Zeitlberger, Hackett: Fear not, HR and finance costs are going down!
General and Administrative expenses (G&A) of global organizations are dropping, says Werner Zeitlberger, senior manager, The Hackett Group.
„We see that in 2003 companies were spending more than 5% on their G&A functions, while in 2013 it dropped under 4%”, Zeitlberger says.
G&A functions, including financial, HR, IT and procurement administrative costs, saw a decrease from 5.20% of revenue in 2003, to 4.42% in 2006, 4.25% in 2009, to grow to 4.48% to 2011 mainly due to financial costs, and then following a descending curve from 2013 to 3.95% of the revenue and in 2014 to 3.77%.
The G&A cost is estimated to further drop to 3.67% of revenue this year and 3.57% during 2016, according to The Hackett group study received by Outsourcing Today.
„We observe that the companies will further decrease their G&A functions. We see the HR cost stayed the same during the years, to roughly 0.6% of revenue in 2003 to 2014, in spite of personnel reductions. We expect HR costs to further drop during the next years,” he says.
Also, in 2015, global large companies (defined by Hackett Group as World –Class companies) decreased their finance functions by 40% as percentage of their revenue, as opposed to 2005 levels.
„In finance, in 2015, world class companies are spending 40% less for their finance functions, against their revenue base, and that’s impressive”.
Also IT costs dropped.
“In 2003-2005 World class companies invested into standardization and harmonization of their systems and now they dropped costs quite significantly, by 22%”.
The survey results, expressed in real value USD as percent of revenue or spending, include cost per employee or per user equivalent in two axes, the peer group and the World –Class lines.
The Hackett Group sees a decline in SG&A costs due to investments.
Most companies surveyed within the Global Business Services (GBS) sector consider in a larger ratio (22%) as a top priority initiative reducing SG&A costs, second only to another top priority of optimizing sales and marketing in commercial organizations (27% of respondents considered this a top priority).Third place in top priorities list is optimizing cost structure (17%), while fourth is improving enterprise talent (15%).
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