Total Cost of Ownership (TCO): How Midsized Businesses Can Find Competitive Advantage

When making strategic decisions, midsized businesses need to consider the “all-in” total cost of managing their workforce. Referred to as Total Cost of Ownership (TCO), this “Big Number” is a measure of the total amount spent on all direct and indirect costs for managing employees.

A businesses’ “Big Number” consists of five key areas of HCM: payroll, employee benefits administration, talent management, human resources administration, and time and labor management. Despite its importance, many midsized businesses lack a comprehensive understanding of TCO, and how it relates to their workforce. In fact:

  • Only one in five midsized businesses has done a cost analysis that includes all five areas of HR
  • Only one in six have done any kind of analysis in the last three years, or ever.

Your “Big Number” goes beyond salary and benefits

When measuring the “Big Number”, focusing solely on the cost of salaries and benefits can be misleading and often results in poor strategic and uninformed business decisions. Of midsized businesses surveyed in ADP’s Total Cost of Ownership (TCO) Awareness study:

  • While 58% say they’re familiar with the total cost of managing their workforce
  • And 66% say their company spends the right amount managing their workforce
  • Only 27% actually understand all that goes into managing their workforce

Why Does Your “Big Number” Matter?

When it comes to your bottom line, there are few costs larger than the “all-in” costs that go into managing a workforce–your “Big Number.”

In today’s highly competitive marketplace, midsized businesses must continue to find ways to differentiate themselves while keeping a close eye on their bottom line, and know their “Big Number.” To effectively manage HCM and boost your bottom line, you need a clear picture of your “Big Number,” which means a solid measurement of the all-in costs related to managing your workforce.

Learn what the “Big Number” can mean for midsized businesses in ADP’s Total Cost of Ownership Study

In 2014, the ADP Research Institute® (ADPRI) commissioned the Total Cost of Ownership (TCO) Awareness study among midsized businesses (50-999 employees). The study found a false sense of confidence with respect to what companies know about Human Capital Management, its costs, and their own HCM performance. The study also provides insights into the degree to which midsized companies understand and manage their Human Capital Management TCO.

*Diagnostic screening only available for companies with 50-999 employees.