President Obama to Reward Companies That Invest in the U.S.

In the USA Today last week, there was a feature with President Obama giving a talk to the business community, where he gave recognition to them for keeping jobs in the U.S.

The President said the economy has changed, and the transformation has been painful for many American workers who used to work in factories where they thought they would retire from, but those factories relocated overseas where the cost of labor has been cheaper. The President recognized that we live in a global economy and other countries want to develop their companies internationally and will therefore want to employ workers all over the world.  But right now, the U.S. is in a unique moment in time where it has the opportunity to bring jobs back as the U.S. has people available and ready to work now. The President wants companies to invest in America, and he is set to introduce a tax proposal that would reward companies who bring jobs back to America and eliminate tax breaks for companies that are moving jobs overseas. The President has set a goal of doubling the export of goods and services by 2014.

So the big question is, will this scheme work and what does it mean to offshoring HRO? As one data point, let’s look at the percentage of HRO contract value by location according to NelsonHall’s latest quarterly HRO Confidence Index released in December 2011:

• 72% Onshore
• 16% Nearshore
• 12% Offshore (the 12% is consistent with April 2010 when tracking of this data point began).

Although some American companies have brought back previously offshored jobs, I believe it will come down to a combination of cost and service. First, pending what the actual tax breaks are that the President will be able to provide, CFOs will evaluate the outsourcing cost savings vs. the tax benefits of bringing jobs back. If HRO service provider jobs are brought back, vendor clients are not going to want to pay more. If the tax breaks don’t cover the labor cost savings, will vendors be willing to eat the extra cost? I don’t think so. Much will also depend on the current level of client satisfaction with outsourced services.

Depending on job type, it is easier said than done. As an example, let’s take moving outsourced call center jobs back to the U.S. Part of the reason call centers are offshored are due to multi-lingual call center support, including for MNCs, that can be provided from HR service centers such as in Manila. Then there is offshoring of non-client facing jobs, often referred to as back-office administration. For example, sourcing of jobs can be done when U.S. offices are closed overnight and candidates can be delivered next morning.

In sum, once the specific tax breaks are known, CFOs will commence cost savings analysis, followed by vendor and client discussions on where and how to best provide HRO services.

Gary Bragar, HRO Research Director, NelsonHall

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The Economy Will Rock, Let HRO Help You Roll With It!

The economic news continues to be as shaky and widespread as the East Coast earthquake this week in the U.S. The 5.8 quake was shaky with localized impacts, but it was not devastating. The older solid bedrock foundations under the East Coast mean that even a moderate earthquake can ring like a bell far and wide, which lessens the destructive impact overall.

The economic uncertainty will likely continue for some time and at some point we must all get on with business, even when there is some rocking and rolling. In my (non-financial expert) opinion, the economy is having an East Coast-style quake and is not facing the destructive seismic forces seen in 2008-2009. Companies able to tell the difference can gain an edge in the market while others panic and dither.

Talent management (TM) is about gaining and leveraging a competitive edge, whether it is in the form of recruiting, developing, or retaining talent. TM is a hot HRO topic and vendors large and small, software-only and full-BPO, and everyone in between are angling for a growing talent management footprint. Why? Because that is what they are hearing from surveys and directly from clients and prospects. That’s good news. Clients are once again recognizing the importance of TM and vendors are listening, investing, innovating, partnering, and acquiring more TM capabilities.

Our NelsonHall HRO analyst team just talked with several IBM Global Process HRO leaders including Mary Sue Rogers, General Manager of Global HR, Learning & Recruiting and John McGlone, Global Process Leader of Compensation and Benefits, on their TM point of view.  Part of our wide-range discussion was the infrastructure needed to support the tools and processes of TM. The underpinnings, like the impact of bedrock on earthquakes, have an integral role to play in the success of a TM program.

According to John, some look to “technology as the solve,” not understanding that it must work hand in glove with TM infrastructure, processes, and execution. TM strategy, policies, and consultation are all also important. TM is where all that is HR comes together and it is the perfect place to develop a dynamic balance of internal capabilities, a top-tier TM application (ERP module or specialty product) with HR outsourcing services that can provide and manage the talent and HR administrative infrastructure.

Another point we touched on with IBM is client maturity on the HR and TM journey. One size does not fit all. First, be sure the HRO vendor and TM products and services selected are appropriate for current use. Then, whether you have the luxury of building from scratch, or must get started with only modest changes to what you have, see that your HRO service provider has an applicable roadmap for development as business TM needs and capabilities change.

Don’t panic and dither. Rock and roll with HRO!

Linda Merritt, Research Analyst, HRO, NelsonHall

Employee Management 101 and HRO Provider Value-Adds

In prior blogs I’ve written about low levels of employee satisfaction and confidence in their employer, and the negative impacts these can have on an organization in terms of lost talent, potential revenue loss and certain additional hiring expenses.

Sadly, employee confidence isn’t increasing. In fact, according to the Kenexa Research Institute, employee confidence decreased, yet again, in Q1 2010. In the twelve countries tracked, all but Spain declined in the first quarter of this year.

With that in mind, I found an article entitled, “Prevent Exit Interviews” in the April 2010 issue of Talent Management magazine very interesting. The article essentially says that to help increase employee retention, supervisors should be conducting “stay interviews” – or what I call Employee Management 101 – with their employees. These are frequent one-on-one meetings with employees to ask how things are going, gauge satisfaction, ask what the company can do to help, etc. Unfortunately, during economic downturns, many managers avoid such meetings because they fear they won’t be able to deliver on employee requests. However, hiding their heads in the sand simply creates more problems and exacerbates employee dissatisfaction. The article suggests simple things managers can do, such as tell employees how much they are valued. And when they ask the “what can our company do to help” question, there will in nearly all cases be at least one thing an employee wants that the company can provide!

So how can an HRO provider help? I certainly don’t advocate having providers replace a manager’s direct and continuous discussions with employees. However, proactive initiatives by HRO vendors can help identify employee concerns and provide managers with insights into how they can address, eliminate, and/or lessen them.

There are a variety of HRO providers assisting their clients with this type of support. For example, Kenexa, an RPO provider, also provides performance management solutions and conducts employee surveys to increase employee engagement. And U.K.-based RPO provider OchreHouse focuses not only on recruiting but also on key aspects of talent management including engagement, development and employee retention. It conducts employee satisfaction surveys, and has a “Keep in Touch” program wherein recruiters periodically contact new hires several months into the job to see how things are going and ask if there is anything they can do to help. OchreHouse also conducts exit interviews to find out why people are leaving. Although too late to retain the exiting employee, the feedback, along with recommendations on how to retain talent, is provided to the company’s hiring managers.

As an organizational leader or supervisor, what are you doing to help retain your talent, whether on your own or with the help of a third-party provider? We’d like to hear!

Gary Bragar, Lead HRO Analyst, NelsonHall

Can RPO Help Ease Chinese and Japanese Employees’ “I Can’t Get No Satisfaction” Woes?

What can employers in China and Japan learn from those in Denmark, Norway and Canada? Seems quite a bit, according to the results of staffing and recruiting provider Randstad’s new global Workmonitor survey released earlier this month. The online survey, administered by a third-party among minimum 400 full-time employees per country, found that only six percent of Chinese employees and seven percent of Japanese employees are “very satisfied” with their current employer, compared to more than 35 percent for those in Denmark, Norway and Canada. (FYI – The “very satisfied” levels for U.K., Australia and the U.S. were 20 percent, 24 percent and 31 percent, respectively.)

While Asia Pacific has been slower than other world regions to embrace HRO, NelsonHall research forecasts the Asia Pacific region to have the highest growth rate of HRO adoption over the next five years. Given the sobering results from the Randstad survey, China- and Japan-based employers may be well served by considering recruitment process outsourcing (RPO) services sooner than later, especially when the contracts include talent management, employee development and retention solution components. Although RPO itself is not an end-all solution to improving employee satisfaction, if it includes the aforementioned services, it will go a long way toward helping to improve it!

We’ve already seen some evidence of RPO activity in China including the Talent2/VivaKi China contract signed in November 2009, and the April 2009-announced partnership between Kenexa and R&J Management Consultants, which resulted in the creation of Shanghai Kenexa. And a variety of other RPO providers, including Manpower, Hays, Futurestep, Adecco, Hudson and Alexander Mann, are stepping up their delivery capabilities and reach into the Asia Pacific market.

My advice to RPO providers servicing (or considering doing so) the Asia Pacific region, especially China and Japan: present your local market knowledge and delivery capabilities, not only in recruiting but also in retention-related activities such as expanded on-boarding processes with linkage to learning, reaching out to new hires at periodic intervals, conducting regular employee satisfaction surveys, conducting exit interviews to find out why people are leaving and then feeding those results with recommendations to senior leaders for action, etc.

My advice to China- and Japan-based employers: with the delicate state of your workforces’ satisfaction levels, robust on-boarding, performance management, talent management, employee development and other retention solutions are very important – as they are for employers around the world. It could be highly advantageous to leverage the expertise of an RPO provider to support you in these areas.

Gary Bragar, Lead HRO Analyst, NelsonHall