HR Budget Outlook for 2014

Late last month, I did a Q&A with Harry Osle, principal in charge of HR transformation and advisory services at the Hackett Group, at our corporate offices in Palm Beach Gardens, Fla. Osle shared the key headlines (and what they mean for HR leaders) from Hackett’s latest 164719145research on HR’s 2014 agenda, which was officially released yesterday and will be distributed on the Business Wire next Tuesday.

During our discussion, one of the topics Osle briefly touched on involved HR budgets for 2014. Generally, the picture Osle (and Hackett’s research) painted isn’t terribly rosy and is pretty much of a repeat of what Hackett found for 2013. Overall, he said, budgets are going to be flat to down -1 percent while full-time-equivalent headcount is going to be down, on average, -2.7 percent.  Sure, some organizations should see modest increases while others will see modest decreases, but, in general, many HR departments are going to once again be in the familiar position of doing more with less.

Right in step with this outlook, you probably read or heard this morning’s jobs report, with the Bureau of Labor Statistics reporting that the U.S. economy added 113,000 jobs in January, far fewer than the 180,000 economists were predicting. Some cited bad weather as a major reason for disappointing numbers, though there’s no way to know how much of a factor that was. (Manufacturing and construction were the two bright spots in the report, adding 21,000 and 48,000 jobs, respectively.)

In the Hackett study, 48 percent of the 150 organizations studied are forecasting a budget increase in 2014, while only 27 percent are projecting an increase in staff. “This will be a year of altering the way that money and staff will be aligned to enable HR to deliver higher-value services while keeping costs relatively flat,” the report says.

Put another way, organizations are going to have to be very smart about the way they spend their HR dollars this year.

In light of these findings, it’s probably no surprise that those surveyed by Hackett indicated they will be counting on measurement and data more in 2014. If an HR leader is going to invest in a new strategy or initiative aimed at addressing a current challenge or better positioning the company for the future, it figures that he or she is going to want to know how these initiatives are paying off and impacting the businesses’ overall performance.

For most of you, I suspect Hackett’s HR-spend numbers don’t come as a huge surprise. Doing more with less has become something of a mantra in recent years for those in the profession—which would also lead me to believe most of you are probably getting pretty good at it by now (and hopefully wiser in the way you allocate your dollars). So if there’s a silver lining here, I’d have to think HR has an opportunity, yet again, to get even better (and smarter) at maximizing its spend between now and the end of the year.

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