HRO Yesterday and Today

Linda Merritt, HRO Research Analyst, NelsonHall

NelsonHall was pleased to contribute to the HRO Today article Out of the Ashes for the 10^th anniversary issue. 

Looking back ten years shows a picture of HR saddled with expensive and paper-heavy manual processes, even after the introduction of the big HR ERPs from PeopleSoft, SAP, and Lawson, providing impetus for an emerging HRO industry.

A New HRO Emerges…

The new HRO industry was full of great ideas and big plans and ready to grow well beyond payroll and benefits administration services. Unfortunately, intentions were a bit ahead of capabilities including the buyers, providers, and technology. Luckily for the industry, most clients and service providers fought through the issues, the losses, the changes in scope, and even changes in providers, to stay with HRO.

One of the biggest changes we have seen is the maturation of the HRO experience and enabling technologies. As the HRO experience has been developed, subject matter expertise has grown, global service delivery networks have been built, processes have become structured and standardized, and technology has advanced with more configuration and less customization.

…Goes Global…

HRO is now global in every sense of the word. Clients are based in every region of the world as are sales and service delivery. The highest revenues are still generated from the established markets like North America and Western Europe; the growth markets in Asia Pacific and Latin America are developing beyond service delivery (supply) for multinationals into internal markets for growing regional businesses (demand). For example, IBM is headquartered in the U.S. and Tata Consulting Services (TCS) is headquartered in India, both have major multi-county multi-process HRO clients in Latin America as well as a growing set of in-region service delivery centers.

… and Gets High Tech

Technology advancement is the great enabler of HRO services. The BPO industry as we know it would not be viable without global low-cost communications and the internet that allows work to be done anywhere at any time. Software advances bring not only better tools to clients, but improved workflow processing to HRO service providers, allowing work distribution to where it can be done most efficiently and effectively. Now an employee in the U.S. may call a service center on or nearshore with a complex issue that creates a tier 2 referral to a center of excellence in a third country using data and analysis derived from the data center in a fourth country.

Web-based services, mobile device access, and social media are all transforming the user experience and bringing more value at affordable prices to HRO. The creation of Software-as-a-Service (SaaS) services, HRO platform services that add BPO to SaaS, and the Cloud are bringing more options and affordability to all clients, especially to the mid-market.  

The HRO industry has grown in maturity, capability, and has an even greater future ahead. 

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RPO, A Bright Future on the Path to Business Impact

Linda Merritt, HRO Research Analyst, NelsonHall

The future of RPO is bright with growth opportunities in every area of the world. According to NelsonHall’s “HRO Market Forecast 2012 – 2013,” RPO will remain the fastest growing area within HRO.

RPO is still evolving as a service line, moving from back-office paperwork administration to the front lines of recruiting, predictive assessment, and employer brand management. Contract renewals and extensions are now a regular part of the RPO news stream. Among those with announcements of renewals and extensions are:

• Alexander Mann Services
• Capita
• Manpower Group
• Novotus
• Pinstripe.

RPO is not for the faint of heart

With great opportunity comes increased risk. Growth is seldom in a straight path upwards and RPO is also on the leading edge of any business downturn that impacts hiring. It is not uncommon to see up and down swings in revenues of 20% or more between good and bad years. RPO providers need to be ready to rock and roll incredibly fast and be flexible in responding to changes in demand while balancing its own core of subject matter expertise.

RPO is the trail blazer

It is hard for any business including HRO service lines to keep up with new technologies, global service delivery networks, social media, and open device access. To recruit highly skilled multi-generational talent anywhere on the planet, RPO needs the latest tools and technologies to bring capabilities to employers they could not easily and affordably duplicate.

RPO has a direct path to business impact

Dr. John Sullivan, a respected HR thought leader, recently said that RPO has the greatest business impact of any HR function. Dr. Sullivan is referring to The Boston Consulting Group’s (BCG) “Realizing the Value of People Management from Capability to Profitability” research that rates the relative business impact of different HR functions on growth and profitability.

This was a major study of over 4,000 respondents across 102 countries, comparing the difference in revenue growth and profit margins at firms with “very high capability” individual HR functions to the business impacts of “low capability” HR functions. The firms studied had been named to Fortune’s “100 Best Places to Work For” list at least three times in the last ten years; their stock price growth was then compared to the stock price growth of the S&P 500. The “best companies” with great HR saw their stock price increase an average of 109% when the S&P 500 rose only 10% over the last 10 years, up to 10 times higher. Wow!

BCG found that the top ten performing HR functions in rank order were:

• Recruiting
• Onboarding and retention
• Managing talent
• Employer branding
• Performance management and rewards
• Leadership development
• Mastering HR process
• Global people management and global expansion
• Enhancing employee engagement
• Providing HR shared services and outsourcing.

In addition to the good news for RPO, the broader picture is the need for integrated talent management and the boost for HR outsourcing. Great HR can and does directly support great business results, and great RPO and HRO can be a part of that success story.

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