HRO Reduces TCO!

Buyers, how much will you save by implementing HRO services? Will it be 8% or over 50%?

ADP recently published the results of its latest total cost of ownership (TCO) study, The Hidden Benefits of Human Resources Business Process Outsourcing. The company has sponsored several PwC TCO studies since 2003 comparing the TCO of companies maintaining HR services in-house to those using ADP HR BPO. The 2012 study was completed by Sourcing Analytics and digs even deeper into the patterns established in the earlier PwC studies.

I touched on this topic last year, but it is well worth a second look because the research supports common HRO advice and counsel.

The good news remains: HRO of services including payroll, time and attendance, workforce administration, and health & welfare reduce TCO over in-house services.

The bad news is that HRO is not a quick financial fix and first year savings are usually modest. It takes time and hard work to transform HR operations and service delivery, but there are companies that have reduced TCO by 50% with 20-30% being possible for most over time.

Often, one or more HR services are outsourced with the focus mostly on the technology and transactions and may include more than one service provider. While there should be many benefits in new service features and functions and improved processing, the TCO impact is likely to be low, perhaps only 8%. To get both full value and full savings, more is needed.

Here are some of the building blocks that can be used to further increase your HRO TCO:

Technology and process

• Use one vendor for integrated payroll and time and attendance to bump up savings a bit
• Move to SaaS-based technology platforms to reduce technology costs the most
• Make it real BPO, include contact center services
• Multi-process HRO (MPHRO) saves more than best-of-breed services managed in-house, can significantly ramp up savings.

Process and people

• Support initial transition, adoption, and utilization
• Adopt standardized and centralized best practice processes across the entire enterprise
• Follow through and reduce or re-deploy the retained organization
• Keep working on it together; it may take up to five years to achieve maximum TCO savings as maturity is attained and more and more of the building blocks are added.

How much a particular client will save depends on a number of choices and options that are largely within the control of the client. In addition to great HRO performance, top-notch providers will be able to support each client in their journey to attain the most savings possible.

Next week, we will take a look at some of the factors and actions that shape the HRO journey.

Linda Merritt, Research Analyst, HRO, NelsonHall

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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