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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Mercer on the Move

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 Talent Management by Client Market Position

Talent management, in all of its various forms, rises and falls depending on how clients perceive its importance at a given time. For high performing companies, it is never too far from the top of the mind.

The talent management services that are wanted and needed by a client can vary by the market position of the enterprise. According to the i4cp survey on The Critical Human Capital Issues of 2011, the top issues change in order of importance between higher and lower performing companies:

      Higher Performers                                         Lower Performers

1. Succession planning                       1. Strategy execution/alignment

2. Leadership development             2. Managing/coping with change

3. Talent management                        3. Leadership development

4. Performance management          4. Talent management

5. Knowledge retention                      5. Innovation and creativity

While many companies are returning to plans for growth, others are still struggling with getting performance improvement.

As the economy recovers, it will once again be harder to attract and retain needed talent. Aon Hewitt’s 2011 Talent Survey shows that engagement levels remain low, that there is a lack of confidence that leaders will retain their critical talent, and that middle management will be essential to business strategy execution and engaging the workforce.

Combine these items with an assessment of a client’s outsourcing maturity and a service provider can shape an offer to show how its services can meet the current and future needs of the client. For example, managing the succession pool for the very top deck is easy enough to do without commercial tools, but it is harder to gain visibility into middle and direct management, or hard to source jobs, without supporting tools and access to standardized organizational data sources.

A company low in outsourcing maturity and lower in performance within its markets may just need a few basic tools to increase process efficiency at the lowest possible cost. Anything too complex may go largely unused and bring complaints of being oversold or not worth the price. The highest warning signals must go to a lower performing organization that does not understand the roles that only its own managers can play – the best HRO services in the world cannot substitute for leadership and this is especially quickly apparent in the talent management arena.

A higher performing company with a trusted HRO service provider partner may be ready to add a fully integrated talent management suite (perhaps with consulting services) to connect with and add value to existing services, and use advanced workforce analytics to attract, retain, and develop talent for the future and for today’s business results. Here, the client/HRO partnership can be nicely synergistic, enhancing both parties.

Companies ready to improve performance and grow are great candidates for HRO. Just be sure to understand each clients starting position and show how HRO services and partnerships can help each one reach its various goals with a service plan and path that is just right for them.

Linda Merritt, Research Director, HRO, NelsonHall