Uncertainty as a Competitive Advantage for Benefits Administration Outsourcing

This week let’s explore how benefits administration (BA) can create a competitive advantage from uncertainty.  A new Institute for Corporate Productivity (i4cp) study, The State of Employee Health Care Benefits, indicates that many organizations are still in wait-and-see mode due to health care reform uncertainty and are delaying any major overhauls of health care benefits into 2012. In the meantime, high-performance organizations are differentiating themselves in the talent marketplace by:

• Emphasizing literacy in health, health care terminology, and health care plans (75%) relative to low-performing organizations (45%)
• Using incentives more than low performing organizations, especially for biometric screenings and health assessments
• Using a broader range of cost-sharing strategies than low performing organizations.

An interesting data point: more high performing organizations report that they target offering competitive benefits (64%), while many low performers target “better than” competitive benefits to effectively compete for talent (43%). High performance companies offer a wider range of common benefits like medical, vision and dental, and provide benefits for part-time employees at almost twice the rate of lower performers. All surveyed organizations continue to increase approaches for employee cost-sharing.

Benefits administration is a win-win HRO opportunity zone for client-vendor partnerships that offer great service at competitive prices while working together to optimize total benefit spend. Mercer just issued a summary of new business for 1H 2011. A significant portion of the 15 new BA contracts, including 10 large market clients, are for added service lines with existing clients. Mercer’s HRO revenues are also up 20% year-over-year, based on a similar volume of new business in 1H 2010.

Buyers, look for a BA service provider that also offers multi-channel employee communication excellence beyond the annual enrollment window. According to the i4cp, “quality of communication will likely be the arbiter of whether or not a new approach to employee health care is embraced by employees.”

Equally important is finding a BA vendor with the capability to gather and analyze evidence-based data that will help you manage the dynamic balance between employer cost, talent management, and employee benefit. Finding a strategy that balances costs with effectiveness is a moving target. Gaining employee cooperation in containing health care costs is extremely difficult for all companies, high performing or not. For example, a poorly designed and communicated incentive can disincent the desired behavior.

Providers, there will always be clients looking for low cost commodity-level BA. There will also be high-performance companies, and those who want to be, willing to lead the way with the right vendor partner in actively managing benefits programs way beyond basic administration. Do you take into account prospect and client market position, strategy, and culture when shaping offers? Do you vary service packages to create pricing offers based on client segments? How effectively are you leveraging your competitive advantages in employee communications that increase desired behaviors and do you have the empirical evidence to prove it?

Linda Merritt, Research Analyst, HRO, NelsonHall

Will Talent Management be the Next Hot Thing in HRO?

One of the challenges for any business, including HRO, is balancing meeting today’s needs while getting ready for the future. I am seeing a positive tone change emerging in HR articles, blogs, service provider and consulting firm research and marketing. Broader workforce issues are starting to get attention again, and will hopefully lead to more business for HRO.

Talent management is one of the topics getting a lot more coverage. After the deep cuts, cost controls and contraction of the labor market of the recent past, employers are now interested in how they are going to shape their talent programs going forward.

HRE Online has a very good article by Tom Starner, Refocusing on Talent Management, that references recent talent management research by Ernst & Young and Mercer. According to Mercer, 51 percent of surveyed employers rated talent management as a top priority, and 76 percent expect it will be a top priority in the next three to five years.

Ernst & Young’s study highlighted three key initiatives: rebuilding the internal talent pipeline; understanding and coordination global talent for key positions; and offering flexible work strategies.

With the expected slow return to growth, employers want to know how well targeted talent management investments are working. Mercer reports that only five percent of respondents were confident in their ability to effectively measure the impact of talent decisions and investments, and 41 percent said they were not at all effective.

Institute for Corporate Productivity (i4cp) research indicates that high-performance organizations were more than twice as likely to emphasize the measurement of talent management (37 percent) than low-performing organizations (16 percent).

A talent management application suite can help organizations manage, track and report on talent management activities, and there many in the marketplace. But some clients have learned that no matter how capable the application, if it isn’t well understood and used, it is no bargain.

Mercer has just launched its new offering, Human Capital Direct, a rewards and talent management consulting and technology service based on software from Peopleclick Authoria. Mercer is embedding its own intellectual capital, and will be implementing and hosting the software and surrounding the whole package with pre- and post-implementation consulting.

Companies can get talent management applications as stand-alone services. The same is true for the broader systems that cover HR, payroll and more; buyers can contract directly from Oracle and SAP for HR SaaS applications. They can also obtain them as fully supported BPO services where vendors such as ADP, Logica, NorthgateArinso, Infosys and others add portals, tools, services and reporting, along with implementation support and hosting.

I always like seeing a full range of available HRO offerings, from client-managed to vendor-managed, from basic cost saving functionality to fully featured transformative vendor relationships. Each type and level of HRO has its time and place.

Can talent management be turned into a full platform BPO service? Is now the time? Mercer is hoping the answer is “yes.” What do you think?

Linda Merritt

NelsonHall

Research Director, HRO 

Linda Merritt, Research Director, HRO, NelsonHall

Up in the Air with Outplacement Outsourcing

The Oscar nominated movie “Up in the Air”, with George Clooney as a high-end outplacement counselor, is a movie worth seeing. I certainly saw the cultural relevance in these days of extensive downsizing, but as a movie it left me, well, a bit up in the air.

Outplacement is a $4 billion market, and participant services typically include an assigned counselor, resume critiques, a variety of courses and workshops, self-assessment tools, access to job search resources and some level of one-on-one coaching. Actual job search assistance is usually not provided in basic packages. In major cities outplacement firms may still offer office space for classes, in-person coaching and even workspace and clerical assistance. Onsite services are also available for added fees. Although some companies do bring in outsiders – as is key to the movie – in my experience most companies have their own managers notify impacted employees and then route them to outplacement services.

I helped manage outplacement services when I was with AT&T and our in-house program transitioned to an outsourced service. We originally had several locations that included workspaces with phones and computers for job-seekers, classrooms, a resource library, onsite counselors, and group sessions for networking and peer support. And there was a time, not so long ago, when that level of support was needed. Now most people have Internet access and the amount of free online job search resources is astounding. In a Net savvy world, outsourcing needs to evolve to keep pace with changing needs.

Outplacements services have been migrating to the Web to reduce costs and allow more employers to continue to offer three to six months of support services for employees leaving under severance programs. A June 2009 study by the Institute for Corporate Productivity and the American Management Association showed that employers spent an average of $5,000 per participant, with a range from $7,518 for executives to $1,472 for hourly employees.

With unemployment still around 10 percent, there will be continued strong demand for effective and affordable outplacement services. And indeed outsourcing revenues have increased, with Right Management, a unit of Manpower Inc., up by 36 percent and Lee Hecht Harrison had up to a 57 percent increase in a recent quarter. Jumping in, ACS has just added an offering called ACS Transition Services – Powered by RiseSmart, to provide outplacement services.

The question is whether today’s outplacement services leave participants up in the air. Some participants complain about simplistic canned workshops, obvious advice and services that have not kept pace with the times. Others question whether the services are really more for assuaging employer guilt and avoiding lawsuits than for increasing and speeding placements for laid-off employees.  While there may well be room to improve, I personally saw how helpful outplacement services can be on an individual basis in terms of providing focus, structure and support during an uncertain time. We had many success stories at AT&T, both in seeing people refocus and find their way forward, and with those who found new jobs.

Realistically, no outplacement service can guarantee participants will quickly find a position equivalent to the one just lost, but there should be data that shows the services are effective and valued by participants to be worth any price point.

HRO providers that offer employers a cost effective outplacement service with high user satisfaction and evidence of job placement effectiveness will continue to find high demand and growth opportunities – and they won’t leave participants up in the air.

Linda Merritt, Research Director, HRO, NelsonHall