Posted tagged ‘Adecco’

Why We’ll See Increasing RPO Contract Activity in a Jobless Recovery

February 18, 2010

We’ve already witnessed a variety of RPO contracts with 2010 start dates, including Kenexa’s with the U.S. Air Force, PeopleScout’s with US Airways and the United States Infrastructure Corporation, and CPH Consulting’s with EEF. And I believe we’ll see an increasing number of RPO contracts announced and kicked-off in 2010, despite the jobless recovery. Why this counter-intuitive expectation? Let’s look at two factors which will contribute to an increase in RPO contract activity this year.

Soon-to-be and 2009 University Graduates

According to research conducted by U.K.-based RPO provider Alexander Mann Solutions, there will be significant competition for fewer jobs among this year’s graduates, only 26 percent of graduates feel confident of finding a position this year, 18 percent of 2009 graduates wound up applying for any job and only 37 percent are limiting their job applications to positions which are in line with their long-term career goals. Further, a full two-thirds of those fortunate enough to be offered jobs said they would accept more than one offer due to skepticism of the job actually coming to fruition until they actually start and are on the payroll. Think about the havoc this economy-driven “apply for any job/many jobs/accept several job offers” rise in quantity of applications and potential loss of selected candidates will wreak on internal recruiting departments already cut to the bone.

I’m Just Happy to Have a Job – Not

RPO provider Adecco Group North America’s annual American Workplace Insights Survey found that just 39 percent of employees feel the economic crisis has caused them to appreciate their jobs more (a steep drop from 55 percent of workers who felt that way a year ago), only 17 percent of employees accept working harder to avoid layoffs, only 19 percent are willing to work longer hours, and 93 percent of workers have less confidence in company leadership since the economic crisis started. Employee satisfaction is clearly on the decline, even worse than when I wrote about it in my September 3, 2009 blog. If companies don’t step-up their hiring activity at least a bit, work quality will suffer and top quartile employees may well jump ship and join another company which has begun hiring and has a strong employee satisfaction brand in the marketplace.

Both these scenarios point to increased RPO contract activity in 2010. In-house recruiting departments may well need assistance in handling the huge influx of incoming job applications, screening and selecting the best talent, and retaining key employees, all while reflecting a positive brand image for both talent attraction and retention purposes.

So despite the jobless recovery, I do expect to see resurgence in RPO activity this year. What do you think?                

Gary Bragar, Lead HRO Analyst, NelsonHall

HRO Provider Acquisitions Heating Up

October 22, 2009

If you thought that pure-play HRO provider acquisitions were out of vogue – as compared to the recent flurry of M&A activity among broad-based BPO providers and technology-oriented companies, ala HP/EDS, Xerox/ACS – think again, per two significant acquisitions announced this week.

First, Adecco, headquartered in Switzerland, is acquiring U.S.-based MPS Group to strengthen its professional staffing services capabilities and expand its delivery footprint, especially in the U.K., Canada and the U.S. Under the terms of the agreement, Adecco will acquire MPS Group for €782m or $13.80 per share in a cash transaction, a 24 percent premium over the October 19, 2009 closing stock price. The acquisition is to be completed Q1 2010. MPS Group will bring to Adecco professional staffing services to businesses with functional focuses in IT, F&A, law, engineering, marketing and healthcare. This is all good for Adecco, its existing clients and potential buyers. It’s also good for employees of both companies as they will benefit from increased career opportunities.

This acquisition could also be a big boost for Adecco’s RPO business and its clients, as MPS Group has its own integrated talent management platform which includes recruitment, learning and performance management systems, as well as compensation management and succession planning. Our research demonstrates clients have shown increased demand for leveraging talent management platforms, both with RPO and other single line HRO services such as payroll.

This transaction makes good sense as it eliminates the two providers from fighting for the same customers, and $50 million of synergy savings gained by combining the companies is no small potatoes.

Second, NorthgateArinso has acquired Randstad HR’s payroll outsourcing division, CIAN, to strengthen its Dutch payroll outsourcing business. CIAN reported 12 million euro in revenue in the past year. Though small in comparison to Adecco’s purchase, this acquisition is still significant in strengthening NorthgateArinso’s position in the Netherlands. With Randstad deciding to exit the payroll business in the Netherlands, CIAN’s five large and 32 mid-sized clients will gain business continuity benefits by moving to a provider that remains committed to payroll outsourcing. CIAN employees will also benefit, as they will be working for a global provider of HR and payroll services, likely resulting in increased career opportunities within and outside of the Netherlands. This acquisition also makes sense as it strengthens NorthgateArinso’s employee base, enabling it to better service its clients, and adds additional clients to its portfolio.

In my analysis, these acquisitions signal two important HRO industry trends:

•  Acquisitions will continue to support geographic expansion and service delivery capabilities

•  Partnerships between HRO providers – which far outpaced acquisitions this year – will continue for the same reasons as acquisitions, such as access to better technology. But the partnerships will be more focused on areas in which the providers are not directly competing for the same customers, e.g., to service existing multi-country clients that have employees in a country they do not currently service when building that capability organically may not make sense if there is not enough scale of clients and employees to service

What do you think will happen in the HRO acquisitions and partnerships arena?

Gary Bragar, Lead HRO Analyst, NelsonHall

RPO Acquisitions Improve Geo Reach, Economies of Scale and Overall Delivery Value

September 10, 2009

My July 22 blog focused on partnerships between RPO providers to improve multi-geo and global RPO capabilities in order to serve the needs of buyers looking for recruiting support beyond domestic regions and to boost their own revenue growth. 

And as we identified in our May 2009 Targeting Recruitment Process Outsourcing report, a growing number of providers in the RPO space are taking the acquisition route to gain the same benefits for themselves and their clients. In fact, 40 percent of all RPO providers have acquired another company, and 28 percent have completed an acquisition in the past two years.

The most recent example was yesterday’s announcement of The RightThing acquiring Capital H Group’s RPO division, based in Milwaukee, to expand its geographical reach in the upper mid-west region of the U.S. Others include Kenexa’s acquisition of Quorum International to strengthen its RPO capability in EMEA, Alexander Mann’s purchase of Capital Consulting to enhance its ability to serve the European and Asian markets, and Adecco’s acquisition of TalentTrack to strengthen its position in North America.

What benefits do acquisitions deliver to RPO providers and buyers?

•  RPO contracts often begin with the provision of services in one or two geographies. But if the relationship proves successful and the provider can service all the client’s geographies, the number of suppliers with which the client works can be reduced and the contracts can be expanded

•  The economies of scale gained by standardization of processes and technologies across geographies reduces expenses for providers and increases cost savings for buyers

•  In countries and regions outside the U.S., clients often want recruiters to be onsite for in-person requirements discussions with hiring managers, to meet candidates during interviews, and greet new hires on their first day and help with the on-boarding process

•  Even in the U.S. where provision of services is more service-center oriented, clients still want providers to be close by to accomplish similar objectives

While growing organically is important, acquisitions can help RPO providers meet revenue growth objectives and satisfy client needs. As a result, we expect further consolidation via acquisition in the RPO provider space. And this consolidation will not only be between big-name players but also with smaller providers that may be experiencing financial difficulties due to reduced hiring volumes and where most of their revenue is paid on a per hire basis.

Gary Bragar, Lead HRO Analyst, NelsonHall