How to Get There From Here – A Roadmap for HR Analytics

HR service providers have reporting and analytics capabilities including software, consulting and outsourcing. But getting beyond providing support for basic reporting capabilities has been a slow and rocky road. To move further down the path, we need a roadmap for HR analytics.

NelsonHall’s 2009 report, “HRO Analytics: Utilizing Analytics to Improve Outsourcing Experiences”, found that 85 percent of vendors have an advanced analytics offering, but only 22 percent of clients have implemented such services. Gaining agreement that workforce data is important is easy, but finding funding to build or buy the capability is considerably harder. One of the reasons for the slow adoption rate in HR analytics is how hard it can be to demonstrate ROI. 

I see signs of current buyer interest that can be leveraged, although the signs may not look like a direct request for HR analytics:

•  Behind the drive for multi-country payroll during a recession was not a bizarre interest in payroll systems, but rather a senior leadership demand for better workforce and financial data in order to understand what is happening in every operating geography.

•  Growth in leave of absence, absence management and dependent audits all support tighter workforce management in lean times.

•  Can anything sound more non-urgent than consolidating time reporting systems? But how about when they are linked to razor-thin staffing levels and controlling the use of overtime while still meeting sales and customer service objectives?

•  With an expected modest rise in recruiting, improved workforce planning and forecasting is vital to ensuring the most critical areas are targeted.

Each of these opportunities require timely and accurate data from across the enterprise, and each impacts the total cost of labor – in other words, an ROI signpost and a roadway to direct bottom line impact.

Sometimes HR wants to start at the end – the fun and strategic stuff. But to get credible workforce data that drives decisions and impacts business results, the data infrastructure must be in place first. Perhaps boring to some, but data definitions, data warehousing, establishing a system of record, reporting applications, data security, etc., are all important, as is having a framework for what data needs to be pulled into the system: employee, workforce, individual and business performance and financial data.

If you’re a buyer, do you have a roadmap to get there from here? Are current HR systems adequate, or can you get there with add-ons at the edge or in the cloud? If you go for separate point solutions for each issue, will you be able to pull in all the data from the various vendors? Where will you connect to the enterprise business performance and financial systems? How many interfaces are manageable, and who will manage them? Which analytical capabilities should you build in-house, and should some be outsourced?

A word to vendors – R analytic sales opportunities may be disguised, but they are there.  The time is right for you to drive your shiny offerings down prospect road.

And advice to buyers – call your friendly HR portfolio manager to ensure you build an integrated set of systems and capabilities at the lowest operational cost level while raising the bar on HR’s ability to increase business results.

Linda Merritt, Research Director, HRO, NelsonHall

Paradise by the (HR) Dashboard Light

Waxing nostalgic, I couldn’t resist using the title of Meat Loaf’s 1977 hit song for the title of this blog. And although “paradise” may be a bit of a stretch, dashboards are a vital tool in HRO as they enable both clients and service providers to gain real-time access to critical data – such as provider and outsourced process performance – via a graphical display.

There are a number of different types of dashboards in use today, including those which track and measure service level agreement (SLA) performance, those which are part of analytics services and used more broadly to track and display HR metrics and track strategic initiatives, and those which benchmark a variety of an organization’s HR-oriented characteristics against industry standards. Today I’m focusing on SLA performance dashboards, but we’ll cover other types in future blogs.

SLA performance dashboards are used to monitor, measure and regularly report on a provider’s adherence to the contractually agreed upon service levels. Dashboard findings are typically gathered by the provider and reported on a monthly basis to senior executives, HR leaders, operational managers and their teams, and key stakeholders within the client organization to enable a quick, at-a-glance view of provider performance against the agreed upon SLAs.

While it varies among client companies, commonly tracked SLAs include:

• Payroll timeliness and accuracy versus the agreed upon target

• Recruitment cost and time to hire as compared to the agreed upon benchmark standard

• System availability versus the agreed upon target

• Time to resolve Tier 1 and Tier 2 inquiries as compared to the agreed upon target. An example of a Tier 1 SLA is for a call center to answer 80 percent of calls within 30 seconds, and a Tier 2 is for 95 percent of cases closed within two business days

• Customer satisfaction versus the agreed upon target

These dashboards depict the status of each service level with a stop light-style indicator. Green confirms the service level has been met or exceeded. Yellow warns the service level is in danger of being unmet unless corrective action is taken. And Red means the service level was missed and immediate corrective action must be taken to resolve the problem, root cause analysis conducted and process improvements put in place to prevent it from happening again.

A Red may also mean providers face financial penalties. In my own experience from my days at AT&T and in intervieiwng over 150 buyers and providers, financial penalties are rarely assessed for a missed service level. The most important things the client and provider are concerned with are immediately resolving the service level failure and preventing a miss from happening again. If Green status is maintained in the subsequent measurment periods, it’s likely no penalty will be assessed. Most buyers and providers understand the focus needs to be on a spirit of partnership to work through problems and prevent them from recurring, rather than creating a contentious relationship.

Dashboards are also commonly used in monitoring the progress of major HRO projects tracking key activities, timelines and budgets. The project managers may need huge and inticrate charts and spreadsheets, but a one page summary with clear indicators is more useful in executive and governance meetings.

As NelsonHall recently published in its report HRO Analytics: Utilizing Analytics to Improve Outsourcing Experiences, dashboards are a useful vehicle to display analytics as well as benchmarking and SLA data. In my role at AT&T I found the dashboards we used were very useful tools to keep everyone informed and focused on any needed issue resolutions, as well a good way to reinforce the efforts and activities it took even when things were going well. Stay tuned for future dashboard-related blogs.

Gary Bragar, Lead HRO Analyst, NelsonHall

Utilizing Analytics to Improve the HRO Experience – It’s Time to Step Up the Game

HR analytics – which we define in our latest market analysis as “a method of tracking, measuring, analyzing and assessing HR and business performance for the purpose of making more informed strategic decisions, improving financial outcomes and monitoring goals” – have never been more vital than in today’s economic climate. Organizations must have data-based insights into their HR cost structures, how to optimize their diminished workforces, their cost per hire, employee cost as a percentage of sales, labor costs by department across various locations and myriad other considerations.

But whether leveraged by in-house staff or an HRO provider on behalf of its clients, most HR analytics today are focused on operational reporting such as basic, aggregated headcount data, and tactical metrics including quality of hires and sourcing effectiveness. HRO providers can  step up their competitive game by addressing the main drivers of HRO analytics – justifying the outsourcing business case,  providing HR ROI and becoming an integral partner in not just process performance but in business intelligence.

To do so, per the findings from our just completed study, “HRO Analytics: Utilizing Analytics to Improve Outsourcing Experiences”, HRO providers must address factors including:

•  Demonstrate the effectiveness of the function or process such as sourcing effectiveness within recruitment or a new communications strategy within benefits administration services

•  Deliver analytics around not only quantity,  but also effectiveness, of recruitment, learning and benefits, e.g., utilization of various benefits programs offered and why they may vary across geographies

•  Prove the return on investment in the relevant HR function, e.g., ROI of a specific training program or reduction in recruitment cycle time

•  Assist in prioritizing HR activities and determining what should be provided with an appropriate budget, such as a particular training course which increases sales capabilities

•  Provide insight into how to improve workforce performance and increase employee productivity

When reviewing the findings from our HRO Analytics market analysis, my colleague Helen Neale observed the following: “Indeed the surprising finding from the study was the low incidence in the use of higher level analytics within multi-process HRO arrangements, which, given their focus across a number of process areas, particularly within talent management, would provide a perfect platform for enabling HR through analytics. However, it seems the struggles providers are experiencing with developing a business model that works has impacted the value-added services originally promised in these contracts. NelsonHall expects the next wave of multi-process HRO contracts, which are more focused on payroll plus basic transactional and HR IT services, should enable a more robust platform for developing higher level analytics solutions. This will help, in the longer term, to prove the ROI of payroll plus multi-process HRO.”

Of course, implementing a robust, high-level HR analytics initiative requires an up-front investment by buyers and providers, in terms of both cost and time. But these can be mitigated by ROI achieved by the buy-side, and increased client satisfaction and development of repeatable solutions on the sell-side.

We believe that as the economy recovers, HR contracts will be likely to adopt more strategic level uses of analytics to justify HR spend, prove ROI for specific HR initiatives, and reduce costs associated with pain points in the organization. HRO providers are continually being asked by their clients to provide more value-added services, and suppliers can prove that value by moving outsourced HR analytics up the value chain.

Gary Bragar, Lead HRO Analyst, NelsonHall

Infosys, Wipro, TCS and other Offshore Providers: How Strong an HRO Play Can They Make?

Against the backdrop of Infosys’ most recent quarter-end financials announcement – of which 6.1 percent of revenue was attributed to BPO, and five to 10 percent of that BPO revenue is estimated to have come from HRO – how viable can it and its Indian brethren be in the HRO space? Despite inherent challenges and both real and perceived buyer concerns about offshoring HR processes, offshore providers are making strong investments in and “upping the ante” of their HRO capabilities.

For example, Infosys within the last several months launched a new SaaS plus BPO platform offering which supports HR processes. And other Indian providers such as Wipro, Caliber Point, Secova, Modis and TCS are partnering, primarily with Oracle and SAP, for a technological BPO backbone which supports HRO processes, and then building more standardized BPO services around that technology.

Further, to address language and cultural barrier concerns of many buyers, India-based offshore providers are understandably touting their centers in locations such as Romania and Poland as HRO delivery sites.

Finally, price points are clearly lower in India and other low-cost locations such as the Philippines in which offshore providers have centers. In today’s economy, given that providers such as Hewitt and Convergys have been challenged to meet the cost-cutting requirements of their existing clients without themselves utilizing offshore resources, there are clearly some natural opportunities for offshore providers.

But the operative word above is “some” natural opportunities. Remember, there are many concrete and ostensible inhibitors to offshore HRO. So where are offshore providers making, and can they make, their play?

At least for the relative near-term, it’s in the low-cost transactional services and low- and mid-level analytics processes. For example:

•  In recruitment process outsourcing (RPO), CV/resume screening and, in some cases, candidate short-listing. But beyond these initial activities, most will require onshore hand-off

•  In learning business process outsourcing (LBPO), managing course scheduling and learner assistance around which courses are suitable, etc. But with language, cultural and proximity issues, the possibility of venue management, course development and learning delivery is null to void

•  In back-office processes, those which are non-voice-related, such as payroll reconciliations, accounting within pensions arrangements, fulfillment, etc., in benefits administration

•  In HRO analytics, low-end processes such as monthly and quarterly reporting on employees per business unit, geography or employee population diversity; cost per hire; hiring manager satisfaction; learner satisfaction and utilization rates for decision support tools. Mid-level analytics provided by offshore providers could include loyalty and attrition modeling

•  And of course the IT support around all of these HR processes

The bottom line is that offshore providers are viable contenders in the HRO space, but we believe buyers are still cautious about fully embracing offshore outsourcing, so are likely to engage only in the non-high-touch areas. If a buyer is seeking lower cost, transactional services, offshore HRO is certainly worth examining.

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall