Archive for the ‘HR analytics’ category

Employee Engagement, High Performance, and HRO

April 13, 2011

Employee engagement is down to the lowest levels seen in many years. Low engagement makes it hard to be high performing and can later raise turnover as employment opportunities improve.

  • In early 2010, The Conference Board found that only 45% of employees were satisfied with their job, the lowest rate seen in the 22 years of the survey.
  • This year, the 2011 Aon Hewitt Trends in Global Employee Engagement survey found that 56% of employees are engaged on average, down from 60% in the prior year, the largest year-over-year drop seen in 15 years. Declines were seen across Asia-Pacific, Europe, and North America, with only Latin America showing improvement.

My colleague, Gary Bragar, has consistently brought attention to the engagement topic because it is important and makes a difference for all: employers, employees, and HRO service providers. It can also make quite a difference! Aon Hewitt’s research indicates there is a strong correlation between employee engagement and financial performance. Organizations with high levels of engagement (65% or more) outperformed the total stock market index and had shareholder returns 22% higher than average in 2010. Companies with low engagement (45% or less) had shareholder returns 28% lower than the average.

Naturally, employee engagement that contributes to high performance business results is first and foremost a critical issue for C-level and management teams and there is a myriad of advice available, including consulting services from many of the HRO providers. Every organization, industry, and market has a life cycle and the management challenges will vary depending upon the stage. Accenture’s new book, “Jumping the S-Curve,” identifies three s-curves and outlines the critical issues for each cycle, including the importance of transitioning from one stage to another.

I see within the very insightful Accenture management advice opportunities for HRO contributions. For example, to climb the cycle of business success based on a winning idea, you need to reach a threshold of capabilities and competence and to attract and keep top talent in critical areas to maximize growth without collapse. As the cycle of achieving business success begins to end, new talent problems can arise as turnover increases due to fewer advancement opportunities and talent poaching. As a new cycle starts, a change may be needed in leadership and business competencies at the executive and other levels. Talent needs to be continually monitored, nurtured, and refreshed – all appropriate to the current and next cycle of the enterprise and what is happening in the broader market and economy.

Layering talent management services (e.g., recruiting, staffing, performance management, succession and career planning, and workforce planning) on top of a capable HR system for employee data management that’s supported by HR analytics can go a long way in helping clients see where they are now, identify gaps and emerging issues, and use HRO services and support to achieve a truly high performance-based business transformation.

Linda Merritt, Research Director, HRO, NelsonHall

HRO – When Will the Horizontal Go Vertical to Grow?

January 20, 2011

Most HRO Insight blogs provide commentary on HRO market news. Occasionally, I like to speculate and dream about how HRO can fully become the linchpin in leveraging HR into the strategic business partner the HR profession has long desired – and business has long needed.  This week, I blend a bit of both market news and pondering on the vertical specialization of HRO.

According to the January 2011 NelsonHall BPO Index, 2010 was an uneven year for BPO recovery.  Total contract value (TCV) for HRO declined from $2.3Bn to $1.5Bn largely due to the drop off in Europe.  North America HRO almost held its own with $1.3Bn in 2010 compared to $1.6Bn in 2009.

Which BPO area grew its piece of the smaller BPO pie?  The options include back office, middle office, and front office.  Back office BPO functions are horizontal and include HRO and F&A; middle office BPO functions cover vertical industry-specific services such as mortgage processing or check processing in the banking sector, etc.; and front office BPO includes customer contact and sales centers.  Middle office, or industry-specific BPO, is the winner with the largest area at $13Bn and 69% of 2010 TCV, leaping up from a 40% share in 2009.  Growth in a down market is surely the sign of compelling client interest and savvy vendors meeting their needs.

Horizontal BPO processes cross the enterprise and are part of almost every business.  The problem is mistaking universality for being generic.  HRO is too often marketed on the strengths of cost and process functionality.  Customization is used for adapting to the quirks of client’s prior HR systems and processes.  To fight the costly morass of over-customization, HRO service providers have strengthened the use of preprogrammed selectable parameters – building in cost effective flexibility, but also reinforcing the generic aspect of HRO.

Rajiv Raghunandan, Infosys BPO Strategic Business Practice Head for Sales and Fulfillment, was recently interviewed by SSON and commented on how Infosys is taking an end-to-end process view of the F&A order-to-cash process and expanding its revenue, client relationships, and market opportunities.  Infosys leveraged its internal knowledge and experience from its client base to find areas of critical mass to take what was a horizontal process and verticalize it for a growing list of industry segments.

Vertical specialization can and should be done for HR as well.  As I have previously mentioned, TriNet, a PEO and HRO service provider in the small and mid market, is already offering integrated solutions for software and banking.  TriNet combined its core technology with customized services for hiring, compensation, performance management, and risk mitigation.

Sustainable growth in HRO is dependent on breaking the bounds of cost-driven volume administrative transaction processing and moving up the value chain to strategic business impacting partnerships.  There is a largely untapped HRO gold mine out there.  Just think of what the large HRO service providers could do with a gathering and packing of the knowledge and services already resident in their client bases!

Linda Merritt, Research Director, HRO, NelsonHall

Hope for HR Analytics – HR is Inching Toward Measuring

July 28, 2010

The lengthy economic downturn has impacted many areas of HR, first with the mandate to do more with less. It has also given many HR organizations the opportunity to truly become more strategically connected enterprise-wide as business leaders look to HR for critical help in managing smaller workforces in constrained circumstances. That has created a pull for HR metrics and analytics. 

The June issue of HRO Today magazine has a CHRO roundtable, Charting the New HR Order, with five HR leaders discussing a range of topics including “the emergent culture of measurement” in HR.  According to Sunoco’s CHRO, Dennis Zeleny, “The bottom line: For HR departments that embrace it, measurement has made them more important strategically and operationally.”  And Roger Gaston, Avaya HR SVP, tied providing strategic counsel and the use of analytics pragmatically together saying, “And, given that we all now have fewer resources, you’ve actually got no choice.”

Unfortunately, there are still plenty of barriers to HR analytics becoming a broadly accepted and available HR competency and capability. To date, HRO has mainly played two progress-making roles in HR analytics. First, HRO naturally brings more accessible data around the outsourced function, and if reporting capabilities are included in core HR systems outsourcing, there is usually improved data and reporting generally available. True, much of the new capabilities are used for basic reporting of what has happened, but accurate and timely data is the foundation needed first to progress to more sophisticated analytics.

The second role HRO has played is perhaps unintended, but should not be discounted. HR managers have not always been comfortable with many metrics areas, but they are more than willing to work diligently to learn and improve in how to measure the performance of an HRO vendor. They quickly become apt and rapt students of SLAs!

This is not always an easy learning process to go through, but service level measures are becoming more consistently defined and understood.  I have seen HR teams involved in vendor management learn more about process, operations, the impact of demand and resource levels and the connection of process performance to pricing, user satisfaction and business impact. That practical learning can and has fueled the improved use of operational metrics in other HR areas, another foundation block in building measurement competency.

A third role HRO wants to play is in providing tools and services for advanced HR analytics. The business case can be a bit tough to make and tight budgets have too often stalled pending sales. The tools and HR capabilities to use them are also a barrier. Another of the roundtable participants, Sharon Taylor, Prudential HR SVP, said, “Some systems are so overly complicated that they are not as helpful as they might be.” And in the current business environment, HR will not want to risk end up with more little used “shelfware.”

Executives have renewed interest in talent management and selective recruiting, as they want to strategically and economically strengthen workforces in light of a continued bumpy economy. HRO vendors: make your case that HR analytics tools and services are an important and cost effective part of the solution.

Linda Merritt, Research Director, HRO, NelsonHall

Can Data Pave the HRO Path to CHRO? Part 1.

May 4, 2010

I am futuring here, positing a new path for attaining the top spot in HR through HR data and services delivery. While managing HRO and HR shared services is not on the current career path for becoming a senior HR leader, I would like to speculate on this possible future.

In my February 23, 2010 blog on the Puzzling Puzzle of HR, one of the puzzle pieces I mentioned is the role of business and HR analytics. I firmly believe that better HR data leveraged as a part of HR’s consulting services is core to expanding HR’s business impact. And yet, HR has had a long-term frustrating relationship with even basic reporting, let alone with advanced analytics.

Yesterday I listened to a replay of a Human Capital Institute webcast, “Turning Analytics into Action,” presented by Capital Analytics. The session was about moving up from descriptive analytics to predictive analytics, an important goal. One of the participant polling questions asked about common barriers to improved data use. The top two items were; incomplete or messy data (55 percent) and knowing what and how to measure (27 percent). Those responses are frighteningly telling. If HR leaders are still largely struggling with what and how to measure, and face barriers in accessing the various needed data sources, they must first strengthen their  data foundation before they can credibly move up the data value chain.

HR’s current data-related focus is obtaining access to what has happened and moving toward what is happening right now. Its future step is predicting what will happen and advising on how to best prepare, adapt and manage limited resources to achieve business results. A number of HRO vendors want to help HR clients move up the data value chain. For example, IBM, Accenture and Wipro all offer advanced HR analytics as available additional services. Unfortunately, advanced HR analytics are an added cost item, and so far the vendor’s capabilities are ahead of most clients’ willingness to spend, and ability to use and leverage.

The first step is to build the data infrastructure for improved basic HR workforce reporting.  And I do mean workforce, not just service silo by service silo. Knowing what data you need, how and where you will get it and making sure it is valid should be a major part of your strategy and planning for HR and HR services delivery. Basic HR administrative software and outsourcing already provide improved reporting capabilities for many buy-side organizations. When selecting HRO vendors, understand what new data and reports will be available, and determine if there will be assistance for the retained organization in learning to use the new capabilities. When transitioning to a new or upgraded HR service platform, take time during configuration and implementation to wire in as many data elements as you can. If you do not collect the data, you cannot later analyze the data.

In part 2, I’ll take a look at why data matters on the path to the top of HR.

Linda Merritt, Research Director, HRO, NelsonHall

How to Get There From Here – A Roadmap for HR Analytics

March 16, 2010

HR service providers have reporting and analytics capabilities including software, consulting and outsourcing. But getting beyond providing support for basic reporting capabilities has been a slow and rocky road. To move further down the path, we need a roadmap for HR analytics.

NelsonHall’s 2009 report, “HRO Analytics: Utilizing Analytics to Improve Outsourcing Experiences”, found that 85 percent of vendors have an advanced analytics offering, but only 22 percent of clients have implemented such services. Gaining agreement that workforce data is important is easy, but finding funding to build or buy the capability is considerably harder. One of the reasons for the slow adoption rate in HR analytics is how hard it can be to demonstrate ROI. 

I see signs of current buyer interest that can be leveraged, although the signs may not look like a direct request for HR analytics:

•  Behind the drive for multi-country payroll during a recession was not a bizarre interest in payroll systems, but rather a senior leadership demand for better workforce and financial data in order to understand what is happening in every operating geography.

•  Growth in leave of absence, absence management and dependent audits all support tighter workforce management in lean times.

•  Can anything sound more non-urgent than consolidating time reporting systems? But how about when they are linked to razor-thin staffing levels and controlling the use of overtime while still meeting sales and customer service objectives?

•  With an expected modest rise in recruiting, improved workforce planning and forecasting is vital to ensuring the most critical areas are targeted.

Each of these opportunities require timely and accurate data from across the enterprise, and each impacts the total cost of labor – in other words, an ROI signpost and a roadway to direct bottom line impact.

Sometimes HR wants to start at the end – the fun and strategic stuff. But to get credible workforce data that drives decisions and impacts business results, the data infrastructure must be in place first. Perhaps boring to some, but data definitions, data warehousing, establishing a system of record, reporting applications, data security, etc., are all important, as is having a framework for what data needs to be pulled into the system: employee, workforce, individual and business performance and financial data.

If you’re a buyer, do you have a roadmap to get there from here? Are current HR systems adequate, or can you get there with add-ons at the edge or in the cloud? If you go for separate point solutions for each issue, will you be able to pull in all the data from the various vendors? Where will you connect to the enterprise business performance and financial systems? How many interfaces are manageable, and who will manage them? Which analytical capabilities should you build in-house, and should some be outsourced?

A word to vendors – R analytic sales opportunities may be disguised, but they are there.  The time is right for you to drive your shiny offerings down prospect road.

And advice to buyers – call your friendly HR portfolio manager to ensure you build an integrated set of systems and capabilities at the lowest operational cost level while raising the bar on HR’s ability to increase business results.

Linda Merritt, Research Director, HRO, NelsonHall