Evaluate the HR Budget Planning, Proposal and Negotiation Strategy
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Evaluate the HR Budget Planning, Proposal, and Negotiation Strategy From burden to boardroom: transform your HR budget to become a strategic partner If you are having problems with your HR budget, you are not alone. Over 40% of organizations do not have a formal HR budget; those that do have budgets suffer from poor data and declining resources. Most forecasts underestimate HR spend; HR costs can far exceed official budgets Some organizations experience related costs that are over 90% higher than planned. Over the past three years company revenues have increased nearly 20% while HR budges and staffing have declined. Compared to other HR functions, HR Budgeting ranked low in both effectiveness and priority. Only 31% of respondents rated their HR budgeting practices as either “Effective” or “Very Effective.” Out of the 31 HR functions, HR budgets ranked 16 th in effectiveness. Only 29% of respondents stated that HR budgeting would be a major priority for the upcoming year. HR budgeting ranked dead last in terms of priority. Source: McLean & Company’s Trends and Priorities for 2014 However, HR budgeting effectiveness was strongly linked with the effectiveness of the HR department as a whole. Attempts at creating an effective HR budget suffer from a variety of underlying challenges, including: HR is viewed as overhead rather than as a business partner The organization is focused on cost reduction rather than making major investments. HR lacks the time and/or the sufficient knowledge to create an efficient budget. HR struggles to demonstrate the value of HR investment Business and Stakeholders lack and understanding of HR spending A well-defined process – such as the one suggested by McLean & Company – combined with a detailed project timeline will alleviate the stress associated with HR budgeting. There should never be such a thing as an HR initiative, just business initiatives; every dollar spent in HR should help the business achieve its goals. Consult with stakeholders before, during, and after budget creation for best results. The key steps to an effective HR budget include: determining the gaps between business needs and current HR initiatives, using historical data to forecast next year’s HR operational costs, defining HR projects that fill business gaps and forecast their costs, negotiating appropriately in order to maintain stakeholder satisfaction. Partner with Finance and create a timeline that details the HR budgeting process and deadlines
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From burden to boardroom: transform your HR budget to become a strategic partner. Your Challenge Over 40% of organizations do not have a formal HR budget. Those that do have budgets suffer from poor data and declining resources. Attempts at creating an effective HR budget suffer from a variety of underlying challenges, including: a view of HR as overhead rather than a business partner, a lack of time/knowledge to create an effective budget, and a struggle to demonstrate the value of HR investment. Our Advice Critical Insight A well-defined process – such as the one suggested by McLean & Company – combined with a detailed project timeline will alleviate the stress associated with HR budgeting. There should never be such a thing as an HR initiative, just business initiatives; every dollar spent in HR should help the business achieve its goals. Consult with stakeholders before, during, and after budget creation for best results. Impact and Result Determine the gaps between business needs and current HR initiatives. Use historical data to forecast next year’s HR operational costs. Define HR projects that fill business gaps and forecast their costs. Negotiate appropriately in order to maintain stakeholder satisfaction.
Transcript of Evaluate the HR Budget Planning, Proposal and Negotiation Strategy
Evaluate the HR Budget Planning, Proposal, and Negotiation StrategyFrom burden to boardroom: transform your HR budget to become a strategic partnerIf you are having problems with your HR budget, you are not alone. Over 40% of organizations do not have a formal HR budget; those that do have budgets suffer from poor data and declining resources.Most forecasts underestimate HR spend; HR costs can far exceed official budgetsSome organizations experience related costs that are over 90% higher than planned. Over the past three years company revenues have increased nearly 20% while HR budges and staffing have declined. Compared to other HR functions, HR Budgeting ranked low in both effectiveness and priority.Only 31% of respondents rated their HR budgeting practices as either “Effective” or “Very Effective.” Out of the 31 HR functions, HR budgets ranked 16th in effectiveness. Only 29% of respondents stated that HR budgeting would be a major priority for the upcoming year.HR budgeting ranked dead last in terms of priority.
Source: McLean & Company’s Trends and Priorities for 2014However, HR budgeting effectiveness was strongly linked with the effectiveness of the HR department as a whole.Attempts at creating an effective HR budget suffer from a variety of underlying challenges, including:HR is viewed as overhead rather than as a business partnerThe organization is focused on cost reduction rather than making major investments.HR lacks the time and/or the sufficient knowledge to create an efficient budget.HR struggles to demonstrate the value of HR investmentBusiness and Stakeholders lack and understanding of HR spendingA well-defined process – such as the one suggested by McLean & Company – combined with a detailed project timeline will alleviate the stress associated with HR budgeting.There should never be such a thing as an HR initiative, just business initiatives; every dollar spent in HR should help the business achieve its goals. Consult with stakeholders before, during, and after budget creation for best results.The key steps to an effective HR budget include: determining the gaps between business needs and current HR initiatives, using historical data to forecast next year’s HR operational costs, defining HR projects that fill business gaps and forecast their costs, negotiating appropriately in order to maintain stakeholder satisfaction. Partner with Finance and create a timeline that details the HR budgeting process and deadlines for each step of the process.Understand the overall business strategy and meet with key stakeholders in order to determine the gaps between business needs and current HR initiatives.Use historical data to forecast next year’s HR operational costs.
