IRS survey: Effective HR

The profession has had a tough year, so the fact that the majority of employers in the latest IRS survey rate their HR departments very highly shows an encouraging level of confidence in HR’s effectiveness.

As HR professionals face unprecedented pressure to keep up with fast-moving business demands together with the usual flow of legislative developments, the latest IRS survey on HR roles and responsibilities, published exclusively by XpertHR, sets out to discover how the HR function is keeping pace

Almost three-quarters of employers (72%) rate their HR function as ‘very effective’ or ‘above average’. The survey shows that organisations typically use a wide range of measures to assess HR effectiveness, including absence management data (85%), staff turnover data (83%), and results of employee surveys (66%).

According to the survey, the number of HR staff has fallen in 25% of respondent organisations over the past two years, but has increased in 34%, and stayed the same in a further 41%. Half of employers (50%) report that the main reason for the rise in HR practitioner numbers was to meet a growing workload – not surprising given the challenges faced by organisations since the start of the recession. The other key factor affecting changes in HR staffing levels – either upwards or downwards – is the need to reflect changes in employee numbers elsewhere in the organisation (37%).

XpertHR employment relations editor Noelle Murphy, who oversaw the survey, says: “With job cuts and redundancies on the table at many organisations, having an effective HR function has been vital to steer through complex compliance issues to ensure that any steps taken resulting in job losses will not leave employers open to claims of unfair or wrongful dismissal.”

The survey shows the average ratio of HR practitioners to employees has fallen slightly since last year’s findings. In 2009, the HR:employee ratio was 1:87, compared with 1:90 in the latest research. Although the two sets of figures are based on different samples, it is not an unexpected finding, given the economic conditions and accompanying job reductions experienced by many organisations over the past year.

On the board

The level of HR representation within organisations, and HR presence on the board, has long been an issue for the HR community. The research shows that in more than one-quarter of organisations (26%), HR is represented on the main board by a director responsible solely for HR. In a further 23% of organisations, the director responsible for HR sits on the main board, but is responsible for other areas as well.

In 29% of organisations, the highest seniority at which HR is represented is at manager level. In 13%, there is a director solely responsible for HR who does not sit on the main board; in 8% a director is responsible for HR and other areas but also does not sit on the main board.

Respondents, all HR professionals, are positive about how HR is positioned within their organisations. Two-thirds (66%) report the influence of the HR function has increased over the past two years – 30% think it has remained the same, while just 4% say it has decreased.

Reporting lines are also a good indicator of the level of influence a function has within an organisation. Findings show 45% of the most senior HR people report to the chief executive or chairman, while a further 29% report to the managing director, suggesting that HR is well positioned within most organisations. Just 16% of the highest-ranking HR executives are one step removed from this top reporting line, answering to either the operations or finance director.

Documented HR strategy

Half of the organisations (50%) taking part in the survey have a documented HR strategy in place. This is developed as an integral part of the main organisational strategy in just over half of these organisations (51%). In a further 41% of cases, the HR strategy is developed after the corporate strategy is agreed.

The survey also looked at whether the function has control over its own budget. Two-thirds of respondents (66%) say their organisation’s HR function has its own budget. When all HR running costs are taken into account, as well as all HR activities for the organisation as a whole, the average annual HR budget is £335,000. According to the median measure, this equals a spend of £1,076 per employee, or £75,203 per HR staff member.

In terms of changes to the HR budget, 28% of organisations report that it has increased, 19% that it has remained constant, and 39% that it has fallen. Fewer respondents expect a further increase over the next two years: 19% predict that the level of HR budget for all HR activities within the organisation will increase, 34% expect it to remain the same, and 35% predict a fall.

Murphy says: “Our respondents are realistic about the future.”

The survey

The IRS survey of 253 employers, covering a combined workforce of more than 355,000 people, looked at how HR departments are rising to the challenges of the past 12 months and explored how HR is positioned within organisations. HR professionals respond to the findings:

  • Two-thirds of respondents say the influence of the HR function has increased within their organisations over the past two years.

“This signals a recognition that HR can, and should, offer more than just technical expertise. It’s about supporting key leaders by acting as true business partners and being a critical friend.”
Jayne Billam, HR director, University of Lincoln

  • The average ratio of HR practitioners to employees is slightly less favourable than last year.

“It’s understandable that HR has been affected by the economic recession, the same as any other function. But the danger is that there are people challenges to address – and will be for some time – such as retention, motivation, and tax and pensions changes. Without having the HR staff needed to deal with these, organisations will struggle to retain their competitive edge.”
Julie Armstrong, HR director, Manchester Airport

  • Half of the organisations surveyed have a documented HR strategy in place. This is developed as an integral part of the main organisational strategy in 51% of these organisations.

“Exactly as the other components of our company are accountable for their performance, so is our HR function. Our HR strategy is one of the most important of all of the strategies in place for our business – without great people we don’t win business, we don’t retain clients and we don’t grow.”
Liz Jones, manager, people and practice, Launch Group

  • In 26% of organisations, HR is represented on the main board by a director responsible solely for HR.

“This is an interesting statistic, but not totally surprising. Appropriate access to the chief executives and directors or senior managers, together with a collaborative approach to people issues within the company, is far more important than sitting on the board. I’m lucky that I have this in my role at Angel, and it works extremely well.”
Andrew McManus, head of HR, Angel Trains

HR job opportunities on the rise

According to the latest Monster Employment Index, released on 12 January, the growth in the number of HR jobs available has outstripped that of any other function. Employers, it appears, are hiring HR staff ahead of the expected recovery.

The index showed an 8% increase in the number of HR jobs advertised online between November and December last year, up for the third consecutive month.

Jonathan Der, a senior economist at Monster Worldwide, told Personnel Today: “Companies take on HR staff to enable them to take on more [non-HR] staff. We expect that once the HR industry has its staffing in place, there will be a bigger turnaround in other functions as far as hiring goes.”

But Der cautioned that the rise could also be down to companies seeking to make up for over-zealous cuts in early 2009.

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