While it’s no secret that the Human Capital Management (HCM) component of midsized businesses (consisting of 50-999 employees) accounts for the lion’s share of expenses at companies (as much as 60-70% of total expenses), according to an IT Business News article.

Among the study’s surprising findings was that fewer than a third of business leaders who responded fully understand what goes into their total HCM costs, according to the ADP study. The study discusses how important it is for a business to know its TCO, or “Big Number” – the total amount of all direct and indirect costs of managing employees.

The Big Number is comprised of what ADP deems the five key areas of HCM:

• Payroll
• Employee benefits administration
• Talent management
• HR administration
• Time and labor management

Despite the obvious importance of HCM, TCO and the Big Number, the study also revealed that:

• Only one in five midsized businesses has done a formal cost analysis of all five HCM areas.
• Four in ten have conducted a formal cost analysis of payroll, time and attendance and employee benefits administration alone.
• Only one in six has done any kind of cost analysis in the last three years – or at all.

The Take-away From the Study

While more than half (54%) of the business owners surveyed indicate that managing employees is important on a day-to-day basis (second only to overhead costs), and most business leaders feel that their TCO costs are under control, most senior executives surveyed feel that cost analysis is too complicated to bother with; or that TCO is just too difficult to track accurately. Which begs the question, how transparent are most companies’ HCM costs if business leaders don’t seem to fully understand them?

Further, is it HR’s job to make sure that they are? Suffice it to say that it’s in the best interest of both C-suite executives and HR to be clear on what’s driving the firm’s HCM costs.

As this itbusinessedge.com blog indicates, linking “…human capital and performance with management strategy and business goals is a keen point of interest for both HR and upper management.” It makes sense, but how should companies go about doing that?

Paging Big Data…

The blog makes a strong case for – and 2015 workplace prediction that – advanced work force analytics will help companies break down and digest their HCM data with somewhat less uncertainty regarding its outcomes than has previously been the case.

In other words, cost management can be made more understandable if workforce data can be more easily deciphered and less “unstructured” than it tends to be. For starters, the blog circles back to the ADP TCO study and a senior ADP executive, who cites the importance of measuring all five of the HCM “Big Number” components to determine work force TCO.

After all, it’s difficult to manage costs without first measuring them.

…Which will get even bigger in 2015

In addition to helping business leaders better understand their workforce data, Big Data analytics are expected to deliver other advanced workforce management tools in 2015 – including what’s known in IT circles as evidence-based decision making. That workforce trend and the ones below are courtesy of Kronos’ Workforce Institute, comprised of internal and external HR executives.

Be on the lookout for:

• The effect of regulations in response to changes imposed by the Affordable Care Act and new minimum-wage laws.
• Greater investment in the work force (especially hourly employees) to increase employee engagement amid greater competition for talent.
• A shift in generational workforce dynamics, as more Baby Boomers retire, Gen X workers are promoted in their place, and Millennials take on managerial roles.
• Workforce management software suites and mobile platforms will continue to evolve and become more sophisticated and integral to HR jobs.

It may seem daunting in some ways, but data analytics and advances in technology are designed to make HR and managerial jobs easier, not more complicated.

Next week: How Our Jobs May Make Us Happier in the Future.