Hackett

2023 Brings Increasing Cost for HR But Greater Business Impact

Human resources (HR) operating costs increased significantly in 2023, with key contributors being wage inflation and high turnover rates, according to new Digital World Class HR research from The Hackett Group, Inc. (NASDAQ: HCKT). Our elite HR performers – Digital World Class – continue to spend significantly less than their peers, while operating with fewer HR staff and delivering far more resiliency, employee productivity, greater business value, and improved operational excellence, the research found. The Hackett Group concluded that increased spend on technology plays a key part in driving the superior performance.

Typical organizations saw HR operations costs increase by 6% in 2023, while Digital World Class HR organizations experienced a 7% cost increase. But Digital World Class organizations still spend 33% less than their peers – a $18 million advantage for the average $10 billion company. At the same time, they operate with 40% fewer full-time equivalent staff.

A public version of the research, “Resilience: The Digital World Class Human Resources Advantage,” is available free, with registration, at https://go.poweredbyhackett.com/qou. It contains nearly 40 metrics detailing the performance gap between Digital World Class human resources organizations and their peers – plus spotlights six key areas where Digital World Class companies excel and a proposed action plan to close the gap.

The research also concluded that there is a correlation between Digital World Class and improved overall enterprise performance. Data analysis performed by The Hackett Group revealed that companies with at least one business services function operating at Digital World Class levels see a five-year average performance premium over their industry medians – an 80% improvement in net margin; 24% higher earnings before interest, taxes, depreciation and amortization margin; 89% greater return on equity; and 44% higher total shareholder return.

The Hackett Group defines Digital World Class organizations as those that achieve top-quartile performance in business value (a composite of stakeholder experience, digital enablement and traditional effectiveness metrics) and operational excellence (a composite of efficiency and business process automation metrics) in The Hackett Group’s comprehensive human resources benchmark. The Hackett Group’s Digital World Class human resources research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of global companies.