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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Oracle Buying Taleo: Is It a Good Deal?

As Howie Mandel always says to his guests after they’ve pressed the button and say “Deal!” on the TV show Deal or No Deal—”but was it a good deal?” Time will of course tell, but I do believe Oracle has made a very good deal. As the acquisition was announced just last February 9, I’ll briefly recap what had happened.

Oracle announced an agreement to buy Taleo for $46 per share, an 18% premium over Taleo’s stock price the day before the announcement, equating to $1.9 billion. As Taleo’s board has approved the acquisition, it is now subject to normal regulatory approval and is expected to close by summer. This follows SAP’s announcement on December 3, 2011 to acquire SuccessFactors for $3.4 billion. I had blogged about my take on the acquisition last December 13, 2011, stating that SuccessFactors is a provider of talent management software, but software alone does not get at the core of what makes for effective talent management. First, let me state that I also feel that SAP buying SuccessFactors was a good deal, albeit a steep price, as cloud-based software, including talent management is clearly on the rise and expected to continue to grow. NelsonHall has seen a large increase in the number of cloud SaaS HR services contracts and nearly 15% of HRO contracts in 2011 also included talent management software, often performance management, mostly in the mid-market.

Getting back to Oracle, Taleo provides cloud-based talent management software as well, so this is also a good deal, but how does that make this different? Because Taleo adds recruitment capability that Oracle did not have before. And although SuccessFactors provides recruitment software as does Taleo, Taleo also has an applicant tracking system that according to NelsonHall’s 2011 RPO report is the most widely used recruitment technology and applicant tracking system, utilized by approximately 80% of all RPO vendors for their clients, Oracle’s PeopleSoft had been in sixth place. The RPO report also noted that approximately 45% of all recruitment technology was platform-based. Taleo also has a business edition, popular in the mid-market for clients seeking a more standardized solution, used by vendors including Alexander Mann Solutions and Pinstripe. According to NelsonHall’s HRO forecast, RPO will have the highest growth of all HR services through the forecast period of 2015.

In summary, I think both acquisitions by SAP and Oracle are good; especially as clients continue to focus on talent management and recognize the need to have integrated technology and processes, most importantly supported by leadership that understand this. I’m in the final stages of my learning BPO research interviews and I‘m seeing a clear trend that learning vendors are now also providing talent management software and associated consulting services to their clients along with their learning services. I look forward to aggregating this data that I’ll present at the HRO Today Forum in Washington, DC on May 1st, titled State of the Learning BPO Marketplace, including the Emergence of Social Learning.

Gary Bragar, HRO Research Director, NelsonHall

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HRO 2012 Trends – The Evolution of Talent Management

The NelsonHall HRO team is pleased to once again contribute the annual HRO Today thought leaders forecast of trends that will influence the year ahead. ‘Artful Predictions’ covers a range of topics with talent management (TM) as one of the highlighted trends. We have covered the subject of talent management frequently as we see the opportunity for it to become an integral part of HR business process outsourcing.

For some time, I have called talent management a disputed ground and a potentially disruptive force that could shake up the HRO field. Why? This is because TM elements include so much of the human capital management value chain and cross over everything—from HR ERPs, software modules, HRO business process outsourcing, HR consulting and the roles of HR leaders, HR business partners, and internal shared service centers. TM includes performance management, succession and career planning, recruiting and staffing, compensation, and learning. I also include workforce planning and management under the TM umbrella.

In addition to the HR ERP vendors and the specialty TM software providers, there are HRO providers that are also building out their TM capability internally as well as through strategic partnerships and acquisitions.

• Kenexa acquired BHI (Batrus Hollweg) a TM company. Although Kenexa has developed TM expertise internally, the company has also been enhancing its efforts over the past few years through prior acquisitions that have included:
  • Salary.com to strengthen its compensation management capability
  • The Centre for High Performance Development to further strengthen its leadership development and management training offering
  • Gantz Wiley Research to increase its employee survey research capabilities.
• Mercer acquired Censeo Corporation to enhance its TM consulting capabilities and online platform of assessment services.
• Both Kenexa and NGA are partnering with SkillSoft for learning content.
• In July, Talent2 re-branded itself to simplify its talent management focus.
  • It also became a reseller of Cornerstone OnDemand, most widely used for its performance management, including succession planning and learning modules.
  • Talent2 also added advisory services as a service offering to help clients more effectively deploy the capabilities.

With recruiting as one of the core TM processes, RPO vendors are among the early leaders in developing internal as well as external TM service options. NorthgateArinso has been moving in this area as well, coming from the standpoint of bring it all together into one integrated system and services package. With the acquisition of The Right Thing, ADP signals both a stronger move into RPO and its interest in TM.

The HRO Today article also discusses whether HRO has reached the maturity stage of providing ‘true business value’. I believe that talent management evolving into a full-fledged HRO service with technology-enabled tools, data integration across the full suite of HR data, supported by analytics assistance and consulting is critical to HRO providing true business value results for clients and achieving its own full measure of success as an invaluable industry.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

ADP has a Platform for HRO Success

Last week, many of us covered announcements from the HR Technology conference.  Among the new service news was ADP’s Vantage HCM SaaS and BPO platform, which was formally launched on October 3^rd at HR Tech.

Vantage HCM covers HR administration, benefits, payroll, time and attendance, and talent management. It is an enhanced version of ADP’s successful Workforce Now platform, which was launched in October 2009 and already has more than 10,000 clients. ADP is estimated to have invested 18 months and $600m in the new platform. General availability is slated for March 2012 to allow time for full testing of critical high volume HR activities such as annual open enrollment and end-of-year payroll with 12 pilot clients from a variety of industries with 1,200 to 20,000 employees.

I see a bigger story here: ADP has built a business platform to support execution of its strategies. Here are several elements I see in play.

Support the core. ADP is adding new services while protecting and enhancing payroll, its single largest revenue generator. Payroll is built into the core package of each multiple process HR (MPHRO) system.

Serve your main markets. In payroll, ADP supports every size organization. Now, it offers MPHRO platforms for nearly every size organization: Workforce Now provides core HR needs for less than 3,000 employees; Vantage HCM covers more robust HR needs and talent management for up to 20,000 employees; and Global View supports large, multi-country organizations typically with more than 20,000 employees.

Leverage acquisitions.  Vantage HCM talent management services include succession planning, performance management, and compensation management as the fruits of collaboration between ADP and Workscape, which was acquired last year.

Reuse development investments.  Vantage HCM uses “plug and play” design for fast and easy additions, integration of new modules, or preferred partners, such as Cornerstone for learning.  Access will be immediately available from multiple devices including smartphones, another benefit of development reuse.

Roadmap development and growth. Workforce Now and Vantage HCM are U.S. services. Both will be expanded to Canada, with Workforce Now ready in 2012. In the future clients will be able to choose the basic benefits module or Workscape services for more complex benefits needs.

Buy, build, and go. ADP prefers to buy or build for strategic growth services. It chose to build its own proprietary MPHRO systems. It acquires complementary service lines and players in geographies to quickly establish a beachhead with top tier players. Once it identifies a target, it moves fast, integrates new acquisitions and captures synergy savings.  (ADP just announced acquisition of The RightThing for RPO. Acting fast indeed!)

Go your own way. Most MPHRO providers offer HR analytic packages as an added cost option. ADP is building in related data views, dashboards, metrics, and integrating workforce analytics use right at the point of need.

Do you have a business platform as broad and consistently used as ADP’s?

Linda Merritt, Research Analyst, HRO, NelsonHall

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Building HRO Business Value

The hockey great, Wayne Gretzky, said “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”HRO service providers and HR leaders each dream of demonstrating business value. There lies strategic relevance and pricing options above commoditization, as well as long-term relationships.

To continue our search for guideposts for the journey, this week we’ll take a look at NorthgateArinso’s 2011 Talent Management Survey. The survey analysis highlights the need for talent management(TM) tools that are integrated with workforce data to gain optimum advantage. Sixty-one percent of the global organizations surveyed have at least one TM program installed, but 64% do not have the TM tool(s) integrated with their HRIS for workforce and payroll, missing out on rich and relevant data sources.

The study also provides hints on where HR and HRO need to “skate” to be great and not just good. Overall, 60% of the respondents agreed that HR contributes to the company’s development and transformation capacity on a daily basis. Looking at data for only HR respondents, the number increased to 82%. HR sees itself as further along than other business leaders. I have always said that strategic is what your senior executives say it is – so know where their strongest interests lie to close the gap.

TM elements include performance management, succession and career planning, recruiting and staffing, compensation, and learning. Certain TM elements are of particular interest as 90% see the identification and retention of top talent as business critical for the next three years, making performance management, succession, and career planning of top concern. Also, TM is considered most critical in areas including sales, marketing, and customer relations, as well as R&D. The TM focus varies by company size. Smaller companies are concerned about enabling growth and larger companies are more focused on the strategic alignment of HR as a driver in the fulfillment of business objectives.

Moving into the TM space will be increasingly important for multi-process HRO providers. Whether the TM tools are built in-house, come from major ERP sources, or are well integrated from a leading supplier partner matters less than that the tools are present and well-supported.

There is a myriad of TM software companies that specialize in one or more TM elements. Few TM software providers currently offer a full suite of TM tools that equal some of the best single solution systems for compensation or learning, for example. There is more HRO value in combining tools and services, and if you can add consulting as well, even better. There needs to be a plan on how to bring all elements together across vendors and technologies or even the silos within HR.

Clients, whether you go best of breed with multiple vendors or use a fully integrated system from one, do you have the HRO partners that will help you advance in the journey to full business value creating strategic partnership?

Linda Merritt, Research Analyst, HRO, NelsonHall

Aon Hewitt 2011 Analyst and Consultant Briefing

At Aon Hewitt’s first analyst and consultant conference, Aon CEO Greg Case set the tone of the day with his enthusiastic overview about the company’s twofold focus on risk and people.  As of 2010, the risk segment makes up 60% of the business, while HR solutions is the remainder with an objective of a 50/50 split.

To achieve the 50/50 split, Bal Dail and Kristi Savacool, co-CEO’s of Aon Hewitt, shared their vision.  That is, for Aon Hewitt to be the most trusted partner for clients seeking HR solutions across its consulting, benefits administration, and HR BPO sectors.

Overall, the sectors are quite healthy with consulting leading the way.  Of particular interest to me is the HR BPO business since I recently completed the 2011 NelsonHall multi-process HRO (MPHRO) report.  HR BPO accounts for 13% of Aon Hewitt’s revenues and positions it as the global leader in the MPHRO space with a little more than 12% of market share.

It has 27 MPHRO clients, most recently adding Bank of America who was previously serviced by Fidelity.  The Bank of America contract is for five and a half years, for 290,000 employees, and covers the following services:

• HR administration
• Performance management
• Payroll
• Time keeping
• H&W administration
• Learning
• Recruiting technology.

Most importantly, Aon Hewitt hasn’t lost any HRBPO clients to its competitors.  It lost Mervyns and Circuit City in 2009 due to liquidations and it has another client that has downsized to where there is no business case for MPHRO services.  Aon Hewitt, however, will still perform benefits administration services for this client.  The most immediate challenge in this space is renewing Air Canada and Prudential.

In terms of its standalone offerings, Aon Hewitt is strongly focused on RPO, which is provided as a standalone service as well as part of its HR BPO offering.  The company has 500 recruitment professionals, assesses 10m candidates annually, and fills 65,000 positions a year.  Current RPO clients include Bank of Montreal, Marriott, and the TSA.

Absence management is another standalone offering that Aon Hewitt is planning to make significant investments in.  It currently has 400 employees, 4 global service centers, and 55 clients.  Absence management is also offered within the company’s HR BPO portfolio.

One thing was very clear throughout the day, Aon Hewitt is excited and enthusiastic about the current direction it has positioned itself in.  But make no mistake, the company won’t sit idle with this strategy even if it is one of the largest HRO and consulting players in the world.  It will continue to evolve so it stays on top.

Amy Gurchensky, Research Analyst, HRO, NelsonHall

Playing the Hidden Object Game with HRO News

As one of NelsonHall’s research analysts, I follow what is happening in the various HRO markets. The simplest method is reading press releases, to which we add our commentary in our tracking service.  As a reader, you see a portion of this analysis in our HRO Insight Blog and HRO Insight Newsletter.

On my own time, I like to play basic computer and online games. One of my favorite types is hidden object games where you follow clues to solve puzzles. Occasionally, tracking press releases is a bit like a virtual scavenger hunt for the larger objective.

Let’s take a look at an example with Ceridian’s recent announcement of its acquisition of Versult Group, Inc. Versult Group is a workforce management consulting firm acquired to enhance Ceridian’s implementation, training, and support services for its InView Workforce Management (WFM) solution.  It is a straightforward article, easy to cover as is, and then I followed one clue to another and ended up with a richer story. HRO analyst fun!

Back in February 2011, Ceridian announced its partnership with Dayforce to launch InView.  The two partners began working together a year earlier to integrate Dayforce’s WFM software suite into Ceridian’s payroll and HR administration services and ready both teams for launch. Ceridian also made an equity investment in Dayforce, which had already raised $20m, including $10m from Bridgescale Partners in July 2010.

Versult was one of seven Dayforce implementation partners and Versult had already performed implementations with Ceridian. As a bonus to Versult’s experience with WFM system implementation, it brings its own mobile access application, Versobile, to Ceridian.

Ceridian intends to further develop this platform for its clients seeking SaaS-based HR services by integrating beyond the current HR administration and payroll services to create an end-to-end offering including: H&W, tax, pay cards, COBRA, recruiting, EAP, tuition reimbursement, performance management, and training.

The payoff so far is that Ceridian’s investments are seeing rapid initial client acceptance. The platform has already grown to 90 Ceridian customers, rapidly escalating from 20 in February 2011.

This is a good, well-thought-out strategic move for Ceridian. It gets to cost effectively expand its SaaS service portfolio, leverage the strengths of its current offerings, increase scope with its client base, and add an experienced implementation team. It also has an equity stake in WFM, an increasingly important service line given employer concerns with cost control and the capability for rapid and effective workforce scaling.

Let’s leave this chapter of the story with a puzzle. How long will Ceridian be satisfied with a partnership with Dayforce, the WFM software source, when it felt the need to acquire Versult, the implementer?

Now for HRO vendors large and small, how are you solving your piece of the HRO SaaS puzzle?

Linda Merritt, Research Director, HRO, NelsonHall

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

Employee Engagement, High Performance, and HRO

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