Posted tagged ‘Consulting’

Employee Engagement, High Performance, and HRO

April 13, 2011

Employee engagement is down to the lowest levels seen in many years. Low engagement makes it hard to be high performing and can later raise turnover as employment opportunities improve.

  • In early 2010, The Conference Board found that only 45% of employees were satisfied with their job, the lowest rate seen in the 22 years of the survey.
  • This year, the 2011 Aon Hewitt Trends in Global Employee Engagement survey found that 56% of employees are engaged on average, down from 60% in the prior year, the largest year-over-year drop seen in 15 years. Declines were seen across Asia-Pacific, Europe, and North America, with only Latin America showing improvement.

My colleague, Gary Bragar, has consistently brought attention to the engagement topic because it is important and makes a difference for all: employers, employees, and HRO service providers. It can also make quite a difference! Aon Hewitt’s research indicates there is a strong correlation between employee engagement and financial performance. Organizations with high levels of engagement (65% or more) outperformed the total stock market index and had shareholder returns 22% higher than average in 2010. Companies with low engagement (45% or less) had shareholder returns 28% lower than the average.

Naturally, employee engagement that contributes to high performance business results is first and foremost a critical issue for C-level and management teams and there is a myriad of advice available, including consulting services from many of the HRO providers. Every organization, industry, and market has a life cycle and the management challenges will vary depending upon the stage. Accenture’s new book, “Jumping the S-Curve,” identifies three s-curves and outlines the critical issues for each cycle, including the importance of transitioning from one stage to another.

I see within the very insightful Accenture management advice opportunities for HRO contributions. For example, to climb the cycle of business success based on a winning idea, you need to reach a threshold of capabilities and competence and to attract and keep top talent in critical areas to maximize growth without collapse. As the cycle of achieving business success begins to end, new talent problems can arise as turnover increases due to fewer advancement opportunities and talent poaching. As a new cycle starts, a change may be needed in leadership and business competencies at the executive and other levels. Talent needs to be continually monitored, nurtured, and refreshed – all appropriate to the current and next cycle of the enterprise and what is happening in the broader market and economy.

Layering talent management services (e.g., recruiting, staffing, performance management, succession and career planning, and workforce planning) on top of a capable HR system for employee data management that’s supported by HR analytics can go a long way in helping clients see where they are now, identify gaps and emerging issues, and use HRO services and support to achieve a truly high performance-based business transformation.

Linda Merritt, Research Director, HRO, NelsonHall

Is HRO at the Table – the Investment Table?

February 10, 2011

IT spend on consulting and infrastructure increased in the fourth quarter of 2010, especially in North America and Asia Pacific.  There were even bright spots in Europe like France and Italy.  Accenture saw its strongest quarter in consulting in 2 ½ years and IBM had its strongest quarter of the last decade.  Increases in outsourcing tend to follow.  For example, at Xerox, now including ACS, BPO was up 11.1%.

The bad news is that major HRO investments often trail at the end of the outsourcing pack.  The good news is that HR and its HRO vendors can see trends coming and prepare to present the strongest business case possible for investment.

ADP was up 7% to $1,663m for Employer Services.  Its bright spot was beyond payroll services, which were up 16% and include benefits administration, MPHRO, and various point solutions.  One-time activities, or smaller add-on services, helped hold up results throughout the recession for many HRO vendors as they were smaller, less risky, and easier to fund investments, but it is hard to have significant growth through small increases in incremental spend.

Aon Hewitt’s Q4 2010 numbers were way up with revenues of $1,151m, an increase of 229%.  Stripping away the impact of the merger, organically HRO was $580m, down 2%.  The same was true at Towers Watson.  For FY Q2 2011, it came in at $791m, but in a pro forma comparison it was down 5%.  Towers Watson completed a lot of integration work in the past year and managed operating margins well at 18.7% for the quarter, but underperformed organic growth expectations.  All of the HRO service providers caught up in last years acquisition frenzy need to ensure they do not miss the current and coming window of opportunity for major HRO decisions and investments.

The business development profile for every HRO client, or hot prospect that wants to do business with you should include the timing and approval process for business case decisions.  Also know what can be done through operating expenses and local discretion.  Even the most solid HRO solution will run into trouble if the funding window is missed and all that is left are the scraps on the table.

Even with investment dollars starting to fly, pie-in-the-sky projects will still be grounded.  I really liked a term I heard in relation to an increase in consumer spend, frugal splurges.  Pragmatic investments that are well supported with facts and figures and direct ties to key business initiatives and business results will have the edge.  Don’t forget to add just a little bite of pizzazz!  Add-on modules, basic features and functions, workflow and service center capabilities are important, but a bit boring.  How will new major HRO investments be riding the tech wave of virtualization, cloud, and mobility – adding to the capabilities of an adaptable workforce of the future, ready to compete, and win today?

Linda Merritt, Research Director, HRO, NelsonHall