IN competitive environment dominated by cost-cutting and tight budget justification, the role of human resource is becoming critical to organisational success.

Currently, with workforce investments ranging from 20 to 70 per cent of overall operating expense, the employer expects accountability and quantifiable metrics to measure the outcome of human resource (HR) investments.

The Society of Human Resource Management Forum Pakistan has carried out a human capital industrial productivity benchmark survey with a sample of 50 organisations with data based on financial year 2011 figure. The survey is designed to help in evaluating the HR management function and its ability to enable organisational workforce to generate business in relation to peer industry benchmarks.

As per the survey, on the median scale, the HR staff to organisational staff ratio is two cent in small size enterprises having less than 100 employees, whereas the ratio is one per cent in large entities having 1000 plus employees. This is probably due to economy of scale and well-established systems in large bodies.

On the median scale, the HR cost to operating cost ratio is highest (58 per cent) in the finance sector. At the same time, HR investment per employee is also highest in this industry (Rs 345,898).

Contrary to this, the pay off on the HR investment is not the highest in the finance sector; rather it is the highest in the oil and gas sector. A closer view of this difference reveals that oil and gas sector spends around three per cent of the overall HR budget on training and development of staff, whereas the finance sector spends only one per cent on this count and remaining on compensation of the staff.

Most of the enterprises do not focus on growth of ‘home talent’ for promotion and vertical movement in the organisation. Those who do, reap the benefits also.

In this regard, the most attractive ratio was found in the telecom sector, where 35 per cent of its hires come from internal pool of staff and the average time to hire in the telecom sector is also best (30 days).

Internal ‘hiring’, well-timed, brings a lot of financial savings in terms of cost of hiring and training, and better productivity associated with immediate availability and speedy learning curve.

Interestingly, finance sector average cost per hire is highest in the whole industrial sector (Rs25,000). Despite this, the staff turnover rate is highest in this sector (15 per cent) with a split of nine per cent as voluntary and the rest involuntary.

The finance sector also has the highest premature turnover rate of three per cent ( people leave before completion of six months’ service); whereas in all other sectors, the premature turnover rate is very negligible. The HR productivity benchmarks are also influenced by external market. Apparently it also seems that finance sector offers more avenues for job mobility due to its growth.

In terms of salary and benefits, finance and manufacturing sectors are pay masters with annual median salaries per staff ( total employees) between Rs340,003 and Rs342,243. Within the spectrum of compensation, the organisations offer different mix of salary and benefits package.

As per the survey, small companies prefer to pay clean salary packages whereas large companies make a mix of salary and benefits. In oil and gas sector, the salary is 58 per cent and the rest are benefits. In terms of annual salary raise, the telecom sector paid maximum 14 per cent increase during year 2011.

Overall the finance sector is highest in compensation to revenue ratio (29 per cent ), compensation to operating cost ratio (48 per cent), and also compensation to HR cost ratio (99 per cent).

On account of training and development, large companies invest more (Rs12649 per staff) on median scale. Sector wise, oil and gas stood on the top with three per cent of overall HR spending on staff training and its median training investment per employee is Rs4187.

The finance sector spent only one per cent of the overall HR cost on training and development of staff.

The operating cost per employee is lowest in telecom sector (Rs345,545) which indicates a better cost management. In terms of profit per employee per year, the manufacturing sector (durable and non-durable, pharmaceuticals) stands highest with Rs252,851. In this survey, finance sector turns out as a preferred choice for the female staff as its male to female ratio is seven. On the other hand, the male to female ratio is the highest 57 in the manufacturing sector.

Pan Pakistan study can be helpful to the organisations in evaluating their performance in relation to industry benchmarks. However benchmarks are just benchmarks, not good or bad figures.

For example, if a company’s operating cost per employee is higher than most, it doesn’t necessarily mean the company is inefficient. It could be due to organisational policies, environmental concerns that competitors do not cater for and maybe because of the large depreciation expense due to a large number of fixed assets.

zahid@thehrmetrics.com