Accenture and Unilever Renew Major MPHRO Contract for Five More Years

Linda Merritt, HRO Research Analyst, NelsonHall

Let’s wrap-up 2012 on a high note for HR BPO with news of Accenture’s award of a 5-year multi-process HRO (MPHRO) contract renewal from Unilever. When orginally announced in 2006, the 7-year contract was the single largest HRO deal signed with an estimated value of $1bn.

First Generation HRO

The focus of the first generation Unilever contract was largely on cost reduction (20% – 30%) and creation of a unfied global HR operating environment of systems and services across 100 countries and 20 languages. Unilver had already begun the tranformation process by introducing shared service centers in key areas to capture some of the early gains on its own as part of its One Unilever program to reduce the cost of back-office services including HR, F&A, and IT. It then moved to HRO to make further progress in efficiency, cost, and to gain a single source of the truth in reporting and mearsurement capabilities.

Second Generation HRO

Accenture will continue to support ~130,000 Unilever employees operating in more than 100 countries through its global delivery network including multiple centers across the U.S., Europe, and Asia Pacific. MPHRO services include:

• Core HR administration
• Payroll administration
• Recruitment
• Learning services covering content sourcing and development, program planning and delivery, and learning system hosting
• Management and administrative services.

As is common with renewals, there are some expansions of scope and a greater focus on improvements, in addtion to a desire for further cost reducing efficencies.

Accenture will be introducing service improvements to drive greater efficiencies and improve the user experience and align the services it delivers with Unilever’s Talent Agenda. New elements include:

• Introducing a more proactive recruiting approach, including the expanded use of social media (Accenture itself has been using LinkedIn and Twitter to recruit staff for a few years now)
• Expanding the scope of the learning services delivered by Accenture to include professional skill-building modules in the curriculum to support Unilever’s focus on developing future leaders; learning programs will make greater use of virtual instructor-led training (VILT), which is in line with Unilever’s sustainability agenda
• Evolving in performance metrics to go beyond traditional operational SLAs to include metrics focused on the client’s desired business outcomes.

It is a good quarter when you can announce a major MPHRO deal, whether it’s new or a renewal. For FY Q1 2013, Accenture’s revenues were $7.2bn, up 5% in local currencies; EPS were up 10% to $1.06; and operating income was up 7% to $1.05bn. Outsourcing brought in $3.26bn in revenues, and $3.3bn in new bookings. A good quarter indeed!

Happy holidays from the NelsonHall HRO team: Gary Bragar, Amy Gurchensky, and Linda Merritt.

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HRO, Shared Services Centers and the HR COO

Oh the things you can find when you wander the Web. One link leads to another and you can find shiny new ideas that catch your eye. Wandering may be a sign of a short attention span, I prefer to considerate it part of having an open mind searching for relevance. My latest Web find is Deloitte’s Human Capital Trends 2011 study.

HR is challenged to meet a myriad of needs and provide ever more value within constrained resources. Cost remains a top priority and business leaders also want HR to be less tactical and more strategic. The HR tactical work must get done to keep the organization running and HR regulatory compliance issues grow ever more complex, necessitating even more tactical tracking and reporting requirements.

In response, HR shared service centers (HRSSC) have emerged in larger organizations, especially multinationals, driven by the need for cost reduction and the efficiency and compliance benefits of better integrated systems and consistent processes.  Outsourcing some of the shared service processes and/or technology support is also a typical part of HRSSCs.

The HRO community touts the benefits of cost optimization, improved processes, improved compliance and reporting, meeting SLAs, and high user satisfaction. By role and nature, vendors focus on the performance of the areas of their own accountability. Therefore, if only a portion of the HRSSC’s processes are outsourced and multiple vendors are involved, it is a challenge to ensure that overall HR delivery services are effective, efficient, and cost-controlled.

One “revolutionary” trend for HR from the Deloitte study is the need for a HR Chief Operating Officer (COO) to focus on the design, development, implementation, and delivery of HR services. This leader needs to be a great organizational, process, and systems designer and manager. I would also add the HR COO needs to be able to determine from a capability and cost perspective where outsourcing is the most viable option and how to integrate HRO into the overall operation.

It is important to not get lost in the tactical aspects of shared services. The HR COO should be a strategic leader, well-versed in both HR and the business. Adding in the art of building and selling business cases, including capabilities in communications, networking, and even marketing would add value.

Tracking cost and process efficiency are necessary parts of managing an HRSSC. So is collaborating with HR generalists and business leaders to create results and provide data-based information for workforce decision making. Promoting HR and the value of the HRSSC is also important – deliver, create awareness, and buy-in for the next cycle of improvement!

Buyers – the HRSSC leader can be a key partner in both operations and strategic HR transformation, invest and select wisely.

HRO vendors – the state of HRSSC leadership, capabilities, vision, and current operation is a component of the HRO Maturity Continuum.

Linda Merritt, Research Director, HRO, NelsonHall

The Staff Retention Ship is in Danger of Sinking – Can HRO be its Life Raft?

Last week I wrote that there is cause for optimism in the BPO space as, per interviews we conducted in September with 480 BPO buyers in North America, Europe and Asia-Pacific, RFP and BPO contract activity is expected to significantly increase in 2010. And that’s obviously good news for providers and buyers alike…increased revenue for providers, and the benefits of BPO for buyers.

But I found one key data point which emerged from those interviews particularly troubling. The buyers rank-ordered the importance of business metrics for 2010, and customer retention and cost reduction took the top two spots, 4.5 and 4.3, respectively, on a 1 – 5 scale. However, staff retention only ranked 3 on the same 1 – 5 scale.

There are so many things wrong with staff retention being viewed as only mid-scale important. First, it signals that little investment will be made in training, development and other staff retention methods. Given the points we made in our September 3 blog – e.g., “A recent study concluded that 54 percent of employed Americans plan to look for new opportunities once the economy begins to turn around”, and “More than eight in 10 employers feel that their workers are just happy to have a job, but just 53 percent of employees feel this way” – businesses which don’t invest in their staff will be on a slippery slope, especially since it will be the top quartile employees who first move to different jobs.

Second, a recent study by Australia-based RPO provider Hudson found that over half of managers admit they lack the skills to properly manage employees during the downturn, and a whopping 60 percent of employers said they have no strategy in place to recruit leaders with the competencies required to lead though adverse and challenging economic times.

Third, businesses can’t meet their number two business objective of cost reduction if they need to spend already scarce dollars on hiring new staff to replace those lost.

Fourth, if employees don’t feel their employers care enough to invest in retaining them, will they continue to be motivated, committed and enthusiastic, or will their morale and productivity wane?

Finally, how can businesses achieve their top business imperative of customer retention when their employee base becomes stripped to the bone with low quartile staff?

Can HRO be a life raft to save the sinking staff retention ship? In a word, no. But a couple of HRO components can help.

Talent management software and services can help monitor and manage workforce issues, e.g., where is performance dipping, is compensation aligned with performance, is top talent being retained, is training under-utilized in critical areas?

Further, I’m seeing an increase in outsourced learning services in which training is being conducted on how to measure the impact and benefit of training and development. I believe the results will demonstrate to businesses their direct importance to retaining staff.

On the flip side, if businesses don’t step up to the plate and make investments in staff retention, RPO providers can source the best talent to replace their client’s lost staff. However, hiring new staff – whether through in-house recruiters or RPO firms – costs significantly more than retaining existing staff.

The bottom line is that to achieve their top-ranked 2010 business objectives, organizations must strategically invest in methods by which to retain at least their top quartile staff. An investment now will help them retain customers and reduce costs. Talk about mapping actions to business objectives!

Gary Bragar, Lead HRO Analyst, NelsonHall