Mercer on the Move

Linda Merritt, HRO Research Analyst, NelsonHall

This week I attended Mercer’s always well managed and informative analyst forum in Boston, MA. The meeting was focused on the talent consulting line of business.

Talent Management on the Rise

Mercer research indicates that human capital issues are a top CEO concern and managing talent is becoming a board of directors’ issue, moving beyond the traditional CEO succession planning and compensation to overall talent and workforce planning. The new Mercer Talent Barometer Survey, which was introduced at the 2013 World Economic Forum, reports that 60% of the 1,200 global companies surveyed are investing more in talent, but only 30% feel that their workforce plans are highly effective.

The business of talent has become both exciting and disruptive, with possible new entrants, globalization, media, innovations, and opportunities. (Talk about new entrants, eHarmony is considering getting into the talent matching game!)

With a possibility of double-digit growth, the talent group looked at how to grow across the talent value chain by expanding its services, tools and technology offerings for talent, rewards, and communications to increase growth and leverage Mercer’s depth of experience and capabilities.

The answer will become apparent over the next few months as more packaged solutions are launched that combine consulting, information, and technology to meet the needs of clients that want a less-customized consulting approach with “off-the-shelf” packaged and reusable services and tools.

Workforce Planning Versus HR Analytics

Some elements that will be leveraged are already mature and solid revenue producers. Surveys, benchmarks, and analytics for compensation/total rewards and job structures are a more than $200m line of business. Globalization of the revenues is already well on its way, with about equal distribution from North America, Europe, and emerging markets across 57 countries.

Instead of focusing on HR analytics, Mercer is emphasizing data acquisition and integration, data modeling, as well as data visualization as it applies to a wide range of workforce and data that drives business results. This may mean a consulting and outsourcing services engagement, it may mean workshops and training, or self-service use of integrated SaaS technology platforms with one or more Mercer products.

Think Big, Start Small, Move Fast

There are a lot of moving parts in Mercer’s strategy to create an integrated talent solutions portfolio.

It is brought together under the go-to-market Talent Impact label that includes new and existing products and services to forecast, engage, mobilize, reward and assess talent. Behind the scenes Mercer will be streamlining its own architecture into fewer and more integrated technology platforms to support the new offerings.

There is a lot to be done in a short time, but that is in alignment with the “think big, start small, and move fast” philosophy of Orlando Ashford, senior partner and president of Mercer’s talent business. Mercer is on the move!

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HR Analytics and Big Data

Linda Merritt, HRO Research Analyst, NelsonHall

I recently had the pleasure of moderating a webinar for HR Outsourcing Association (HROA) members on HR Analytics and Big Data on behalf of the Publications and Practices Committee. This was a natural hot topic for our group of HR service providers, advisors, analysts, and buyers as you can hardly read your email without finding a new batch of blogs, webinars, articles, and conferences on analytics and big data, including for HR.David Bernstein, the head of eQuest’s Big Data for HR / Predictive Analytics Division, and Yvette Cameron, VP and principal analyst at Constellation Research, Inc. and founder of NextGen Insights, were our guest experts and both have an extensive background and long-term interest in HR measurement and analytics. The following is a summary from our discussion with Yvette and David.

How are HR Analytics and Big Data different?

When we talk about Big Data what we’re really talking about is slightly bigger than normal but not a huge amount. There is a lot of work that still needs to be done in getting better HR metrics and measures and better ways of communicating results. By bringing in data from a variety of sources from across the enterprise and pairing it with your HR data and looking at patterns, you can start to see correlation, infer causation, and create the ability for forecasting / modeling.

Much of the work we are doing today is measuring the effectiveness of our programs using HR system data – the challenge is getting to the broader business data in order to start making correlations to business value and outcomes and to build understanding of our own employees by mining data in enterprise, productivity, and employee interaction systems.

Are HR clients ready for Big Data?

The desire is there to push beyond the wall we’ve hit with current analytics and metrics. The industry is ready for that helping hand and is looking for service providers to offer help with this.

The struggle isn’t around ‘should I’ but around ‘how do I’ in terms of where to begin. The vendor community can help bring the profession forward in terms of ‘how to make it happen.’  Right now, there is more of a consultative need to fill in missing knowledge and skills; the opportunity for the vendor community is to provide these plus ongoing services that turn the data into insightful information.

Is there a Big Data skills gap in HR?

One of the biggest hurdles and obstacles to implementing a Big Data program, second to having the budget, is the lack of expertise and skills – the HR component of any implementation program can hold companies back. HR divisions struggle between bringing these skills onboard or developing them internally.  This is an opportunity for service providers to help HR become even more strategic as they increase their skills.

The interest in HR analytics is building, but there a gap in actual buying and client abilities to leverage the new capabilities. This provides a growing opportunity for us as an HRO community to make Big Data real in HR and HRO!

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The Evidence is Mounting: HR Outsourcing is a Key Part of World Class HR Organizations

Linda Merritt, HRO Research Analyst, NelsonHall

For years the Hackett Group’s HR benchmarking analysis has shown the increasing use of HR outsourcing. Now its research of Global 1,000 companies over the past two years shows that effective use of outsourcing plays a key role in achieving world class HR organizations. According to advisory practice leader Harry Osle, “our research shows not only that it is possible, but also explains precisely how world-class HR organizations manage to do more with less and play a key role in helping their companies succeed.”Hackett HR benchmarking provides staffing and cost comparisons by HR process and then identifies best practices. Those companies in the top quartile in both efficiency and effectiveness metrics are considered world class.

World class HR costs less

The research finds that world class HR organizations:

• Spend 27% less on HR services per employee than typical companies
• Reduce HR labor costs by 29%
• Operate with 24% fewer HR staff per 1,000 employees
• Spend 50% less on outsourcing
• Dedicate 25% greater spend to technology.

World class HR focuses on operational excellence, talent management, and strong relationships

World class organizations use HR outsourcing more effectively; they outsource at similar levels to typical companies, but they retain fewer in-house staff associated with these processes, gaining greater cost benefits while avoiding work duplication and shadow staff.

HRO service providers have been encouraging clients for years to simplify and standardize processes and policies to gain the most from outsourcing, which matches what world class HR is doing:

• Using more self-service for payroll, training, total rewards administration, and staffing services
• Focusing on automation, standardization, and complexity reduction
• Reducing the number of job grades, health and welfare plans, and compensation plans.

Integrated talent management is another component of success. The HR leaders closely align talent management strategies with business objectives and increase strategic workforce planning capabilities including high-level consulting and analytics and modeling. They also develop internal talent, recruit externally faster, and measure rigorously.

HR executives at world-class organizations have a seat at the table, and are universally involved in business planning compared to less than half of typical companies. Leading HR staffs are much more engaged in managing and facilitating organizational change.

World class HR brings data

According to Hackett, an increased focus on measurement and analytics is another way that world-class HR organizations partner with the business more effectively. Only 20% of typical HR groups report metrics for HR-managed projects, while the leaders do this over three times more often and close to 80% report organizational metrics for change initiatives.

Leading full service HRO vendors have been building out their own talent management offerings and have added options for HR analytics, providing support for two more aspects of world class HR.

Certainly we expect HRO to support operational effectiveness and cost reduction.  Now, we know it can do more in the transformation of HR into world class business partners!

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What’s New Again in HRO for 2013

Linda Merritt, HRO Research Analyst, NelsonHall

Even though predictions are a perennial New Year activity, the truth is that most trends play out over many years. Most HRO “predictions” are more like annual status checks and updates.

Transformation is new again

Several aspects of our old friend, HR transformation, are back on the table for 2013:

• Operations transformation: new, upgraded, standardized, and integrated HR tools, systems, and processes
• Strategic transformation: increases in overall HR performance that improve business performance
• Accelerated transformation: the cycle of transition, standardization, and improvement needs to move at a faster pace than ever; which provider can help you get where you want to go with a track record of getting there faster?

A return to transformation fits with our NelsonHall 2013 HRO trend of value balancing cost and pent up demand for improved operations.

Even with more client and vendor maturity this go-around, we need to ensure that strategic HR transformation goes hand-in-hand with the evolution of the retained staff, HR generalists, and service delivery operations. One can either leverage and empower the other or hold back real progress in both.

Evolution and the use of new HR technologies  

Rapid technology advancement continues across all HRO services and within in each service line, providing a great opportunity for HRO buyers and a challenge for HRO service providers.

• Easy access: mobility, bring-your-own-device, and cloud-based SaaS impacts every business including HR BPO. Increasingly, not only clients, but end users are expecting the same types of access and functionality from HR as they experience elsewhere.
  • HRO providers with modern platforms can bring these technologies to clients and their employees faster and at less overall cost
  • Service provider investments and the rapid pace of introduction add cost and stress to release cycles for services rapidly becoming table stakes which could pressure margins.
• Emerging technologies: social media and analytics are new transformation tools, potentially powerful ways to improve performance of HR services and produce business results.
  • RPO leads in integrating the use of social media in recruiting, which helps RPO become a value play in the war for talent. This is a win-win: improved recruiting for clients and fuel for growth for vendors
  • Leading vendors with an active client community including early adopters will be able to create and test new and effective ways to leverage the new technologies that then can be added to service offerings. Learning vendors are already experimenting with effectively incorporating social media and gamification
  • Investments in leading-edge technologies that have not yet found breakthrough acceptance require a long view of growth and profitability, a risk that not all service providers are willing or able to take on.

From the most basic cost-reducing transactions to advanced partnerships in HR transformation, the full and growing range of HRO services has something for every organization in 2013.

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Onward and Upward for HRO in 2013

Linda Merritt, HRO Research Analyst, NelsonHall

Each year, the NelsonHall HRO team is asked by HRO Today to make predictions for the year ahead. Here is a summary of our featured article, Onward and Upward to kick off our 2013 blog series.

HRO is reaching maturity

There is a growing level of acceptance with less perceived risk in making the HRO decision; value is balancing the focus on cost, and pent-up technology needs will be opening the door to new service provider opportunities.

• Value and cost are reaching parity for many buyers that want agile new HR capabilities that produce results, including the ability to measure and manage HR issues across the enterprise as well as improve the employee experience
• The need for core HRMS upgrades and new technology should reach the point of increased budgeted spend; be ready to discuss whether upgraded and bolt-on additions versus a new core HRMS is the better path for increasing business impact and the total cost of ownership.

Breakthrough HR technology for 2013: cloud-based SaaS

Major technology costs will open the door wider for SaaS. As SaaS offerings move “up-stack,” the ecosystem for SaaS support will continue to develop in 2013 via consulting, implementations, integrations, BPO, etc.

• SaaS HRMS adoption will continue to move fastest for mid-market organizations
• Expect little large market HR ERP near-term erosion from SaaS HRMS; but cloud-based SaaS HR platforms are disruptive technologies that will quickly move up the value chain and be able to serve larger and more complex organizations
• Total cost analysis, not just system costs, will be important in the adoption of SaaS HRMS in larger organizations; over time, the ERP per user pricing advantage will disappear, especially if evidence continues to mount of better performance and lower overall costs.

Emerging HR technologies: social media and HR analytics

There is increased interest in how to deploy the newer tools strategically. Look for adoption to slowly build as clients need a certain level of maturity in systems, services, and vision to create real value with the newer HR technologies.

The word for 2013: convergence

It may be a bit early to pick a HRO word of the year, but I think convergence will be a good candidate to cover changing client needs and new and emerging technologies.

Where, when, and how do we bring together the old and the new to create new synergistic capabilities? What can we do with a fully-integrated HRMS with HR analytics? How can we change the delivery of services with strategically deployed social media? Can we bring new magic to the employee experience with mobility and social tools?

As choices increase and grow more complex, confusion and inaction may result. With clear purpose, planning, and great advice and counsel the opportunity is before us all to create a real breakthrough year for HR and HRO in 2013.

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Update on Shared Services and HRO

I am on the Human Resources Outsourcing Association (HROA) Publications and Practices Committee and for the November meeting our hot topic was an update on shared services and HRO.

Linda Merritt, HRO Research Analyst, NelsonHall

Value Delivered

All three guest speakers agreed that HR shared services organizations (SSO) remain one of the core transformation trends in HR. Colin Brennan, Aon Hewitt product management and strategy VP, sees that the movement to SSOs and HRO is focusing more on value delivered and less on pure cost.  Clients want to improve both the cost and quality of services like talent management, recruiting, and learning. Clients also want to measure and manage HR issues across the enterprise, whether it is various operating divisions or regions of the world.

Tech Talks

Maribeth Sivak, a principal consultant with ISG, also sees an uptick in interest in SSOs and HRO, but as a follow on to HR technology decisions.  Many companies are facing major and costly upgrades in core HR technology systems, which create the opportunity to consider consolidation into shared services including HRO. Cost is a key driver, of course, but so is a desire to improve the employee experience with mobile and social capabilities as well as improve HR with access to more HR analytics.

Major technology costs also open the door for considering new vendor-provided systems and even SaaS. As SaaS offerings move “up stack” there is and will be a call for BPO service support.

The Chicken or the Egg

What comes first, shared services or HRO? Some start with HRO and others create SSOs first. Either way, clients usually want to get their arms around what they can do first and then look to optimize and increase velocity, often ending up with a blend of both.

At KellyOCG, Kathleen Bienkowski, global shared services VP, sees some organizations that start with shared services continue to evolve into multi-functional general business services as they mature. KellyOCG has its own showcase that demonstrates many of the aspects of a mature SSO: delivery centers, transaction processing, recruitment sourcing, and a knowledge center for global mobility. The contact center is outsourced to another division, Kelly Connect.

What Doesn’t Change

Each of our speakers commented on the continued need to manage major change including:

• A strong internal sponsor / champion to drive the change
• A clear vision that articulates the benefits and defines the future state delivery model
• Change management  in transition and implementation plans
• A governance structure for performance and issues management.

As both shared services and HRO reach a level of maturity, they are reaching a level of acceptance with less perceived risk in the decision, value is balancing the focus on cost, and pent up technology needs will be opening the door to opportunity. All in all, a great update with plenty of good news!

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The Trajectory of Change for HR and HRO

Linda Merritt, HRO Research Analyst, NelsonHall

The 15^th Annual PwC Global CEO Survey of 1,258 CEOs in 60 countries shows what CEOs want now from HR that transcends country and industry. PwC summed it up as:

1. Protect the home market from uncertainty
2. Attack new and emerging markets for growth.

Hockey legend Wayne Gretsky said that he skated to where the puck would be, not to where it was, anticipating the trajectory of change. This is hard for HR, which often takes years to complete a major change and looks to HRO with a focus on price and improving operational efficiency. Skating to where we needed to be yesterday is hard enough; how do we skate to where we need to be tomorrow?

CEOs Top Concern: Talent

For the last two years, the number one concern of CEOs in the PwC survey is talent. CEOs are personally concerned with developing leaders and the talent pipeline. Why? Because CEOs see that talent constraints and mismatches are already limiting opportunities. CEO talent concerns include:

1. Talent-related expenses rising more than expected
2. Not being able to innovate effectively
3. Not being able to pursue a market opportunity
4. Cancelling or delaying key strategic initiatives
5. Not achieving growth forecasts in overseas markets.

Talent Gaps

Availability of key skills is a concern in every market outside of North America, especially for the Middle East, Africa, and Latin America. This matches well with the drive to increase the global coverage of RPO.

Talent gaps are greater in some areas. In addition to global talent concerns, it is harder for some industries such as technology and pharmaceuticals / life sciences to find needed skilled talent. Of heightened concern is middle management talent. Will RPO best fit at the level of volume and skilled talent hires? Or will RPO further encroach into middle management recruiting?

The future is also about talent management and proof of HR’s business impact. This supports the movement we are seeing to strengthen talent management (TM) capabilities through M&A. Examples include:

• SAP and SuccessFactors
• Oracle and Taleo
• IBM and Kenexa.

CEOs Want Proof

Proof of business impact is part of HR metrics and advanced analytics. Even what should be the basics in workforce information is not considered comprehensive enough by most CEOs; they would like more data including the return on human capital investments, the cost of turnover, and staff productivity. HRO is ready with HR analytics as one of the newest components of HRO offerings.

Today, most HRO remains pressured on price rather than on value delivered. In hockey, someone must put the puck into play. In HR and HRO, someone must pay to develop the capabilities CEOs say they want. In the meantime, HRO is doing a good job of getting ready to skate to where business needs are going.

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Bridging Talent Management and Workforce Management with HRO

Linda Merritt, HRO Research Analyst, NelsonHall

One of the hottest topics in HR and HRO has been talent management (TM), including everything from recruiting and RPO to performance management and employee engagement. Major ERP vendors have snapped up TM software leaders to strengthen HR product lines, e.g., SAP and SuccessFactors; Oracle and Taleo. Very good moves and very on trend, but let’s not forget about the less flashy powerhouse: workforce management (WM).

TM and WM are both critical components of human capital management (HCM) and depending on definitions and models, there can be a lot of overlap. For my purpose here, TM is about the individual and the capabilities for a specific job position and WM is about groups of workers and managing multiple positions.

TM involves attracting, retaining, and developing people with the required capabilities according to requested volumes and performance management. WM involves workforce planning and forecasting the capabilities and volumes needed and day-to-day scheduling and time and attendance. It takes both processes to have the right number of people, with the right skills, in the right places, at the right time.

Let’s consider two more elements, HR analytics and ROI, that will also benefit from seamless HR systems and processes, which our dear HRO community can enable and deliver. Timely and accurate workforce data is a foundation block upon which HR is built. At least part of the drive for multi-country payroll has been to get better employee data, and there is an important feeder into payroll: time reporting. Today’s leading time and attendance systems offer great flexibility in capturing the detailed data needed for payroll plus analyses of productivity, labor costing, pricing, project billing, workforce planning, etc.

Everybody wants to tie HR and HRO to ROI. Lowering the cost of HR operations alone is not enough. We must show real impact in measurable business results. Simplifying a bit, TM supports improved business results through customer satisfaction and revenues generated; WM supports improved business results through optimizing SG&A via operations and reducing losses.

Many HRO offerings come in basic and advanced levels. HRO providers– ensure you offer both levels of time and attendance, scheduling, and attendance management services. Buyers – take the time to determine whether advanced workforce management services will not only provide better data, but will pay for itself through reductions in overtime and the impact of absences. Also, for many positions and industries, ensuring all customer-facing seats are filled at the right capacity, capability, and time has a direct link to productivity and revenues. Finally, don’t forget about compliance with wage, hour, and labor regulations where accurate records and proactive scheduling are a great defense against fines and losses.

HR and HRO in partnership can be the bridge to strengthen TM and WM across the entire human capital value chain.

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HR, Analytics, and HRO – No Walk in the Park

By Linda Merritt, HRO Research Analyst, NelsonHall

Business intelligence tools, consulting, and services have been around for years, including for HR. Increasingly, one can find analytic solutions from HRO service providers, including those whose business services extend far beyond HRO and those that are pure-play HRO vendors. Every so often I review analytics packages, success stories, and service offerings and each time I am impressed by what can be done with the right tools, technologies, consulting, and data.

One would think that analytic solutions that provide fact-based information to support HR recommendations and then track the business impact of HR interventions and programs would be an easy sell, but it is not.

There are always leaders and early adopters ready to use the most cutting-edge tools and with the internal capabilities to ensure that value is delivered. That group is now getting into advanced HR analytics, but that group is not large enough to sustain a robust market.

Savvy HRO vendors with advanced analytic solutions understand the issue of client readiness and maturity. If the foundations and fundamentals are put in place first, then a vendor can whet the client’s appetite for more useful and usable information. For example:

• Vendors in a consulting engagement for a specific problem should show how its advanced offering can be used along the way
• Vendors should be aware of clients that are dealing with anecdotal data and data silos and who are struggling to get consistent, accurate, and timely data on the workforce basics because this foundation can be built on to support the entry point for analytics
• Vendors providing HR outsourcing should teach its clients how to take full advantage of the metric capabilities, reporting, and data analysis that are already built into the services.

Too often, HR analytic solutions get too advanced too quickly for the average HRO client. HR is already drowning in data and the thought of getting more, even more sophisticated data is not necessarily a perceived plus. What would we do with it? Would we really use it? How will it fit in with all of our other sources of data, reporting, dashboards, etc.? Our standalone applications have built in reports and analytics, why do we need another system? Would it pay its own way as an investment from our limited budget (i.e., ROI)? Even for those with a strong interest, the data and capability to make it dance are often lacking.

As a long-time champion of the use of metrics and analytics in HR, I loving seeing the strength that the use of great data adds to the consulting and relationship skills of HR business partners. There is a whole lot of foundation work needed to prepare for getting full value out of HR analytic solutions. I hope HRO service providers will stay the course because better use of data is a critical part of becoming strategic HR business partners and succeeding in the age of human capital management.

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ADP: Analyst Day Priorities

Last week, ADP held its annual industry analyst day in NYC. Its priorities for the event included communicating its identity and progress as a global HCM company, its innovations in talent management, and its benefit services. Of course no ADP analyst day would be complete without product demos.

To begin the day, Carlos Rodriguez, CEO, spoke about the company’s vision to become the global HCM market leader. With workforces expanding globally, talent shortages, and the need to be more strategic, the international HCM opportunity is huge and ADP is determined to be at the center of it all. Given its large client footprint for its payroll and time and attendance solutions, integrating talent management functions including learning, compensation, and performance will be paramount for global domination in the HCM market.

Well-timed with the analyst event was ADP’s announcement that it launched an integrated end-to-end platform for talent management. In addition to talent acquisition, compensation and performance management, and succession, the talent management suite now leverages advanced learning management tools, learning content from Bersin and Associates, and an enterprise competency framework, and will be available for both its GlobalView and Vantage platforms.

ADP’s HCM toolbox is loaded and ready to be used. The GlobalView platform is available in 81 countries; the general availability date for Vantage has moved up to June; and WorkforceNow, which includes integrated HR, payroll, time and labor management, benefits, and talent management will soon support Canada. On the back-end, it would be great to see some HR BPO opportunities beyond payroll arise, and the company has been busy making enhancements to this portfolio as well.

In addition to its acquisition of the The RightThing, which brought in RPO capabilities, ADP has been quite busy building up its benefits business. There is great potential for benefits outsourcing due to changing regulations and complexities, not to mention the fact that an HCM market leader would not be complete without a strong benefits offering. Investments began with the Workscape acquisition, and continued with Asparity (for decision-support tools, analytics, and reporting) and SHPS (for reimbursement account administration and absence management). Finally, it added a Strategic Advisory Services offering to provide value-added analytics and advice to clients.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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