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!

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

Transformational MPHRO is Thriving at IBM

I love covering MPHRO news! I still believe that broad-scope MPHRO has the greatest potential for long-term partnerships that create significant HR business impact and financial results for clients.

A summary of IBM HRO wins in the second half of 2011 shows that it is doing well in a still tough market for large-scale MPHRO while winning major MPHRO awards, including transformational deals.

Let’s start with the 13-year multitower award from Algar Group in Brazil that covers HR, F&A, and procurement supply chain management. The contract is valued at $100m and covers seven of Algar’s business segments and ~13,000 employees. While Algar Group covers a wide range of services: telecom, IT, agribusiness, and even tourism, it wants a standardized platform for back-office services with efficient processes, high quality, and lower costs. The HR portion includes call center, personnel management, benefits administration, payroll, training, and performance management.

There was also a unique long-term multitower award from Tanfeeth that covers HR, F&A, banking and other vertical back office, and client-facing BPO services. Tanfeeth is a fully owned subsidiary of Emirates NBD, the largest bank in UAE. IBM will provide managed services for the Tanfeeth shared services center, including BPO management and workflow services, predictive analytics, tools and training, and managing part of Tanfeeth’s delivery portfolio. The shared services center will also use IBM’s software applications to provide and manage the services and will support Emirates NBD’s 8,000 employees.

Tanfeeth will also provide services to other UAE organizations as the Gulf Cooperation Council’s first authorized multi-employer service center. This is a major strategic step for IBM in bringing larger-scale BPO to the Middle East. Tanfeeth has the needed local knowledge and long-term relationships, and IBM will bring its expertise in process, training, service delivery, and systems management.

As part of a planned transformational journey, there is a built-in attention for the employees of Tanfeeth and its clients covering change management, training and development, and even the opportunity for high-performance employees to participate in IBM’s worldwide leadership training program.

Then there is the competitive-bid MPHRO contract award from Air Canada for almost eight years and worth an estimated $76m. The deal is for full-scope MPHRO serving Air Canada’s 26,000 employees in North America and includes HR contact center, employee data management, employee travel support, payroll, benefits administration, leave management, recruiting services (with select support from manpower), and software application support for the HR systems used to provide the services.

Why is IBM continuing its MPHRO winning streak? According to Kevin Howlett, Air Canada’s senior vice president of employee relations, “IBM’s core strengths as a market leader in innovation played an important role in our decision-making process.” It also helped that the client felt IBM also had the strongest service offerings, a commitment to transformation, and the proven ability to ensure delivery performance and lower cost.

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.

Let’s Not Forget About Learning

According to a survey by KnowledgePool, a U.K.-based managed learning services provider, 70% of internal client learning and development (L&D) organizations are too busy doing daily fire-fighting to focus on strategic talent and learning issues in their company. Out of 104 L&D managers, 69% say their training department does not have enough resources and 42% say that training receives inadequate support from senior managers. Yet 80% of L&D managers said they could improve their organization’s training ROI; 77% think new opportunities for improvement could be identified through rigorous analysis of their training spend and evaluation data; and 75% say improvements could be made by using more informal and on-the-job learning methods.

Sound like an opportunity for outsourcing? You bet!  The good news from NelsonHall’s most recent quarterly HR Outsourcing Confidence Index is that learning services, which has been the last of the HR outsourcing service lines to recover, is expected to continue to strengthen as the year progresses. Following several strong quarters of growth within RPO, the need is now shifting toward implementing and optimizing learning programs. Good news in learning since the beginning of Q2 includes:

• Genpact winning a content development contract by JobSkills in India
• Raytheon Professional Services winning a contract to develop an e-training program for NATO
• CIBER’s Federal division winning a 5-year training development contract with a potential value of $30.7m by the Center for Strategic Leadership, an institute of the U.S. Army War College
• Accenture winning an e-learning contract with a major bank that may later add classroom ILT
• General Physics winning $3m in 5 new contracts from energy companies across Africa, the Middle East, South America, and Asia
• Edvantage group winning a safety e-learning contract by Yara International, providing 7 interactive e-learning courses for 3,000 technicians, operators, engineers, and supervisors at 30 plants across 17 countries.

In NelsonHall’s last learning BPO report, top drivers of why companies are outsourcing learning, which support KnowledgePool’s findings, include:

1.        Lowering costs (average client savings of 26%)
2.        Increasing training effectiveness and ROI
3.        Improving the quality of learning for employees
4.        Accessing experts in the industry whose core competency is                       learning
5.        Flexible services, aligning learning with the customer’s                                 strategic objectives
6.        Focusing on strategic work, not transactional activities.

Look for increased learning outsourcing to continue the remainder of 2011, including by the likes of IBM who continue to see increased demand globally. In 2012, I think learning outsourcing will really soar. Although uncertainty in the economy continues to cause delayed decision-making, there is no doubt in my mind that we will see a boost in learning as companies unanimously agree talent management is more important than ever. To improve and engage talent, you have to invest in your people. There is only so long you can just say the words, eventually you have to walk the talk!

Gary Bragar,  HR Outsourcing Research Director, NelsonHall

The Market Segments of MPHRO

NelsonHall’s 2011 Targeting Multi-Process HR Outsourcing (MPHRO) report identified four unique market segments that MPHRO buyers fall within and their characteristics.  Let’s take a closer look at each.

The first segment, “multi-country standardization,” makes up 15% of the MPHRO market and contains buyers looking to centralize processes within certain geographies.  Buyers in this category typically have a presence in more than 20 countries and more than 10k employees. MPHRO services are either deployed regionally for these clients or globally and include HR administration and payroll. Another service often incorporated in this segment is technology to support other HR functions.  The main driver for MPHRO within this sector is to centralize processes within geographies and gain consistency.  Of the four market segments, this one has the highest growth rate for the next five years.

“Client-specific shared service transformation” is the second market segment and the largest at 48%.  Again, buyers in this group have operations in 20+ countries, with an average of 50 countries.  Employee headcount is more than 30k and typically averages more than 100k. Services include the entire HR service line (i.e., HR administration, payroll, benefits, training administration, and learning administration) with buyers in this category purchasing MPHRO to make their HR departments more effective by implementing best practices.  In the next five years, growth will be modest, but its overall market share will shrink due to decreased total contract values.

The third segment contains buyers looking to focus on their core business.  This is the second largest category at 24%.  These buyers have operations in one or a small handful of countries and tend to be start-ups or buy-outs.  Average employee headcount is 8k, but can be as little as 1k.  MPHRO services utilized by this group are HR administration, payroll, and sometimes recruitment or training administration.  The main reason MPHRO services are procured by this group is to obtain HR capability quickly so internal focus can be applied somewhere else, as often experienced by organizations experiencing high growth, especially in emerging markets.  Growth for this segment will continue to be strong.

Buyers looking for “technology-led HR service enhancement” make up the final segment at 13%.  These organizations are usually in just one country with employee headcount ranging from 1k to 50k+.  The service scope includes a technology upgrade, HR administration, and payroll.  The driver for MPHRO services for this group is to update an antiquated system and improve processes.  Like the “core business focus” segment, growth for this segment will steadily continue.

Stay tuned to find out success factors for service providers within each segment.

Amy Gurchensky, Research Analyst, HRO, NelsonHall