Posted tagged ‘HRO contracts in 2010’

NelsonHall HRO Confidence Index finds Banking, Healthcare, Pharma and Manufacturing Industries to Experience Strongest Growth

June 17, 2010

My blog last week focused on geographical HRO growth per the findings of NelsonHall’s most recent HRO Confidence Index. Today, the focus is growth by industry sector. When asked about expected changes in 2010 HRO revenues by industry sector, year-on-year relative to 2009, the HRO providers that participated in our most recent Index responded similarly to the prior quarter, with strong growth continuing to be expected in the banking (3.9 on a 1 – 5 scale), healthcare, pharmaceutical and manufacturing (all 3.8 on a 1 – 5 scale) industries.

On the opposite end of the spectrum, expectations from the state and local government sectors declined during the quarter. Addressing this drop first (always nice to end on a more upbeat note!), although a few state and local government contract renewals and new wins created some optimism in the second half of 2009, frozen decision making remains as many states struggle to pass budgets. State and local government HRO contracts are few and far between, and have an extremely long sales cycle. In today’s environment, as jobs are hard to come by and the recovery is taking longer than most of us thought or hoped, state talk of outsourcing, even without job reduction, will be hard to pass muster.

Now on to the positive. Supporting high growth in the pharmaceutical industry, RPO provider The RightThing issued a press release on June 1, 2010 stating that as hiring freezes across the U.S. begin to lift, there has been a major trend in pharmaceutical client hiring as organizations begin to rebuild their employee base. Over the last four months, The RightThing has assisted in major expansions (to the tune of 2,300 total positions) with five North American pharmaceutical companies including Boehringer Ingelheim.

And the NelsonHall contract database provides evidence of HRO’s growth in the banking and manufacturing industries. A hefty number of the most recently signed HRO contracts include Xafinity with BAE (pension administration), Kenexa with MphasiS (a 360-degree survey program), Xchanging with Insyte (multi-process HRO), Alexander Mann with Premier Foods (contingent workforce), Liberata with the U.K. Ministry of Justice (a portion of which is for payroll outsourcing), Hewitt with International Paper (multi-process HRO) and Manpower with Techcombank (RPO and staffing).

The continued growth in the banking industry is due to a number of factors. Hit exceptionally hard by the recession with downsizing in HR departments/across the board and in a current state of reorganization, banks are now trying to be more efficient and, in doing so, no longer want to assume the risk of investing in technology and HR staffs when they may be required to downsize again. And there are common roots to continued growth in the healthcare, pharma and manufacturing industries. In addition to reducing risk and becoming more efficient (obviously requisites for any private or public sector organization), it’s also about being able to quickly scale up and down. For example, if the U.S. Food and Drug Administration approves a new drug to prevent or cure a life threatening disease, manufacturers will need to rapidly hire staff to meet demand. Swift hiring of large numbers of employees, which has implications for payroll, benefits and learning, is often difficult for a company to do internally. HRO providers with much more abundant resources can more quickly deploy resources to meet this new demand.

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall

Alice in Wonderland 2010 – HRO Providers Help Clients Shrink and Grow

December 1, 2009

Many are scurrying at a furious pace to publish 2010 HR and outsourcing trends and predictions, including the NelsonHall HRO team. My 2010 HRO list will be published in the next issue of HRO Today magazine, and Gary is providing RPO insight to several publications.

One of my predictions is that we are facing a spendless recovery in the HRO industry. Given the persistent uncertainty of the strength of the recovery and continued high levels of unemployment in many areas, cost will remain the leading HRO decision criteria factor. More contracts will get signed in 2010, although most will be smaller in scale and scope, and face deep scrutiny by risk adverse buyers.

What is the recipe for doing business in such a cautious environment? One way is to learn from HR trends and predictions to see how we in the outsourcing community can support clients as their needs and pressures change.

Mercer’s Human Capital group has published its list of the top five human capital issues for 2010. While presented by Mercer Australia, the issues highlighted are common to businesses around the world:  

 1. Foster growth in a new workforce context

2. Be smarter with benefits as pay packets matter again

3. Restore equilibrium in Executive Remuneration

4. Mitigate turnover risk and restore employee engagement

5. Develop well-rounded leaders who can maintain momentum and/or pick up the pieces

I was reminded of Alice in Wonderland by a comment Ken Gilbert, head of Human Capital at Mercer, made about the first challenge noted above: “Success in 2010 will be defined by organizations’ ability to ‘shrink and grow’ – maintaining a focus on costs while growing talent, workforce productivity and the bottom line.”

Wow. Alice grew very large and shrank very small, but she was not asked to do both at the same time. As budgets remain constrained and business demand starts to increase for targeted talent, HR will be looking for assistance from its partners to recruit, train and retain new employees both effectively and cost efficiently.

The benefits of improved recruiting will be as ethereal as the Cheshire Cat’s grin if turnover increases too much. Employee engagement and leadership development will be important elements in capturing growth opportunities, and throwing money around like the Mad Hatter at a tea party is not an option.

For example, targeted analysis of workforce and performance data will be needed to help focus attention and limited resources in the most impactful areas. Also, learning opportunities are needed to develop specific workforce skill sets, and as effective tools for increasing engagement. Careful planning, collaboration and curriculum management can achieve both goals while still reducing overall expense.

Buyers, be sure to share 2010 workforce goals and challenges with your HRO providers so they better understand your needs. Providers, review the services you provide to your clients and identify how they support current and returning business needs. Where might a little bit of proactive consultation show how your current or new services will help the client organization shrink expenses and grow business results at the same time?

If you want to keep your head, this is not the time to pitch a grand transformation plan. Whether it is building a closer relationship through better utilization of current services, or growing the relationship through very precise projects and new services, it is time to help Alice find the wonder in Wonderland.

Linda Merritt, Research Director, HRO, NelsonHall