Businesses that fully understand their costs, right down to cost per employee, have a competitive edge over those that don't. In the mid-sized company arena, more than half of companies that participated in a study have only a modest understanding of where their investments in personnel truly stand.
The study was commissioned by ADP with findings delivered via a Harris poll of more than 1,000 mid-sized (50 to 999 employees) firms. Participants were specifically asked about their understanding of their total cost of operation, a measure of the true investment a company makes in its business. TCO includes measures that, according to the study, many businesses do not factor in.
The major conclusion drawn by the researchers: 73 percent do not calculate TCO correctly. That's because they're not considering one or more of the five following "pillars of TCO:"
- Payroll
- Employee benefits administration
- Talent management
- Human resources administration
- Time and labor management
"While about six in 10 respondents indicated they have a good familiarity with the TCO concept, only 25 percent could provide an estimate of their human capital management TCO across [the five pillars]," the report said. "One of the key findings the study revealed is that it appears midsized businesses tend to underestimate the all-in costs of managing a workforce."
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
