The Sun is Rising on HRO in Asia Pacific

As an “emerging market” the Asia Pacific (A/P) has more and more A/P companies become forces in the global marketplace as buyers and as producers – providing growth opportunities for product and service sales for companies headquartered in other regions (usually the West).

Do be aware that the markets for services like HRO already exist and are served by local and regional providers. Hence, new entrants offering unfamiliar brands to A/P buyers will need to assess their competitive value propositions for this vast, yet very localized market with a wide range of languages, price sensitivity, and HRO needs.

One of the largest A/P regional HRO service providers is Talent2, which offers payroll, RPO, traditional recruiting searches, HR administration, learning, talent management, and HR advisory services. Talent2 has services in 31 Asia Pacific and Middle Eastern countries, and its FY 2011 (ended June 30, 2011) revenues were AU$360m, up 26% from FY 2010. In operations since 2003, the company has ~1,700 personnel with offices and service centers spread across the region.

Talent2’s growth over the years had been organic, until 2008 when it added acquisition as a growth strategy and subsequently bought PCA in Japan, a payroll outsourcing and HR consulting provider. In 2010, it acquired Singapore-based Zapper Services with payroll outsourcing and HR administration in 14 A/P countries, adding ~1,000 clients, including multinational corporations (MNCs).

Having an available range of technologies and services is a benefit, especially when there are clients that are expanding their businesses for the first time and need a foundation of basic HR services with a high degree of subject matter expertise. This is also the case for large clients in mature markets looking for top quality and performance at a lower cost. Talent2 has multiple payroll offerings and other services to mix and match to meet the specific needs of clients of many sizes, verticals, with employees in one country to pan-national or global, using a broad range of languages and onshore and nearshore locations.

ADP and NorthgateArinso are two major global players that have been in the region for many years. As the A/P HRO market expands, more players will be looking to gain a foothold. With growth in many areas and services, Talent2 will need to focus its own value proposition and investments to maximize its regional advantages against what will be an even more competitive market. A sign that the company is ready to do just that is the addition of Mary Sue Rogers, one of the leading lights in the HRO community and previously the global leader of HRO for IBM. Rogers recently joined Talent2 as the Global Managing Director of HR services including payroll, HR advisory, and learning services.

No matter where the sun sets, at the end of the day, succeeding in emerging markets is the same as achieving HRO success anywhere: provide high-quality, high-performance subject matter expert services at the optimum price that solves business problems and delivers business results.

Linda Merritt, Research Analyst, HRO, NelsonHall

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SAP and SuccessFactors, Let’s Not Forget About the Basics of What Makes Talent Management Effective

Much has been written and tweeted about SAP’s announcement last December 3 that it will acquire SuccessFactors for $3.4 billion. Granted that SuccessFactors is a provider of talent management software, but software alone does not get at the core of what makes for effective talent management. That is why it is very intriguing to me – now that Twitter and blogging are “in vogue” – that all the excitement has been centered on the SaaS over the Internet buzzword “cloud.”

Don’t get me wrong, SaaS talent management is a great enabler, and terrific for SAP to have, providing employers with the tools to do performance management. But talent management is about attracting, developing, and retaining the best talent. Good recruitment technology helps attract candidates and software can help in doing performance management, but it is not going to develop and retain talent for you — now that would be a breakthrough if it did! As most of us are keenly aware, thanks to data provided by the likes of Randstad and Manpower (http://bit.ly/ujuMhC), there is a talent shortage and employers can help themselves by engaging and retaining the talent that they have. To do so requires the good old fashioned basics that the cloud cannot replace.

Organizational change is not going to happen if continual investment is not made in people as well as technology. Having conducted retention studies and managed employee programs, I can tell you first hand that the top reasons why talent leaves typically include:

• Dissatisfaction with supervision and/or leadership
• Lack of recognition
• Lack of developmental opportunities
• Lack of a career path
• The desire for more challenging and engaging work
• Work/life balance.

Money by itself is not a motivator!

Call me old school, but I’m much more excited when I see things like:

• Cornerstone sponsoring a Ken Blanchard webinar on the 14th of December: Helping People Win at Work, including the use of performance reviews to develop people, how to set clear goals, provide year-round coaching, and build an engaging performance-based culture
• PageUp’s webinar last week showing  global employers how to retain critical talent with career planning
• Contracts awarded to Kenexa for employee engagement surveys, including with Unilever for 140,000 employees globally, to not just conduct surveys, but help with action planning to act on any issues identified to improve employee engagement
• Many of Ochre House’s RPO contracts also include: KPIs to reduce attrition, accomplished by conducting exit interviews, providing a dashboard with reasons why people leave, exploring problem areas in depth, and making recommendations to client leadership. In addition, OchreHouse often conducts employee satisfaction surveys and has a “Keep In Touch” program for recruiters to keep in touch with new hires to ensure successful transition and retention.

I’m just beginning to conduct my next global learning BPO market analysis. My Q4 2010 study found that companies are just beginning to invest again in leadership and performance management to increase employee engagement and retention. I’ll be looking for evidence that this is happening.

Employers, are you making the investments needed in your employees?

Gary Bragar, HRO Research Director, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

A Look at Automatic Enrollment in the U.S. to Predict the Success in the U.K. and Potential Opportunities for HRO Service Providers

There is currently a global crisis of people failing to save enough funds for their retirement. This reality is faced by those nearing retirement, and it’s affecting millions more. Reasons for this range from a lack of an employer plan to it being too confusing to simply just not getting around to it. In an effort to manage the crisis, legislation has been enacted to facilitate the ease of saving.

 

In the U.K., the primary answer lies in the automatic enrollment (AE) requirement of the Pensions Act of 2008. The AE requirement compels employers to automatically enroll their employees into qualifying pension schemes and to contribute to the pension as well. AE will commence in October 2012 and will be rolled out in stages based on employer size until September 2016 with large organizations (i.e., those with more than 120,000 employees) starting first.

 

Trying to predict the success that AE will have in the U.K. is difficult, but perhaps the Pension Protection Act of 2006 (PPA) in the U.S. can provide some guidance.

 

Recently, Fidelity highlighted the positive impact that the PPA has had on participation rates among other things. Fidelity’s plans that offer AE have increased to 21%, up from 2% in 2006. Furthermore, the AE feature is a part of 63% of plans with more than 50,000 participants, and Fidelity has seen participation increasing as a result of AE.

 

The average participation rate for plans without AE is 55%; but with AE, the participation rate is 82%. More interesting is the effect that AE is having on younger employees, who are typically not too concerned with saving for retirement. For employees between ages 20 and 24 years old, the participation rate for plans with AE is 76% and only 20% for plans without AE.

 

While the PPA in the U.S. does not require AE by all employers, it is proving to be an effective way to encourage participation to actively save for retirement, and it can also provide further opportunities for HRO service providers.

 

In the U.K., for example, Capita has already won business related to the AE requirement of the Pensions Act of 2008. It was awarded a 7 year £105m contract by the U.K. Pension Regulator to support direct communications and transactional processes with employers for AE that began in October 2011. Capita’s responsibilities include:

• Communicating campaign messages to employers
• Communicating AE duty dates to employers
• Ensuring employers register with the regulator
• Operating a customer contact center
• Some enforcement activities such as administering compliance notices and penalties for non-compliance.

 

Shortly after Capita’s contract award, Xafinity became the first pension administration provider to launch an AE offering that:

• Identifies who to automatically enroll and when to enroll them
• Sets a course of action for all stakeholders
• Runs financial analysis on different scenarios and take-up rates based on employee data, and selects a strategy that supports corporate objectives
• Provides AE administrative services including member communications; employee identification; auto-enrolling, opting out, and re-enrolling employees; and reporting.

 

Expect to see more HRO service providers based in the U.K. and others doing business there to launch an AE offering. Some may be late to the game though since the first staging date is less than a year away and compliance can take ~18 months to achieve. It is an area with lots of potential and service providers like Capita and Xafinity are well-poised to gain the first-mover advantage.

 

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

 

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

 

Recruit and Retain Employees with a Creative Benefits Package

Kudos to the Affinity Federal Credit Union.  In the Spring 2011 issue of the Affinity Connections magazine, there was an article titled “Recruit and Retain Employees with a Creative Benefits Package.”  We often write about recruitment and benefits in our blogs and this article makes the simple yet important tie-in that you need an effective benefits strategy for attracting and retaining talent.  I couldn’t agree more!

It’s not just about the money, but about benefits that include:

• Health, disability, and life insurance
• Tax saving ways to pay for health expenses and child care
• Retirement plans
• Opportunities to continue education
• Flexible working hours, etc.

The article points to a 2010 study done by MetLife on employee benefits trends.  It states employers greatly underestimate the loyalty factor of retirement benefits, non-medical benefits (i.e., dental, disability, vision, life, etc.), and work-life balance programs.  I would also add in retirement savings plans since there are fewer pension plans and great doubts about what will be there for social security, particularly for the younger generations.

The major benefits, which are also the most expensive, are retirement plans, health insurance, and paid leave.  But, employers need to be creative and think out of the box at more cost-effective options.

The study states that 61% of employers and 56% of employees say that work-life balance programs are effective at improving productivity at work.  Examples of such programs include flex working hours and access to financial planning resources, such as Aon Hewitt’s integrated advisory offering to its DC plan participants through its subsidiary Aon Hewitt Financial Advisors.  Other ideas include:

• Flexible working hours
• Flexible spending accounts
• Employee assistance programs (EAP)
• Matching donations
• Educational opportunities including on or offsite employee training & seminars, tuition reimbursement, and paid time off to attend classes.

As the economy recovers, turnover will increase.  As the talent marketplace becomes more competitive again, it is important to see that offered benefits are utilized.  A benefits outsourcer or HRO provider can help with data mining to analyze benefit utilization patterns across key positions and geographies.  Also, total rewards statements help employees see the full impact of their benefits.  Modern benefits communication and decision support tools help participants know about and make optimum choices.

Outsourcing vendors, not just benefits providers, but also RPO providers who are helping their clients with talent management including attraction and retention strategies, should be engaging with their clients to ensure that they have a better benefits package than their competitors!  How do you stack up?

Gary Bragar, Lead HRO Analyst, NelsonHall

Can Data Pave the HRO Path to CHRO? Part 1.

I am futuring here, positing a new path for attaining the top spot in HR through HR data and services delivery. While managing HRO and HR shared services is not on the current career path for becoming a senior HR leader, I would like to speculate on this possible future.

In my February 23, 2010 blog on the Puzzling Puzzle of HR, one of the puzzle pieces I mentioned is the role of business and HR analytics. I firmly believe that better HR data leveraged as a part of HR’s consulting services is core to expanding HR’s business impact. And yet, HR has had a long-term frustrating relationship with even basic reporting, let alone with advanced analytics.

Yesterday I listened to a replay of a Human Capital Institute webcast, “Turning Analytics into Action,” presented by Capital Analytics. The session was about moving up from descriptive analytics to predictive analytics, an important goal. One of the participant polling questions asked about common barriers to improved data use. The top two items were; incomplete or messy data (55 percent) and knowing what and how to measure (27 percent). Those responses are frighteningly telling. If HR leaders are still largely struggling with what and how to measure, and face barriers in accessing the various needed data sources, they must first strengthen their  data foundation before they can credibly move up the data value chain.

HR’s current data-related focus is obtaining access to what has happened and moving toward what is happening right now. Its future step is predicting what will happen and advising on how to best prepare, adapt and manage limited resources to achieve business results. A number of HRO vendors want to help HR clients move up the data value chain. For example, IBM, Accenture and Wipro all offer advanced HR analytics as available additional services. Unfortunately, advanced HR analytics are an added cost item, and so far the vendor’s capabilities are ahead of most clients’ willingness to spend, and ability to use and leverage.

The first step is to build the data infrastructure for improved basic HR workforce reporting.  And I do mean workforce, not just service silo by service silo. Knowing what data you need, how and where you will get it and making sure it is valid should be a major part of your strategy and planning for HR and HR services delivery. Basic HR administrative software and outsourcing already provide improved reporting capabilities for many buy-side organizations. When selecting HRO vendors, understand what new data and reports will be available, and determine if there will be assistance for the retained organization in learning to use the new capabilities. When transitioning to a new or upgraded HR service platform, take time during configuration and implementation to wire in as many data elements as you can. If you do not collect the data, you cannot later analyze the data.

In part 2, I’ll take a look at why data matters on the path to the top of HR.

Linda Merritt, Research Director, HRO, NelsonHall

Training HR Business Partners – Breaking New Ground for HRO Relationships

My August 27 blog focused on the importance of training recruiters – both in-house and outsourced – on how to leverage new school recruiting techniques, platforms and mediums in order to prepare for the hiring uptick that’s expected in 2010. This training is vital, as it not only aids the recruiting effort but also enables HR to help support the company’s strategic and competitive business objectives.

Broadening our view here to training which helps enable attainment of business objectives and better relationships between HRO buyers and HRO providers, a variety of HRO service providers hold user conferences which include educational components. For example, Ceridian has an academic program that offers resources and some training for client HR teams, and its user conferences always offer a few very well attended sessions that qualify for continuing education credits.

So I was very interested in Kenexa’s announcement earlier this week of a training initiative it launched for E. ON U.K., an integrated power and gas company. Kenexa’s new one-day developmental training program is helping E. ON U.K.: 1) embed HR guru David Ulrich’s business partner model – the intent of which is to “help HR professionals to integrate more thoroughly into business processes and to align their day-to-day work with business outcomes… focusing more on deliverables than doables…Instead of measuring process, business partners are encouraged to measure results’’ – and 2) assess the development needs of its staff.

The training simulates an HR business partner’s workday, in which participants are observed and given immediate feedback including career advice, developmental recommendations and a full assessment report.

To underscore the significance of this type of training, let’s define HR business partner. Internally, HR business partners support the business leaders and teams of each division/ business unit of their company to manage implementation and execution of HR processes such as workforce planning and performance management. When involved in an HRO engagement, the HR business partners in the retained organization – at least at the top ranks – have added responsibility for managing the relationship with the HRO provider in conjunction with the governance team, and ensuring results are achieved and qualitatively and quantitatively measurable.

HR business partner training, if engineered to specifically address best practices in HRO provider relationship management and objectives achievement, represents a monumental boon to HRO buyers and providers alike.

While I think it will take a while for this type of training to catch on and for success stories to arise in the marketplace, I thoroughly expect buyers beyond E. ON U.K. will take notice and look for their providers to provide similar training. Further, I believe other forward-thinking HRO providers will begin evaluating how they can offer this type of training. 

I hope both parts of the equation do, as it will help strengthen the relationship and extend the strategic partnership between HRO buyers and providers, and more easily enable the realization of business objectives expected from the engagement.

Gary Bragar, Lead HRO Analyst, NelsonHall