Editor:
Susan F. Sandler
NOVEMBER 2008
VOLUME
85 NO. 11
Inside this month
COVER STORY: Set 2009 HR Goals
Consistent With Slowing Economy
It’s no surprise that hiring and other trends
within HR are moderating. Find out the lat-
est benchmarks from a leading information
provider.
  3 RETENTION: Ideas for Building and
Expanding Diversity Initiatives
Even “elite” professional services firms
struggle to get diversity initiatives right.
Learn from their successes and challenges.
  6 BENEFITS: Drug Cost-Control Is Still
Key in a Tough Economy
Has your organization gone far enough?
Learn what other companies are doing to
tighten drug spending.
10 LEGAL: What the ADA Amendments
Act Will Mean to Your Organization
Find out why you need to schedule a review
of policies and procedures now to be sure
you meet the demands of the new law.
DEPARTMENTS
  2 Legal Insights
  8 HRfocus News Briefs
12 Compensation & Benefits News
15 HRfocus Calendar
Research Manager:
Bikram Gautam
V.P., Publisher:
Perry Patterson
Sr. Managing Editor:
Janice Prescott
Managing Editor:
Maggie Shaw
Sr. Marketing Manager:
Laraine Kelly
Design:
WWW.IOMA.COM/HR David Allikas
President:
Joe Bremner
HR METRICS
Set 2009 HR Goals
Consistent With
Slowing Economy
Y ear-end is a time for HR professionals to look ahead as
well as take in current trends that are affecting the opera-
tion of the HR department. This look is never more important
than during times of change, which certainly define the situa-
tion of many industries and organizations right now.
Metrics and benchmarks are an increasingly important way
for HR to assess and plan. This is so not just within your de-
partment and the organization but also for the bigger picture
of what is happening with HR practices, budgets, and expen-
ditures in your organization’s industry and in the economy as
a whole.
An excellent resource for the most current benchmarks is
HR Department Benchmarks and Analysis 2008. The annual
report is produced by a team of researchers at the Bureau of
National Affairs (BNA), the parent company of HRfocus’s
publisher. The information collected from HR professionals
focuses on traditional HR functions and emerging issues in
HR and contains data on staffing, expenditures, measurement,
and planning.
Highlights from the responses of HR professionals at 607
U.S.-based organizations will help your organization to assess
the “state of the industry” as it is now and will help you in
looking forward to the year ahead.
MODERATION TREND
Activities and growth of HR departments are moderating in
a number of areas, perhaps in response to the uncertainty in
the economy that was present late in 2007 (the period during
which the data for the report was being collected).
HR staffing ratios declined in this most recent report, com-
continued on page 1
employers are not required to pro-
vide a reasonable accommodation
to individuals who are regarded as
disabled, an issue over which the
federal courts of appeals were pre-
viously split.
“In addition, the ADAAA may
have a limited impact in states where
the state or local law already defines
‘disability’ more broadly than the
existing ADA.”
Review your materials and consult
with your organization’s lawyers to
see what changes are recommended
to protect your organization. o

HR METRICS (cont’d from page 1)

pared with the 10-year highs re-
corded in 2005 and 2006. Also, HR
expenditures stabilized in this last
year, following a period of growth
from 2004 to 2006. Another area of
stabilization is average HR depart-
ment staff salaries.
The proportion of HR departments
taking on new responsibilities also
declined from 2006 levels, follow-
ing a four-year increase.
HR STAFF
The median HR staff ratio across
all surveyed organizations declined
slightly from 1.1 HR staff members
for every 100 employees served in
2005 and 2006 to 1.0 in 2007 (see
Table 1). “This decline in the HR
staff ratio was coincident with a
softening U.S. economy, particu-
larly in the manufacturing sector,”
the report concluded.
Organizations with larger work-
forces typically dedicate fewer
staff per 100 employees to carry
out HR’s varied roles, a trend that
is unchanged. While organizations
with fewer than 250 employees
have a median staff ratio of 1.8 HR
employees for every 100 workers,
organizations with 2,500 or more
workers have a median staff ratio
of 0.7 HR employees for every 100
workers. This lower staff ratio for
larger organizations appears to be
one of the benefits of economies of
scale, according to the report.
The more core activities that an
HR department performs, the higher
the staff ratios. “This points to the
need for organizations to adjust their
assessments of suitable HR staff ra-
tios for comparative benchmarking
purposes to take into account the ac-
tivity load of their HR department,”
the report noted.
More HR staff are likely to be
specialists now: The proportion of
HR departments with specialists on
staff has steadily increased over the
past four years. Six in 10 HR de-
partments (60 percent) surveyed in
2007 have at least one nonclerical
specialist. In 2004, only 46 percent
had a specialist.
The growth in the proportion of
specialists indicates the growing
professionalism of the HR function,
the report observes. HR specialists
are most often employed in the
areas of benefits, employment, and
recruitment.
Although there are more special-
ists, there are fewer secretarial and
clerical workers on HR staffs now:
Just 20 percent of the department
work in this capacity, compared to
27 percent in 2004.
Data for 2007 show the highest net
increases in HR staff levels in the
past 10 years, the report observes.
This year, one in three organizations
(33 percent) report additions to HR
staff, while 15 percent indicate HR
staff cuts for a net increase of 19 per-
centage points. “This is a dramatic
increase from 2002 and 2003 when
the percentage of employers report-
ing HR staff cuts and staff increases
was virtually identical.”
Three out of four HR departments
(75 percent) hire contingent work-
ers for their organizations. Among

Table 1. HR Staff Ratios by Workforce Size

25th 75th
Low Percentile Median Percentile High
All employers 0.03 0.6 1.0 1.8 10.3
By workforce size
Less than 250 0.43 1.1 1.8 2.5 10.3
250 to 499 0.26 0.9 1.4 1.8 5.9
500 to 999 0.30 0.7 1.0 1.5 8.5
1,000 to 2,499 0.30 0.6 0.9 1.4 6.7
2,500 or more 0.03 0.4 0.7 1.1 7.1

(Source for all tables: HR Department Benchmarks and Analysis Survey, 2007-2008 © 2008 BNA Inc.)

hrfocus / NOVEMBER 2008

  11
 HR METRICS (cont’d)

those departments, nearly three out
of four (74 percent) assume all or
most of the responsibility of hiring
contingent workers (29 percent) or
share that responsibility with line
management (45 percent).
HR departments are increasingly
global: Nearly one in five HR depart-
ments (19 percent) serve employees
outside the United States. Responsi-
in 2007 at 1.2 percent. These find-
ings are consistent with a lack of
growth in the median HR staffing
ratio, the report explained.
HR COMPENSATION
HR staff members continue to earn
more on average than other workers:
HR salaries constituted a median of
1.4 percent of organizations’ bud-
of the list of HR spending priori-
ties, with only 10 percent of HR
executives anticipating increases
in this area.
MORE TRENDS
Other major trends cited in the report
that will be of interest to HR profes-
sionals in the year ahead include:
 Measurement and strategic

bility for global HR operations most
often resides at the corporate level
within the United States. Imple-
menting and administering global
HR policy, however, is more likely
to be handled abroad at the regional
or country level.
BUDGETS & EXPENDITURES
Median HR expenditures for 2007
were $1,082, only a marginal in-
crease over the $1,056 per worker
budgeted by HR departments in
2006 (see Table 2). The projected
median budgeted increases in HR
expenditures stayed at the same 7.2
percent in the 2007 research as they
were for 2006.
The fact that the last big increase
was from 4.9 percent in 2005 to the
2006 number suggests a moderating
trend, the report noted, “possibly
growing out of the economic uncer-
tainties felt by businesses and other
geted payroll in 2007, unchanged
from 2006.
Comparing this figure with the
median staffing ratio of one HR
employee for every 100 workers
served demonstrates that the share
of payroll going to HR staff mem-
bers exceeds their proportion of the
overall workforce—and so indicates
that average pay for HR employees
exceeds the pay of workers in the
rest of the organization.
However, median HR department
staff salaries grew less in 2007 than
in 2006. The median HR department
staff salary in 2007 was $62,301, a
5.2 percent increase over median
salary levels in 2006 ($59,220). The
2006 salary figure, however, was a
7.7 percent increase over the median
HR staff salary of $55,000 earned in
2005, indicating a slowing in salary
growth of HR staff (see Table 3).
The top areas for increased HR
planning. HR departments are most
likely to focus their measurement ef-
forts on compensation and benefits,
and staffing activities. More than
half of HR departments regularly
apply measurement and planning
tools to the area of compensation
and benefits (59 percent) and work-
force staffing (52 percent). Many
HR departments also regularly ap-
ply measurement to assess cost sav-
ings (44 percent) and training and
development activities (40 percent).
Regular measurement is rare in the
areas of succession planning (26
percent) and workforce diversity
planning (22 percent).
Not surprisingly, HR departments
in larger organizations measure their
activities more often. This is true for
all measures surveyed but especially
so for employee relations and suc-
cession planning.
 Access to top executives. Re-

organizations in 2007.” expenditures by HR executives in spondents indicate their HR depart-

HR budgets as a percentage of to-
tal operating costs also stabilized in
2007, after increasing steadily from
0.8 percent in 2002 to 1.2 percent in
2006. This figure as a percentage of
total operating costs was unchanged
2007 are compensation (54 percent),
followed by benefits (52 percent),
employment and recruiting (44
percent), and training and develop-
ment (44 percent), the report noted.
External relations is at the bottom
ments have access to the highest
levels of management in their orga-
nizations, and report high levels of
involvement in the key business de-
cisions within their organizations.
Six in 10 survey respondents

Table 2. Per Capita HR Expenditures Budgeted by Workforce Size

25th 75th
Low Percentile Median Percentile High
All employers $70 $641 $1,082 $2,255 $6,083
By workforce size
Less than 250 537 1,239 2,153 3,190 6,083
250 to 499 308 936 1,532 2,327 5,265
500 to 999 362 657 1,008 1,607 3,708
1,000 to 2,499 161 617 1,008 1,991 5,307
2,500 or more 70 428 827 1,261 4,427

hrfocus / NOVEMBER 2008

  13

(60 percent) indicate that the head
of HR reports directly to the CEO
or president of their organizations.
Reporting relationships between HR
and lower-level individuals—senior
vice presidents, vice presidents, or
directors—are far less common.
In addition, nearly seven in 10
surveyed HR executives (69 percent)
report full or substantial strategic in-
volvement in key business decisions
made in their organizations.
 How top management assesses
HR success. Recruitment, retention,
and partnering to implement key or-
ganization goals are key factors used
by top management to evaluate HR,
according to respondents.
Nearly half of surveyed HR execu-
tives (48 percent) cite recruitment
and retention of employees as among
the most important criteria by which
top management evaluates the per-
formance of the HR department.
Other top evaluation criteria in-
clude partnering to implement key
organizational goals (39 percent)
and internal client/manager satisfac-
tion with HR (30 percent).
 HR department priorities.
These align with what matters most
Table 3. Change in Median HR Staff Salaries, 1997 - 2007
7.0%
6.0
4.9%
5.0
4.6%
4.0
3.0
2.0
1.0
0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
14  hrfocus / NOVEMBER 2008
HR METRICS (cont’d)
to top management: Among the top
priorities for HR departments for
the year ahead were recruitment and
retention of employees (34 percent)
followed by strategic planning and
management (13 percent). Training
and development also are among the
more important stated HR priorities
for 2008.
 HR departments and strategy.
HR departments that measure more
regularly report larger strategic in-
volvement in their organizations. In
fact, the more HR measures, the more
likely it appears that HR is involved
in the organization’s strategy.
 Outsourcing. The use of out-
sourcing continues to rise: The pro-
portion of organizations that out-
source HR activities has increased
from levels seen in the prior decade,
according to the report.
Three-quarters (75 percent) of
the organizations surveyed report
that they outsource at least one HR
activity. Comparable outsourcing
numbers were about 60 percent dur-
ing the late 1990s.
While a majority of HR depart-
ments in all three major industry
sectors have outsourced at least
5.0% 4.9% 5.0%
4.4%
4.0%
some HR activities, outsourcing is
less common in nonbusiness orga-
nizations (65 percent) than it is in
manufacturing (80 percent) or ser-
vices/nonmanufacturing companies
(75 percent).
The most commonly outsourced
activities continue to be those related
to employee benefits and employee
services. Most often outsourced:
employee assistance plan/coun-
seling (42 percent), preretirement
counseling/retirement planning (36
percent), flexible spending account
administration (35 percent), and out-
placement services (30 percent).
Overall, the top stated motive
for HR outsourcing benefits and
employee services activities is ac-
cess to greater expertise. Cost sav-
ings and improved service also are
important.
The reasons most often given for
outsourcing benefits activities are
access to greater expertise (57 per-
cent) followed by cost savings (36
percent) and improved quality of
service (33 percent).
For outsourcing employee ser-
vices, access to greater expertise (68
percent) also is the most important
5.9%
5.2%
4.2% 4.0%
motive, but improvement in service
quality (40 percent) occupies second
place followed by cost savings (20
percent).
HR departments in smaller organi-
zations (less than 1,000 workers) are
more likely than those in larger ones
to cite access to greater expertise as
a motivation for outsourcing benefits
and employee services activities. HR
departments in larger organizations
are more likely to outsource because
of potential cost savings.
Most HR executives view out-
sourcing of benefits activities as suc-
cessful. Opinions are more mixed on
the success of outsourcing employee
services activities.
And the rating of “successful”
depends upon which factor is be-
ing considered. A majority of HR
executives rate their experience with
outsourcing benefits as “favorable”
in terms of employee communica-
tion (73 percent), vendor quality
of service (69 percent), planning
prior to outsourcing (68 percent),
and reallocation of resources and
net cost savings to the organization
(57 percent).
Ratings on the success of outsourc-
ing employee services is more mixed.
A majority of HR executives report
favorable outcomes in terms of ven-
dor quality of service (69 percent),
communication with employees
(63 percent), and planning prior to
outsourcing (56 percent). However,
nearly two-thirds of respondents (62
percent) report “undetermined” (56
percent) or “unfavorable” outcomes
(6 percent) in net cost savings to the
organization or successful realloca-
tion of resources.
Among organizations that out-
sourced benefits or employee servic-
es, approximately one in 10 reported a
reduction in HR staff. Eleven percent
of HR departments outsourcing ben-
efits activities reported staff reduc-
tions in relation to this outsourcing
initiative, compared with 8 percent
of HR departments that outsourced
employee services activities.
Few HR departments—only 15
percent among the survey respon-
dents—that have outsourced a service
bring that service back in-house. The
report pointed out that this fact under-
scored the importance of HR making
informed decisions about outsourcing,
including due diligence in the initial
HRfocus CALENDAR
Northeast Human Resources Association
Annual Conference Series, various geo-
graphic locations in Massachusetts:
Nov. 5, 2008; Feb. 11 and May 21, 2009.
Contact: NEHRA, 781-235-2900; www.
nehra.com
Recruiting 2008 Conference and Expo,
Orlando, Nov. 16-19. Contact: Ken-
nedy Information, 800-531-0007 or
603-924-1006, ext. 631; conferences@
kennedyinfo.com; www.TheRecruiting-
Conference.com
Employee Benefits: What’s on the Hori-
zon—Regulatory, Judicial, and Legislative
Initiatives, Washington, D.C., Nov. 17-18.
Contact: BNA, 800-952-2477, www.
bna.com
The Best of Talent Management, Lake
Buena Vista, Fla., Dec. 9-11. Contact:
Linkage, 781-402-5400; fax: 781-402-
5556; www.linkageinc.com
IN 2009
Employers of Excellence National Confer-
ence, Las Vegas, Jan. 27-29. Contact:
HR.com, 877-472-6648; events@
hr.com
The 2009 Executive Coaching Conference,
New York City, Jan. 29-30. Contact:The
Conference Board,212-339-0345;www.
conference-board.org
Strategic e-HR Conference, San Diego,
Feb. 4-5. Contact: The Conference
Board, 212-339-0345; www.confer-
ence-board.org
The 2009 Employee Health Care Confer-
ence, New York City, Feb. 12-13; San
Diego, March 19-20. Contact: The
Conference Board,212-339-0345;www.
conference-board.org
Talent Management Strategies Conference,
choice of an outsourcing vendor
and in monitoring the chosen ven-
dor’s performance.
FOR MORE INFORMATION
The complete HR Department
Benchmarks and Analysis 2008 is
available from BNA at www.bna.
com. o
New York City, Feb. 26-27; San Diego,
March 19-20. Contact:The Conference
Board,212-339-0345;www.conference-
board.org
2009 Employment Law & Legislative Con-
ference, Washington, D.C., March 9-11.
Contact: Society for Human Resource
Management, 800-283-7476; shrm@
shrm.org; www.shrm.org
The Summit on Leading Diversity, Atlanta,
March 16-18. Contact: Linkage, 781-
402-5400; fax: 781-402-5556; www.
linkageinc.com
The Best of Organizational Development
Summit, Chicago, May 12-14. Contact:
Linkage, 781-402-5400; fax: 781-402-
5556; www.linkageinc.com
2009 SHRM Global Conference and
Exposition, Toronto, March 31-April 1.
Contact: Society for Human Resource
Management, 800-283-7476; shrm@
shrm.org; www.shrm.org
IHRIM 2009 Conference and Technol-
ogy Exposition, San Diego, April 19-22.
Contact: IHRIM; 1-800-804-3983; www.
ihrim.org
ASTD International Conference & Exposi-
tion, Washington, D.C., May 31-June 3.
Contact: ASTD, 703-683-8100; www.
astd.org
Total Rewards Conference & Exhibition
2009, Seattle, May 31-June 3. Contact:
WorldatWork, 480-951-9191 or 877-
951-919; www.worldatwork.org
SHRM’s 61st Annual Conference & Ex-
position, New Orleans, June 28-July 1.
Contact: Society for Human Resource
Management, 800-283-7476; shrm@
shrm.org; www.shrm.org
hrfocus / NOVEMBER 2008
  15