Centralized G&A Data Benchmark

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Centralized G&A Data Benchmark

Key Takeaways

  • According to Bloomberg BNA Report, the average amount budgeted to HR departments in 2017 was $1,087 per employee. 69% of HR experts plan to channel their budget increase towards technology.
  • Most companies use IT spending as a percentage of revenue as a key metric for calculating their IT spending levels. According to Computer Economics, manufacturing companies allocate between 1.4% and 3.2% of their revenue to IT spending, and large companies have IT operational budgets of at least $20 million. Enterprise software is projected to have the highest increase in 2022, led by infrastructure software expenditure steadily outperforming application software expenditure.
  • According to APQC’s data, large companies with over $1 billion in revenue, now spend about 0.56% of their revenue on the finance department. The finance function cost as a percentage of revenue is lower in companies with larger revenue because they benefit from economies of scale.
  • Research by Bain found that the largest single expense category for most companies is external procurement, accounting for about 43%.

Introduction

This report provides a benchmark of the total budget for centralized General and Administrative functional spending in large companies, specifically around the Human Resources, Information Technology, Finance, and Procurement departments.

Human Resources

  • According to Bloomberg BNA's HR Department Benchmarks and Analysis Report, across all employers, the average amount budgeted to HR departments in 2017, was $1,087 per employee. The average per capita budget figure differs broadly across companies of various sizes — varying from $594 per employee among companies with more than 2,500 employees, to $2,966 per worker in businesses with lesser than 250 employees.
  • HR department's budget spending can be categorized under these groups: Selection and Placement, Training and Development, Compensation and Benefits, Employee and Labor Relations, Health, Safety and Security, and others. According to 37% of the organizations surveyed for the 2021 Gartner HR Budget and Staffing Report, their allocation to learning and development will increase. 46% intend to increase their spend on diversity and inclusion. Gartner research reveals that over one-third of participants plan to increase their HR technology budgets. In a survey by Bloomberg, 69% of HR experts state that technology leads the list of planned use for their budget increase.

Information Technology

  • Most companies use IT spending as a percentage of revenue as a key metric for calculating their IT spending levels. A study has shown that larger companies in the United States spend about 3.2% of their revenue on Information Technology (IT). Manufacturing companies are found to allocated between 1.4% and 3.2% of their revenue to IT spending, according to Computer Economics. Mid-size organizations have been found to budget between $5 million and $20 million to IT operations. While large companies have IT operational budgets of at least $20 million.
  • Most businesses are prioritizing cloud technology in their spending. Other sources of expenditure in the IT department include business intelligence, digital transformation, and other backup-focused solutions. According to John-David Lovelock (distinguished research vice president at Gartner), “digital tech initiatives are a leading strategic business priority for organizations.” Enterprise software is projected to have the highest increase in 2022, led by infrastructure software expenditure steadily outperforming application software expenditure.
  • The average salary for a Chief Information Technology Officer in the U.S. is about $295,921, with a range of between $244,880 and $359,377.
  • Depending on factors such as location, experience, skills, etc., Computer Network Specialists earn about $55,353 to $91,637 on average in the US.
  • The average base salary for Database Administrators in the U.S. is between $84,131 and $109,325 annually.

Finance

  • As companies grow larger, the comparative finance function cost as a percentage of revenue decreases. According to APQC’s data, large companies with over $1 billion in revenue, spend just 0.4% of revenue on finance activities, while smaller organizations with revenue below $1 billion spend 0.9%. Today, 0.56% of the revenue of top-performing organizations is spent on the finance department. The finance function cost as a percentage of revenue is lower in companies with larger revenue because they benefit from economies of scale and operating model design to provide efficient finance activities.
  • The finance department budget can be grouped under these categories: Personnel Cost, Systems Cost, Overhead Costs, Outsourced Cost, and others. McKinsey research found that several large companies have significantly increased efficiency in transaction functions by about 39%. The rising application of innovations in machine learning and artificial intelligence to complex tasks are employed to automate transactions. For instance, a manufacturer using machine-learning algorithms and analytics to monitor financial and business-continuity risks can reduce the overall cost of internal audits by about 20%.

Procurement

  • Knowing how much large companies spend on office supplies may not be as helpful as knowing how much companies spend on office supplies per employee. The more workers a company has, the lower their cost-per-employee. It is calculated that businesses with more than 200 employees spent $27 to $32 per employee on office supplies, monthly.
  • According to research by Bain, the largest single expense category for most companies is external procurement. The average industry spend managed by the procurement department is about 43%.
  • Procurement costs provide a very valuable key performance indicator in defining the total cost-effectiveness and efficiency of the procurement department. Some of these costs include, base costs, i.e. the individual cost of goods and services, purchasing costs, transportation costs, i.e. the costs incurred to obtain the goods and services, contract and negotiation costs, taxes and customs costs; this is incurred when companies get supply from overseas or foreign dealers, and inventory brokerage costs; associated with outsourcing inventory management.

Research Strategy

For this research on Centralized G&A Data Benchmark, we leveraged the most reputable sources of information that were available in the public domain, including Boardish, Salary.com, Bloomberg, and Gartner.

For uniformity, we have used salary quotes of July 2022, from Salary.com, mostly.
Note that we have referenced some slightly dated sources to add robustness and/or corroboration to the findings, considering the highly specific nature of the topic and the limited availability of more recent reputable sources.
After exhaustive research through several market reports, such as APQC, we were unable to locate specific figures/percentages for budgeting in the manufacturing industry in particular. More information may be available behind paywalled resources such as Zycus, and Computer Economics.

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