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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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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Bridging Talent Management and Workforce Management with HRO

Linda Merritt, HRO Research Analyst, NelsonHall

One of the hottest topics in HR and HRO has been talent management (TM), including everything from recruiting and RPO to performance management and employee engagement. Major ERP vendors have snapped up TM software leaders to strengthen HR product lines, e.g., SAP and SuccessFactors; Oracle and Taleo. Very good moves and very on trend, but let’s not forget about the less flashy powerhouse: workforce management (WM).

TM and WM are both critical components of human capital management (HCM) and depending on definitions and models, there can be a lot of overlap. For my purpose here, TM is about the individual and the capabilities for a specific job position and WM is about groups of workers and managing multiple positions.

TM involves attracting, retaining, and developing people with the required capabilities according to requested volumes and performance management. WM involves workforce planning and forecasting the capabilities and volumes needed and day-to-day scheduling and time and attendance. It takes both processes to have the right number of people, with the right skills, in the right places, at the right time.

Let’s consider two more elements, HR analytics and ROI, that will also benefit from seamless HR systems and processes, which our dear HRO community can enable and deliver. Timely and accurate workforce data is a foundation block upon which HR is built. At least part of the drive for multi-country payroll has been to get better employee data, and there is an important feeder into payroll: time reporting. Today’s leading time and attendance systems offer great flexibility in capturing the detailed data needed for payroll plus analyses of productivity, labor costing, pricing, project billing, workforce planning, etc.

Everybody wants to tie HR and HRO to ROI. Lowering the cost of HR operations alone is not enough. We must show real impact in measurable business results. Simplifying a bit, TM supports improved business results through customer satisfaction and revenues generated; WM supports improved business results through optimizing SG&A via operations and reducing losses.

Many HRO offerings come in basic and advanced levels. HRO providers– ensure you offer both levels of time and attendance, scheduling, and attendance management services. Buyers – take the time to determine whether advanced workforce management services will not only provide better data, but will pay for itself through reductions in overtime and the impact of absences. Also, for many positions and industries, ensuring all customer-facing seats are filled at the right capacity, capability, and time has a direct link to productivity and revenues. Finally, don’t forget about compliance with wage, hour, and labor regulations where accurate records and proactive scheduling are a great defense against fines and losses.

HR and HRO in partnership can be the bridge to strengthen TM and WM across the entire human capital value chain.

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WorkForce Software Fits with HRO

Linda Merritt, HRO Research Analyst, NelsonHall

“Let’s elevate the discussion on workforce management.” That’s how Kevin Choksi, CEO of WorkForce Software, kicked off the company’s first analyst day. Workforce management, with time, attendance, and scheduling at its heart, is not the most exciting topic, even when it is designed on open systems, is fully configurable, addresses all employee types, and can be deployed globally. But when you have passion for your products, the heart can beat with the energy and excitement that keeps the three founders on board after 13 years and attracts top talent to take the company to the next level of growth.

The inflection point for the company was late 2010 when the SaaS version of the core product, EmpCenter, was introduced. New clients selecting the SaaS option quickly grew to 80% compared to the licensed on-premise or hosted system options. Revenue growth has also accelerated dramatically and Workforce Software has increased the average size of its clients, total users, and services in 30 countries.

The live demo showed how clients can use the flexible rules engine to self-define and update calculations for workforce policies, labor/union requirements, etc. The flexible Advanced Scheduler can create schedules based on a wide range of customer defined requirements and can even directly contact employees to fill in empty shift positions according to availability, skills, seniority rules, etc.  

Two additional modules, Absence Compliance Tracker and Fatigue Management, are available as standalone services or can be integrated with EmpCenter, adding to the differentiation of the workforce management up-and-comer that is in a market currently dominated by the much larger Kronos.

Absence Compliance Tracker supports leave intake, leave determination, and case management. The system provides a recommended leave determination and supporting rationale based on the employee’s eligibility; company policies; and for the U.S., the more than 300 state and federal leave laws and regulations, improving consistency of policy application and providing evidence of compliance.

Fatigue Management helps prevent scheduling fatigued employees, something that is already a requirement in industries such as nuclear power, transportation, oil and gas, pipelines, etc. It will also accommodate industry, labor/union, or company best practices, all of which can address compliance and safety needs.

Making money does cost money. The good news is that WorkForce Software has secured its first infusion of external capital to ensure it can keep up with growth and its development roadmap. Look for it to add staff, geographies, and service locations over the next couple of years as well as adding more BYOD (bring your own device) mobile access and enhanced services.

Expanding is always easier when you have friends, so the company is working to enlarge its partner network. Recent additions include SuccessFactors, Oracle Fusion, and Patersons. WorkForce Software would do well to increase its connections to the HRO vendor community too, as even major HRO vendors sometimes integrate or refer clients to best-of-breed preferred partners.

It was refreshing to spend time with a company not only succeeding, but accelerating in this economic environment. It made even my HRO analyst heart beat just a bit faster.

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ManpowerGroup Solutions Analyst Day – It’s All About Talent

On June 8, 2011, ManpowerGroup Solutions held its first analyst day where it talked about multiple services, including its RPO business, which is currently providing recruitment services in ~35 countries, including for eight global clients, which range in scope from two to ten countries. ManpowerGroup Solutions has a center of excellence in the U.S. to share best practices so it provides a consistent experience and doesn’t reinvent the wheel for each implementation. It is smart enough, however, to recognize that the greatest satisfaction for the hiring manager comes when services are delivered locally. Thus playing to its strength of having the ability to deliver RPO locally, with a total company presence in ~82 countries.

In Q1 2011, it closed 37 RPO deals: 8 in APAC, 9 in EMEA, 2 in LA, and 18 in the U.S. For the next eighteen months, it’s focus includes driving consistency of operation and customer experience and improving the client’s employment value proposition via improved employer branding and candidate experience.

ManpowerGroup Solutions still has the largest RPO deal to date in the industry, a $200m contract with the Australian Defense Force to provide full end-to-end services from sourcing through onboarding for 8,500 – 10,000 new hires annually. Approximately 300 personnel are employed onsite to support the contract which includes a marketing team of 22 people providing services that include social media and employment branding. There is also an 80 seat call center to proactively manage relationships with candidates and 90 I/O psychologists.

Other highlights of the day included a presentation on ManpowerGroup Solution’s Tapfin business, a MSP that handles over $3.3bn in managed services spend and administers 221 MSP programs globally.  This was followed by a demo of Workforce Scan, a consulting process to help model future scenarios of emerging supply and demand gaps in the availability of talent needed by taking a 5, 10, 15, or 20 year timeframe view.

There was also an announcement of a new contact center offering to help existing client centers increase productivity, improve customer service, and retain talent through a set of services including: talent sourcing; program and process management; best practice and benchmarking consulting; and talent-based outsourcing for center-based and distributed workforces such as virtual / work-from-home models. NelsonHall will cover more on this recent announcement in our tracking service and next HRO Industry Insight Newsletter.

According to its new Workforce Strategy Survey, almost a quarter of employers across 36 nations admit their workforce strategy does not support their business strategy or have any idea if it does. More than half of this group is doing nothing about it, which sounds like more opportunity for RPO providers to help employers with workforce planning.  I’ll share more on this topic next time!

Gary Bragar, Lead HRO Analyst, 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