6 Ways to Use Labor Cost Benchmarking to Support Financial Decision-Making

Understanding your labor spend is critical to financial decision-making. Oftentimes, departmental budgeting approaches limit visibility into true labor spending patterns, reinforcing siloes and encouraging duplication of job activities. One way to solve for this is to consistently map your labor spend data to allow for a more granular view of the individual activities being completed within each job role.

Unique to HelioCampus, we use our Standard Activity Model (SAM) to enable this level analysis so you can compare your spending with other members, as well as within your own institution, by using using a common set of analysis factors and characteristics. It's this differentiated approach that opens up a number of options for using your labor cost benchmarking data. Read on for 6 examples for how to put this data into action, from informing finance processes to workforce planning.

Putting Labor Cost Benchmarking into Practice and Creating Usage Goals

1. Budgeting and financial planning: Support budgeting focused on cost containment, revenue generation, and strategic investment. By understanding and analyzing the largest source of expense for an institution - labor spend - you can identify opportunities for staffing efficiencies and investments.
   
   1. Annual budget presentations: Benchmarked data supports annual budgeting by providing a new set of data by which to evaluate spending, introducing a new step in the budgeting process to provide further justification for decision-making.
2. Support workforce planning: Review administrative and academic labor data to optimize your staffing mix, support organizational restructuring, and inform hiring and retention.
   1. Resource planning: Benchmarked data provides justification to support or deny additional headcount requests.
3. Enable student success: Evaluate your staffing investment to determine the most effective distribution of labor to support student success.
4. Support the academic mission: Understand and optimize the balance between administrative and academic staff in your schools and colleges relative to student enrollments to support the academic mission.
5. Demonstrate financial sustainability: Using benchmarking data demonstrates your institution is managing finances in alignment with your mission and strategic planning, as well as providing evidence of good financial stewardship for accreditation.
6. Plan for research growth: Support strategic planning for research growth, and use data to evaluate how your institution can chart a path to reach research targets efficiently and effectively. 

Let's take a look at some of these usecases in action with current members.

Reimagining Workforce Planning

The University of Buffalo needed a data-driven approach to hiring and retention to remain financially stable in the coming years. Specifically, they wanted to:

• Redefine/reclassify roles and positions
• Evaluate payroll reduction opportunities
• Highlight redundancies for centralization or shared services

The Benchmarking Consortium helped them get a comprehensive view of staffing investments to clearly bucket roles into three categories - strategic (for future-focused roles), core (for essential services), and "currently utilized" - positions that a department might re-envision if the current staff member were to leave or retire. They analyzed every single position at the university (with the help of our SAM), and discovered that about 25% of the current jobs fell in this final category. 

This data led them to the realization that they had an opportunity to fundamentally change their approach to hiring. For example, they could consider payroll reduction and redeployment. They could focus on promoting from within, turning veteran roles into entry level positions, and redeploying existing personnel into critical positions - and that would be more affordable for the college. They were also able to hold data-backed conversations with leadership to drive behavior change.

Staffing Insights to Support Student Success

Oregon State University (OSU) relies on benchmarking data to learn more about its own internal processes and staffing levels across different OSU units. OSU recently used HelioCampus data to conduct an internal analysis that compared OSU's 11 colleges' spend on student services and how those investments impact the university's six-year graduation rate.

Our detailed analysis - enabled by our Standard Activity Model (SAM) - unearthed college spending across a dozen sub-activities within student services, including career services, diversity, financial aid, and more. In one instance, the OSU college with the highest six-year graduation rate was also found to have the lowest SAT scores and highest number of Pell Grant recipients - factors that typically lead to lower graduation rates. Because this college appeared to be investing more in student services, their students were graduating at a much higher rate. This critical information showed that university funding for student services could significantly improve retention and graduation rates, even with at-risk students. The data also made it clear exactly where OSU could benefit from further investments.

Strategically Allocate Resources and Justify Labor Spending and Investment

With their benchmarked data, Temple University leadership could see how their spending compared with other large public universities in a wide variety of categories including student support services, facilities management, HR, research administration, and more, which allowed them to address resource allocation without across-the-board approaches to budget cuts and investments. 

Temple also conducted a satisfaction survey, which allowed Temple leaders to see where labor investment may affect the quality of services and where they could make smarter choices about where additional spending might make a difference. If a department had an incredibly high satisfaction rating, for example. but spent more each year, Temple could justify that spending because there was demonstrated value for the community. Whereas when Temple strategically decided to grow its research portfolio, it was clear that an investment was needed to increase staff in research administration to support the growth.