HRO – Cloudy with a Chance of Sunshine

One way to while away the long hot days of summer is to speculate over the timing and pace of economic recovery and when it will translate into a return of workforce growth – which in turn adds units of volume to new and existing HRO contracts.

According to Accenture’s interesting The High-Performance Workforce Study 2010, the mood of senior executives around the globe is turning more positive, indicating that companies are starting to shift focus from cost control to also investing in growth. Compared to 12 months ago, those focusing primarily on cost control dropped from 41 percent to 15 percent. Eighty-five of the 674 surveyed executives said they are now evenly focused on cost control and growth (45 percent), or are primarily on investing in growth-oriented activities (40 percent).

While workforces are generally the same size or smaller, some hiring continues, often while other jobs are being eliminated as companies adjust to changed business direction. The top rationales for selecting where to trim employees included skills and workforces not critical to the future direction of the business. New employees were primarily added to meet specific needs for launching new products or entering new markets, and to add skills and workforces needed for the future.

In asking if the workforce will return to its pre-recession size, U.S. respondents were more positive, with 54 percent saying yes within the next two years. Globally only 35 percent said yes, while 65 percent said either no or probably not. Companies, as one would expect, cut back most in hiring-related activities during the downturn, with training the next most common reduction.

The senior executives indicated their workforces were pretty well prepared for managing during economic uncertainty. Forty-five percent felt their workforces were better than most of their competitors, but only 16 per cent considered them industry leading.

The return of a focus on growth and workforce expansion will bring back some volume to existing HRO contracts, and presents opportunities for added scope and new sales. But we need to understand and prepare for what will be different. Buyers and providers alike should be talking now about changes in business planning and what those changes mean for outsourced HR services.

Recruiting is already ticking up, but existing clients may need to gain skill sets in new areas, and more thoughtfully build a global workforce. Where are new pipelines needed, where can providers handle specialty recruiting, how can we help applicants understand salary offers that are perhaps a bit more modest? How will re-skilling the workforce and a renewed interest in leadership development be addressed?

Multiple surveys show a positive tone returning, yet, so far, moods and intentions are improving more than actual new sales. But then summer days often include pop-up thunderstorms in the afternoons. All is not yet sunshine, but the clouds are lifting a bit, so be sure to be prepared.

Linda Merritt, Research Director, HRO, NelsonHall

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