Archive for the ‘health and welfare administration’ category

HRO is Never Static or Still

October 12, 2010

During every stage of the economic lifecycle, HRO service providers are doing something to either anticipate or react to changes in the marketplace and client needs while simultaneously striving to achieve strategic goals. This week I wrap-up NelsonHall’s review of 3Q 2010 HRO activity with a look at what’s new in offerings, partnerships and acquisitions.

One way to quickly expand a service line or fill-in gaps is to partner with a provider that is already offering the service or operating in the target geography. Last quarter was most active for RPO. Those announcing new RPO-related partnerships included Alexander Mann Solutions (AMS), Kelly Services, Kenexa, Pinstripe and The RightThing. Notably, two of the partnerships were to continue to expand RPO services internationally in the Asia Pacific region, with AMS adding reach into India and Kelly in Vietnam.

A more committed path to rounding out or adding new services is to buy it. Making small to large acquisitions is another constant in the world of HRO as players define and redefine their portfolios. In addition to the close of the three game changing major acquisitions in the benefits community (ADP/Workscape, ACS/ExcellerateHRO, and Aon/Hewitt), other folks were also making deals. For example, Mercer acquired IPA and ORC, and Xafinity bought PwC’s pension consulting and administration business in the U.K. Further, Randstad continued its acquisitive ways, this time outside of Europe, with its planned acquisition of FujiStaff in Japan.

Health and welfare (H&W) outsourcing used to be limited to the U.S., and that will remain the major market. But no matter how health insurance and care is funded, H&W concerns are growing globally. In the U.S., Fidelity is partnering with RedBrick Health to offer its clients wellness services, and in the U.K., Capita is acquiring FirstAssist Services to add to its health service offerings.

Finally, if you cannot find what you want in the marketplace, you can build or expand it yourself. Ceridian wants to truly offer a new line of BPO services and has announced it is ready to consult, build and manage the health insurance exchanges that some states will need in a couple of years as part of the U.S. health care reform program. 

Most announcements of “new offerings” are incremental additions. For example, Hewitt is adding Micromedex medical reference information to its advocacy service offering. You can also simply package what you have and call it new. Aditro has done that with a standardized set of payroll services that include preset services levels and implementation process to make a lower cost bundled option.

Yet another variation blends supply chain partnerships with building it yourself to make a new service offering. Take a SaaS HR service from Oracle or Sap and wrap in value added enhancements and services additions and, voila, you have a new HRO service platform. Mercer introduced its Human Capital Direct that uses PeopleClick Authoria’s talent management suite as the core, surrounded by Mercer’s consulting, tools and methodologies such as decision support, competency models and analytics.

In HRO, somebody is always doing something. What have you done lately?

Linda Merritt, Research Director, HRO, NelsonHall

HRO Themes at the HR Tech Conference: Portals, Platforms and Self-Service

October 7, 2010

If you’ve never attended the HR Tech conference – which was in Chicago last week – I highly recommend finding a way to do so next year (and not just because the venue is changing to Las Vegas.) It’s always a top-notch conference with a superior speaker line-up, and a great forum for meeting with HRO buyers, providers and pundits.

With my eyes and ears focused, of course, on all things HRO, the key themes I witnessed – during both public sessions and private meetings with providers – were portals, platforms and self-service, all geared toward improving the customer experience and getting work done as quickly and easily as possible. By-the-drink-pricing and quick solution implementation were also key focuses. Some examples:

  • Caliber Point’s recently launched multi-tenant HRO service, called Republic. For mid-market organizations with between 2,000 and 15,000 employees, it’s a SaaS solution based on Oracle and includes software hosted and maintained by Caliber Point covering payroll, recruiting, performance management, compensation, employee benefits, time and attendance and reporting. Pricing is per employee per month by country, which covers both software licensing and BPO services, and implemetation can be completed in as quick as six – eight weeks.
  • ADP’s new portal and mobile developments, to be launched by early 2011. I must admit that increased mobile access to HR information, anytime, any place, didn’t wow me until ADP used the example of getting a listing of your in-network benefits and providers on your mobile phone. Think about it…you’re out of town on holiday – without your laptop – and you cut your foot on a piece of glass on the beach or sprain your ankle while skiing. You could pull your insurance card from your wallet or purse and call the 800# to find a local in-network provider. But, with instant access to the information on your mobile phone, why wouldn’t you take the quick route?
  •  Mercer’s integrated rewards and talent management offering, called Human Capital Connect. The technology platform includes performance management, succession planning, compensation and incentives. While a third-party provider can’t replace an in-house manager’s performance management responsibilities, Mercer provides not only the technology but also consulting for implementation, training, change management and execution, and a dedicated client team to ensure success. 
  • IBM’s transformation of its HRO client Kraft’s employee portal, with enhanced self-service, phone-based call center support and live chats with call center specialists. During its session at the HR Tech conference, Kraft stated IBM’s recently established Manila HR Services Center is getting high marks for customer satisfaction and intuitive and user-friendly employee self-service. And we can anticipate this contract, which will further roll out into 2011, will continue to support Kraft’s approximately 140,000 employees, per its acquisition of Cadbury, with the same improved employee experience, including further enhancements to live chats.

Yes folks, today and into the future, we’ll see rapid developments in portals, platforms and self-service. But these technological developments won’t remove the “human” element from HRO. Rather, they’ll increasingly support the way humans need, want and expect to accomplish their tasks and jobs, at an increasingly attractive price point.

Gary Bragar, Lead HRO Analyst, NelsonHall

Recapping the Not-so-Dog-Days of HRO’s 2010 Summer

October 5, 2010

One of the biggest HRO stories of 2010 will be the flurry of big and small acquisitions in the benefits administration space. The three big acquisitions – ACS and ExcellerateHRO, ADP and Workscape, and Aon and Hewitt – have recently closed.

As acquisition mania played out, many HRO deals were getting done, and this week, as the weather has finally, thankfully, started to cool, I’m taking a look at some of the deal activity over the long hot summer.

There were not a lot of announced deals in benefits administration, but a Hewitt summary indicates plenty of activity was still quietly going on. Hewitt won new awards across the span of benefits administration in the large and mid-market, including several in defined benefits and defined contributions. But the greatest activity was in health and welfare, and for point solutions like dependant audits and flex spend accounts.

While not necessarily matching North America in total contract value, the U.K. and Europe were also quite active in HRO. Logica was awarded a £10m payroll and pensions HRO contract extention by U.K’s Metropolitan Police, with new scope this time around including increases in employee and manager self services and electronic pay slips. And Midland HR won a deal for its iTrent HR platform including HR administration, employee and manager self-service, payroll, talent management and workforce planning.

In RPO, CPH won a contract with Opal Telephone, and Alexander Mann was awarded  a contract for recruitment and contingent labor by Cobhan. On the continent, HRO activity included HR administration and payroll deals by Reat and HR Access in the mid-market.

ADP parlayed existing payroll services for KAO, a Japan-based consumer products manafacturer, into extended HR administration and payroll services across Asia Pacific including China, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, Taiwan, Thailand, Vietnam and Japan. In addition, ADP won a global managed payroll services contract with BT that will cover more than 40 countries in North America, Europe and Asia Pacific when fully implemented.

It was refreshing to see a spate of learning contract awards won by Expertus, General Physics, Intrepid and The Learning Associates. However, as most of the learning outsourcing activity was in the public sector, we still need to see more of an uptick in the private sector before we can say learning is fully on the road to recovery.

RPO maintained its lead position as the most active single service area, with the greatest increase in revenues and new contracts. RPO activity was highest in the U.S., followed by the U.K., and was spread nicely across providers including Alexander Mann, CPH, Kelly Services, Manpower, PeopleScout and SourceRight. Several of the awards were for contingent labor or combined RPO, with the contingent labor focuses indicating that employers are still cautious about a full return to permanent hires.

There were no announcements of the HRO mega-deals of yore, but it was very nice to see the increased activity levels across many HRO service lines and service providers. Now that the cooler weather of fall is here, we’ll  hopefully see an even more serious return to getting business done before the end of the year!

Linda Merritt, Research Director, HRO, NelsonHall

Don’t Rain on My HRO Parade

September 21, 2010

The HRO community deserves a break, and the latest NelsonHall HR Outsourcing Confidence Index is here to deliver with lots of good news. Strike up the band and let’s have a virtual HRO parade!

To gauge HRO confidence, we use a scale in which 100 equals no change and 200 means all participants are highly confident. Compared to the dearth of optimism at 115 in Q2 2009, the 3Q 2010 HRO Confidence Index is at a high of 168. HRO vendors stating they are much more confident in their HR outsourcing business increased from a dismal 10 percent to a buoyant 41 percent.

We have been reporting for some time that pipelines are filling and looking better, and that continues. And yet, providers’ financial results have not yet shown a logjam break in frozen decision-making and willingness to commit in many HRO service lines.

On the other hand, this quarter we finally see an upswing in contract value growth. In fact, we have a triple play of good news underway! HRO service providers are reporting increases in:

  1. New contract activity
  2. Scope expansion with existing clients
  3. Volume in existing contracts

New contract activity is now outpacing increasing scope with existing clients. New deals signed, given the lag time before revenues flow, will take a while to show up in results. Volumes beginning to pick-up with existing clients will show up sooner in results, especially if vendors can gear up to increasing activity levels quickly and efficiently.

RPO and payroll continue to lead the parade to revenue growth recovery, with multi-process HRO also improving. While learning has been slow, its current 3.5 ranking in NelsonHall’s 3Q 2010 HRO Confidence Index indicates a much brighter outlook as compared to its score of 2.8 in Q4 2009.(Note that we use a scale of 1 – 5, with 5 being a strong increase.) 

Benefits administration outsourcing revenue growth expectations have been stable for several quarters around 3.5, but the outlook for pipeline growth is lower for benefits administration outsourcing than other HRO areas. Expected increases in health and welfare consulting should lead longer term to opportunities, but vendors are not seeing it yet. There may be short term distraction caused by the spate of mergers and alliances this year. ADP recently reported the successful acquisition of Workscape, now an ADP company, and Aon announced the leadership slate for the soon to be Aon Hewitt team.

Global delivery remains a factor in HRO growth in two ways. First, multi-country contracts, at 34 percent of deals, continue as organizations seek to standardize payroll and other HR processes. Also, acceptance of multi-shoring HRO continues. Onshore HRO delivery is still in the lead at 71 percent, but nearshore and offshore delivery are now 29 percent of HRO contract values.

People have parades for many reasons including celebration, commemoration and optimism. Our virtual parade is for optimism with a tad of celebration thrown in. Let’s save the full celebration parade for when the earnings results match the current high level of optimism.  Hmm, when and where do you think we should have a real HRO community parade?

Linda Merritt, Research Director, HRO, NelsonHall

Compensation – a Critical Component of Performance Management (and a Process Ripe for HRO)

September 3, 2010

Let’s cut to the chase here. While compensation is not always the primary reason people change jobs, I think we’ll all agree we should be appropriately compensated for the work we do. And while it can be challenging and time-consuming for companies to find the data they need to determine market- and role-appropriate salaries, not doing so can lead to loss of top talent. This issue came top of mind to me because of two occurrences this week.

First, Kenexa on September 1 acquired Salary.com for approximately $80 million. Kenexa provides talent management services including RPO and performance management – both software and advisory services – and additional talent management services that help improve employee engagement and retention. In addition, Kenexa’s 2X Perform Platform (which will be available H2 2010) will contain performance managment components including goal setting, appraisals, succession planning and compensation management. Salary.com provides compensation software and content. In addition, it has a database of compensation information across thousands of job positions. The acquisition of Salary.com not only enhances Kenexa’s ability to provide compensation management; having Salary.com’s benchmark database will enable Kenexa to help its clients ensure they are paying their employees market-competitive salaries to aid in talent retention. 

Second, on its September 1 analyst briefing upon completion of its acquisition of Workscape, ADP not only spoke about the merits of Workscape’s benefits administration capability, including health and welfare, but also about the importance of Workscape’s talent management capability, notably its compensation planner. ADP today provides performance management services including succession management and learning management, in part via its partnership with Cornerstone OnDemand, With its acquisition of Workscape, ADP has added compensation management to its performance management offerings portfolio.

The importance and impact of compensation as an integral component of performance management cannot be underestimated. While supervisors are, and will continue to be, ultimately responsible for performance management, including compensation, they need the right tools, technology and insights to effectively do the job. HRO providers that offer the full mix of performance management capabilities – robust tools and technologies, as well as advisory services – are best positioned to support their clients performance management needs. And there is definitely opportunity for growth in this space. According to NelsonHall’s June 2010, “HRO Issues and Opportunities” report, only one-third of buy-side executives have outsourced compensation administration, and it is the second least outsourced service/component of multi-process HRO deals.

My advice? Providers, beef up your compensation management offerings, either organically or via partnerships or acquisitions. And buyers, evaluate your current compensation management capabilities. If they fall short, either due to lack of insights or resources, consider engaging the services of an HRO provider with expertise in this process. You have everything to gain by ensuring talent retention through the right compensation plans.

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall

The Next Shore for HRO – Finding Cultural Compatibility

September 1, 2010

HRO clients have become more open to multishoring to gain cost, scalability and flexibility advantages. And as the major HRO vendors have globalized their service delivery capabilities, some portion of the work is increasingly likely to be done offshore in order for their clients to benefit from optimized services. 

Voice services have been the most challenging area to find culturally compatible locations with a scalable English speaking talent base. According to the new NelsonHall market research report, “BPO Delivery from the Philippines,” the Philippines is a growing location for both voice-based and back-office BPO services, with more than 386,000 personnel across a growing number of service providers. The largest segment by far is customer management services for the U.S., with F&A, especially order to cash outsourcing, as the next largest.  Major BPO vendors, including Convergys, IBM, Infosys, Logica, NorthgateArinso and Wipro, are already there.

HRO services are there as well. HRO is a small, but growing, portion of the service base in the Philippines. The top HRO services supported are employee care and payroll.  With HRO service providers using sophisticated workflow technology and processes, portions of service lines can be handled from just about any location. In the Philippines, initial screenings for RPO, and enrollment and inquiries for learning BPO are supported, as are employee data management, benefits administration and mobility services.

Right now services from the Philippines are highly centered on the U.S., followed by Canada and the U.K. Future growth is expected from English-speaking Asia Pacific countries like Australia and New Zealand. In addition to organic growth for the services already located there, healthcare from both the payer and provider sides is seen as a good opportunity for expanded services.

Latin America is also growing as a BPO region. I recently spoke with country representatives from Chile and Jamaica, and both countries would like to add HRO to the other BPO service lines already migrating to Latin America as it grows as a near shore region and as its own market.

The HRO community can look forward to a wide range of shoring options and cost points. The HRO back-office location will increasingly be by vendor choice, and less and less visible to clients. HRO voice services will remain a client decision to balance cultural compatibility, scalability, flexibility and cost.

Linda Merritt, HRO Research Director, NelsonHall

Employee Satisfaction is Tanking…Can HRO Help?

August 26, 2010

Per the results of the most recent Spherion Staffing Services Snapshot survey, released yesterday, employee satisfaction in the U.S. is bleak. In fact, the subhead of the press release stated only five percent of those surveyed – a sample of 896 full-time and part-time working adults aged 20 and older – enjoy what they’re doing and wouldn’t consider another job. More sobering survey stats:

• 62 percent feel less secure about their job compared to a year ago

• 56 percent did not take a vacation in the past year, and of the 44 percent who did, one-third indicated they did not completely disconnect from their job responsibilities

• 30 percent worked from home the last time they called in sick

• 57 percent said their company does not help/support their effort to have a good work/life balance

• 95 percent would consider looking for a new job in the future or are actively looking, regardless of whether or not they enjoy their job

• 53 percent have had to assume additional responsibilities or workload during the recession due to co-worker layoffs, and 93 percent of those who had to assume additional responsibilities did not receive additional compensation

• 57 percent who have taken on additional responsibilities feel burdened and overworked, and another 53 percent said their job or workload affects their health in a negative manner

With this, borrowing the famous and oh-so understated line, “Houston, we have a problem” from the movie Apollo 13, seems appropriate. In this case, “Houston” is employers, senior managers and first line supervisors. And the problem – as I’ve written about and as we all know – is that lacking an engaged, committed, compensated, rewarded, respected and energized workforce, morale decreases, productivity plummets and highly talented employees jump ship. This is all too obviously a losing proposition for companies.

So what should employers do, and how can outsourcing help? While there are many process areas to cite, I’ll touch on just two here.

First, I’m currently working on a learning BPO study, and was pleased to hear from several companies I’ve interviewed thus far that they are providing performance management training to managers and senior leaders to develop, reward and retain employees.

Second, the results of a Mercer study released yesterday found that 30 percent of the respondents – headquarters representatives of 114 multinational organizations from a wide range of industries – are increasing employee involvement in design of their organizations’ benefits plans. It’s a big move in the right direction – even though only 30 percent of respondents are currently doing so – to include employees in benefits-related decisions and options, whether for health insurance, health-related assistance options, defined benefits plans, defined contribution plans, etc.

Benefits outsourcing providers are not only able to help senior leaders determine the most advantageous benefits plans for their company and their employees, with eyes on both cost-effective options and employee retention, but also evaluate and administer the decided-upon plans.

My call to senior HR executives? Don’t wait…engage your employees! And if you’re outsourcing or considering doing so, engage your provider in helping make the right decisions for your employees. I still believe that employee satisfaction = customer satisfaction = profitability.

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall

HRO SaaS Uptake – What, How Much and Where?

August 19, 2010

As a follow-on to my July 7 blog titled, “SaaS More Than Just Catching On,” let’s today look at what types of HRO SaaS clients are buying, the size of awarded contracts and the industries in which HRO SaaS has had the greatest penetration to date.

The What

By rank order of the most commonly purchased software applications/modules:

• Payroll

• HR administration

• Benefits administration, including benefits planning, health and safety, claims submission, absence management and occupational health

• Employee and manager self-service

• Talent management, including recruiting and learning

• Workforce planning

• Compensation/salary administration

• Employee development for career pathing

• Travel  

The reasons behind the rankings, especially at the top of the list, are pretty self-evident. Payroll leads as it is the most visible and frequently used (and arguably, the most important) service. And HR administration really ties into employee and manager self-service, as one of the primary drivers of SaaS implementation is self-service for cost reduction and employee satisfaction.

The Size

As I noted in my July 7 blog, the mid-market is proving to be the ripest for HRO SaaS. Using Netherlands-based HRO provider Raet as an example – and a good one at that, as it in the past six weeks inked seven new SaaS contracts and one renewal – client company size is ranging from 250 to 12,000 employees. This uptake in the mid-market makes perfect sense, particularly on the lower end, as companies in this space need access to HR technology to enhance their operational efficiency but frequently lack the budget to invest their own capital in purchasing it. In terms of contract sizes, we’re seeing a length range from four to seven years, with an average of five years.

The Industries

In looking across all HRO SaaS contracts awarded thus far in 2010, education is the top industry, followed equally by local government and retail. I don’t necessarily believe there’s any secret sauce as to why these are the top three ranking industries, as organizations in virtually all – including healthcare, media, manufacturing and financial services – may be challenged with a preponderance of multiple divisions and locations, and often have several disparate systems for HR and payroll that do not communicate with each other, causing extra administrative work and duplication of effort, etc. Thus, the driver for most existing and upcoming HRO SaaS contracts is the ability to have one singular system for HR and payroll in order to achieve standardization, data accuracy, cost savings, self-service, timely processing and data, and employee satisfaction.

Due to all the inherent advantages, I believe we will continue to see a growing number of HRO SaaS contracts in the mid-market, across all industries. In addition, but to a lesser extent, I believe we will continue to see combined SaaS and outsourcing contracts such as the one announced on August 10 between MidlandHR and Swan Housing Group. Under this contract, Swan Housing will internally host MidlandHR’s iTrent software – which provides a single platform for HR, payroll, talent management and workforce planning. Swan Housing will simply provide the payroll data via iTrent, and MidlandHR will do everything else, from the structuring of pay and deduction calculations, through to payslip printing and distribution. The advantage of these hybrid-type contracts? Economies of SaaS scale coupled with outsourcing of processes for which internal resources and/or knowledge may be lacking.

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall

Online Chat Usage Increasing in HR Outsourcing

August 12, 2010

Picture this: You need to ask your bank a question. After navigating through its website unable to find the needed information and then trying to determine what you think is the correct toll-free phone number to dial, the fear sets in. Will I get lost forever in an IVR queue? Will I be on hold for an interminable period of time? Will I finally reach a live person only to be transferred and put on hold…again and again? We’ve all faced this, and it’s not pretty. But recently, after spending way too much time searching for the information I needed from my bank, I had a great experience getting an actual answer – yes, it’s true! – via its live online chat feature. After I clicked the button, the online agent greeted me in less than a minute, and within three minutes I had the information I needed, including follow up questions I had.

Granted, a key component of HRO providers’ core expertise is top-notch customer service via both websites and call centers. But what if there was another, alternative method for gaining desired information? Enter a Mercer news release issued earlier this week which carried the headline, “Mercer reports significant increase in online chat usage.” The announcement stated that use of its online chat capabilities has increased 55 percent since it piloted the offering with two clients in the beginning of 2009. 11 clients are now making the service available to their employees, and a number of clients plan to roll out the capability later this year. And usage by employees of the two pilot clients has upticked by 48 percent and 10 percent, respectively, in usage volume between 1H09 and 1H10.

Such a large increase in number of online chat sessions clearly indicates desire and demand for this type of communication – whether it be for questions on defined contribution plans, defined benefits plans or virtually any outsourced HR process. One of the reasons we’re seeing this surge is that live chat marries online ease and personal touch.

My advice to HRO providers considering adding live chat capabilities to their offerings portfolios – and I know of several that are currently evaluating the possibility – is that customer support must be absolutely world-class, employee satisfaction-focused. Within seconds responses, kept-to promises of when the answer will be delivered to the employee if it’s not immediately available, highly knowledgeable and skilled reps – not only in policies and programs, but also in quelling concerns…all of these are critical to ensuring the success of online chat. Fail in any of these areas and you’ll not only have an unsuccessful offering, you’ll have those who experienced a poor interaction blogging and tweeting about it. They will…you can be certain of it. These are tech-comfortable individuals who will have no qualms – or technological challenges – in doing so. Be prepared, start with a pilot, learn from the pilot and you may have a winning service offering for you, your clients and their employees.

Care to share your online chat experience?

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall

Health and Welfare Services are a Nice Slice of the HRO Pie

August 11, 2010

Wellness programs have been around for years, but employers needing to manage ever increasing health care costs are looking for a stronger connection to results. HRO vendors and programs that can show proof of progressive results over time and an impact on health care costs will strengthen client relationships and do well in a still tight market.

Fidelity is adding RedBrick Health’s wellness programs as an optional service offering in its employee benefits and outsourcing program. RedBrick Health is a 2006 start-up specializing in wellness, disease and chronic care management programs that often include employer-funded financial rewards tied to participation in activities and programs. Fidelity selected RedBrick for the uniqueness of its interactive programs, technology, analytics and results that include rates of participation as high as 40-60 percent, compared to industry averages of five-10 percent. And it tracks health assessment biometrics that show improvements of six-30 percent in areas such as blood pressure, cholesterol and weight, which can lower the total cost of health care.

“Nice to have” HR programs are now expected to show value to employees and employers based on outcomes. HR and its HR service providers are under greater pressure than ever to show impact. Some HR services are “need to haves,” and demonstrating lower operating expenses, improved process performance and strengthened compliance are often enough proof in the pudding. Also improving the employee experience is icing on the cake.

Optional HR benefits and services outsourcing in a down economy have a higher hurdle as the looming question is, “why offer the benefit at all?” But outsourced services in the health and welfare (H&W) area that can make the connection to lowering the cost of benefits, health care and the total cost of labor have been bright spots.

Even the larger HRO vendors are aware of this trend. Hewitt has been expanding its H&W offerings with absence management, and it recently acquired HR Advance to add to its dependent verification capabilities. Others, like Fidelity, are selecting specialty partners to build out H&W services.

Where H&W services are transactional, like flex spend accounts, look for innovation in technology and processing efficiency. Other services – such as absence management – need to blend in consultative and deeper subject matter expertise, and the bench strength of the care center personnel is very important. In all cases, the quality of the employee communication and experience is critical, even if cost savings is the driver. If employees are not aware of the program, or do not understand the benefits of participating in it, outcomes will not be maximized. And you need awareness and participation to get to impact and capture a healthy slice of the H&W pie.  

Linda Merritt, Research Director, HRO, NelsonHall