Catching Up with ADP

Linda Merritt, HRO Research Analyst, NelsonHall

The recent passing of long-term U.S. Senator Frank Lautenberg reminds us of his early role in the formation of what became ADP, a founding member of HR outsourcing. In the early 1950s he was engaged in selling insurance and sold a policy to two young New Jersey businessmen, Henry and Joseph Taub. The Taub’s were pioneering a then new concept; payroll outsourcing. The brothers knew payroll processing and Lautenberg knew sales and marketing. Lautenberg took a risk and joined the Taub brothers and together they created a new industry.

Establish Operating Principles

By the time the company incorporated in 1961 the three leaders established principles that still guide the company some 60 years later. Following are a few of the principles they put in place.

Focus on Business Markets that Offer Significant Growth Opportunities

ADP has always pursued growth through new market opportunities, both by expanding it service lines and by entering new geographies. Much of the early growth was through acquisitions, as well as organic growth. Lautenberg retired as CEO from ADP in 1982 having made over 100 acquisitions!

Over time, ADP became a global player. An early acquisition was GSI, a large payroll and HR services company in Europe. The latest 2013 acquisition is Payroll S.A. to expand LATAM payroll capabilities to Chile, Argentina, and Peru. In the last few years major acquisitions included Workscape (benefits), The RightThing (RPO) and SHPS (benefits).

Embrace Technological Change to Enhance Product and Service Offerings

By the early 1960s ADP had moved from manual operations to the pre-computer punch cards and on to leasing its first computer: an IBM 1401 mainframe. That willingness to continue to embrace the new is seen in ADP’s successful launch of a series of cloud-based SaaS HR technology and BPO service platforms, including Workforce Now (1k-20K employees), Vantage HCM (50-3k employees), and GlobalView for multi-nationals. Together, the three services support more than 40k clients.

The company has also launched extensive mobility options, including RUN powered by ADP for small business mobile payroll and ADP Mobile Solutions for access to a broad range of information and transactions spanning time and attendance to benefits and pay cards.

Attract and Retain Motivated and Talented People

ADP has grown into a $10bn global outsourcing business with one of only four remaining AAA credit ratings in the U.S. With ~570k clients across 125 countries, we know customers support its line-up of services and proprietary developed technologies. What about people? A few recent awards tell the story:

• Ranked second on Fortune’s 2012 list of America’s Most Admired Companies in Financial Data Service
• Ranked in the Top 50 on IDG’s Computerworld 2012 list of the 100 Best Places to Work in Information Technology (IT)
• Named to the 2012 Working Mother 100 Best Companies, for the third time.

We therefore need to ask the question of prospective purchasers: does your prospective or current HRO service provider have long-term guiding principles and can you see evidence of them in action? Because ADP does.

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Global Growth Requires Global Mobility and Global HRO

No country is an island, even if some are surrounded by water. Each country, its employers and workforces are part of a globally intertwined macro economy and an employer in any one country can be competing for sales and talent with competitors from around the world.

Global growth requires developing global workforces to: increase a middle class of consumers; develop in-country sales, service, and/or production employees; and take advantage of right-shoring labor pools. Employers also need to access skilled talent in short supply in-country and yet importing talent can find an employer caught up in the turmoil of political as well as logistical issues.

The EU can be especially difficult to navigate. According to a new Accenture study issued at the European Business Summit 2011, “Europe in Tomorrow’s World,” one issue Europe needs to address to get back on track for future growth is the graying of the workforce and how to both develop and access more skilled labor.

As reported by Worldwide ERC, many EU countries are already wading in the waters of culture and immigration and are either considering or taking action to improve opportunities to augment local workforces:

• Sweden reduced its “Experts Tax” by 25% to attract more highly skilled expats, especially in the areas of science, research, and engineering;
• Austria opened its doors to workers from the eight Eastern European EU countries to bring in both highly-skilled and lower-skilled workers for industries such as construction and food service because of its aging population;
• Denmark’s major businesses called for relaxed immigration policies because six of the country’s ten largest businesses say they need to attract foreign employees within the next three years, and most businesses believe that current immigration policy is preventing them from hiring the foreign employees they need.

There are many ways for HRO service providers to assist in globalizing workforces including:

• RPO: Top-tier RPO providers continue to expand coverage into more and more countries.  RPO vendors can also help navigate the work visa process in-country.
• Mobility: Expat assignments are a key tool to developing global leaders, one that must be carefully managed due to cost and complexity. Who better to assist than a workforce mobility expert?
• HR systems and payroll: Managing a multi-country workforce requires timely and accurate data and that is hard to come by without access to a top-notch employee data and reporting system. Services and systems are available from HRO payroll and multi-process HRO providers.
• Consulting: Before acting, a global workforce strategy and polices are needed to guide expansion. A HRO provider with an industry leading reputation in HR consulting can provide you with a one stop resource for transformation planning, implementation, and change management as well as operations.

Whether your company is a major MNC entering into new markets or a mid-sized company expanding into just one additional country, a resource skilled in the dynamics, logistics, and legalities of global workforce growth can be invaluable — check out your friendly HRO global community.

Linda Merritt, Research Director, HRO, NelsonHall

Going Mobile

In early November, my colleague Linda Merritt wrote a blog titled “Mobile Apps Are Ringing Up HRO.” It recognized ADP as one of the early entrants with its payroll app “RUN Powered by ADP” for small business owners, which was launched in October 2010 for the iPhone, iPad, and iPod touch with plans to release Android and RIM-compatible versions this year.  Well, it’s hard to believe it has been this long for those of us considered middle-aged, but 40 years ago, Pete Townshend of the rock band The Who wrote “Going Mobile.” The song was about taking a vacation by riding around in a car with no particular destination, something Pete liked to do.  I don’t think Pete was thinking about processing payroll while riding around in his car, but this week ADP issued a press release with some very impressive statistics noting that there are already 100,000 users for its RUN payroll app.

A comment by one user, Scott McKain, stated “with just a few clicks, we process payroll conveniently and securely… and since transitioning to the RUN Powered by ADP mobile platform, we can now process payroll securely over a mobile device, no matter where our busy schedules take us.” Hopefully, Scott is not processing payroll while driving around in his car on vacation.

The article also references a 2010 nationwide survey conducted by ADP Research Institute that found that small businesses are leading the trend toward increased mobility, with 90% of small business executives out of the office an average of 23% of the time per 40-hour work week.

Since ADP released its app, other providers have announced mobile offerings for HR services as well, which include:

• Raet’s iPhone and iPad app for gross and net payment calculations and accessing jobs and news from Raet (March 2011)
• Manpower’s mobile recruitment app for candidates and recruiters (February 2011)
• Wipro and McGraw-Hill’s partnership to develop “mConnect,” an open-standard mobile learning (m-learning) platform targeted at low-income, rural, and otherwise underserved students and workers in emerging markets (January 2011)
• Buck Consultants’ (subsidiary of ACS, a Xerox Company) two iPhone apps for health and insurance information: Benefits Genie Lite and Benefits Genie, which give individuals the ability to set future appointment reminders and track health and insurance information (November 2010).

Other providers to launch mobile apps include SourceRight Solutions, Kenexa, and The RightThing.

Out of the necessity to provide payroll services, I think we will continue to see increased mobile payroll for processing payslips, viewing payslips, and performing other associated functions such as direct deposit.  In general, mobile offerings for other HR service lines including benefits, recruitment, and learning will be more gradual to take off because they are not as time-sensitive as payroll.  I believe that mobile recruitment will take off but initially more so for hiring managers to approve job requisitions when out of the office and candidates to check on status of jobs they are submitting for.  M-learning will initially be for more self-paced learning to access content and as I stated last fall in my blog I do believe benefits mobile apps will be important for accessing benefits information, including doctors and other medical care providers for such instances when you are on vaction and an emergency arises or as Pete Townshend would say for when you are Going Mobile.

Gary Bragar, Lead HRO Analyst, NelsonHall

HRO: Mobility is a Link in the Talent Management Value Chain

Mobility outsourcing is largely a standalone service from specialty providers. ACS, a Xerox Company offers global mobility as part of its multi-process HRO (MPHRO) suite of services while most MPHRO providers do not.

On one hand, it makes sense to leave mobility services to specialty providers because relocation is dynamic with constant changes requiring depth of knowledge and it rides the leading edge waves of economic tides. According to Worldwide ERC’s 2010 Transfer Volume and Cost Survey, relocation is trending up again after the severe trough in 2009. Although it will take some time to reach pre-recession levels, up is good and mobility is joining recruitment outsourcing as an indicator of recovery. For example, Cartus went from $320m in revenues in 2009 to $405m in 2010 and managed 148k relocations. Even in the downturn, it proceeded with the acquisition of Primacy in 2010 and the combined entity added 140 new clients and expanded services with 300 existing clients.

On the other hand, leaving mobility services solely to specialty providers can leave a weak link in the value chain. The answer for most HRO service providers is to ensure inclusion of a strong mobility vendor in the preferred and integrated supplier ecosystem.

Mobility matters because of the continuing evolution of talent management which includes a growing awareness of the link with mobility. While one would think the link is obvious, it is not always managed as an integrated component of succession planning, talent acquisition, and retention, especially on a global basis. In many HR organizations relocation is under the purview of compensation and benefits and talent management is elsewhere.  Add in multiple vendors and a consultant or two and you have a situation needing a bridge of connectivity.

Who will bridge the gap? Mobility providers have really increased their pace of innovation and made strides in becoming strategic advisors in order to survive the recession. The use of new services like pre-decision relocation assessments increased from 9% to 40% since 2007. In addition to administering the relocation process and paperwork, the relocation specialist may help the client decide on a temporary rotational assignment with the lower cost of temporary living versus a permanent relocation with a home sale in a down market. Or they may advise a transferee on renting versus buying, all based on knowledge of client policies, costs, and local markets. It is this group that is raising their eyes over the fence of talent management and going, hmm.

I am not predicting that a mobility provider is going to leap into full scale talent management tomorrow. I do see a new player in the mix for client mind and wallet share. If you are a HRO vendor with talent management as a major offering, think about more than just which technology to use. Do not let mobility be a missing link in your HR value chain.

Linda Merritt, Research Director, HRO, NelsonHall