Catching Up with ADP

Linda Merritt, HRO Research Analyst, NelsonHall

The recent passing of long-term U.S. Senator Frank Lautenberg reminds us of his early role in the formation of what became ADP, a founding member of HR outsourcing. In the early 1950s he was engaged in selling insurance and sold a policy to two young New Jersey businessmen, Henry and Joseph Taub. The Taub’s were pioneering a then new concept; payroll outsourcing. The brothers knew payroll processing and Lautenberg knew sales and marketing. Lautenberg took a risk and joined the Taub brothers and together they created a new industry.

Establish Operating Principles

By the time the company incorporated in 1961 the three leaders established principles that still guide the company some 60 years later. Following are a few of the principles they put in place.

Focus on Business Markets that Offer Significant Growth Opportunities

ADP has always pursued growth through new market opportunities, both by expanding it service lines and by entering new geographies. Much of the early growth was through acquisitions, as well as organic growth. Lautenberg retired as CEO from ADP in 1982 having made over 100 acquisitions!

Over time, ADP became a global player. An early acquisition was GSI, a large payroll and HR services company in Europe. The latest 2013 acquisition is Payroll S.A. to expand LATAM payroll capabilities to Chile, Argentina, and Peru. In the last few years major acquisitions included Workscape (benefits), The RightThing (RPO) and SHPS (benefits).

Embrace Technological Change to Enhance Product and Service Offerings

By the early 1960s ADP had moved from manual operations to the pre-computer punch cards and on to leasing its first computer: an IBM 1401 mainframe. That willingness to continue to embrace the new is seen in ADP’s successful launch of a series of cloud-based SaaS HR technology and BPO service platforms, including Workforce Now (1k-20K employees), Vantage HCM (50-3k employees), and GlobalView for multi-nationals. Together, the three services support more than 40k clients.

The company has also launched extensive mobility options, including RUN powered by ADP for small business mobile payroll and ADP Mobile Solutions for access to a broad range of information and transactions spanning time and attendance to benefits and pay cards.

Attract and Retain Motivated and Talented People

ADP has grown into a $10bn global outsourcing business with one of only four remaining AAA credit ratings in the U.S. With ~570k clients across 125 countries, we know customers support its line-up of services and proprietary developed technologies. What about people? A few recent awards tell the story:

• Ranked second on Fortune’s 2012 list of America’s Most Admired Companies in Financial Data Service
• Ranked in the Top 50 on IDG’s Computerworld 2012 list of the 100 Best Places to Work in Information Technology (IT)
• Named to the 2012 Working Mother 100 Best Companies, for the third time.

We therefore need to ask the question of prospective purchasers: does your prospective or current HRO service provider have long-term guiding principles and can you see evidence of them in action? Because ADP does.

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Does HRO Help or Hurt in Achieving Human Capital Leadership?

Can employers be recognized as leadership development advocates and a great place to work and still take advantage of HRO services? Yes—and recent “best companies” announcements provide plenty of examples.

Fortune’s annual 100 Best Companies to Work For list includes a number of companies known to use HRO services. RPO examples include: American Express (Hays RPO), Edward Jones and Intuit (Manpower Group), Microsoft and Novartis (Alexander Mann Solutions), and SAS and Telefonica (Ochre House). Accenture, which provides HRO services, is on the list as an employer.

HRO clients are also among the recognized companies in the 2011 Top Companies for Leaders, another recent Fortune study in association with Aon Hewitt. PepsiCo (Aon Hewitt) and Unilever (Accenture, IBM) are among the multinationals taking the lead in developing leaders. Again we see RPO as a common talent management service selection; Eli Lily and Novartis AG (The Right Thing, An ADP Company), GE and Siemens AG (KellyOCG), and Whirlpool (Kenexa). IBM, another major HRO player, is recognized, as is Wipro. Accenture is noted on the U.S. list and Infosys is on the Asia Pacific list. ADP is included in the 2012 list of 10 Best  Companies for Leaders rankings by the Chief Executive.

Business Today has just released its 11th annual “Best Companies to Work for” in India and top companies include HRO providers such as Accenture, IBM, Infosys, Wipro, and TCS. Honeywell International (SourceRight Solutions) also made the list and is on the U.S. list for Leaders as well.

The lists go on and on and you will find companies that use HRO as well as HRO providers among the best of the best. You can be a pioneer in leadership development and use HRO in critical talent management areas. You can achieve greatness in any region of the world. You can even look to some of the HRO providers to share their own expertise as a “best company” in the human capital leadership arena.

Will HRO automatically make you the best company? No. However, HRO will not slow you down and may even provide a committed partner in accelerating your success.

Linda Merritt, Research Analyst, HRO, NelsonHall

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An HRO Provider on the “100 Best Companies to Work For” List… Now That’s Walking the Talk

I was very pleased to see an HRO provider, Accenture, named on Fortune’s “100 Best Companies to Work For” list for the third year in a row.  Last week I wrote about customer service being important to customer retention, so I thought this was an appropriate blog to write about this week, particularly when you are a true believer in the adage that employee satisfaction = customer satisfaction = increased profitability.

Accenture was cited for initiatives including its “Future Leave” program, which is a three-month, self-funded, sabbatical with continued benefits and assurance to be able to return to work when the leave is over.  Accenture also has a number of other programs for employees including:

• Learning and development: A global online learning portal with 20,000 courses available.  All Accenture employees are assigned a career counselor to help them manage their careers
• Flexible work arrangements: Options of how and where employees perform their work to help achieve a better work-life balance

Another HRO provider walking the talk is Kenexa.  Its CEO, Rudy Karsan, recently co-authored a book titled “We: How to Increase Performance and Profits Through Full Engagement.” The book highlights three common factors that drive engagement that I completely agree with:

1. “Growth: We need to feel that we are advancing in our careers or are learning new things.
2. Recognition: We need to feel appreciated and believe that our ideas count.
3. Trust: We need to trust our senior leaders and feel confident about the future.”

More HRO providers are offering talent management services and can help clients improve employee engagement.  For example, Kenexa was recently awarded a contract by Unilever to survey 140,000 employees globally in 2010 and again in 2012 to assess employee engagement.  Kenexa will also help Unilever with action planning for any issues identified to improve employee engagement.

Manpower is another example of an HRO provider, helping companies in Asia to develop effective workforce strategies to improve their competitiveness.

As I’ve written before, as the economy improves and more jobs become available, it will be even harder to retain talent.  HRO providers can help and where needed, implement new employee programs or strengthen existing ones that are not achieving the desired results.  In assessing which HRO vendor to work with on tools and services designed to increase employee retention and engagement consider the vendor’s own human capital management practices. Who better to work with than an HRO partner that walks their own talk!

Gary Bragar, Lead HRO Analyst, NelsonHall