Hr's Evolving Role in Organizations

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Linking Critical HR Functions to Organizational Success

HR’s Evolving Role in Organizationsand Its Impact on Business Strategy

A Survey Reportby the Society forHuman ResourceManagement


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PROJECT TEAM

Project leader: Amanda Benedict, M.A., survey research specialist

Project contributors: Nancy R. Lockwood, M.A., SPHR, GPHR, manager, HR Content Program

Evren Esen, manager, Survey Program

Steve Williams, Ph.D., SPHR, director, Research

External reviewers and contributors: SHRM Organizational Development Special Expertise Panel: Libby Anderson, M.S.,

SPHR, Fernán R. Cepero, PHR, Tom Darrow, Nancy Gerhardt Davies, Ernest Gundling,

Charity Hughes, MSOD, SPHR, John Lewison, SPHR, Colleen Mills, Ph.D., Ken

Moore, Maggie Romance, SPHR, Trellis Usher-Mays, Bill Young, SPHR

HR Consulting/Outsourcing Special Expertise Panel: Franchette Z. Richards, GPHR,GMS, CRP

Copy Editing: Katya Scanlan, copy editor

Design: Shirley Raybuck, graphic designer

Production: Bonnie Claggett, production traffic coordinator

This report is published by the Society for Human Resource Management (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.

© 2008 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

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CONTENTS

About This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

About SHRM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Critical HR Functional Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

HR Responsibility Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

In-House HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Partially Outsourced HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Completely Outsourced HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Decisions About Sourcing HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Assignment of HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

HR Function/Department Staffing Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

HR’s Role Within the Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Strategic vs. Transactional Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

HR Mentoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

HR’s Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

HR Metrics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Tracking Staff Hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Obstacles to HR Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Recently Published SHRM Survey Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

HR’s Evolving Role in Organizationsand Its Impact on Business Strategy A Survey Report by the Society for Human Resource Management

May 2008


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ABOUT THIS REPORT

In September 2007, the Society for Human Resource Management (SHRM)conducted a survey about how human resource functional areas and responsibilities

are approached within organizations. This report presents an analysis of the HR in

Organizational Context Survey results and examines differences among organizations

by organization staff size and employment sector.

In 2007 and 2008, SHRM reviewed existing research to identify differences in how

organizations approach human resources. Workforce size has a profound effect on

the roles and responsibilities of HR functions within organizations. The results of

this review are compiled in a report titled The Varying Roles of HR: A Look at HR by

Organization Staff Size .1 Relevant findings from previous SHRM survey data included

in the review are presented in this report to contribute to the understanding of the

human resource function within organizations of various sizes.

ABOUT SHRM

The Society for Human Resource Management (SHRM) is the world’s largest

professional association devoted to human resource management. Our mission is to

serve the needs of HR professionals by providing the most current and comprehensive

resources and to advance the profession by promoting HR’s essential, strategic role.

Founded in 1948, SHRM represents more than 225,000 individual members in over

125 countries and has a network of more than 575 affiliated chapters in the United

States, as well as offices in China and India. Visit SHRM at www.shrm.org.


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Introduction

HOW HR OPERATES WITHIN ORGANIZATIONS MATTERS TO BUSINESS

STRATEGYHuman resources includes a myriad of functional areas, encompassing responsibilities

from recruitment and staffing to compensation and benefits or training and

development. The human resource profession has evolved during the past 20 years and

continues to change, from the collective demographics of HR professionals and the

ways that practitioners enter the profession to the functions and roles served by HR and

the value it brings to organizations.2 HR is increasingly mobilized to offer much more

to organizations than record-keeping, payroll and employee benefits administration.

In fact, many of the transactional functions that traditionally formed the core of HR

departments’ responsibilities are now often outsourced so that organizations can focus

on business strategy through talent management and leadership development activities.

Yet, it is argued that HR functions and departments in many organizations are not

engaged in strategic roles. What factors contribute to how HR’s role is viewed within

the organization? Human resource functions and departments are typically bound

by a number of organizational factors, not the least of which is the staff size of the

organization. How do organizations determine which functional areas are critical to the

organizational strategy, the priority of critical functions and how to best develop and

assign HR staff to those functions?

While organization staff size clearly has an influence on the headcount and budget

within the organization’s HR function and/or department, there may be other factors

contributing to decisions about HR responsibility and functional area staffing. How

much control do HR professionals have over the functional areas to which they are

assigned and/or the scope of their responsibilities? To what extent are HR professionals

receiving mentoring about strategic contributions to the organization, including from

organization leaders in non-HR functions?

Understanding how HR is approached in the context of the organization in which it

operates is crucial to understanding how HR contributes to business strategies and

the value that it is poised to bring to the organization. Moreover, it adds to the overall

picture of HR professionals’ career progression expectations as well as non-HR business

leaders’ perceptions of and mentoring involvement with HR.

Understanding how

HR is approachedin the context ofthe organization inwhich it operatesis crucial tounderstanding howHR contributes to

business strategiesand the value thatit is poised to bringto the organization.


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Methodology

The survey was conducted among HR professionals employed by organizations

operating in the United States. The survey instrument included questions regardingorganizational practices and HR staffing related to human resource functions within

respondents’ organizations.

A sample of HR professionals was randomly selected from SHRM’s membership

database, which included approximately 225,000 individual members at the time the

survey was conducted. Only members who had not participated in a SHRM survey or

poll in the previous six months were included in the sampling frame. Members who

were students, consultants, academics, located internationally or had no e-mail address

on file were also excluded from the sampling frame. Beginning in September 2007,

an e-mail that included a link to the 2007 HR in Organizational Context Survey 3 was

sent to 3,000 SHRM members. A total of 2,744 surveys were successfully delivered,

and 589 HR professionals responded, yielding a response rate of 21%. The survey wasfielded for a period of three weeks. Two e-mail reminders and a faxed reminder were

sent, and reminder phone calls were made to sample members in an effort to increase

the response rate.

The sample was representative of the SHRM membership population, although there

were some differences by organization staff size, with more HR professionals in this

sample from small- and medium-staff-sized organizations and fewer from large-staff-

sized organizations. HR professionals in this sample were more likely to report that

their HR departments had 1–4 employees and less likely to report that their HR

departments had larger numbers of employees. Compared with the general SHRM

membership, HR professionals in this sample were more likely to be from the service

(profit), manufacturing (durable goods) and health industries.


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Key Findings

The top three critical HR functional areas that contributed to organizations’ current

business strategies were 1) staffing, employment and recruitment, 2) training anddevelopment, and 3) employee benefits.

Among HR professionals who indicated that staffing, employment and recruitment was

one of their organizations’ top three critical HR functional areas, more than one-half

reported that it was their first priority.

The HR responsibilities most likely to be staffed in-house were performance

management, employee communication plans/strategies, policy development and/or

implementation, and strategic business planning. The HR responsibilities that were

most likely to be outsourced were employee assistance/counseling and flexible spending

account administration.

One-half of HR professionals reported that their organization’s business strategycontributed to the decision of whether to staff, outsource or eliminate various HR roles

and responsibilities, suggesting an alignment of HR function staffing decisions with

business operating plans.

The largest percentage of HR professionals from organizations that intended to expand

their HR departments in the next 12 months reported that their decision to hire

additional HR staff was due to the HR department/function being understaffed for

current number of employees within the organization.

Slightly less than one-half of HR professionals reported that their organizations had

formal (i.e., documented and established) systems and processes in place for collecting

HR metrics and/or measurement data. Among these, slightly more than one-half

reported formally calculating the impact of HR activities on measurable aspects ofbusiness performance.

The largest percentages of HR professionals reported that HR’s effectiveness was

limited by the budget and headcount available for HR initiatives.

The top threecritical HRfunctional areasthat contributedto organizations’current businessstrategies were1) staffing,

employmentand recruitment,2) training anddevelopment,and 3) employeebenefits.


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Survey Results

CRITICAL HR FUNCTIONAL AREAS

Although conducting business and managing a workforce involves multiple humanresource activities, some HR functional areas are of more importance than others in

supporting the organization’s business strategies and operating plans. When asked to

identify the top three critical HR functional areas contributing to their organization’s

current business strategy, more than one-half of HR professionals (52%) reported that

staffing/employment/recruitment was among the most critical HR functional areas.

The next largest percentages of respondents reported that training and development

(29%) and employee benefits (29%) were among their top three critical HR functional

areas. This indicates that HR is most likely to support the organization’s business

strategy through human capital-related areas such as building, developing and

maintaining the workforce. The smallest percentages of HR professionals reported that

EEO/Affirmative Action (3%), international human resource management (HRM)

(1%) or research (less than 1%) were critical to their organization’s current business

strategy.

Staffing and employee benefits issues are often intertwined. John Lewison, SPHR,

director of human resources for MDRC and SHRM Organizational Development

Special Expertise Panel member, offers, “Both recruitment and talent retention are key

issues for our company. We are a large policy research organization in New York, where

attracting and retaining academic-trained experts in the fields of welfare, disability,

prison reform and education are key. While we’re anticipating that a softer economy

may make it easier for us to hire support-related staff in 2008, we’re still expecting a

competitive market for key researchers and economists.”

“We are constantly examining our benefit programs, not only from a competitiveperspective, but in terms of cost-effectiveness. This is especially true for our wellness

programs; e.g., medical, hospital and dental plans. With employees in large cities

on both coasts, like many companies, we’re hostage to the vagaries of escalating

medical costs. A while back we shifted to a self-insured model, coupled with stop-loss

insurance to better control our costs. So far, this approach seems to be working. We

also embarked on several cost-savings initiatives, such as increasing copayments and

deductibles. Many companies have taken similar actions,” says Lewison.


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Table 1 | Which HR Functional Areas Are Most Critical to Contributing

to the Organization’s Current Business Strategy?

Overall

(n = 582)

Staffing/employment/recruitment 52%

Training/development 29%

Employee benefits 29%

Employee relations 27%

Strategic planning 27%

Administrative/transactional 18%

Change management 17%

Compensation 15%

Organizational development 15%

Legal compliance 13%

Communications 10%

Workforce planning/forecasting 10%

Human resource information systems (HRIS) 9%

Health, safety, security 8%

Diversity 7%

Labor/industrial relations 6%

HR metrics/measurement data/return on investment 5%

EEO/Affirmative Action 3%

International HRM 1%

Research 0%

Other 1%

Note: Data sorted in descending order. Percentages do not total 100% due to multiple response options.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)

Table 2 | Critical HR Functional Areas Contributing to the Organization’s Current Business Strategy (by Organization Staff Size)

Overall

(n = 582)

Small

(1 to 99 employees)

(n = 142)

Medium

(100 to 499 employees)

(n = 177)

Large

(500+ employees)

(n = 138)

Differences by

Organization

Staff Size

Employee benefits 29% 35% 27% 20% Small > large

Strategic planning 27% 19% 28% 34% Large > small

Administrative/transactional 18% 25% 19% 11% Small > large

Legal compliance 13% 19% 11% 7% Small > large

Human resource information systems (HRIS) 9% 6% 8% 14% Large > small

Diversity 7% 2% 5% 10% Large > small

Note: Data sorted in descending order by “overall” column. Sample size is based on the actual number of respondents by organization staff size who answered this questionusing the response options provided.Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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As shown in Table 2, several differences emerged in critical HR functional areas

according to organization staff size. HR professionals employed by small-staff-sized

organizations (1 to 99 employees) were more likely than HR professionals from large-

staff-sized organizations (500 or more employees) to report that employee benefits

(35% compared with 20%), administrative/transactional functions (25% compared

with 11%) and legal compliance (19% compared with 7%) were among the top three

critical HR functional areas that contributed to their organizations’ business strategies.

By contrast, HR professionals from large organizations were more likely than their

counterparts employed by small organizations to place strategic planning (34%

compared with 19%), HRIS (14% compared with 6%) and diversity (10% compared

with 2%) among their organizations’ top three critical HR functional areas. In addition

to reflecting the organization’s business strategy, these data may also indicate the

organization’s philosophy of HR responsibilities as well as the availability of HR staff to

undertake selected functional areas and initiatives.

Table 3 depicts differences in critical HR functional areas based on organization sector.

HR professionals from nonprofit organizations (37%) were more likely to report employee

benefits as one of the top three critical HR functional areas than were respondents from

publicly owned for-profit organizations (18%). HR professionals from publicly owned for-

profit organizations (36%) were more likely than their counterparts from privately owned

Extent to Which HR Department Strategically Contributes to Organization Functions (by Organization Staff Size)

Overall

(n = 419)

Small

(1-99 employees)

(n = 111)

Medium

(100-499 employees)

(n = 174)

Large

(500+ employees)

(n = 120)

Differences by

Organization

Staff Size

Recruitment and selection processes 94% 88% 97% 95% Medium > small

Note: Table includes only response options for which there were significant differences between organization staff-size categories. Sample size is based on the actual number ofrespondents by organization staff size who answered this question using the response options provided. Percentages include responses of “to some extent” and “to a large extent.” HRprofessionals who responded “not sure” or “not applicable” were excluded from this analysis.Source: SHRM 2006 Strategic HR Management Survey Report

SHRM recently reviewed previously

released survey data related to HRroles and responsibilities in order

to identify differences in how HR

is approached by organizations of

various staff sizes.4 What emerged

was a picture of HR professionals’

level of engagement in various HR

and other functional areas within

organizations, differences in chal-

lenges experienced in supporting

HR functions and the varying waysin which HR professionals bring

value to organizations of different

workforce sizes.

Although HR functional areas

support organizational functions,

there are variations in the extent

to which HR departments feel that

they contribute strategically through

performing these responsibilities.HR professionals from medium or-

ganizations (97%) were more likely

than those from small organizations

(88%) to report that their HR de-

partment strategically contributed “to

some extent” or “to a large extent”

to the organization’s recruitment and

selection processes. HR profession-

als in medium organizations may be

able to more immediately see theimpact of their activities on organiza-

tion functions compared with their

counterparts from large organiza-

tions and may be more likely than

those in small organizations to feel

that HR activities are an integral part

of organization functions.

Related Research


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for-profit organizations (21%) to report that strategic planning was among the top three

critical HR functional areas contributing to their organizations’ business strategy. Labor

and industrial relations were more likely to be among the top three critical HR functional

areas for government agencies (24%) than for publicly owned for-profit organizations (3%)

or privately owned for-profit organizations (3%).

Table 4 | Priority Ratings of Critical HR Functional Areas Contributing to the Organization’s Current Business Strategy

First Second Third

Staffing/employment/recruitment (n = 266) 57% 23% 20%

Training/development (n = 144) 18% 44% 38%

Employee benefits (n = 138) 18% 39% 43%

Strategic planning (n = 135) 56% 25% 19%

Employee relations (n = 134) 26% 37% 37%

Administrative/transactional (n =92) 23% 28% 49%

Change management (n = 83) 36% 33% 31%

Compensation (n = 77) 31% 44% 25%

Organizational development (n = 77) 26% 39% 35%

Legal compliance (n = 60) 50% 38% 12%

Communications (n = 53) 30% 36% 34%

Workforce planning/forecasting (n = 51) 24% 33% 43%

Human resource information systems (HRIS) (n = 45) 22% 36% 42%

Health, safety, security (n = 35) 37% 37% 26%

Diversity (n = 35) 37% 31% 31%

Labor/industrial relations (n = 29) 28% 24% 48%

HR metrics/measurement data/return on investment (n = 26) 12% 27% 62%

Note: Data sorted in descending order by number of respondents who indicated that each HR functional area was among the top three areas critical to their organization’s current business strategy.Rankings for each of the HR functional areas include only respondents who indicated that it was a top critical HR functional area contributing to the organization’s business strategy. Only criticalfunctional areas that at least 25 respondents selected as a top priority are included in table. Row percentages may not total 100% due to rounding.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)

Table 3 | Critical HR Functional Areas Contributing to the Organization’s Current Business Strategy (by Organization Sector)

Overall

(n = 582)

Publicly Owned For-Profit

(n = 114)

Privately Owned For-Profit

(n = 235)

Nonprofit

(n = 71)

Government

(n = 42)

Differences by Organization

Staff Size

Employee benefits 29% 18% 31% 37% 14% Nonprofit > publicly owned for-profit

Strategic planning 27% 36% 21% 30% 29% Publicly owned for-profit >

privately owned for-profit

Labor/industrial

relations

6% 3% 3% 6% 24% Government > publicly owned for-profit,

privately owned for-profit, nonprofit

Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Sample size is based on the actual number of respondents by organization sector who answeredthis question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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HR professionals were asked to rank the priority of their organizations’ top three critical

HR functional areas. Of the respondents who indicated that staffing/employment/

recruitment was a critical HR functional area, more than one-half (57%) reported that it

was the top-ranked priority for their organizations. More than one-half of respondents

(56%) who selected strategic planning as a critical HR functional area ranked it as the

top priority for their organizations. One-half of HR professionals (50%) who indicated

that legal compliance was one of their organizations’ top three critical HR functional

areas rated it as the first priority.

Among those who identified training and development as a critical HR functional

area, the largest percentage of HR professionals (44%) reported that it was the second

priority for their organizations. Of the HR professionals who indicated employee

benefits as a critical HR functional area, 43% responded that it was the third-ranked

priority within their organizations. These data and others depicted in Table 4 reflect

organizations’ workforce development philosophies as well as the predominant HR

functional areas to which organizational resources may be allocated.

SHRM Organizational Development Special Expertise Panel member Fernán Cepero,

PHR, vice president of human resources for YMCA of Greater Rochester, offers, “The

results are indicative of a Generation Y trend that is intertwined. Allow me to explain:

“The first critical area confirms the challenge HR professionals have in recruiting and

retaining Generation Y employees. The decision to accept a job offer involves many

factors for Generation Y. A good job is no longer defined by monetary gains alone. Gen Y

employees take a job because they want to work somewhere, not because they have to.

“The second critical area validates the first point in that training and development initiativesmust appeal Generation Y’s desire to learn and involve the application of high-technology

mediums, such as online media (i.e., webcasts, videos, podcasts, blogs, instant messaging).

Recruiting efforts must now highlight paid training and skill development.

“The third and final—benefits—requires HR to attract/sell Generation Y on benefits

such as flexible schedules, telecommuting and full tuition reimbursement. While all

employees think the benefits they receive as a part of their compensation packages are

an important factor in rating job satisfaction, what type of benefit they value is entirely

different. Gen Y employees don’t necessarily plan to stay at a company very long, and

both Gen Y and Gen X employees grew up without expectations of job security, so HR

professionals do not expect to win their loyalty by talking about ‘traditional benefits’

such as pension vesting or funeral leaves. To motivate these generations, focus more onthe benefits they value most—flexibility to balance work and life.”

HR RESPONSIBILITY SOURCING

Which HR responsibilities are carried out in-house and which are outsourced, either

partially or completely? Table 5 depicts the sourcing of common HR responsibilities.

The vast majority of organizations that carry out performance management (94%),

employee communication plans/strategies (93%), policy development and/or

implementation (91%), strategic business planning (90%) and compensation and/


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or incentive plans administration (85%) staff these HR responsibilities within their

organizations. This finding suggests that organizations strongly prefer to maintain

control over these HR responsibilities rather than to entrust them to a third party by

outsourcing. These may also be the HR responsibilities that require the most in-depth

understanding of the organization’s workforce and would be most difficult for a third

party to competently perform on the organization’s behalf.

Table 5 | Sourcing of HR Responsibilities

Completely In-House Outsource Partially Outsource Completely

Performance management (n = 482) 94% 5% 1%

Employee communication plans/strategies (n = 477) 93% 6% 1%

Policy development and/or implementation (n = 495) 91% 8% 1%

Strategic business planning (n = 463) 90% 8% 2%

Compensation and/or incentive plans administration (n = 489) 85% 13% 2%

HR metrics/measurement data/return on investment (n = 353) 82% 12% 6%

Organization development (n = 461) 78% 21% 1%

Recruitment/staffing of employees (nonexecutives) (n = 507) 78% 21% 1%

Affirmative Action Plans/EEO-1 filing (n = 382) 76% 20% 4%

Learning management system (n = 411) 61% 33% 7%

Human resource information systems (HRIS) development (n = 435) 59% 30% 11%

Payroll administration (n = 504) 59% 31% 10%

Employee relocation (n = 292) 57% 26% 18%

Expatriate administration (n = 178) 54% 36% 10%

Recruitment/staffing of executives (n = 492) 54% 40% 6%

Training and development programs (n = 480) 54% 42% 4%

Work/life balance benefits administration (n = 337) 53% 31% 17%

Wellness programs (n = 376) 40% 38% 22%

Consolidated Omnibus Budget Reconciliation Act (COBRA) (n = 491) 36% 18% 46%

Executive development and coaching (n = 407) 36% 50% 14%

Risk management/worker’s compensation (n = 484) 34% 46% 21%

Health care benefits administration (n = 504) 33% 40% 27%

Temporary staffing (n = 448) 30% 45% 25%

Background/criminal background checks (n = 462) 26% 22% 52%

Retirement benefits administration (n = 452) 25% 45% 31%

Pension benefits administration (n = 422) 24% 44% 33%

Retirement planning (n = 432) 23% 49% 28%

Employee assistance/counseling (n = 425) 17% 21% 62%

Flexible spending account administration (n = 411) 15% 25% 60%

Note: Data sorted in descending order by “completely in-house” column. HR professionals who responded “not applicable” were excluded from analysis. Row percentages may not total 100% dueto rounding.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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By contrast, more than one-half of organizations completely outsource employee

assistance/counseling (62%), flexible spending account administration (60%)

and background/criminal background checks (52%). Retirement benefits-related

responsibilities were among the HR responsibilities that the largest proportions of

organizations partially or completely outsourced, including retirement planning

(77%), pension benefits administration (76%) and retirement benefits administration

(75%). Retiree benefits are an area where many companies have recently made

changes, including freezing plans and changing from defined benefits plans to defined

contribution plans. Many organizations may find it more efficient and cost effective

to outsource the administration of their retiree benefits to firms that are highly

knowledgeable about the financial regulations involved with these types of plans and

benefits rather than to staff that specialization in-house.

Views of HR’s role within the organization may also influence which functions are

outsourced. Comments Franchette Richards, GPHR, GMS, CRP, member of SHRM’s

HR Consulting/Outsourcing Special Expertise Panel, “Human resource functions

Top 5 Insourced

HR Responsibilities

1) Performance management

2) Employee communication plans/

strategies

3) Policy development and/or

implementation

4) Strategic business planning

5) Compensation and/or incentive

plans administration

Although critical HR functional

areas may be clearly aligned with

and prioritized according to the

organization’s business strategy,

HR professionals’ perceptions of

the extent to which various HR

functional areas add value to the

organization’s business strategy

may be linked to the size of the or-

ganization. The results of the 2007

Human Resource Competency

Study yielded numerous differences

by organization staff size in HR

professionals’ perceptions of how

various HR practices add value to

the business.5 Compared with HR

professionals from large organiza-

tions, HR professionals from small

organizations reported to a greater

average extent that training and

development added value to the

business. Compared with HR pro-

fessionals from large organizations,

HR professionals from medium

organizations reported to a greater

average extent that performance

appraisal, internal communication,

organization structure, workplace

policies and work process design

add value to the business. These

findings may reflect HR profes-

sionals’ general observation of

immediate or lasting impact to

the organization as a result of HR

practices.

Average Degree That Various HR Practices Add Value to the Business (by Organization Staff Size)

Small

(1-99 employees)

(n = 26)

Medium

(100-499 employees)

(n = 36)

Large

(500+ employees)

(n = 381)

Differences

by Organization

Staff Size

Training and development 4.24 4.11 3.76 Small > large

Performance appraisal 3.72 4.22 3.74 Medium > large

Internal communication 3.72 4.19 3.63 Medium > large

Organization structure 3.44 4.00 3.59 Medium > large

Workplace policies 3.88 4.42 3.87 Medium > large

Work process design 3.24 3.63 3.20 Medium > large

Note: Based on a scale where 1 = “to a very little extent” and 5 = “to a very large extent.” Greater numbers indicate greater average degrees that various HR practices add value to thebusiness. Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided.Source: RBL Group, University of Michigan Ross School of Business, SHRM, IAE School of Business, IMI, Tsinghua University, AHRI, and the National HRD Network. 2007 Human ResourceCompetency Study [unpublished data]

Related Research


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that affect a company’s strategy, the overarching company culture or the organization

as a whole typically remain seated at the center of HR leadership. True organizational

effectiveness is not measured by the successful execution of a company’s employee

assistance program nor how it administers its flexible spending accounts. While these

are very important HR functions that clearly serve an organization’s employees,

these functions are more tactical in nature and not, in a strategic sense, impactful to

the achievement of business goals and objectives. In short, transactional excellence is

necessary—but no longer sufficient—for HR today. From evaluating the survey results

and reviewing ongoing commentary in the HR and business media, it has become

clearer that HR functions that are viewed as tactical are some of the first components

to be outsourced. There are exceptions—areas that are so key, so strategic (such as

leadership development/executive coaching, succession planning, employee relations)

that they must remain in-house. However, the key differentiator for HR will be whether

they are viewed as tactical or strategic.”

Numerous differences emerged in the sourcing of HR responsibilities when the data

were analyzed by organization staff size and organization sector. These findings are

shown in Table 6 through Table 11.

In-House HR Responsibilities

As illustrated in Table 6, HR professionals employed by small-staff-sized organizations

were more likely to report in-house staffing of a number of HR responsibilities.

Compared with HR professionals from large-staff-sized organizations, HR professionals

Table 6 | HR Responsibilities Staffed Completely In-House (by Organization Staff Size)

Overall Small

(1 to 99 employees)

Medium


Large

(500+ employees)

Differences

by Organization

Staff Size

Policy development and/or implementation

(n = 451)

91% 84% 93% 96% Medium, large > small

Strategic business planning (n = 415) 90% 95% 89% 83% Small > large

Organization development (n = 360) 78% 85% 80% 71% Small > large

Payroll administration (n = 298) 59% 50% 54% 73% Large > small, medium

Employee relocation (n = 165) 56% 78% 56% 46% Small > medium, large

Recruitment/staffing of executives (n = 264) 54% 63% 51% 41% Small > large

Executive development and coaching(n = 148)

36% 50% 33% 28% Small > medium, large

Health care benefits administration (n = 168) 33% 44% 32% 26% Small > large

Temporary staffing (n = 136) 30% 39% 29% 22% Small > large

Retirement planning (i.e., educating

employees) (n = 98)

23% 20% 30% 15% Medium > large

Employee assistance/counseling (n = 73) 17% 29% 13% 11% Small > medium, large

Note: Data sorted in descending order by “overall” column. Table includes only response options for which there were significant differences. Sample size is based on the actual number ofrespondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)

Top 5 Completely

Outsourced HRResponsibilities

1) Employee assistance/counseling

2) Flexible spending account

administration

3) Background/criminal background

checks

4) Consolidated Omnibus Budget

Reconciliation Act (COBRA)

5) Pension benefits administration


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working at small-staff-sized organizations were more likely to report in-house staffing

of strategic business planning, organization development, recruitment/staffing of

executives, health care benefits administration and temporary staffing. Small-staff-

sized organizations were also more likely than either medium- or large-staff-sized

organizations to provide in-house staffing of employee relocation (78% compared

with 56% and 46%), executive development and coaching (50% compared with 33%

and 28%) and employee assistance/counseling (29% compared with 13% and 11%).

Retirement planning (i.e., educating employees) was more likely to be staffed in-house

by medium-staff-sized firms (30%) than by large-staff-sized organizations (15%). Both

large (96%) and medium organizations (93%) were more likely than small organizations

(84%) to report that policy development and/or implementation was staffed in-house.

By contrast, large organizations (73%) were more likely than either medium (54%) or

small organizations (50%) to report carrying out payroll administration in-house.

Several differences were identified when the in-house HR responsibility data were analyzed

by employment sector. The HR responsibilities that differed by organization sector in

the percentages of organizations that staffed them in-house were payroll administration,

employee relocation, recruitment/staffing of executives, recruitment/staffing of employees

(nonexecutives), work/life balance benefits administration, wellness programs, COBRA,

health care benefits administration, temporary staffing and background/criminal

background checks. Respondents from government agencies (76%) were more likely than

those from privately owned for-profit organizations (53%) to report in-house staffing of

payroll administration. HR professionals from publicly owned for-profit organizations

(36%) were less likely than those from government agencies (87%), nonprofit organizations

(76%) or privately owned for-profit organizations (65%) to report in-house staffing of

employee relocation activities. HR professionals from nonprofit organizations (90%) weremore likely than those from privately owned for-profit organizations (75%) or publicly

owned for-profit organizations (74%) to report that staffing recruitment of nonexecutive

employees was conducted in-house, whereas respondents from nonprofit organizations

(61%) and privately owned for-profit organizations (56%) were more likely than those

from publicly owned for-profit organizations (38%) to report that recruitment/staffing

of executives was conducted in-house. Work/life balance benefits administration was

more likely to be conducted in-house by nonprofit organizations (67%) than by publicly

owned for-profit organizations (43%). Wellness programs were more likely to be staffed

in-house by nonprofit organizations (64%) than by privately owned for-profit organizations

(39%), government agencies (34%) or publicly owned for-profit organizations (28%). HR

professionals from government agencies (56%) and nonprofit organizations (51%) were

more likely than those from publicly owned for-profit organizations (31%) or privatelyowned for-profit organizations (31%) to report in-house staffing of responsibilities related

to COBRA. Respondents from nonprofit organizations (43%) and privately owned for-

profit organizations (38%) were more likely than those from publicly owned for-profit

organizations (23%) to report that health care benefits administration was staffed in-house.

HR professionals from nonprofit organizations and government agencies were more likely

than those from publicly owned for-profit organizations to report in-house staffing of

duties related to temporary staffing and performing background/criminal background

checks. These data are shown in Table 7.


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Table 8 | HR Responsibilities Outsourced Partially (by Organization Staff Size)

Overall Small

(1 to 99 employees)

Medium


Large

(500+ employees)

Differences by Organization

Staff Size

Executive development and

coaching (n = 203)

50% 36% 50% 60% Large > small

Risk management/worker’s

compensation (n = 221)

46% 37% 49% 52% Large > small

Health care benefits

administration (n = 201)

40% 32% 46% 41% Medium > small

Recruitment/staffing of executives

(n = 199)

40% 32% 41% 53% Large > small

Policy development and/or

implementation (n = 40)

8% 14% 6% 4% Small > large

Strategic business planning

(n = 39)

8% 2% 10% 14% Medium, large > small


Table 7 | HR Responsibilities Staffed Completely In-House (by Organization Sector)

Overall Publicly Owned

For-Profit

Privately Owned

For-Profit

Nonprofit Government Differences by

Organization Sector

Payroll administration (n = 298) 59% 60% 53% 62% 76% Government > privately owned for-profit

Employee relocation (n = 165) 57% 36% 65% 76% 87% Privately owned for-profit, nonprofit,

government > publicly owned for-profit

Recruitment/staffing of executives

(n = 264)

54% 38% 56% 61% 61% Privately owned for-profit, nonprofit >

publicly owned for-profit

Recruitment/staffing of employees

(nonexecutives) (n = 397)

54% 74% 75% 90% 86% Nonprofit > publicly owned for-profit,


Work/life balance benefits


53% 43% 54% 67% 44% Nonprofit > publicly owned for-profit

Wellness programs (n = 149) 40% 28% 39% 64% 34% Nonprofit > publicly owned for-profit,privately owned for-profit, government

Consolidated Omnibus Budget


(n = 175)

36% 31% 31% 51% 56% Nonprofit > publicly owned for-profit,


Government > publicly owned for-profit,


Health care benefits administration

(n = 168)

33% 23% 38% 43% 25% Privately owned for-profit, nonprofit >


Temporary staffing (n = 136) 30% 19% 30% 45% 45% Nonprofit, government > publicly owned

for-profit

Background/criminal background

checks (n = 120)

26% 15% 25% 38% 43% Nonprofit, government > publicly owned

for-profit

Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Table includes only response options for which there were significant differences. Sample size is

based on the actual number of respondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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Partially Outsourced HR Responsibilities

Table 8 depicts the differences by organization staff size in the percentages of

organizations that partially outsourced various HR responsibilities. According to HR

professionals, large-staff-sized organizations were more likely than small-staff-sized

organizations to have partially outsourced executive development and coaching (60%

compared with 36%), risk management/worker’s compensation (52% compared with

37%), recruitment/staffing of executives (53% compared with 32%) and strategic

business planning (14% compared with 2%). Medium organizations were more

likely than small organizations to report partially outsourcing health care benefits

administration (46% compared with 32%) and strategic business planning (10%

compared with 2%). By contrast, HR professionals from small organizations (14%) were

more likely than their counterparts at large organizations (4%) to report that policy

development and/or implementation was partially outsourced.

As shown in Table 9, differences emerged among organization sectors for HR

responsibilities that were partially outsourced. HR professionals from government

agencies (50%) were more likely than their counterparts at privately owned for-profit

organizations (26%) to report that their human resource information systems (HRIS)

development was partially outsourced. According to HR professionals, pension benefits

administration was more likely to be partially outsourced by privately owned for-profit

organizations (51%) than by publicly owned for-profit organizations (32%). Partial

outsourcing of recruitment/staffing of executives and wellness programs was more

likely to be reported by HR professionals from publicly owned for-profit organizations

(54% and 47%, respectively) than by HR professionals from nonprofit organizations

Table 9 | HR Responsibilities Outsourced Partially (by Organization Sector)


For-Profit

Privately Owned

For-Profit


Organization Sector

Pension benefits administration

(n = 184)

44% 32% 51% 48% 32% Privately owned for-profit >


Recruitment/staffing of

executives (n = 199)

40% 54% 39% 31% 37% Publicly owned for-profit >

nonprofit

Wellness programs

(n = 144)


nonprofit

Human resource information

systems (HRIS) development

(i.e., software selection and

implementation)

(n = 131)

30% 33% 26% 24% 50% Government > privately owned

for-profit

Employee relocation

(n = 75)



Recruitment/staffing of

employees (nonexecutives)

(n = 104)

21% 25% 24% 9% 14% Publicly owned for-profit,

privately owned for-profit >

nonprofit

Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Table includes only response options for which there were significant differences. Sample size isbased on the actual number of respondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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(31% and 21%, respectively). Respondents from publicly owned for-profit organizations

(35%) were more likely than those from privately owned for-profit organizations (19%)

to report partially outsourcing responsibilities related to employee relocation. HR

professionals from publicly owned for-profit organizations (25%) and privately owned for-

profit organizations (24%) were more likely than those from nonprofit organizations (9%)

to report that recruitment/staffing of nonexecutive employees was partially outsourced.

Table 10 | HR Responsibilities Outsourced Completely (by Organization Staff Size)

Overall Small

(1 to 99 employees)

Medium


Large

(500+ employees)

Differences by

Organization Staff Size

Employee assistance/counseling (n = 263) 62% 49% 65% 70% Medium, large > small

Flexible spending account administration

(n = 248)

60% 51% 62% 68% Large > small

Temporary staffing (n = 112) 25% 20% 21% 37% Large > small, medium

Employee relocation (n = 52) 18% 5% 19% 26% Medium, large > small

Payroll administration (n = 48) 10% 14% 10% 2% Small, medium > large


Table 11 | HR Responsibilities Outsourced Completely (by Organization Sector)


For-Profit

Privately Owned

For-Profit


Organization Sector

Background/criminal

background checks (n = 240)


government

Privately owned for-profit >

government

Nonprofit > government

Consolidated Omnibus Budget


(n = 228)

46% 48% 52% 33% 28% Privately owned for-profit > nonprofit,

government

Pension benefits administration

(n = 138)

33% 44% 29% 23% 37% Publicly owned for-profit > nonprofit

Health care benefits



privately owned for-profit, nonprofit

Government > nonprofit

Temporary staffing (n = 112) 25% 39% 23% 15% 18% Publicly owned for-profit > privately

owned for-profit, nonprofit

Employee relocation (n = 52) 18% 29% 15% 0% 0% Publicly owned for-profit > privately

owned for-profit

Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Table includes only response options for which there were significant differences. Sample size isbased on the actual number of respondents who indicated that their organization supported each HR responsibility.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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Completely Outsourced HR Responsibilities

Table 10 shows the differences in the percentages of organizations by staff size that

reported completely outsourcing various HR responsibilities. HR professionals from

large- and medium-staff-sized organizations were more likely than those from small-

staff-sized organizations to report completely outsourcing employee assistance/

counseling (70% and 65% compared with 49%, respectively) and employee relocation

(26% and 19% compared with 5%). Large organizations (68%) were more likely than

small organizations (51%) to report completely outsourcing flexible spending account

administration and were also more likely than either medium or small organizations

(37% compared with 21% and 20%, respectively) to report completely outsourcing

temporary staffing. By contrast, HR professionals at small organizations (14%)

and medium organizations (10%) were more likely than their counterparts at large

organizations (2%) to report completely outsourcing payroll administration.

HR professionals from publicly owned for-profit organizations (64%), privately owned

for-profit organizations (55%) and nonprofit organizations (45%) were more likely than

their counterparts at government agencies (19%) to report completely outsourcing

background/criminal background checks. Respondents from privately owned for-profit

organizations (52%) were more likely than those from nonprofit organizations (33%)

or government agencies (28%) to report completely outsourcing responsibilities related

to COBRA. HR professionals from publicly owned for-profit organizations (44%)

were more likely than those from nonprofit organizations (23%) to report completely

outsourcing pension benefits administration. Employee relocation was more likely to

be completely outsourced by publicly owned for-profit organizations (29%) than by

privately owned for-profit organizations (15%). HR professionals from publicly owned

for-profit organizations (39%) were more likely than those from privately owned for-

profit organizations (24%) and those from publicly owned for-profit organizations

and government agencies (both 35%) were more likely than their counterparts at

nonprofit organizations (11%) to report completely outsourcing health care benefits

administration. According to HR professionals, temporary staffing was more likely to

be completely outsourced by publicly owned for-profit organizations (39%) than by

privately owned for-profit organizations (23%) or nonprofit agencies (15%). These data

are shown in Table 11.

Decisions About Sourcing HR Responsibilities

Given the myriad HR functional areas and the limits to most organizations’ HR

department/function headcount, what factors contribute to decisions about sourcing

HR responsibilities? When asked how their organizations determine which HR roles

and/or responsibilities will be staffed within the organization rather than outsourced

or eliminated, the largest percentage of HR professionals (50%) reported that the

organization’s business strategy contributes to the decision. These data are shown

Figure 1. This suggests that for a substantial percentage of organizations, HR function

staffing decisions are aligned with business operating plans, providing support for a

strategic partnership between HR and the organization as a whole. The next two largest

percentages of HR professionals reported that competencies of HR staff (45%) and the

organization’s workforce management needs (40%) determined which specific HR roles


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and/or responsibilities would be staffed, outsourced or eliminated. Only one out of 10

HR professionals responded that their organization made decisions about sourcing HR

roles and/or functional areas based on HR consultant evaluations and/or advice (11%)

or employee feedback and requests (11%), indicating that few organizations make HR

staffing or outsourcing decisions based on input from outside of the organization or from

the bottom up. Trellis Usher-Mays, founder and chief people strategist, T.R. Ellis Group

LLC, and member of SHRM’s Organizational Development Special Expertise Panel,

comments, “Corporate leaders and HR practitioners are wising up to the fact that the HR

function is critical to driving sustainable business results. As HR continues to transform

itself from a transactional to a strategic partner, it becomes even more important to

make sure that practitioners are building skills that enable them to think strategically

and systemically, build and manage relationships and thoroughly analyze organizational

issues. Part of HR’s value proposition has to be our intimate knowledge of our internal

Figure 1 | How Do Organizations Decide Which HR Roles and/or Functional Areas Will Be Staffed?

36%

45%

20%

50%

23%

40%

11%

11%

HR department staffing budget

Competencies of HR staff

Internal audit or review of HR processes

Organization’s business strategy

Ongoing established staffing of the role and/or responsibility

Organization’s workforce management needs

Employee feedback and requests

HR consultant evaluations and/or advice

(n = 509)

Note: Percentages do not total 100% due to multiple response options.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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customers’ business and industry and not simply our functional HR expertise. The more

closely aligned HR is to the organization’s strategic objectives, the more value it can add

and the less we have to worry about being outsourced or eliminated.”

Organization staff size has an impact on factors determining which HR roles and

functional areas will be staffed within the organization. HR professionals from large

organizations (46%) were more likely than their counterparts from small organizations

(25%) to report that the HR department’s staffing budget was a factor in determining

which HR roles/functional areas would be staffed. This finding may be related to the

prevalence of HR specialists versus HR generalists in large organizations compared

with small organizations. In addition, large organizations were more likely than small

organizations or medium organizations to report that an internal audit or review of

HR processes (32% compared with 13% and 16%, respectively) or HR consultant

evaluations and/or advice (19% compared with 8% and 6%, respectively) contributed to

their organizations’ decisions about staffing HR roles and/or functional areas. These

findings are not surprising, given that large organizations may have more of a need as

well as more resources such as time and money to allow them to undertake a formal

internal audit of HR processes or contract the services of HR consultants to review HR

processes. These data are depicted in Table 12.

Organization sector also had an impact on factors determining the HR roles and/or

functional areas to be staffed (Table 13). An organization’s business strategy factored

into decisions about HR role/functional area staffing for 62% of publicly owned for-

profit organizations compared with 45% of privately owned for-profit organizations

and 38% of government agencies. Publicly owned for-profit organizations may be

more likely to expect operating plan alignment across the organization’s divisions

and departments, including human resource functions. More than two-thirds of HRprofessionals from government agencies (69%), compared with only about one-third

of HR professionals from publicly owned for-profit organizations (35%), reported

that competencies of HR staff were a factor in determining staffing of HR roles and/

or functional areas. This suggests that, to a certain extent, HR professionals who are

employed in the government sector may have some degree of influence over the HR

Table 12 | Factors Determining the HR Roles and/or Functional Areas to Be Staffed (by Organization Staff Size)

Overall

(n = 509)

Small

(1 to 99 employees)

(n = 131)

Medium


(n = 167)

Large

(500+ employees)

(n = 134)

Differences

by Organization

Staff Size

HR department staffing budget 36% 25% 37% 46% Large > small

Internal audit or review of HR

processes

20% 13% 16% 32% Large > small, medium

HR consultant evaluations and/

or advising

11% 8% 6% 19% Large > small, medium

Note: Data sorted in descending order by “overall” column. Percentages do not total 100% due to multiple response options. Sample size is based on the actual number of respondents byorganization staff size who answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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responsibilities that will be staffed in-house through the experience that they bring to

and/or attain in the position. HR consultant evaluations and/or advice determined

staffing for HR roles and/or functional areas for 18% of publicly owned for-profit

organizations compared with 8% of privately owned for-profit organizations. This

finding may be due in part to publicly owned for-profit organizations having more

resources available to engage the services of HR consultants.

Assignment of HR Responsibilities

How are HR responsibilities distributed amongst HR function and/or department

staff? More than one-quarter of respondents (29%) reported that their organizations

did not have more than one HR staff person, suggesting that all HR roles and/or

responsibilities that were carried out in-house by their organizations were handled

by a single HR function employee. This is logical, given that of the respondents who

reported that their organizations did not have more than one HR staff person, 68%

were from small-staff-sized organizations and 32% were from medium-staff-sized

organizations. Among organizations with multiple HR staff, nearly two-thirds of HR

professionals (63%) indicated that their HR staff simultaneously handled multiple

HR functional areas for the organization, i.e., generalist roles. About one-quarter of

respondents (24%) responded that their organization’s HR staff were hired into and

advanced within single HR functional area tracks based on their experience and/or

education. Just 1% of HR professionals reported that their HR staff had scheduled

rotations among HR functional areas supported by the organization’s HR department/

function. These data, shown in Figure 2, indicate that HR professionals who are

employed as specialists or within limited HR functional areas may have some degree of

flexibility for selecting the responsibilities that they perform.

Both nonprofit (42%) and privately owned for-profit organizations (38%) were morelikely than government agencies (12%) and publicly owned for-profit organizations

(11%) to report that their organizations did not have more than one HR staff person.

Unsurprisingly, small organizations (65%) were more likely than medium organizations

Table 13 | Factors Determining the HR Roles and/or Functional Areas to Be Staffed (by Organization Sector)

Overall

(n = 509)

Publicly Owned

For-Profit

(n = 109)

Privately Owned

For-Profit

(n = 221)

Nonprofit

(n = 65)

Government

(n = 41)

Differences by

Organization Sector

Organization’s business

strategy


privately owned for-profit,government

Competencies of HR staff 45% 35% 49% 46% 69% Government > publicly owned

for-profit

HR consultant evaluations

and/or advising



Note: Data sorted in descending order by “overall” column. Excludes “other” organization sectors. Percentages do not total 100% due to multiple response options. Sample size is based onthe actual number of respondents by organization sector who answered this question using the response options provided. Table includes only response options for which there were significantdifferences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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(24%) and large organizations (1%), and medium organizations were more likely than

large organizations, to report that their organizations did not have more than one HR

staff person.6

Among organizations with multiple HR staff, differences emerged by organization staff

size in the percentages of organizations that reported that their HR staff simultaneously

handled multiple HR functional areas for the organization (Table 14). Medium

organizations (71%) were more likely than large organizations (57%) to report that their

HR staff held generalist roles. There were no significant differences by organization

sector.

More often than not, among organizations with multiple HR staff, some—if not all—of

these staff operate from a single location. More than two-thirds of HR professionals

from organizations with multiple HR staff (69%) reported that the organization’s HR

department was primarily centralized (Figure 3). Another 21% indicated that they weresplit between corporate headquarters and field offices, and only 10% reported that their

organization’s HR staff were primarily decentralized.

For many organizations, HR departments/functions serve as default owners for

responsibilities that are not directly HR-related but are necessary to operations and do

not have a more suitable department match. In addition to their responsibilities related

1%

24%

63%

3%

9%

HR staff have rotations among HR functional areas

HR staff are hired into single HR functional tracks

HR staff simultaneously handle multiple roles

Other

HR staff may request to switch HR functional area tracks

Figure 2 | How Are HR Staff Roles and/or Responsibilities Assigned?

(n = 361)

Note: Excludes HR professionals who responded, “N/A, my organization does not have more than one HR staff person.”Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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to HR functions, one-half of HR professionals (50%) reported having other non-HR

duties. This may include facilities, IT, administration and other responsibilities.7

HR professionals from small organizations (79%) were more likely than those from

medium (48%) and large organizations (22%), and HR professionals from medium

organizations were more likely than their counterparts from large organizations, to

report that they had non-HR duties in addition to their HR responsibilities (Table 15).

Organizations with fewer staff are more likely to assign cross-functional roles to HR

departments or functions than larger organizations, which can more easily establish

Table 14 | Factors Determining HR Staff Assignments of HR Roles and/or Responsibilities (by Organization Staff Size)

Overall

(n = 361)

Small

(1 to 99 employees)

(n = 50)

Medium


(n = 136)

Large

(500+ employees)

(n = 138)

Differences

by Organization

Staff Size

HR staff simultaneously handle

multiple HR functional areas for

the organization (i.e., generalist

roles)

63% 68% 71% 57% Medium > large

Note: Excludes HR professionals who responded, “N/A, my organization does not have more than one HR staff person.” Sample size is based on the actual number of respondents by organizationstaff size who answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)

Primarily centralized

69%

21%

10%

Split between headquarters

and field offices

Primarily decentralized

Figure 3 | Where Are HR Staff Located Within the Organization?

(n = 345)

Note: Excludes HR professionals who responded, “N/A, my organization does not have more than one HR staff person.”Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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departmental duty boundaries because they are likely to have other, more appropriate

departments with available headcount for handling non-HR duties.

HR professionals from privately owned for-profit organizations (59%) as well as those

from nonprofit organizations (59%) were more likely than those from publicly owned

for-profit organizations (37%) and government agencies (26%) to indicate having

non-HR duties in addition to their HR responsibilities (Table 16). Staff size within the

sectors may have an impact on the likelihood of HR functions or departments being

tasked with non-HR related responsibilities.

HR FUNCTION/DEPARTMENT STAFFING CHANGES

What are organizations’ planned headcount changes for the short-term future?

Although the majority of HR professionals (72%) reported that their HR staff

headcount will most likely remain the same during the next 12 months, one-quarterof respondents (25%) indicated that their HR staff headcount will grow during that

timeframe (Figure 4). Very few organizations—just 3%—expected a decrease in HR

staff numbers. Even in a slowing economy, HR functions or departments may be more

resistant to downsizing due to the essential nature of their responsibilities on behalf of

the organization’s workforce. This may be even more the case for organizations whose

HR departments or functions are comprised of generalist roles and where multiple HR

roles and responsibilities can be assigned to each HR staff person.

Table 15 | HR Staff Have Non-HR Duties (by Organization Staff Size)

Overall

(n = 508)

Small

(1 to 99 employees)

(n = 141)

Medium


(n = 172)

Large

(500+ employees)

(n = 138)

Differences

by Organization

Staff Size

HR has non-HR duties 50% 79% 48% 22% Small > medium, large

Medium > large

Note: Excludes HR professionals who responded “not sure” to this item. Sample size is based on the actual number of respondents by organization staff size who answered this question using theresponse options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)

Table 16 | HR Staff Have Non-HR Duties (by Organization Sector)

Overall

(n = 508)

Publicly Owned

For-Profit

(n = 114)

Privately Owned

For-Profit

(n = 234)

Nonprofit

(n = 71)

Government

(n = 42)

Differences

by Organization Sector

HR has non-HR duties 50% 37% 59% 59% 26% Privately owned for-profit > publicly

owned for-profit, government

Nonprofit > publicly owned

for-profit, government

Note: Excludes HR professionals who responded “not sure” to this item and those from “other” organization sectors. Sample size is based on the actual number of respondents by organization sectorwho answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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HR headcount will increase

25%

72%

3%

HR headcount will remain the same HR headcount will decrease

HR professionals from large organizations (36%) were more likely than those from

medium (21%) or small organizations (16%) to report that their organization’s HR staff

headcount was expected to increase in the 12 months following the survey. Conversely,

small organizations (82%) and medium organizations (76%) were more likely than large

organizations (60%) to report that their organization’s HR headcount was expected to

remain the same in the upcoming 12 months. These data are depicted in Table 17.

Figure 4 | Will the HR Staff Headcount Change in the Next 12 Months?

(n = 430)

Note: Excludes HR professionals who responded “not sure” to this item.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)

Table 17 | HR Staff Headcount Changes Expected for Next 12 Months (by Organization Staff Size)

Overall

(n = 430)

Small

(1 to 99 employees)

(n = 141)

Medium


(n = 172)

Large

(500+ employees)

(n = 138)

Differences

by Organization

Staff Size

HR headcount will increase 25% 16% 21% 36% Large > small, medium

HR headcount will remain the same 72% 82% 76% 60% Small > large

Medium > large

HR headcount will decrease 3% 2% 3% 3%

Note: Excludes HR professionals who responded “not sure” to this item. Sample size is based on the actual number of respondents by organization staff size who answered this question using theresponse options provided.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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As shown in Table 18, there were fewer differences in changes to HR headcount by

organization sector. Although a small percentage of organizations overall expected

a decrease in HR headcount, HR professionals from publicly owned for-profit

organizations (8%) were more likely than those from privately owned for-profit

organizations (1%) to report that their organization’s HR staff headcount was

expected to decrease in the 12 months following the survey. Publicly owned for-profit

organizations may be more sensitive to mergers, acquisitions and large-scale downsizing

efforts that might include HR department staff as well as other line operations within

the organization.

Among HR professionals employed by organizations that expected to increase their

number of HR staff over the next year, the largest percentage (49%) reported that their

decision to hire additional HR staff was due to the HR department/function being

understaffed for current workforce size. This is consistent with the traditional view

of the HR department size as a ratio to the total number of organization employees.

However, more than two of out five HR professionals (44%) that were expanding their

HR functions/departments reported that the organizational business strategy created

new priorities for HR roles and/or functions, requiring the hiring of additional HR

staff. This finding, again, supports the notion that within many organizations, the HR

function/department operations are closely aligned with the organization’s business

operations. These data are illustrated in Figure 5.

Among HR professionals employed by organizations that expected to increase their

HR staff headcount in the next 12 months, those from publicly owned for-profit

organizations (32%) were more likely than those from privately owned for-profit

organizations (6%) to report that a shift in workforce demographics and/or needs

contributed to the decision to hire additional staff (Table 19). The U.S. workforce ischanging through an aging baby boom generation, the work/life balance demands

of younger workers and an increasingly diverse general population. According to

employees, benefits tied with compensation as the top-rated most important aspect

contributing to job satisfaction.8 Further, workers aged 35 and younger and workers

employed by large-staff-sized organizations placed the greatest importance on benefits

Table 18 | HR Staff Headcount Changes Expected for Next 12 Months (by Organization Sector)

Overall

(n = 430)

Publicly Owned

For-Profit

(n = 92)

Privately Owned

For-Profit

(n = 205)

Nonprofit

(n = 63)

Government

(n = 34)

Differences by Organizatio

Sector

HR headcount will increase 25% 27% 25% 22% 18%

HR headcount will remain

the same

72% 65% 74% 76% 82%

HR headcount will

decrease



Note: Excludes “other” organization sectors and HR professionals who responded “not sure” to this item. Sample size is based on the actual number of respondents by organization sector whoanswered this question using the response options provided.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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HR department/function is understaffed for current workforce size

Organizational business strategy created new priorities for HR roles and/or functions

HR department/function is expanding in anticipation of increase in workforce

Unaccompplished work projects require adding staff in order to meet business goals

HR department/function is expanding to manage recruitment and hiring needs following

high turnover in workforce

HR department/function needs new or additional staff to manage the technology systems

that support HR functional areas

HR department/function staffing structure requires new or additional managers or

executive-level staff

Shift in workforce demographics and/or needs requires additional HR staff to manage

related programs

Previously outsourced HR functions are being pulled in-house

49%

44%

43%

23%

22%

18%

16%

12%

3%

Table 19 | Factors Contributing to Decision to Hire Additional HR Staff (by Organization Sector)

Overall

(n = 107)

Publicly Owned

For-Profit

(n = 25)

Privately Owned

For-Profit

(n = 52)

Nonprofit

(n = 14)

Government

(n = 6)

Differences

by Organization

Sector

Shift in workforce demographics and/

or needs requires additional HR staff to

manage related programs



Note: Includes HR professionals who indicated that their HR staff headcount would increase over the next 12 months. Excludes “other” organization sectors. Sample size is based on the actualnumber of respondents by organization sector who answered this question using the response options provided. Table includes only response options for which there were significant differences.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)

Figure 5 | Hiring Additional HR Staff: Which HR and Organizational Factors Matter?

(n = 107)

Note: Includes HR professionals who indicated that their HR staff headcount would increase over the next 12 months. Percentages do not total 100% due to multiple response options.Source: HR’s Evolving Role in Organizations and Its Impact on Business Strategy (SHRM, 2008)


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as a factor in job satisfaction. Publicly owned for-profit organizations may be under

more pressure to customize their benefits programs to meet the benefits demands of the

workforce, potentially requiring specialized HR staff to manage them.

HR’S ROLE WITHIN THE ORGANIZATION

Strategic vs. Transactional Role

How do HR professionals view their HR function/department’s role within their

organization? As shown in Figure 6, nearly two-thirds of HR professionals (61%)

viewed their HR function/department’s role as equally strategic and transactional. One-

third of respondents (33%) reported that their HR function/department’s role was

primarily transactional, indicating that one out of three HR function/departments serve

a traditional HR role within organizations. Only 6% of HR professionals viewed their

HR function/department’s role within the organization as primarily strategic.

There were differences by both organization sector and organization staff size in HR

professionals’ perceptions of the HR function or department’s role. HR professionals

from publicly owned for-profit organizations (10%) were more likely than their

counterparts from privately owned for-profit organizations (3%) to report that they

viewed their HR function or department as having a primarily strategic role. HR

professionals from small organizations (42%) were more likely than those from large

organizations (26%) to report that they viewed their HR function or department as

having a primarily transactional role within their organization (Table 20). In smaller

organizations, the HR function or department—which may be

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Hr's Evolving Role in Organizations

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