Posted tagged ‘HRO service providers’

HRO Déjà Vu

April 11, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Each quarter, we publish the NelsonHall HR Outsourcing Confidence Index (HROCI) for our clients and the participating service providers. I like to share some of the highlights in my blog, but it can be hard to make fresh insights during times when the results are stable from quarter to quarter. When the confidence ratings are generally strong, as they are, then stability is pretty good news for HRO service providers.

Overall Confidence Remains Stable

The most recent HROCI shows a vendor confidence level of 157 for Q1 2013, where 100 represents unchanged confidence and higher scores indicate increased confidence. That is in line with the 156 from Q4 2012 and a bit up from the 153 one year ago. Confidence dipped mid-2012 with Q2 at 138 and Q3 at 140, which was not too surprising given the political and economic uncertainty we saw last year:

  • While the overall confidence score at 157 remains stable, those suppliers reporting slightly more or much more confidence increased 13% quarter over quarter
  • Increased confidence is reflective of solid pipelines of potential new sales and expectations for growth.

Growth Expectations Vary

Service lines: HR business process outsourcing service lines do not grow at the same rate. Some services like RPO and payroll remain steady performers, followed closely by benefits administration. The pipeline for benefits administration is looking especially strong. Expectations for multi-process HRO and learning remain about the same, which indicates continued slow growth.

Geography: Location matters in HRO and the patterns of growth also vary by region. The economic recovery is uneven in pace, readiness for HRO is uneven, and multi-country deals are a smaller part of the mix than in the recent past.

Overall, vendor confidence by geography has weakened with many regions showing some decline in confidence. North America, Asia Pacific, and Latin America show the strongest numbers, but there can be significant variation country by country. As we have seen for some time, growth expectations for Europe and the Middle East remain dampened.

Industry: High-tech and retail look to be the optimistic growth industries with most sectors remaining within prior modest expectations for growth. Expectations remain low for federal government and defense.

Mostly Steady and Stable Ahead

It is good to see the balancing of demand for cost savings and process standardization continuing. Client pricing expectations may still be unrealistic as there are always those who want a quick 50% off along with some freebies thrown in at the same time.

One area to watch is the growing client interest in and adoption of platform-based services. Some buyers are specifying SaaS and cloud-based services in proposals. We need to help educate buyers on leaving some room for discovering the best solution fit for each client situation.

To end on a positive note, 79% of HRO suppliers believe that a net up-turn in decision-making is taking place. Let’s get out there and get those deals signed!

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

Advertisements

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

February 26, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

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!

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here

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

June 25, 2012

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.

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here

A Deeper Look – HRO and Health Care Exchanges

May 3, 2012

HRO is an ever changing set of services, processes, technologies, and client needs. My HRO colleague Amy Gurchensky recently covered one of the emerging service areas in benefits: health care exchanges. I wanted to know more about active employee exchanges and arranged for educational briefings with Aon Hewitt and Mercer since both are already in this market.

Both of the HRO service providers have found similar reactions from insurers to the exchanges. As with any new concept, some carriers are more progressive and recognize changing market needs. Other carriers are more cautious and methodical and want to know more about how the new models work, how to underwrite the risk, client implications, etc.

Even though health care exchanges offer preconfigured selections with price advantages for employers, exchanges are still group programs and the employer is still the plan sponsor for active pre-65 participants. Aon Hewitt’s corporate exchange offering includes services to help clients meet their obligations as plan sponsors.

Exchanges are a bundled service. Along with structured plans from participating carriers, traditional benefits administration services are also included. Both Mercer and Aon Hewitt have great depth in providing end-to-end participant services, handling escalations, and advocacy. For example, Mercer’s exchange offering includes clinical case management support as well as program oversight and audits. Aon Hewitt includes both tier one and tier two call center support and advocacy services for participants with issues or claims that are more complex and require a greater level of case management and carrier interaction.

Both companies are major league benefits administrators, and I wondered how the exchanges may impact revenues as clients move to an exchange-style service. Mercer sees the revenue impact as neutral initially and additive overall; Aon Hewitt views the exchange markets as an important natural extension of its traditional benefit administration services.

Today, health care exchanges are a very small part of benefits HRO, but there is significant growth potential. Mercer will be testing service models in rolling its Mercer Benefits Choice Exchange (MBCE) for employers with less than 1,000 employees, so expect to see the changes and evolutions that are common with emerging services. It will not be surprising if more HRO vendors launch exchanges, and even a couple large carriers may decide to offer exchange services directly as the market develops.

The future of health care private exchanges is not dependent on whether or not the current U.S. health care reform is amended or survives. Research indicates that up to 90% of employers offering health care coverage intend to continue to offer coverage in 2014.  Employers will continue to need options that help them offer competitive benefits at controllable costs, and innovative HRO service providers will continue to develop new services and options to meet those changing market needs.

Linda Merritt, 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.

The Seams Matter in HRO

April 13, 2012

To complete our review of HRO’s total cost of ownership (TCO), I want to expand on the factors that can either ramp-up or create a drag maximizing savings. The ADP studies on TCO do more than show the savings that real customers are achieving; the research also looks at why.

First, we need to understand what goes into TCO, which can help create a base case for outsourcing and in tracking the results. Included in the ADP TCO research are:

  • Systems cost for initial implementation, upgrades (both amortized over three years), and system maintenance
  • Direct fully loaded labor costs for associated administrative and IT employees
  • Non-direct labor cost for overheads like facilities and corporate overheads
  • Supplier or outsourcing costs.

Some of the costs are hidden in budgets other than HR’s, including IT, finance, or corporate. Remember that some of the employee costs are also hidden out in the field. We call them the shadow staff—people who support HR processes part-time. It’s important to understand the full cost of providing pre-outsourced services to be able to determine the difference in operating expenses after outsourcing.

There are also costs that result from the “seams.” Seams create gaps and can be found between technologies, processes, and people. These costs are seldom apparent or included in base cases, but they are real and can make the difference in 8-10% savings versus 20-30% savings.

Why does using a single vendor for multiple integrated processes create additional savings? With more services on one vendor integrated platform there are fewer interfaces to maintain, which costs less. When using various separate technologies and vendors, more complexity is in the system, and that generates an increased need to ensure that interfaces are maintained and addressed every time a change is introduced; it also increases the need for customizations and workarounds. When a payroll change was made, I could not understand why it took so long. It was because payroll data touches so many other HR processes that every calculation and interface needs to be addressed, tested, and ensured, many of which touch other suppliers and outsourcers, which adds even more time and cost.

Fewer systems, fewer non-integrated interfaces, and fewer vendors reduce complexity and can further reduce cost. The same concept is true for processes and people. Changing and standardizing internal processes and behaviors across the enterprise is hard. Persistence over time can make the difference in achieving 20% savings and 40% or greater savings.

The good news is that you do not have to do this all alone. Understand what you can expect from your primary HRO vendor(s) and what is included in standard pricing and what additional services are available at additional cost. HRO vendors like ADP, IBM, and Infosys, while specializing in various areas of HRO services, understand the importance of ongoing HRO governance, relationship management, change management, and step-by-step maturity along the way to maximizing the TCO benefits of HRO.

Linda Merritt, 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.

HRO Reduces TCO!

April 5, 2012

Buyers, how much will you save by implementing HRO services? Will it be 8% or over 50%?

ADP recently published the results of its latest total cost of ownership (TCO) study, The Hidden Benefits of Human Resources Business Process Outsourcing. The company has sponsored several PwC TCO studies since 2003 comparing the TCO of companies maintaining HR services in-house to those using ADP HR BPO. The 2012 study was completed by Sourcing Analytics and digs even deeper into the patterns established in the earlier PwC studies.

I touched on this topic last year, but it is well worth a second look because the research supports common HRO advice and counsel.

The good news remains: HRO of services including payroll, time and attendance, workforce administration, and health & welfare reduce TCO over in-house services.

The bad news is that HRO is not a quick financial fix and first year savings are usually modest. It takes time and hard work to transform HR operations and service delivery, but there are companies that have reduced TCO by 50% with 20-30% being possible for most over time.

Often, one or more HR services are outsourced with the focus mostly on the technology and transactions and may include more than one service provider. While there should be many benefits in new service features and functions and improved processing, the TCO impact is likely to be low, perhaps only 8%. To get both full value and full savings, more is needed.

Here are some of the building blocks that can be used to further increase your HRO TCO:

Technology and process

  • Use one vendor for integrated payroll and time and attendance to bump up savings a bit
  • Move to SaaS-based technology platforms to reduce technology costs the most
  • Make it real BPO, include contact center services
  • Multi-process HRO (MPHRO) saves more than best-of-breed services managed in-house, can significantly ramp up savings.

Process and people

  • Support initial transition, adoption, and utilization
  • Adopt standardized and centralized best practice processes across the entire enterprise
  • Follow through and reduce or re-deploy the retained organization
  • Keep working on it together; it may take up to five years to achieve maximum TCO savings as maturity is attained and more and more of the building blocks are added.

How much a particular client will save depends on a number of choices and options that are largely within the control of the client. In addition to great HRO performance, top-notch providers will be able to support each client in their journey to attain the most savings possible.

Next week, we will take a look at some of the factors and actions that shape the HRO journey.

Linda Merritt, 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.

Social Media in HRO Needs to be NICE

March 23, 2012

To work my way into the topic of social media, I am going to start outside of HRO. IBM recently launched a Social Media Boot Camp for its small- and mid-market business partners and clients.

The social media boot camp is globally available for qualified candidates, including those from emerging markets such as China, Australia, and Saudi Arabia. It is designed to develop the skills and ideas that will enable participants to sharpen their social networking capabilities and build stronger and more interactive ties with their clients. The online course includes an eight-week session with live coaching. It is produced in conjunction with Profitecture and is available for up to 75 participants each quarter. The Q2 2012 classes are already full, and enrollment has started for Q3 2012.

The IBM-led conversation on social media provides a broader view in using new media channels. According to Ed Abrams, IBM vice president of mid-market marketing and strategy, “…remember that social media is all about conversation. You don’t want to use this forum for press releases, or collateral- type materials. You need to remember that social media is very much like a face-to-face conversation. People want to engage, they want the chance to participate.”

Starfire Technologies is one of the early business partners to complete the boot camp. Mary Spurlock, Starfire’s Vice President of Marketing, says that social media is a 2-way street and that while it is important to publish, share, and deliver value when using social media, it is also important to listen, read, and follow what your customers are doing with social media.

There are very practical aspects as well. In RPO it is already critical for a service provider to be on the leading edge of leveraging the latest social media trends, functionalities, and tools. For now, let’s stay with the broader view.

The use of social media in HRO needs to be NICE.

  • New: Use social channels to offer something of unique value. Don’t simply repeat the same content offered elsewhere, and keep it fresh—update, update, update! Offer something unique (or at least a unique take) in the content.
  • Interactive: Offer multiple ways and levels of interaction. Providing a “comments” section is not even table stakes today. People know how to find your corporate website. If they are on Facebook, they are looking for new ways to connect with you. Be creative.
  • Connective: Take advantage of the opportunity to interact with the intended audience to continue, extend, and expand the conversations and weave connections across multiple channels into a whole. Each media channel should have a specialized point, purpose, and voice.
  • Engaging: Social media provides a unique opportunity to bring your brand attributes to life in ways that create enriched longer-lasting relationships. Here, “engagement” does not mean “interactive”; it means being invested in a mutually beneficial relationship.

How NICE is your use of social media?

Linda Merritt, 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.