HR staffing levels
                 indicates there is less efficiency and productivity.   between organizations. It represents the number
                                                                        of HR staff per 100 employees supported by HR
                 Net Income Before Taxes                                in the organization. The number is calculated by
                 Net income before taxes is the amount of               dividing the number of HR FTEs by the total
                 revenue received during the fiscal year minus          number of FTEs in the organization and
                 the operating expenses during the fiscal year.         multiplying the outcome by 100:


                 Net Income Before Taxes per FTE                        HR-to-Employee Total number of HR FTEs
                                                                                      =                          X    100
                                                                           Ratio            Total number of
                 Net income before taxes per FTE is the net                             FTEs in the organization
                 income before taxes divided by the number
                 of FTEs. It calculates efficiency by taking net        Human Resource Expenses
                 income before taxes, which is the difference           Human resource expenses represent HR’s total
                 between gross revenue and expenses, and                costs for a given fiscal year.
                 divides the outcome by the number of FTEs.
                 Unlike revenue per FTE, which has only one             HR Expense to Operating Expense Ratio
                 factor—revenue, net income per FTE comprises           HR expense to operating expense ratio is
                 two factors, and it is best looked at over time.       calculated by dividing the organization’s total
                                                                        HR expenses by the operating expenses for a
                                                                        given fiscal year. This ratio depicts the amount
                                                                        of HR expenses as a percentage of total
                                                                        operating expenses, which is an indication of
                                                                        the amount of dollars an organization invests
                                                                        in its HR function.


                                                                        HR Expense by FTE Ratio
                                                                        HR expense by FTE ratio represents the amount
                                                                        of human resource dollars spent per FTE in the
                                                                        organization. It is calculated by taking the HR
                                                                        expenses for a given fiscal year and dividing
                                                                        that by the number of FTEs in the organization.

50

     SHRM Human Capital Benchmarking Study
C O M P E N S AT I O N A N D                      H E A LT H C A R E D ATA
T U R N O V E R D ATA                             Health Care Expense per All Employees
Annual Salary Increase                            Health care expense per all employees is
Annual salary increase is the percentage of       calculated by taking the total health care
increase in salaries that an organization         expenses paid by the organization in a given
expects to provide to its employees for a given   fiscal year and dividing that by the number of
fiscal year.                                      employees in that organizational unit. Total
                                                  health care expenses include both employee-
Salaries as a Percentage of Operating Expense     and company-paid premiums, stop-loss
Salaries as a percentage of operating expense     insurance and administrative fees. These
is calculated by dividing the total amount of     expenses do not include dental costs.
employee salaries by the operating expense
for a given fiscal year.                          Health Care Expense per Covered Employees
                                                  Health care expense per covered employees is
Annual Turnover Rate                              calculated by taking the total health care
Annual turnover rate is the rate at which         expenses paid by the organization in a given
employees enter and leave a company in a          fiscal year and dividing that by the number of
given fiscal year. Typically, the more loyal      employees who are enrolled in a health care
employees are to a firm, the lower the turnover   plan in that organizational unit. Total health
rate. A 100% turnover rate from year to year      care expenses include both employee- and
means that as many employees left the             company-paid premiums, stop-loss insurance
company as were hired. To calculate annual        and administrative fees. These costs do not
turnover, first calculate turnover for each       include dental costs.
month by dividing the number of separations
during the month by the average number of         Percentage of Premiums Organization
employees during the month and multiplying        Pays for Employee-Only Coverage
by 100: # of separations during month ÷           Percentage of premiums organization pays for
average # of employees during the month x         employee-only coverage is calculated by
100.13 The annual turnover rate is then           dividing the amount the organization pays for
calculated by adding the 12 months worth of       employee-only coverage premiums by the total
turnover percentages together.                    premium amount.




                                                                                                                    51

                                                                            SHRM Human Capital Benchmarking Study
                 Percentage of Premiums Organization Pays        E M P L O Y M E N T D ATA
                 for Employee and Dependent Coverage             Number of Positions Filled
                 Percentage of premiums organization pays for    Number of positions filled reflects the number
                 employee and dependent coverage is calculated   of open positions for which individuals were
                 by dividing the amount the organization pays    hired during the fiscal year. Open positions
                 for employee and dependent coverage             could be filled either by internal or external
                 premiums by the total premium amount.           candidates. “Hired” means the individual
                                                                 accepted the position during the fiscal year, but
                 Projected Increase in Health Care Expenses      may not have started until the following year.
                 This percentage represents the expected
                 increase in an organization’s health care       Time-to-Fill
                 expenses for a given fiscal year.               Time-to-fill represents the number of days
                                                                 from when the job requisition was opened
                                                                 until the offer was accepted by the candidate.14
                                                                 This number is calculated using calendar days,
                                                                 including weekends and holidays.


                                                                 Cost-per-Hire
                                                                 Cost-per-hire represents the costs involved
                                                                 with a new hire. These costs include the sum
                                                                 of advertising, agency fees, employee
                                                                 referrals, travel cost of applicants and staff,
                                                                 relocation costs, and recruiter pay and benefits
                                                                 divided by the number of hires.15




52

     SHRM Human Capital Benchmarking Study
ENDNOTES                                                   .
                                                  8 Digh, P (1998, October). Holding people
1 Huselid, M. (1995, June). The impact of           accountable. HR Magazine, 43, 11, 63.
 human resource management practices on
 turnover, productivity and corporate financial   9 Cadrain, D. (2003, May). Put success in sight.
 performance. Academy of Management                 HR Magazine, 5, 84.
 Journal, 38, 3, 635.
                                                  10 Fitz-enz, J., & Davison, B. (2002). How to
2 Chartered Institute for Personnel and              measure human resources management
 Development. (2004). Human capital                  (3rd edition). New York: McGraw-Hill.
 reporting: An internal perspective. London:
 Author.                                          11 Ibid.


3 Becker, B., & Huselid, M. (2003, December).     12 Gates, S. (2004, February). Linking people
 Measuring HR? HR Magazine, 48, 12, 56.              metrics to strategy. New York: The
                                                     Conference Board.
4 Due to the nature of the data in the current
 study, only data that were three standard        13 Society for Human Resource Management.
 deviations above the average were excluded.         HR metrics toolkit. Retrieved from
 In other words, this includes data in which         www.shrm.org/metrics/library_published
 99.5% of the data fall below the given data         /nonIC/CMS_005910.asp.
 point. Extreme outliers can skew the results,
 leading to higher (or lower) averages among      14 Kluttz, L. (2003). SHRM/EMA 2002 staffing
 the measures.                                       metrics survey: Time to fill/time to start.
                                                     Alexandria, VA: Society for Human Resource
5 CFO Research Services. (2003). Human               Management.
 capital management: The CFO’s perspective.
 Boston: CFO Publishing Corp.                     15 Society for Human Resource Management.
                                                     HR metrics toolkit. Retrieved from
6 Anderson, J., & Sohn, M. (2003, July).             www.shrm.org/metrics/library_published
 Stimulus-related priming during task                /nonIC/CMS_005910.asp.
 switching. Memory & Cognition, 31, 5, 775.


7 Schramm, J. (2004). SHRM 2004-2005
 workplace forecast: A strategic outlook.
 Alexandria, VA: Society for Human Resource
 Management.




                                                                                                                     53

                                                                             SHRM Human Capital Benchmarking Study
SHRM CUSTOMIZED
H U M A N C A P I TA L B E N C H M A R K I N G S E R V I C E
  Allows you to customize the HR metrics you need by:


          Industry
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     …plus more


  More than 1,500 organizations in SHRM’s database


Step 1. An organizational profile can be created for you based on your organization’s revenue,
industry, employee size or geographic region. Additional categories may be ordered.


Your profile is then compared against peer organizations with similar profiles—so the HR metrics
that you receive are from organizations just like yours. See the charts starting on the next page for
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          HR expenses                   Health care
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                                              Contact
          www.shrm.org/research/benchmarks or 800-283-7476 ext. 6366



                                                                                                                        55

                                                                                SHRM Human Capital Benchmarking Study
                                      *** Fictitious Data Sample ***




SHRM CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                       FOR

                          [YOUR ORGANIZATION’S NAME]




                                                                                      This report includes
                                                       Customized tables based on your criteria on page 6
                                                       Summary graphs for your entire industry on page 12
                                                                          A glossary of terms on page 22

                                                                                            Prepared by
                                                                                         Noël Smith, MA
                                                                 Society for Human Resource Management
                                                                                             June, 2005




HR: Leading People, Leading OrganizationsSM
                                   *** Fictitious Data Sample ***




                       Thank you for ordering a
          SHRM Customized Human Capital Benchmarking Report!


                       Your custom report is based on the following criteria



                                        Selection Criteria

                             Industry            Manufacturing (Durable Goods)

                             Staff Size          Under 100




HR: Leading People, Leading OrganizationsSM                                      2
                                         *** Fictitious Data Sample ***




Using Benchmarking Data

Benchmarking is rapidly becoming an indispensable tool for HR professionals. It is a mechanism for
measuring processes, practices and results against the competition in order to improve performance. Used
wisely, it can transform a company’s HR and people management strategies by showing how human capital
practices influence organizational performance.

HR professionals can use benchmarking data to compare their organization against their competitors or
other similar organizations. For example, the HR professionals can compare their organization’s health care
costs with other similar organizations, to see if the discrepancy is large enough to warrant further analysis.
Benchmarking also protects areas or programs that are performing well. To illustrate, if line executives want
recruiting costs lowered, benchmarking data may show that their current recruiting costs are in line with their
industry. In fact, to lower costs far below their competitors might actually jeopardize their organization’s
ability to find the right talent to compete in the market.

Benchmarking can also create support and momentum for organizational change. For example, making
changes to existing pay practices may be difficult, unless there is objective benchmarking data that can
support otherwise. For example, if the HR professional wants to alter an organization’s long-standing
practice of not offering employee bonus plans, making that argument alone, without benchmarking data, is
very difficult. Benchmarking data can help make the case.

CEOs and board-level executives also depend on quality benchmarking data to make strategic decisions
that affect their organizations. In fact, benchmarking is more effective when used as part of an overall
business strategy. It is less effective, however, when companies use benchmarking only for short-term cost
reductions and not part of a long-term strategy. An example of this occurs when an organization lowers
training budgets to meet short-term budget goals. While this may achieve a short-term objective, it has a
negative impact on developing the skills of the organization’s workforce. Thus over the long term, the


 HR: Leading People, Leading OrganizationsSM                                                                 3
                                         *** Fictitious Data Sample ***




knowledge and skills of its human capital start to lag behind the market, and the organization loses its
competitive advantage to successfully compete.


Understanding the Data

As you compare your own data against the other organizations, keep the following in mind:

1. A deviation between your figure (for any human capital measure) and the comparative figure is not
   necessarily favorable or unfavorable; it is merely an indication that additional analyses may be needed.
   Human capital measures that relate more closely to the context of your organization’s industry, revenue
   size, geographic location and employee size are more descriptive and meaningful than information that is
   more generic in nature, such as all industries combined. The larger the discrepancy between your figure
   and those found in this report, the greater the need for additional scrutiny.

2. In cases where you determine that potentially serious deviations do exist, it may be helpful to go back
   and calculate the same human capital measure for your organization over the past several years to
   identify any trends that may exist.

3. The information in this report should be used as a tool for decision-making rather than an absolute
   standard. Because companies differ in their overall business strategy, location, size and other factors,
   any two companies can be well managed, yet some of their human capital measures may differ greatly.
   No decision should be made solely based on the results of any one study.




 HR: Leading People, Leading OrganizationsSM                                                                 4
                                          *** Fictitious Data Sample ***




Working with the Data

The information in this report is designed to be a tool to help you evaluate decisions and activities that affect
your organization’s human capital. When reviewing these data, it is important to realize that business
strategy, organizational culture, leadership behaviors and industry pressures are just a few of the many
factors that drive various human capital measures. For example, an industry that generally hires nonskilled
labor, such as manufacturing, may have less costly benefit packages than the high-tech industry that hires
specialized knowledge workers. This is because organizations in the high-tech industry may need to have
richer, more attractive benefit plans to make themselves more enticing in order to attract “hard-to-find”
knowledge workers.

Absolute measures are not meaningful in isolation--they should be compared with one or more measures to
determine whether a satisfactory level exists. Other measures, for example, might be your organization’s
past results in this area or comparatives based on organizational size, industry or geographic location.

Notes

The “n” is comprised of the organizations that responded to the specific metric for which it is listed.
Therefore, the number of peer organizations may vary from metric to metric. Some metrics are less
frequently collected by organizations, or may be more difficult to obtain. Therefore some metrics show a
smaller “n” than others.

Due to the diverse nature of the organizations in the database, as more cuts are requested with each report,
fewer peer organizations are provided.




 HR: Leading People, Leading OrganizationsSM                                                                   5
                                           *** Fictitious Data Sample ***




                           CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                   FOR [YOUR ORGANIZATION’S NAME]

                                               ORGANIZATIONAL DATA


                                    2004             2004             2004                     2004
                                                 Revenue per      Net Income           Net Income Before
          Organization            Revenue            FTE         Before Taxes            Taxes per FTE
          Organization *        $ 72,000,000      $ 720,000        $ 500,000                  $ 5,000
          Organization *         $ 6,700,000      $ 111,667        $ 400,000                  $ 6,667
          Organization *        $ 10,000,000      $ 111,111       $ 2,000,000                $ 22,222
          Organization *         $ 4,653,556      $ 110,799       $ 2,605,171                $ 62,028
          Organization *         $ 1,700,000       $ 80,952       $ (600,000)               $ (28,571)
                                             All Peer Organizations
                n                     24              24               17                        17
            th
         25 Percentile           $ 7,321,252      $ 111,389        $ 400,000                  $ 3,049
             Median             $ 23,456,706      $ 173,453        $ 816,000                  $ 6,667
         75th Percentile        $ 34,855,500      $ 309,183       $ 2,605,171                $ 28,571
            Average              $ 1,751,028      $ 496,840       $ 1,523,296                $ 15,398


   *While individual organizational information is presented, due to the confidentiality of the data, the name of
   the organization is not provided.




HR: Leading People, Leading OrganizationsSM                                                                         6
                                             *** Fictitious Data Sample ***




                              CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                      FOR [YOUR ORGANIZATION’S NAME]

                                        HR DEPARTMENT AND EXPENSE DATA


                       2004           2004            2004                2004              2004 HR
                     Total HR        HR-to-            HR        HR Expense to Operating Expense to FTE
  Organization         Staff      Employee Ratio Expenses            Expense Ratio            Ratio
  Organization *        2.0            1.74        $ 130,000             0.42 %              $ 1,130
  Organization *        2.0            1.22        $ 140,000             0.35 %               $ 854
  Organization *        1.0            0.87        $ 550,000             2.50 %              $ 4,783
  Organization *        3.0            1.71        $ 421,000             1.89 %              $ 2,406
  Organization *        2.0            2.22        $ 150,000             1.88 %              $ 1,667
                                            All Peer Organizations
        n               51              51             30                  16                   30
     th
  25 Percentile         1.0            1.33        $ 72,000              0.55 %              $ 1,008
      Median            1.5            1.59        $ 125,500             1.24 %              $ 1,583
    th
  75 Percentile         2.0            2.38        $ 200,000             2.66 %              $ 2,857
     Average            1.7            3.15        $ 270,367             4.79 %              $ 2,454


*While individual organizational information is presented, due to the confidentiality of the data, the name of the
organization is not provided.




 HR: Leading People, Leading OrganizationsSM                                                                         7
                                             *** Fictitious Data Sample ***




                              CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                      FOR [YOUR ORGANIZATION’S NAME]

                                        COMPENSATION AND TURNOVER DATA


                                          2005                        2004                            2004
                                                           Salaries as a Percentage
       Organization             Annual Salary Increase      of Operating Expense             Annual Turnover Rate
       Organization *                   1.4 %                         2.3 %                         48.0 %
       Organization *                   3.0 %                        32.0 %                         21.0 %
       Organization *                   3.0 %                        20.0 %                          0.0 %
       Organization *                   5.0 %                        70.0 %                          0.1 %
       Organization *                   2.5 %                        45.0 %                         50.2 %
                                              All Peer Organizations
             n                            47                            23                              26
          th
       25 Percentile                    2.5 %                        14.3 %                           6.5 %
           Median                       3.0 %                        25.0 %                          12.1 %
         th
       75 Percentile                    3.5 %                        37.0 %                          20.0 %
          Average                       3.2 %                        26.9 %                          16.5 %


*While individual organizational information is presented, due to the confidentiality of the data, the name of the
organization is not provided.




 HR: Leading People, Leading OrganizationsSM                                                                         8
                                                *** Fictitious Data Sample ***




                                 CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                         FOR [YOUR ORGANIZATION’S NAME]

                                                      HEALTH CARE DATA


                        2004             2004               2004                         2004                 2005
                                                      Percentage of                 Percentage of
                    Health Care     Health Care          Premiums                     Premiums             Projected
                    Expense per     Expense per     Organization Pays            Organization Pays for    Increase in
                        All           Covered       for Employee-Only               Employee and          Health Care
  Organization       Employees       Employees           Coverage                Dependent Coverage        Expenses
  Organization *      $ 6,006         $ 6,156              80.0 %                       70.0 %              12.0 %
  Organization *      $ 4,974         $ 5,062              75.0 %                       58.0 %              10.0 %
  Organization *      $ 3,375         $ 3,971              80.0 %                       80.0 %              12.0 %
  Organization *      $ 4,171         $ 5,840              76.0 %                       76.0 %              14.0 %
  Organization *      $ 6,283         $ 6,180             100.0 %                      100.0 %              10.0 %
                                               All Peer Organizations
         n                30             26                  47                           48                    36
  25th Percentile      $ 3,954        $ 4,882              75.0 %                       67.5 %                9.5 %
      Median           $ 4,679        $ 5,571              80.0 %                       77.2 %               11.0 %
  75th Percentile      $ 5,918        $ 6,471              92.0 %                       80.0 %               14.5 %
     Average           $ 4,203        $ 5,673              80.5 %                       73.1 %               11.5 %


*While individual organizational information is presented, due to the confidentiality of the data, the name of the
organization is not provided.



  HR: Leading People, Leading OrganizationsSM                                                                         9
                                           *** Fictitious Data Sample ***




                            CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                    FOR [YOUR ORGANIZATION’S NAME]

                                                 EMPLOYMENT DATA


                                                2004                2004                   2004
                                            Number of
                  Organization            Positions Filled      Time-to-Fill          Cost-Per-Hire
                  Organization *                 2.0              21 Days                $ 500
                  Organization *                45.0               7 Days                $ 256
                  Organization *                25.0              60 Days               $ 2,000
                  Organization *                20.0              21 Days                $ 500
                  Organization *               207.0             7.5 Days                 $ 510
                                             All Peer Organizations
                       n                         50                  26                      17
                    th
                 25 Percentile                   5.0             7.5 Days                  $ 500
                     Median                     13.5             23.0 Days                $ 1,000
                   th
                 75 Percentile                  34.0             35.0 Days                $ 3,000
                    Average                     24.8             31.9 Days                $ 5,081


          *While individual organizational information is presented, due to the confidentiality of the data, the
          name of the organization is not provided.




HR: Leading People, Leading OrganizationsSM                                                                        10
                                        *** Fictitious Data Sample ***




                           CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT

                  SUMMARY DATA FOR ALL MANUFACTURING (DURABLE GOODS) INDUSTRY

  Total Revenue for All Organizations in the Human        Geographic Region for All Organizations in the
  Capital Benchmarking Database from the                  Human Capital Benchmarking Database from the
  Manufacturing (Durable Goods) Industry in 2004          Manufacturing (Durable Goods) Industry in 2004

  Average          $ 571,491,304                          Pacific West                 9%
  Median            $ 42,000,000                          Southwest Central           15%
                                                          North Central               41%
  Staff Size for All Organizations in the Human           Southeast                   20%
  Capital Benchmarking Database from the                  Northeast                   16%
  Manufacturing (Durable Goods) Industry in 2004
                                                          Profit Status for All Organizations in the Human
  Under 100 FTEs           19%                            Capital Benchmarking Database from the
  100 to 249 FTEs          31%                            Manufacturing (Durable Goods) Industry in 2004
  250 to 499 FTEs          20%
  500 to 999 FTEs           9%                            Nonprofit                   0%
  1,000 to 2,499 FTEs      12%                            For Profit                100%
  2,500 to 7,499 FTEs       4%
  7,500 or More FTEs        4%                            Industry Sector for All Organizations in the Human
                                                          Capital Benchmarking Database from the
                                                          Manufacturing (Durable Goods) Industry in 2004

                                                        Private                       92%
                                                        Public/Government              8%
  Note: Percentages may not total 100% because of rounding.



HR: Leading People, Leading OrganizationsSM                                                                    11
                                                           *** Fictitious Data Sample ***




                                       CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                       FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                           ORGANIZATIONAL DATA

                                                Nonprofit/For-Profit Status for Industries in 2004
                              100%           98%

                              90%
                                                                 74%
                              80%
         % of Organizations




                              70%
                              60%
                              50%
                              40%
                                                                                                                26%
                              30%
                              20%
                              10%
                                                                                             2%
                               0%
                                                    For-Profit                                      Nonprofit
                                                          Manufacturing (Durable Goods)     All Industries

                                     Note
                                     Manufacturing (Durable Goods) Industry n = 85
                                     All Industries n = 1,562



HR: Leading People, Leading OrganizationsSM                                                                           12
                                                             *** Fictitious Data Sample ***




                                         CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                         FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                             ORGANIZATIONAL DATA

                                                     Expectations for Revenue Change in 2005
                              100%
                              90%
                                          80%          74%
                              80%
         % of Organizations




                              70%
                              60%
                              50%
                              40%
                              30%
                                                                                                                       20%
                              20%
                                                                           7%          6%                    13%
                              10%
                               0%
                                                Increase                        Decrease                     Stay the same

                                                           Manufacturing (Durable Goods)    All Industries




                                     Note
                                     Manufacturing (Durable Goods) Industry n = 85
                                     All Industries n = 1,562

HR: Leading People, Leading OrganizationsSM                                                                                  13
                                                            *** Fictitious Data Sample ***




                                          CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                          FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                   HR DEPARTMENT AND EXPENSE DATA


                                                      Where the Head of HR Reports in 2004
                    100%
                             90%
                             80%
        % of Organizations




                             70%
                                    61%
                             60%          54%
                             50%
                             40%
                             30%
                             20%                                                                                   11%
                                                  13%               8%     7%              9%                            14%
                             10%                          8%                        4%                   3%   8%
                             0%
                                      CEO*         Head of          CHRO**          Head of               Other     CFO***
                                                 Operating Unit                   Administration
                                                        Manufacturing (Durable Goods)   All Industries

                                   Note
                                   Manufacturing (Durable Goods) Industry n = 84
                                   All Industries n = 1,573
                                   *CEO = Chief Executive Officer or Chief Operating Officer, or President or Owner
                                   **CHRO = Chief Human Resources Officer
                                   ***CFO = Chief Financial Officer
HR: Leading People, Leading OrganizationsSM                                                                                    14
                                                                 *** Fictitious Data Sample ***




                                          CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                          FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                      HR DEPARTMENT AND EXPENSE DATA

                                                                    HR FTEs by Level in 2004
                               100%
                               90%
                               80%
          % of Organizations




                               70%
                                                                              54%
                               60%
                                                                                           51%
                               50%
                                             36%
                               40%
                                                         31%
                               30%
                                                                                                                            18%
                               20%
                                                                                                                  10%
                               10%
                                0%
                                           Administrative support       Professional and technical staff    Supervisors, managers and
                                                                                                                      above
                                                               Manufacturing (Durable Goods)     All Industries




                                      Note
                                      Manufacturing (Durable Goods) Industry n = 74
                                      All Industries n = 1,448
HR: Leading People, Leading OrganizationsSM                                                                                             15
                                                             *** Fictitious Data Sample ***




                                        CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                        FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                    HR DEPARTMENT AND EXPENSE DATA

                                                          Expectations for HR Hiring in 2005
                                15%

                                13%

                                11%
           % of Organizations




                                                   9% 9%
                                 9%    8%                                                                        8%
                                            7%
                                 7%                             6%                6%
                                                                     5%      5%
                                 5%                                                        4%
                                                                                                3%                    3%
                                 3%                                                                         2%
                                                                                                                            1%
                                 1%

                                -1%   Generalist   Recruiting Compensation   Training      Benefits     Other areas Organizational
                                                                                                                     development
                                                           Manufacturing (Durable Goods)   All Industries




                                Note
                                Manufacturing (Durable Goods) Industry n = 85
                                All Industries n = 1,629

HR: Leading People, Leading OrganizationsSM                                                                                          16
                                                           *** Fictitious Data Sample ***




                                         CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                         FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                   HR DEPARTMENT AND EXPENSE DATA

                                           Expectations for Changes in Human Resource Costs in 2005
                              100%
                              90%
                              80%
         % of Organizations




                              70%
                              60%
                                           46%       52%                                                       49%
                              50%
                                                                                                                          40%
                              40%
                              30%
                              20%
                                                                         5%              9%
                              10%
                               0%
                                              Increase                        Decrease                          Stay the same
                                                         Manufacturing (Durable Goods)        All Industries




                                     Note
                                     Manufacturing (Durable Goods) Industry n = 83
                                     All Industries n = 1,543
HR: Leading People, Leading OrganizationsSM                                                                                     17
                                                           *** Fictitious Data Sample ***




                                         CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                         FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                               TURNOVER DATA

                                                         Expectations for Turnover in 2005
                              100%
                              90%
                              80%
         % of Organizations




                              70%
                                                                                                          62%
                              60%
                                                                                                                    51%
                              50%
                              40%
                                           25%                                      26%
                              30%
                                                     23%
                              20%
                                                                         13%
                              10%
                               0%
                                              Increase                      Decrease                       Stay the same
                                                         Manufacturing (Durable Goods)   All Industries




                                     Note
                                     Manufacturing (Durable Goods) Industry n = 85
                                     All Industries n = 673
HR: Leading People, Leading OrganizationsSM                                                                                18
                                                           *** Fictitious Data Sample ***




                                        CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                        FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                              HEALTH CARE DATA

                                                        Health Care Plans Offered in 2004
                             100%
                             90%
                                     76% 78%
                             80%
        % of Organizations




                             70%
                             60%
                                                  46%
                             50%
                                                        42%
                             40%
                                                                 32% 24%
                             30%
                             20%
                                                                                 5%                       4%        4%
                             10%
                                                                                         3%        1%          3%
                              0%
                                       PPO           HMO            POS              None              Other   Employer
                                                                                                               Provided
                                                     Manufacturing (Durable Goods)    All Industries



                                    Note
                                    Manufacturing (Durable Goods) Industry n = 85
                                    All Industries n = 1,629

HR: Leading People, Leading OrganizationsSM                                                                               19
                                                               *** Fictitious Data Sample ***




                                          CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                          FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                                 HEALTH CARE DATA

                                              Expectations for Changes in Health Care Costs in 2005
                               100%
                               90%
                                            74%          77%
                               80%
          % of Organizations




                               70%
                               60%
                               50%
                               40%
                               30%
                                                                                                              23%       19%
                               20%
                                                                                        4%
                               10%
                                                                            3%
                                0%
                                                  Increase                       Decrease                      Stay the same
                                                             Manufacturing (Durable Goods)   All Industries




                                      Note
                                      Manufacturing (Durable Goods) Industry n = 84
                                      All Industries n = 1,262
HR: Leading People, Leading OrganizationsSM                                                                                    20
                                                               *** Fictitious Data Sample ***




                                          CUSTOMIZED HUMAN CAPITAL BENCHMARKING REPORT
                                          FOR THE MANUFACTURING (DURABLE GOODS) INDUSTRY

                                                                  EMPLOYMENT DATA

                                                       Expectations for Changes in Hiring in 2005
                               100%
                               90%
                               80%
          % of Organizations




                               70%
                               60%
                                            44%
                               50%
                                                         40%                                                   40%       39%
                               40%
                               30%
                                                                             16%        21%
                               20%
                               10%
                                0%
                                                  Increase                       Decrease                       Stay the same
                                                             Manufacturing (Durable Goods)    All Industries




                                      Note
                                      Manufacturing (Durable Goods) Industry n = 85
                                      All Industries n = 1,571

HR: Leading People, Leading OrganizationsSM                                                                                     21
                                          *** Fictitious Data Sample ***




                      Glossary of Metric Terms, Definitions and Calculations

  Statistical Definitions

  Median (50th percentile)
  The median is the midpoint of the set of numbers or values arranged in ascending order. It is recommended
  that the median is used as a basis for all interpretations of the data when the average and median are
  discrepant.

  Average
  The average is the sum of the responses divided by the total number of responses. It is also known as the
  mean. This measure is affected more than the median by the occurrence of outliers (extreme values).

  Percentile
  The percentage of responses in a group that have values less than or equal to that particular value. For
  example, when data are arranged from lowest to highest, the 25th percentile is the point at which 75% of the
  data are above and 25% are below it. Conversely, the 75th percentile is the point at which 25% of the data
  are above and 75% are below it.

  “n”
  Letter “n” in tables and figures indicates the number of respondents to each question. Therefore, when it is
  noted that n = 25, it indicates that the number of respondents was 25.




HR: Leading People, Leading OrganizationsSM                                                                      22
                                           *** Fictitious Data Sample ***




  Organizational Data

  FTE
  FTE is an abbreviation for full-time equivalent. Full-time equivalents represent the total labor hours invested.
  To convert part-time staff into FTEs, divide the total number of hours worked by part-time employees during
  the work year by the total number of hours in the work year (e.g., if the average work week is 37.5 hours,
  total number of hours in a work year would be 37.5 hours/week x 52 weeks = 1,950). Converting the number
  of employees to FTEs provides a more accurate understanding of the level of effort being applied in an
  organization. For example, if two employees are job-sharing, the FTE number is only one.

  Revenue
  In business, revenue is the amount of money that a company actually receives from its activities, mostly
  from sales of products and/or services to customers. To investors, revenue is less important than profit, or
  income, which is the amount of money the company has earned after deducting all of its expenses.

  Revenue per FTE
  Revenue per FTE is the total amount of revenue received during an organization’s fiscal year divided by the
  number of FTEs. This ratio conceptually links the time and effort associated with the firm’s human capital to
  its revenue output. If the revenue-per-FTE ratio increases, it indicates that there is greater efficiency and
  productivity because more output is being produced per FTE. If the ratio decreases, it indicates there is less
  efficiency and productivity.

  Net Income Before Taxes
  Net income before taxes is the amount of revenue received during the fiscal year minus the operating
  expenses during the fiscal year.




HR: Leading People, Leading OrganizationsSM                                                                          23
                                          *** Fictitious Data Sample ***




  Net Income Before Taxes per FTE
  Net income before taxes per FTE is the net income before taxes divided by the number of FTEs. It
  calculates efficiency by taking net income before taxes, which is the difference between gross revenue and
  expenses, and divides the outcome by the number of FTEs. Unlike revenue per FTE, which has only one
  factor--revenue, net income per FTE comprises two factors, and it is best looked at over time.

  HR Departments and Expenses

  Total HR Staff
  Total HR staff is the actual number of employees supporting the HR function for an organizational level.

  HR-to-Employee Ratio
  The HR-to-employee ratio provides a more manageable way to compare HR staffing levels between
  organizations. It represents the number of HR staff per 100 employees supported by HR in the organization.
  The number is calculated by dividing the number of HR FTEs by the total number of FTEs in the
  organization and multiplying the outcome by 100:

        HR-to-Employee = Total number of HR FTEs              X 100
          Ratio          Total number of Employee FTEs in the organization

  HR Expenses
  Human resource expenses represent HR’s total costs for a given fiscal year.

  HR Expense to Operating Expense Ratio
  HR expense to operating expense ratio is calculated by dividing the organization’s total HR expenses by the
  operating expenses for a given fiscal year. This ratio depicts the amount of HR expenses as a percentage of
  total operating expenses, which is an indication of the amount of dollars an organization invests in its HR
  function.



HR: Leading People, Leading OrganizationsSM                                                                     24
                                           *** Fictitious Data Sample ***




  HR Expense to FTE Ratio
  HR expense by FTE ratio represents the amount of human resource dollars spent per FTE in the
  organization. It is calculated by taking the HR expenses for a given fiscal year and dividing that by the
  number of FTEs in the organization.

  Compensation and Turnover Data

  Annual Salary Increase
  Annual salary increase is the percentage of increase in salaries that an organization expects to provide to its
  employees for a given fiscal year.

  Salaries as a Percentage of Operating Expense
  Salaries as a percentage of operating expense is calculated by taking the total amount of employee salaries
  divided by the operating expense for a given fiscal year.

  Annual Turnover Rate
  Annual turnover rate is the rate at which employees enter and leave a company in a given fiscal year.
  Typically, the more loyal employees are to a firm, the lower the turnover rate. A 100% turnover rate from
  year to year means that as many employees left the company as were hired. To calculate annual turnover,
  first calculate turnover for each month by dividing the number of separations during the month by the
  average number of employees during the month and multiplying by 100: # of separations during month ÷
  average # of employees during the month x 100.1 The annual turnover rate is then calculated by adding the
  12 months worth of turnover percentages together.




HR: Leading People, Leading OrganizationsSM                                                                         25
                                           *** Fictitious Data Sample ***




  Health Care Data

  Health Care Expense per All Employees
  Health care expense per all employees is calculated by taking the total health care expenses paid by the
  organization in a given fiscal year and dividing that by the number of employees in that organizational unit.
  Total health care expenses include both employee- and company-paid premiums, stop-loss insurance and
  administrative fees. These expenses do not include dental costs.

  Health Care Expense per Covered Employees
  Health care expense per covered employees is calculated by taking the total health care expenses paid by
  the organization in a given fiscal year and dividing that by the number of employees who are enrolled in a
  health care plan in that organizational unit. Total health care expenses include both employee- and
  company-paid premiums, stop-loss insurance and administrative fees. These costs do not include dental
  costs.

  Percentage of Premiums Organization Pays for Employee-Only Coverage
  Percentage of premiums organization pays for employee-only coverage is calculated by dividing the amount
  the organization pays for employee-only coverage premiums by the total premium amount.

  Percentage of Premiums Organization Pays for Employee and Dependent Coverage
  Percentage of premiums organization pays for employee and dependent coverage is calculated by dividing
  the amount the organization pays for employee and dependent coverage premiums by the total premium
  amount.

  Projected Increase in Health Care Expenses
  This percentage represents the expected increase in an organization’s health care expenses for a given
  fiscal year.




HR: Leading People, Leading OrganizationsSM                                                                       26
                                                  *** Fictitious Data Sample ***




  Employment Data

  Number of Positions Filled
  Number of positions filled reflects the number of open positions for which individuals were hired during the
  fiscal year. Open positions could be filled either by internal or external candidates. “Hired” means the
  individual accepted the position during the fiscal year, but may not have started until the following year. This
  would occur mostly with those candidates who accepted positions during the last month of the organization’s
  fiscal year.

  Time-to-Fill
  Time-to-fill represents the number of days from when the job requisition was opened until the offer was
  accepted by the candidate.2 This number is calculated using calendar days, including weekends and
  holidays.

  Cost-Per-Hire
  Cost-per-hire represents the costs involved with a new hire. These costs include the sum of advertising,
  agency fees, employee referrals, travel cost of applicants and staff, relocation costs, and recruiter pay and
  benefits3 divided by the number of hires.




  1
    Society for Human Resource Management. HR metrics toolkit. Retrieved from
  www.shrm.org/metrics/library_published/nonIC/CMS_005910.asp.
  2
    Kluttz, L. (2003). SHRM/EMA 2002 staffing metrics survey: Time to fill/time to start. Alexandria, VA: Society for Human Resource
  Management.
  3
    Society for Human Resource Management. HR metrics toolkit. Retrieved from
  www.shrm.org/metrics/library_published/nonIC/CMS_005910.asp.




HR: Leading People, Leading OrganizationsSM                                                                                        27
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www.shrm.org

								
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