Pinstripe’s RPO Analyst Day: Talent Forward

Gary Bragar, HRO Research Director, NelsonHall

I attended Pinstripe’s analyst day on May 15, 2013. It was combined with its Client Talent Forward Summit, with the theme “Commitment to Innovation”. Highlights of the day included:

Client Panel

Pinstripe discussed 10 recent innovations, of which a panel of four Pinstripe clients then discussed a few Pinstripe innovations that have benefitted their business, including:

• Email campaigning: A proactive approach to creating candidate pools with active and passive candidates. This enables messaging a high number of candidates with relevant information – such as familiarizing candidates with potential hiring company announcements; e.g. “Did you happen to know we were named one of the best places to work 4 years in a row” or “We were rated as the safest operating room to work in St. Louis”. Email Campaigning has resulted in a two-to-three times increase in passive candidate responses
• Video interviewing: Both live and prerecorded interviews of candidate presentations. Managers feel more informed of when to take candidates to the next step. Team interviewing is also conducted
• Employment branding and social recruiting: All about making a connection with the candidate to “get them in the door”. Includes training and education on how to properly use social media to send out positive messages.

Client Tour

We toured the Brookfield facility where ~60% of employees work. The tour included:

• Understanding how employees are recognized
• How virtual employees are connected and communicated with as though they were onsite in Brookfield
• Demos of some of the innovations, including email campaigns to build talent pipelines
• A visit to the Impression Center.

The Impression Center, which receives 250k calls per year, is staffed by customer service experts who are imperative to potential candidates’ first impression of the company. Applicants and candidates can call the center with questions throughout the job offer, and live chat is also offered. First call resolution is 96% with 97% customer satisfaction. Over 63k interviews have been scheduled by the Impression Center. Candidates may still contact the recruiter if needed; however, by using the Impression Center there has been a 97% reduction of calls to recruiters, allowing them to focus on their primary concern – recruiting.

Pinstripe Analyst Briefing

Pinstripe has grown from ~450 employees and ~73,000 hires in 2011 to ~575 employees today and nearly 100,000 hires in 2012. Most recruitment contracts at Pinstripe are end-to-end, full service RPO as opposed to projects. Several of the more recent contracts have been second- and third-generation RPO clients. Pinstripe’s partnership with Ochre House, formed in 2009 to deliver RPO in EMEA and Asia-Pacific, has been awarded several contracts to fill multi-regional hiring needs. Both companies attribute their success to sharing similar values. Honeywell is an example of a second-generation client now expanding beyond North America to Europe that Ochre House will serve. Combined with Ochre House, RPO is provided to ~85 clients in 45 countries in 23 languages.

Summary

One of the key messages taken from this summit is that Pinstripe is keenly focused on the candidate experience and a positive work environment for its employees to excel at satisfying client needs. It is therefore of no surprise that Pinstripe recruiters have an average of >9 years’ experience.

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M&A Activity in Benefits Administration: Round 2

Following the benefits administration merger and acquisition (M&A) frenzy of 2010 that resulted in some major consolidations including Aon Hewitt, Towers Watson, Xerox/ACS and ExcellerateHRO, to name a few, are we poised to see round 2?

The second wave actually began in early 2011 and tends to consist of the more established providers, in their own right, acquiring Tier 2 health and welfare (H&W) administration companies in the U.S.  Examples include:

• Towers Watson acquiring Aliquant in January 2011
• Sedgwick, a leader in the leave of absence administration market with ~20% market share, acquiring the productivity solutions unit of Nationwide Better Health in May 2011
• Morneau Shepell, the leading total benefits outsourcing (TBO) provider in Canada, acquiring SBC Systems Company in January 2012.

As of last week, we can now add ADP to this list since it signed a definitive agreement to acquire SHPS Human Resource Solutions—a subsidiary of SHPS, Inc. ADP has actually been making key acquisitions to strengthen components within its benefits administration offering for the last 18 months. It started with Workscape, which added compensation management services, and was followed by Asparity Decision Solutions for decision support tools and analytic capabilities.

Now, the SHPS acquisition strengthens ADP’s leave administration and reimbursement account administration offerings. The HSA and HRA components will be especially important considering the rising cost of health-care and the transition toward high-deductible health plans paired with these health savings accounts.

The H&W acquisition trend is also expanding beyond the U.S. It started in September 2010, when Capita – a U.K.-based HRO vendor providing total retirement outsourcing (TRO) exclusively in the U.K. – acquired FirstAssist Services Holdings for £12.5m. Then it continued when Mercer acquired REPCA – a brokering and advising firm for health and benefits (H&B) plans – to strengthen its H&B administration offering and advisory services in France.

The remaining question on my mind is whether U.S.-based TRO providers such as ING, Great-West, T. Rowe Price, etc. plan to jump on the H&W acquisition bandwagon to provide a one-stop shop for benefits administration like Fidelity Investments.

I’m eager to see who will make the next M&A move in benefits administration.  In the meantime, it’s always fun to hear about cross-selling opportunities that resulted in contract scope expansions.  Stay tuned.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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The Changing Shape of DB and DC Administration

Practically all large market organizations have already outsourced defined benefit (DB) and defined contribution (DC) administration. Therefore, DB and DC administration contract activity is more about competitive wins.  When reading these contract award announcements, the first question I ask myself is, why did the client change service providers?

Some clients have a preference in the type of vendor used due to the large-scale financial worth of these portfolios. Some client executives prefer the independence of a non-financial administrator like Aon Hewitt, ACS/Xerox, or Mercer, while others prefer the industry closeness of a financial-type provider like Fidelity, T. Rowe Price, or Vanguard.

Other reasons for changing vendors include client dissatisfaction with the existing service or wanting to obtain a lower price or perhaps both.  Another cause revolves around vendor consolidation for both total retirement outsourcing (TRO) and total benefits outsourcing (TBO), which also includes health and welfare (H&W) administration. Consolidation is driven by a desire to reduce the number of vendors to a select few. Mergers and acquisitions also add to consolidation as integration occurs.

Last year produced a string of TRO and TBO contract awards due to consolidation, including the following:

• HP in North America: Fidelity became the exclusive TRO provider for HP, which had ~162,000 participants from EDS being served by other providers
• Office Depot: Fidelity was awarded this new TBO contract from three different providers that had administered the 401(k), H&W, and stock plans.

With an estimated $11bn market at stake, both financial and non-financial administrators need to remain competitive in the TRO and even TBO space. As a result, benefits administrators are offering additional service features such as automatic enrollment and automatic contribution escalation for client-employers, and resources to educate participants so that they become more accountable for their retirement savings.

This strategy is reinforced by Aon Hewitt’s recent survey of 500 large market U.S. employers representing more than 12m employees. The survey found that just 4% of employers are very confident that their employees will retire with enough savings, down from 30% last year. Examples of services and solutions recently launched to create a competitive edge include:

• Aon Hewitt’s DC advisory offering: providing online personalized advice and professional management with Financial Engines serving as a sub-advisor
• ADP’s strategic advisory services group: helping clients maximize the value of in-depth benefits data and analysis
• Mercer’s RetireTALK: an interactive website with hypothetical scenarios, designed to motivate and educate users on retirement planning
• Fidelity’s myPlan tool: offering online retirement advice based on answers to a few questions.

The Aon Hewitt survey also found that only 10% of employers are very confident that their employees are taking accountability for their own retirement success.  The remaining issue then is how to encourage employees to utilize these services and solutions that are already available to them and which service provider will best help both the employer and employees achieve their goals.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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HRO – How the Garden Grows

Everything seems pretty moderate and modest in the garden of HRO so far this year. After the abundance in 2010, perhaps that is not so bad. Reasonably steady business gives service providers a breather and a chance to attend to growth opportunities by leveraging current capacities while cultivating new capabilities selectively.

In benefits outsourcing, the contract levels were good with some key wins and renewals. Fidelity continues its blossoming growth with major 5 year renewals for total retirement outsourcing contracts with HP and BP, and a new defined contributions contract with the University of Oklahoma. In the U.K., Mercer was awarded a 7 year defined benefits renewal by Saint-Gobain and it won a new pensions administration client, Loomis UK.

RPO saw a smaller crop of new awards, but is still growing, especially in North America and the U.K.  My colleague, Gary Bragar, will be heading off soon to the RPO Summit as a presenter and I look forward to hearing the latest views.

Smaller M&A and partnership activity remains perennial, continuing the pattern of growing footprints in terms of geography and specialized services. GP was the most active with the acquisitions of Ultra Training in the U.K.; RWD Technologies with offices in the U.S., U.K., and Colombia; and Communications Consulting in China. Manpower Group acquired Web Development Company in India to add to its IT recruiting in Asia Pacific. Finally, Raytheon Professional Services partnered with Baptist Health to increase training in healthcare systems.

With the blooming of HRO platform managed services, we have two trends. First is the belief that the time for HRO mid-market is finally here. Vendors are confident enough to invest in and launch new platform service offerings specifically for the mid-market. The second is growth into new fields beyond the base of payroll and HR administration systems. Examples of both trends:

• Payroll – NorthgateArinso launched agoHRa for companies with up to 500 ee’s per country
• Learning – IBM launched the mid-market Smart Business Learning Services and has launched Smart Business Learning Content Services
• RPO – Mid-market grew from c. 20% of total revenue in 2008 to c. 33% in 2010
• RPO – SourceRight Solutions launched RPO One for organizations with 100 – 5,000 employees, providing a dedicated service team, pre-configured ATS, and reporting and analytics.

Contract activity adds evidence that customers agree these services are desirable options. NorthgateArinso was awarded a 5 year managed payroll services and HR software contract by Historic Scotland utilizing ResourceLink Aurora. Historic Scotland is responsible for data entry, while NorthgateArinso will handle processing, pay runs, and produce electronic payslips. Edvantage Group won a 3 year managed learning services contract with Rieber & Son in Norway, which included Learning Gateway, Edvantage Group’s SaaS LMS, and e-learning courses. Edvantage Group also recently announced two contacts for its SaaS LMS. 

Learning has been slower to recover. Hopefully, 2011 will be the year for its bountiful harvest.

Linda Merritt, Research Director, HRO, NelsonHall

Where the Action is At in HRO

As a follow-up to my colleague Linda Merritt’s blog last week titled “HRO is Settling in for a Good 2011,” I thought I’d write about where the most action is at thus far. If you were thinking recruitment, good guess, but it is actually benefits administration leading the way in the number of announced contracts in 2011.

In addition to Mercer being awarded a pensions administration contract by Loomis UK Ltd., which Linda also wrote about Mercer in her February 23rd blog, a number of providers have announced important contract awards, including:

Fidelity Investments, after two big five-year contract awards in Q4 2010 by AT&T and Office Depot, in January Fidelity was awarded a five-year contract renewal for total retirement outsourcing (TRO) services by BP America, Inc., a subsidiary of BP. Fidelity will continue to provide administration and recordkeeping for BP America’s 95,000 DB and 48,000 DC and nonqualified deferred compensation plans for U.S. employees. Later in the same month, Fidelity was awarded another five-year contract renewal for TRO services by HP in North America. Under this deal, Fidelity will service all of HP’s retirement plan participants, adding 162,500 participants from EDS who were previously serviced by other providers. In total, Fidelity will serve more than 135,000 DC participants and more than 192,000 DB participants for HP.

Aon Hewitt, in February announced it had gone live with eight new benefits administration clients since the beginning of the year. Across these clients, Aon Hewitt has implemented 12 services including DB, DC, and H&W and has added more than 325,000 participants and retirees to its base of 22 million participants.

Capita, in February was appointed as a preferred supplier for the administration of the Teachers’ Pension Scheme (TPS) by the U.K. Department of Education. This is a seven-year, £80m contract renewal that starts in October 2011 and includes an additional three-year option. A week later, on a smaller scale, Capita won a three-year occupational health services contract by Technip. Capita will provide its Wellness Assessment Surveillance Portal, which gives centralized visibility of health surveillance records to Technip’s 3,000 personnel in Aberdeen and offshore locations.

So will benefits administration continue to be hot this year? I believe it will, though it might be hard-pressed to exceed RPO for the full year in terms of number of contract awards.  As evidenced in the examples above, there are huge volumes of benefit plan participants that are serviced and in today’s economy, clients cannot afford internal resources to manage these programs, nor do they have the expertise and most up-to-date technology. Handling benefits administration is vitally important to employees and retirees, whether it’s the ease of an annual online enrollment or the knowledge of a service center professional in answering DB and DC questions. And it’s not just large companies that need this expertise.  As I wrote in my February 25th blog, mid-market HRO is rapidly growing as well.

A final thought about what will continue to drive contract awards in benefits administration is that buyers are increasingly looking to consolidate their outsourcing services under one provider, as evidenced by Fidelity’s contract with Office Depot. This is a trend I believe will continue and from an employee and retiree perspective is a good thing. I was fortunate enough to leave my long-term employer four years ago with H&W benefits, DB & DC plans, and voluntary benefits, of which all four were provided by four different vendors. Sounds like I should play the number four!

Gary Bragar, Lead HRO Analyst, NelsonHall