HR seen critical to efficiency: PwC.

A survey by the Saratoga Institute, a PricewaterhouseCoopers LLP Human Resource Services unit, found that many companies dealt with the uncertainties of the economy last year by restructuring their businesses and shifting operations and staff.

Organizational and employee profiles continue to change, and human resource departments must look for credible and innovative ways to manage a company's most complex investment--human capital. More specifically, the 2002 Workforce Diagnostic Survey revealed a focus on benefit costs, particularly related to healthcare, and compensation controls as a means of delivering better results. Survey data was provided by organizations in more than 20 industry sectors, ranging in size from 1,000 employees to more than 50,000.

"As the U.S. economy slowly gains ground toward recovery, human resource executives are being challenged to find innovative and competitive ways of delivering improved results," said James Hatch, national director, Saratoga Institute. "HR must be a key player in this search for added value by managing a global workforce, retaining and motivating talent and containing costs while delivering more efficient human capital programs and services."

Concerted cost-cutting efforts are evident in the compensation area, and performance is key, the survey found. Nearly 40 percent of participating organizations indicated they had changed their compensation programs to counter adverse financial results. Merit pay increases are being offered sparingly, with a continuous emphasis on performance, the survey found. This approach appears to be working: Overall costs per employee increased less than 1 percent--from $55,977 per regular employee to $56,307.

Nearly 80 percent of companies indicated having a formal pay-for-performance system, and more organizations reported having project, team or gain-sharing plans.

The sector most affected in 2002 was the benefits area, specifically health care costs. Eighty-one percent of participating organizations offered defined-contribution health benefits, a sharp jump from just 23 percent in 2001. Yet healthcare costs alone represented over 30 percent of the total benefit cost. In 1999, health-related medical costs averaged $3,905 per covered employee. In 2002, that figure was $5,403.