OBJECTIVE:

Uncover True Spend on
Enterprise–wide HR Activities

Situation
A prestigious academic medical center was faced with the challenge of implementing an ambitious growth strategy while at the same time controlling escalating operating costs. At the same time, deteriorating economic conditions were negatively impacting endowments and other funding sources. An internal review of cost saving opportunities was mandated. The Human Resources function, traditionally regarded as underfunded, was already undergoing a major re-design initiative. It became clear that the historical lack of resources had spawned an enterprise-wide network of “shadow” HR functions within operating units. Redundant units or positions had been established to perform tasks related to talent acquisition and retention as well as core HR processing activities. There was no mechanism in place to capture the true “HR Spend” or to take advantage of the economies of scale available to the larger organization.

Strategy
Through the initial re-design effort, HResults had identified several areas of the broader organization where HR redundancies had been established to supplement or substitute for services either under-resourced or not provided by the central Human Resources department. We were engaged to develop a process to identify those significant areas where these expenses were being incurred and to factor these costs into an overall business case for the funding of HR services.

Working closely with internal Financial, HR and Operating managers, we identified several key spending categories. Through a process of budget reviews, vendor identification and manager interviews, we developed a profile of the true spend in these categories and were able to project an enterprise-wide pro forma presentation to senior leadership.

Outcome
The forensic HR review identified expenditures related to talent acquisition and management outside of the HR Department that were either misclassified or buried in unrelated budget categories. These costs were essentially unmanaged. As a result:

• In excess of $650,000 in immediate and short-term savings opportunities were identified
• Longer term opportunities for cost saving and cost avoidance in excess of $4.5 million were targeted and plans were developed to achieve this objective. Actions included:
• Elimination of task redundancies and “work around” processes
• Re-negotiation of vendor contracts to take advantage of economies of scale
• Senior leadership policy mandates
• Improved lost time management procedures
• Enhanced communications

Central to the success of these actions was to address the situation that enabled their formation in the first place. This required defining and communicating the role of the HR Department, development of HR service level agreements and identification of clear accountabilities.