Volatility Is the Future – for Businesses and HRO

According to the Talent2 APAC Market Pulse Survey, many business executives in the Asia Pacific region have come to accept market volatility as the new business norm with a large proportion feeling more prepared to respond to unstable market conditions. The just released study presents a broad view of senior business executives across Hong Kong, Singapore, China, Australia, New Zealand, and Japan. Of the more than 700 survey respondents, more than 70% were from multinational corporations.

The goal of the study was to understand the level of business confidence and volatility and its impact on talent and people strategies across APAC. Tested by fire, 55% of the executives feel better prepared for continued market volatility. That will be needed, as the study highlights that even those countries enjoying consistent growth are concerned about another recession happening within the next year, with 97% in Singapore, 95% in Hong Kong, 87% in China, and 85% in Australia worried about another financial crisis.

Even with these concerns, many APAC companies are continuing to add employees with businesses in China, Hong Kong, and Singapore increasing staff numbers. In China, 80% of businesses have increased staff in the last 12 months, followed by Hong Kong and Singapore at 73%, then Australia (53%) with New Zealand (40%), and Japan (30%). At the same time, skill shortage is of concern in the region, with most businesses (65%) having experienced problems in recruiting due to skill shortages in the past year.

Although executives are accepting that market instability will continue and they must balance growth and cost control in the face of recessionary concerns, Talent2 points out that not much is changing in how workforces are managed in APAC. Most recruiting and hiring is focused on permanent employees, even though executives see the benefits in employing contract workers for the flexibility to scale up and down (76%) and the ability to better manage employment costs (43%). Currently, only 12% of the APAC workforce is employed on a contingent basis, compared to 22% globally.

It is not easy to move to a blended workforce that includes a greater use of contingent workers. For many of the APAC countries with faster growth workforces, employees are naturally looking for permanent jobs with higher wages. It is also hard to find all of the tools and talents needed to help from one vendor. RPO is taking off very well in many APAC areas, but vendors may not also have the technology and expertise to support building a contingent workforce.

Talent management is not just a software application. It is a critical business capability, one well suited for HRO providers that can blend technology, service, analytics, and consulting on a regional and global basis across the full suite of talent management elements. Leading HRO vendors should also be leaders in creating the agile workforces of the future. Who will we be seeing leading the way?

Linda Merritt, Research Analyst, HRO, NelsonHall

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A Steady State in HRO for 2Q 2011

After several quarters of new HRO activity, the pace settled down a bit in the second quarter, but was still plenty interesting. Here are several samples from 2Q 2011.

Capita stands out for its volume and breadth of HRO activities. It is the largest MPHRO provider in the U.K. according to the NelsonHall MPHRO 2011 market report. Capita was awarded preferred supplier status by NHS in North Mersey, providing a potential of up to £27m by offering a mix of HR, payroll, and RPO services to 12 Mersey NHS trusts. There were also two awards for occupational health services, which it is expanding into the more holistic well-being services. An acquisition was also in the mix. Team24 was brought in to enhance medical RPO capabilities, further strengthening a market segment in which Capita is rated third in the U.K.

I like to look at the mix of new partnerships, offerings, and mergers and acquisitions to see where vendors are placing their bets on expansion and growth. Global remains hot and deal activity is there to keep hopefuls in the game of capturing new markets.

A leading example is ManpowerGroup’s strategic moves in China. It purchased REACH HR in south China, added Xi’ an Fesco with its 10k associates, and partnered with the city of Kaifeng in the Henan Province to add coverage in the west and north central area of China. To top off this spree, ManpowerGroup aligned itself with China’s Ministry of Industry & Information Technology (MIIT) for a five year plan.  It will develop a talent exchange center, enabling ManpowerGroup’s local partners to provide workforce solutions focused on manufacturing.

Remember that China is not a market you can just jump into and Manpower has been on the ground in mainland China for 17 years. It has the needed relationships and is well-positioned to benefit from the development expansions now moving into inland China.

Other APAC activity included Australia. Mercer was awarded a superannuation pensions administration contract by RBK. Also, Towers Watson is partnering with Link Group to enter the superannuation market in Australia which is not big in numbers, but each group plan can have a large number of members. Finally, Futurestep opened global service management centers in Australia and New Zealand.

Elsewhere in APAC, Genpact was selected for a five year learning content development contract by JobSkills in India; Merce r launched a flex benefits offering in Hong Kong, and is partnering with PayrollServe to offer its HR services in APAC; and ManpowerGroup acquired Web Development Company in India to strengthen IT recruiting.

With plenty of recent HRO deals in implementation and early stabilization, along with perkier volumes and special projects in existing contracts, service providers need to focus on balancing delivery performance with new acquisitions. Compared to some of the things we have experienced in HRO, a steady state is not such a bad thing!

Linda Merritt, Research Analyst, HRO, NelsonHall