Archive for the ‘hro’ category

Mercer on the Move

June 14, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

This week I attended Mercer’s always well managed and informative analyst forum in Boston, MA. The meeting was focused on the talent consulting line of business.

Talent Management on the Rise

Mercer research indicates that human capital issues are a top CEO concern and managing talent is becoming a board of directors’ issue, moving beyond the traditional CEO succession planning and compensation to overall talent and workforce planning. The new Mercer Talent Barometer Survey, which was introduced at the 2013 World Economic Forum, reports that 60% of the 1,200 global companies surveyed are investing more in talent, but only 30% feel that their workforce plans are highly effective.

The business of talent has become both exciting and disruptive, with possible new entrants, globalization, media, innovations, and opportunities. (Talk about new entrants, eHarmony is considering getting into the talent matching game!)

With a possibility of double-digit growth, the talent group looked at how to grow across the talent value chain by expanding its services, tools and technology offerings for talent, rewards, and communications to increase growth and leverage Mercer’s depth of experience and capabilities.

The answer will become apparent over the next few months as more packaged solutions are launched that combine consulting, information, and technology to meet the needs of clients that want a less-customized consulting approach with “off-the-shelf” packaged and reusable services and tools.

Workforce Planning Versus HR Analytics

Some elements that will be leveraged are already mature and solid revenue producers. Surveys, benchmarks, and analytics for compensation/total rewards and job structures are a more than $200m line of business. Globalization of the revenues is already well on its way, with about equal distribution from North America, Europe, and emerging markets across 57 countries.

Instead of focusing on HR analytics, Mercer is emphasizing data acquisition and integration, data modeling, as well as data visualization as it applies to a wide range of workforce and data that drives business results. This may mean a consulting and outsourcing services engagement, it may mean workshops and training, or self-service use of integrated SaaS technology platforms with one or more Mercer products.

Think Big, Start Small, Move Fast

There are a lot of moving parts in Mercer’s strategy to create an integrated talent solutions portfolio.

It is brought together under the go-to-market Talent Impact label that includes new and existing products and services to forecast, engage, mobilize, reward and assess talent. Behind the scenes Mercer will be streamlining its own architecture into fewer and more integrated technology platforms to support the new offerings.

There is a lot to be done in a short time, but that is in alignment with the “think big, start small, and move fast” philosophy of Orlando Ashford, senior partner and president of Mercer’s talent business. Mercer is on the move!

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HRO and Innovation – Getting Practical

May 31, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Innovation in multi-process HRO (MPHRO) has been a topic of discussion, and some contention, since the early mega-deals that created the modern MPHRO market more than ten years ago.

Even in the early days there was a desire for innovation, but there was also a lack of common definitions and mutual understanding, along with difficulty in articulating innovation in contract language.

There was an even greater barrier – systems spaghetti. Early MPHRO clients had highly-customized ERP infrastructure, aging legacy systems, and third-party applications, much of which may have been non-centralized and non-integrated. Each major customer was in their own bubble of services and systems. It quickly became apparent that it would be hard to add new and different innovations within the constraints of the contracts and the technologies.

Platforms for Innovation

Major MPHRO service providers now have global multi-client service delivery and data centers with sophisticated workflow processes. Early clients have been moved bit-by-bit into the common support infrastructure, even if they remain on their own, licensed ERP systems.

Many HRO clients are ready for increased standardization and multi-client platforms to reduce cost and to improve performance. Innovative cloud-based SaaS and services platforms are opening up new services to the mid-market and parts of the large client market:

  • Clients on a shared service platform benefit from ongoing incremental improvements
  • Clients benefit from access to new products and services without paying a significant portion of the R&D needed for a one-off innovation.

Some tension between continuous improvement and innovation is natural, as the line between an “included enhancement” and what is “new and different to be added as an extra charge” looks very different depending on whether you are a buyer or a supplier.

Collaborative Innovation

Client user groups support both HRO improvement and innovation. Vendors were originally reluctant to let clients communicate with each other (partially because the clients might “gang-up” on the vendor – and sometimes they did!).

Companies like IBM and Xerox were leaders in developing client advisory boards. These interactive groups provide feedback on the services, give input into common needs, and even offer guidance on parts of the vendor’s development roadmap. They are not just “the voice of the customer”; they are also a built-in base of beta testers. Willingness to put some skin into the game is also a great way to test market viability and further strengthen relationships.

Infrastructure of Innovation

Buyers can develop their processes for HRO innovation in the following ways:

  • Assess vendors for innovation capabilities as part of the selection process
  • Develop the language and mutual expectations for measurable innovation upfront and include in the terms of contract. Include who pays, and when, determine if there will be vendor incentives, and clarify the client’s role
  • Use the governance process to jointly monitor, manage, and measure improvements and innovations over the course of the relationship.

The good news is that we are beginning to build the HRO infrastructure for future innovation; common language, standardized multi-client platforms, and client user groups.

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HRO and Innovation – a Changing Dynamic

May 14, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Last week the Human Resources Outsourcing Association’s (HROA) Publications & Practices Committee held a webinar on collaborative innovation in HRO with industry experts Lisa Johnson, director of recruiting, North America at Gate Gourmet, Rolf Kleiner, senior vice president and chief innovation officer at Kelly Services, Inc. and Dr. Greg McLaughlin, senior vice president of research & development for Global Targeting, Inc.

Understanding Innovation

Innovation has been a conundrum for years for HRO buyers and suppliers. There are many ways to define the word ‘innovation’ and that makes it hard to be sure each party is speaking the same language. All three experts agreed that open discussions between clients and service providers are needed to develop a mutual understanding of what innovation means in the context of the relationship and contract.

Greg walked us through aspects of innovation range from the conceptual “innovation is an experience”, to the practical “innovation begins with a need and ends with an outcome that creates a competitive advantage.”

Lisa looks for HRO suppliers with the spirit of innovation – backed by experience. Rolf looks for employees who “rise above the white noise” to work on special innovation projects that also support talent management.

Innovation and Continuous Improvement

The HROA Buyers Group’s survey on innovation and continuous improvement showed there is a commonality in basic definition and understanding developing across the community of buyers, service providers, and advisors. From the words of HRO community members:

  • Continuous improvement is an enhancement of a product, service or process that already exists:
    • Increased operational efficiency, improved user experience, ongoing, incremental, and step changes
    • Efficiency and effectiveness gains that “keep pace with the market”
  • Innovation is something new and different:
    • Cutting edge, transformational, precedent setting, competitive advantage, disruptive, and dramatic
    • A significant and often transformational change that, once introduced, “you wonder how you ever lived without it.”

The HRO community is in agreement that continuous improvement and innovation should be a collaborative effort between the HRO service provider and the client:

  • 92% of respondents agree that this collaborative effort is what should be happening between service provider and client, but only 59% see that as true now, with 40% of buyers and only 22% of providers agreeing that collaboration is actually happening in the marketplace right now
  • 77% agreed that innovation should be a collaborative effort among the parties, with agreement from 100% of advisors, 60% of HR practitioners, and 83% of providers.

 The Innovation Gaps

Significant gaps – and therefore opportunities – remain:

  • 75% of respondents said that continuous improvement is in the HRO contract
  • Only 42% agreed that innovation is included in the HRO contract.

In the next blog I will be getting practical about innovation in HRO.

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Benefits Outsourcing is Blooming

May 9, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Benefits administration is producing a bountiful crop of new and expanding services. Recent contract award announcements included ADP, Aon Hewitt, Ceridian, Equiniti, Fidelity, Mass Mutual and Merrill Lynch. A wide range of industry segments were represented: banking; food; education; non-profits; hi-tech; pharmaceuticals; and travel. This week, I have taken a look at some of the newer benefit outsourcing “crops” that are starting to grow nicely.

Managed Retirement Accounts

Fidelity’s relatively new managed retirement account offering – Fidelity Portfolio Advisory Service at Work – was designed to address the low rate of adequate preparation for retirement by many employees by combining Fidelity Investments plan sponsor customized portfolio active management services with auto enrollment and available advisory services to help bridge the gap in achieving retirement goals from a defined contribution plan. The service grew in both participants and assets by 50% in 2012. Already in 2013, another 135 new clients have been added, bringing the total to more than 1,800 plan sponsors.

  • Fidelity awarded a contract for Portfolio Advisory Service at Work by ADM.

Health and Wellness

ADP’s Vitality wellness solution supports employers with between 50 and 1,000 employees manage rising healthcare costs and also reduce employee absenteeism. Vitality’s incentive-based program includes an interactive wellness portal, health risk assessments, biometric screenings and personalized wellness plans with recommended goals and activities. It integrates with social networking sites, mobile applications and fitness technologies; and when employees achieve planned goals, they earn points towards lowering their health plan contributions. The service is also integrated with ADP’s payroll services.

  • ADP awarded a contract by Jackson Companies for ADP Vitality services.

Benefits Bouquet Bundles

HRO buyers want multiple related services from one vendor under one contract; and health and wellness lends itself to packaging separate services into bundles. Ceridian’s LifeWorks.com combines EAP, work-life, and wellness services into one program with its own portal and mobile access. Also available is Health Coaching – a program for high-risk employees that provides access to comprehensive health assessments and personalized guidance programs – and Client Value Dashboard – included for employers to monitor reports usage data and ROI information.

  • Ball State University chooses Ceridian’s LifeWorks.com

Private Employer Exchanges

Mercer’s Marketplace allows employers to improve management of their benefits spending and administrative responsibilities for active employees. Employers determine how much to contribute toward the cost of their benefits program and can select from a range of insured and self-funded products and providers. The platform includes full benefits outsourcing and provides employees with call center and online decision support.

  • Mercer recently announced names of 10 of its 20 national, regional and state carriers that have joined Mercer Marketplace for providing core medical and voluntary benefits.

A good garden has a variety of plants. Some base crops are evergreen like benefits enrollment and management services, while others are changed out to meet growing market demand. Benefits HRO: how does your garden grow? Very well thank you.

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Targeting Payroll BPO, Part II

April 26, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

There is so much in my colleague Gary Bragar’s NelsonHall Targeting Payroll BPO market analysis that I will cover a few more items this week. The payroll market is divided into three parts: payroll software services; service bureau payroll (also called managed payroll, where the vendor manages payroll production and the client manages data input and employee help desk services); and payroll business process outsourcing (where the end-to-end payroll process is outsourced, including tier 1 and tier 2 employee help desk support).

Payroll BPO market share is growing

Payroll BPO is what NelsonHall follows most of all, and it is a growing part of the overall payroll market. Even as SaaS payroll products become more ubiquitous, many clients will still want support for the whole process. We can see some of the reasons why in the changing pattern of client requirements. As I covered in the first Targeting Payroll blog, cost remains the number one priority. However, other needs have increased in importance over time:

  • Standardization of centralization of processes and technology: Instead of defending customization, now buyers are demanding standardization to increase efficiency and reduce costs from maintaining disparate systems
  • Compliance/risk management: Compliance with ever-more complex and changing regulations and work rules needs the time and attention of fulltime experts. For example, in Europe the complexity of regulations combined with employee populations spread over multiple countries adds to the challenges of compliance
  • Better employee experience: Users want access that is easier and simpler, including 24×7 access to data, self-service, and mobile. Payroll self-service is widely available and has become table stakes. The vendors that deliver the most useful mobile applications, the fastest and with the greatest security, will create valuable market differentiation.
  • Payroll subject matter expertise: Clients expect improved quality of payroll with augmented accuracy, which can lower overpayment and off-cycle payroll runs.

Payroll Cost #1 with a new spin

While cost remains the number-one client requirement, there is a new aspect and it is the same one NelsonHall is seeing in other HRO areas; balancing cost with value. Value for price is especially understood by second- and third-generation buyers who indicate their willingness to change vendors to get it!

Payroll Analytics

It has been my view for some time that the focus on improved payroll processes and systems is driven by more than the need to pay employees timely and accurately. It is also driven by the need to manage the total cost of labor with real-time access to data and analytics for decision-making that leads to improved business performance. Payroll is increasingly being seen as a valuable management strategic tool, and clients will be looking to payroll BPO providers to help them access and develop workforce analytics expertise.

It great to see how dynamic the payroll outsourcing industry has become!

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Targeting Payroll BPO, Part I

April 18, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

The NelsonHall Targeting Payroll BPO report has recently been released by my colleague, Gary Bragar. Payroll is such a well-accepted mainstay of HR outsourcing that it’s nice to see it still showing steady growth year after year.

Gary regularly produces the payroll market analysis, and profiles leading vendors in this space. Over time you can see how what seems like a basic service has grown, evolved and increased in strategic importance. What has not changed is that buyers are looking for savings by outsourcing payroll. The good news is that payroll BPO delivers: first-time payroll outsourcing can save from 15% to +40% depending on the degree of complexity and variables (like the number of locations, with everything from a single location to more than 100 countries).

The full report includes more on what buyers want from payroll outsourcing and what’s key in vendor selection; including where data needs vary between the mid-market and large market. Here are a few highlights of the report:

Why Outsource Payroll?

Cost saving remains the number-one reason to outsource payroll, and several nuances have been added including:

  • Clients want a more variable cost structure and less fixed costs
  • Savings now often include not having to refresh client technology (cost avoidance)
  • Simplifying payroll after a series of M&As or restructurings reduces cost
  • Reduction in payroll losses from ineligible and overpayments.

Centralization and standardization of process and technology has increased in importance, similar to what has been seen in other HRO areas. Where clients used to want customization, many are now seeing the benefits of standardization to improve efficiency, reduce cost, and to increase timely access to accurate payroll data across the enterprise.

With constantly-changing regulations and taxation across multiple jurisdictions, accuracy, compliance and risk management remain core payroll benefits.

Multi-Country Payroll

For MNCs, multi-country payroll remains a sought-after capability. MNCs want one vendor, one contract, and one payroll platform. Also wanted is visibility to aggregated costs and data reporting, in addition to the flexibility and scalability to add or change geographies.

Payroll BPO vendors have responded to the blended needs of clients for cost savings and global coverage by:

  • Increasing nearshore and offshore service centers
  • Partnering for coverage in some countries
  • Offering multiple technology platforms from SaaS to ERPs.

Pricing Pressure

Given the focus on cost reduction, pricing pressure should be no surprise. This is a market with many mature and capable suppliers, which in itself adds competitive pricing pressure and the need for differentiation to focus on value as well as cost.

As an indicator of payroll service provider capabilities to compete, I earlier mentioned the steady year-over-year revenue growth. That growth has been achieved at the same time as the average price per-payslip has fallen significantly over the last three years!

There is so much more in the Targeting Payroll BPO market analysis, look for more highlights in a future blog.

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RPO Generation 2.0 is Ready to Go

March 28, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Recruitment Process Outsourcing (RPO) is one of the younger HRO service lines and it is both growing and maturing quickly. The March issue of HRO Today recognizes the emergence of RPO 2.0.  NelsonHall’s RPO specialist, Gary Bragar, would certainly agree. Gary’s October 2012 Targeting Recruitment Process Outsourcing market analysis highlighted many of the same developments in this rapidly growing HRO segment.

What is New in RPO 2.0?

The rapid growth and incorporation of social media for recruiting is a big part RPO 2.0, one that keeps pushing RPO to the leading edge of innovation in the HRO space.

RPO services are rapidly moving up the value chain, and changing client expectations is the key. While reducing the cost of service provision is always on the table, it is no longer the number one issue. Flexibility and scalability will always remain important as well, given how quickly hiring needs can change.

Today’s RPO 2.0 clients are looking for more value:

  • Improved quality of hires
  • The latest tools and technologies for social and mobile
  • Expertise in accessing talent pools and passive hires
  • Greater focus on candidate experience
  • Analytics and insights, in addition to metrics and reports
  • Improved retention
  • Access to advanced services including employment branding, talent management, talent engagement, and integration with workforce planning.

Clients Simply No Longer Want To Do It

In the last few years, many buyers reduced internal recruiting staff in line with the reduced volume of hires, and they do not want to rebuild and reinvest in the rapidly evolving technologies and advanced skill sets it takes to succeed in today’s competitive, social, mobile, and global recruitment process market.

Buyer Choice is Broad

For every large staffing company that does RPO including Adecco, Kelly, Manpower, and Randstad, there are smaller vendors that specialize in RPO such as Ochre House and Pinstripe.   Most leading RPO vendors of all sizes can offer services in most of the regions of the world as they have partnered and made acquisitions to make their footprints global.

Not long ago, major multi-process HRO (MPHRO) providers either did not provide end-to-end RPO or saw it taken out of contracts. Now, more MPHRO providers have full RPO services strong enough to be offered as standalone services including ADP, Aon Hewitt, Infosys, and IBM.

With RPO 2.0 You Can Have It All

While having it all may still be a bit aspirational for most of us, we are finding evidence that successful client / provider RPO partnerships can improve process efficiencies (e.g., reduce time to hire 20% to 50%), reduce the total cost of hire (often 20% to 30% or more), along with increasing hiring manager and candidate satisfaction.

Imagine what we can achieve with RPO 2.0!

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