HR managers still struggle to understand the total cost of managing their workforces. Knowing where to turn can help them gain a competitive advantage.
Human capital management — or HCM — is an essential component of today’s corporate strategy. HR decision-makers who try to estimate workforce costs without understanding the key components of HCM set themselves up for unintended expenses, potential fines and penalties, and unexpected distractions – such as employee-related disputes – that may arise down the road. Formally analyzing the total cost of ownership (TCO) of their workforces, on the other hand, frees up HR decision-makers to help their companies have better focus on their strategic goals.
“Realizing my total cost of ownership made my department more efficient, enabling them to concentrate on things like employee relations, which is where my people need to be concentrating, not on the paperwork,” says Ronald Weaver, SVP of HR at American Campus Communities, a student housing company that oversees 190 campus properties throughout the United States.
American Campus Communities uses ADP Workforce Now®, an innovative platform for integrated HCM that includes all five pillars: payroll, benefits administration, time and attendance, talent management, and HR administration. With Workforce Now, midsized companies can take advantage of a streamlined solution to manage the day-to-day workforce essentials so they can turn their attention to the strategic work of HR.
Yet, there still seems to be a gap between what companies think they know about HCM, and how their TCO is currently being estimated.
The ADP Research Institute (ADPRI) found that many midsized companies are unaware of the unknowns associated with their workforce TCO. More than half (58%) of surveyed HR leaders are familiar with the TCO concept, but less than a quarter (22%) accurately analyzed their TCO in the past 12 months. What’s more, when estimating their TCO, only slightly more than a quarter (27%) could name all five HCM areas.
This inability to identify the five pillars can cause daily distractions at midsized companies where HR departments are particularly lean, costs are worrisome, and efficient systems may be lacking. In fact, while 56% of HR leaders stated they have a plan to manage or reduce their labor costs, 37% of them lack confidence in those plans.
Analyzing some of these costs, then, can save precious dollars and time that can be better spent focusing on broader, more strategic goals. ADP can help pinpoint exactly where to look to accurately analyze company TCO.
“It’s just a huge burden off my shoulders,” Weaver says, “having that guidance and that help.”
In some instances, simply knowing where to turn for help is all the confidence these professionals need.
For more information on how midsized companies are analyzing their TCO, download the full report.
This article originally appeared on the ADP@Work Blog.