RPO Generation 2.0 is Ready to Go

Linda Merritt, HRO Research Analyst, NelsonHall

Recruitment Process Outsourcing (RPO) is one of the younger HRO service lines and it is both growing and maturing quickly. The March issue of HRO Today recognizes the emergence of RPO 2.0.  NelsonHall’s RPO specialist, Gary Bragar, would certainly agree. Gary’s October 2012 Targeting Recruitment Process Outsourcing market analysis highlighted many of the same developments in this rapidly growing HRO segment.

What is New in RPO 2.0?

The rapid growth and incorporation of social media for recruiting is a big part RPO 2.0, one that keeps pushing RPO to the leading edge of innovation in the HRO space.

RPO services are rapidly moving up the value chain, and changing client expectations is the key. While reducing the cost of service provision is always on the table, it is no longer the number one issue. Flexibility and scalability will always remain important as well, given how quickly hiring needs can change.

Today’s RPO 2.0 clients are looking for more value:

• Improved quality of hires
• The latest tools and technologies for social and mobile
• Expertise in accessing talent pools and passive hires
• Greater focus on candidate experience
• Analytics and insights, in addition to metrics and reports
• Improved retention
• Access to advanced services including employment branding, talent management, talent engagement, and integration with workforce planning.

Clients Simply No Longer Want To Do It

In the last few years, many buyers reduced internal recruiting staff in line with the reduced volume of hires, and they do not want to rebuild and reinvest in the rapidly evolving technologies and advanced skill sets it takes to succeed in today’s competitive, social, mobile, and global recruitment process market.

Buyer Choice is Broad

For every large staffing company that does RPO including Adecco, Kelly, Manpower, and Randstad, there are smaller vendors that specialize in RPO such as Ochre House and Pinstripe.   Most leading RPO vendors of all sizes can offer services in most of the regions of the world as they have partnered and made acquisitions to make their footprints global.

Not long ago, major multi-process HRO (MPHRO) providers either did not provide end-to-end RPO or saw it taken out of contracts. Now, more MPHRO providers have full RPO services strong enough to be offered as standalone services including ADP, Aon Hewitt, Infosys, and IBM.

With RPO 2.0 You Can Have It All

While having it all may still be a bit aspirational for most of us, we are finding evidence that successful client / provider RPO partnerships can improve process efficiencies (e.g., reduce time to hire 20% to 50%), reduce the total cost of hire (often 20% to 30% or more), along with increasing hiring manager and candidate satisfaction.

Imagine what we can achieve with RPO 2.0!

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What are the Top Global Skill Shortages?

Even when the U.S. unemployment rate was over 10%, we’ve heard that the unemployment of skilled workers with college degrees remained low at ~4-5%, and we’ve read data on just how bad the skill shortage is, including ManpowerGroup’s findings that 52% of U.S. companies are struggling to fill key jobs. We’ve also heard from me as an analyst (and former HRO buy-side client), pointing to the fact that development and retention of talent are more paramount than ever. But not as much has been written about what are the top global skill shortages. Well not until last week when U.K.-based global recruitment and RPO provider Hays issued a good concise summary of the top ten global skill shortages.

The list divides the skills by soft skills and hard skills that are in shortage globally.

Soft Skills

• Languages
• People and communication
• Team management and leadership
• Organization.

Hard Skills

• Financial and budgetary
• IT
• Green skills
• Procurement and negotiation
• Research and development
• Healthcare.

Beyond being good for job candidates and employees to know the skills they need to focus on; employers need to do a better job of investing in their workforce to develop and retain the talent that they already have. In fact, employees are looking for that. Mercer’s newly released eBook, “What’s Working Around the World”, points to the fact that career advancement and training opportunities are among the top priorities of the employee value proposition in many countries and are needed to address low levels of employee engagement.

As I get ready to publish my next global learning BPO report, I am optimistic to hear that talent management focus is no longer just a desired priority but is now a business imperative. Clients are increasingly focused on learning linked to talent management, including the linkage of learning to performance management and developmental plans. To meet client needs to attract, develop, and retain talent, vendors have been developing their talent management capability. This includes MPHRO vendors such as Xerox, Aon Hewitt, Talent2, IBM, and Accenture, whose talent management offering includes workforce forecasting and analytics, recruitment, performance management, succession planning, and learning.

In the report, I also wrote about the advent of social learning. For now, I’ll just say that speed to competence, followed by how the new generation of employees that are entering the workforce wants to learn, as well as the need for improved talent management, are what’s driving the acceleration of social learning.

If you are not already following me on Twitter, please do so at @GaryB_NH as I will tweet when the LBPO report is published. I’m targeting the 30^th of April, in time for my presentation at the HRO Today Forum on May 1^st titled State of the Learning BPO Marketplace and the Emergence of Social Learning.

Gary Bragar, HRO Research Director, NelsonHall.

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Transformational MPHRO is Thriving at IBM

I love covering MPHRO news! I still believe that broad-scope MPHRO has the greatest potential for long-term partnerships that create significant HR business impact and financial results for clients.

A summary of IBM HRO wins in the second half of 2011 shows that it is doing well in a still tough market for large-scale MPHRO while winning major MPHRO awards, including transformational deals.

Let’s start with the 13-year multitower award from Algar Group in Brazil that covers HR, F&A, and procurement supply chain management. The contract is valued at $100m and covers seven of Algar’s business segments and ~13,000 employees. While Algar Group covers a wide range of services: telecom, IT, agribusiness, and even tourism, it wants a standardized platform for back-office services with efficient processes, high quality, and lower costs. The HR portion includes call center, personnel management, benefits administration, payroll, training, and performance management.

There was also a unique long-term multitower award from Tanfeeth that covers HR, F&A, banking and other vertical back office, and client-facing BPO services. Tanfeeth is a fully owned subsidiary of Emirates NBD, the largest bank in UAE. IBM will provide managed services for the Tanfeeth shared services center, including BPO management and workflow services, predictive analytics, tools and training, and managing part of Tanfeeth’s delivery portfolio. The shared services center will also use IBM’s software applications to provide and manage the services and will support Emirates NBD’s 8,000 employees.

Tanfeeth will also provide services to other UAE organizations as the Gulf Cooperation Council’s first authorized multi-employer service center. This is a major strategic step for IBM in bringing larger-scale BPO to the Middle East. Tanfeeth has the needed local knowledge and long-term relationships, and IBM will bring its expertise in process, training, service delivery, and systems management.

As part of a planned transformational journey, there is a built-in attention for the employees of Tanfeeth and its clients covering change management, training and development, and even the opportunity for high-performance employees to participate in IBM’s worldwide leadership training program.

Then there is the competitive-bid MPHRO contract award from Air Canada for almost eight years and worth an estimated $76m. The deal is for full-scope MPHRO serving Air Canada’s 26,000 employees in North America and includes HR contact center, employee data management, employee travel support, payroll, benefits administration, leave management, recruiting services (with select support from manpower), and software application support for the HR systems used to provide the services.

Why is IBM continuing its MPHRO winning streak? According to Kevin Howlett, Air Canada’s senior vice president of employee relations, “IBM’s core strengths as a market leader in innovation played an important role in our decision-making process.” It also helped that the client felt IBM also had the strongest service offerings, a commitment to transformation, and the proven ability to ensure delivery performance and lower cost.

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.

Insourcing American Jobs – The Risk and Opportunity for HRO

Offshoring is once again under the harsh glare of the polarized political spotlight in a presidential election year. As my NelsonHall HRO colleague Gary Bragar commented in his blog, President Obama is increasing focus on job creation including encouraging employers to insource jobs back to the U.S. This may cast a shadow of negative publicity on outsourcing that includes offshoring, but I predict the issue poses only minimal direct threat to HRO. In fact, I see increased opportunity for savvy HRO service leaders.

In listening to the President’s remarks and reading the insourcing and investment fact sheet issued by the White House, it is clear that manufacturing jobs are the primary target.

The U.S. lost millions of manufacturing jobs and in some cases almost entire industries, as companies pursued ways to remain competitive with lower-priced global competitors. Lower wages and benefits were a key part of the equation, but there were other factors including regulations, taxation policies, and the low cost of transportation in what was still a bountiful world of low-cost oil.

Offshoring dynamics are changing, especially for manufacturing. The time delay inherent in moving products around the world now creates challenges in meeting the rapidly changing market preferences and shortened product lifecycles of a connected world. With increased competition for limited energy supplies from the emerging economies, the cost of transportation has become a significant factor. Add in moderately decreasing wage gaps and we can see why companies will be able to insource some jobs. Others will be able to create more jobs in the U.S., much like Honda, Toyota, and Mercedes Benz have been doing for years.

HRO as an industry is already a blend of onshore, nearshore, and offshore technologies and workforces. A mix of right-shoring talent and technology helps vendors meet client needs for cost, service, and value. With time and transportation being minor factors in HRO or other BPO, talent remains a primary driver.

Access to pools of affordable skilled talent is an increasingly important element in the growth of all businesses, whether small or large, local or multinational. Who has access to comprehensive data on workforces around the world including costs, turnover, and availability? Who can see trends emerging on skilled labor capabilities and capacity shortages? Who has direct experience in building and maintaining global workforces both for clients and for themselves? HRO service providers!

Think about it, in our HRO community are the likes of Accenture and IBM, growing globalists like ADP and NorthgateArinso, modern tech heavyweights like Infosys and TCS, global research and analysis specialists like Aon Hewitt and Mercer, and RPO leaders such as Alexander Mann, Hays, and Manpower, we even have learning leaders that can handle rocket science like Raytheon RPS.

We need to have a large enough vision for what we can become as an HRO community. There is so much already that we can leverage. Be confident in our value and let our light shine bright!

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.

HR Tech: Another Winner!

Kudos to Bill Kutik and everyone involved in planning and organizing the 14^th Annual HR Tech Conference that took place October 3 -5. Surveys are still being collected, but I’d rate it as a success! As an analyst, I did attend a couple presentations and briefly visited the showroom floor but, the majority of my time was spent in small meetings learning about new outsourcing contract activity and technology offerings, which included demos.  Highlights from some meetings included:

• IBM, already a major global MPHRO and LBPO provider, winning three significant contracts in the past month with clients headquartered in three different continents including a MPHRO contract with Air Canada (press release issued this morning). More to follow on the Air Canada win as well as the other MPHRO and LBPO contract awards as those press releases are issued.
• ManpowerGroup Solutions’ RPO business continuing to grow at > 50% thus far in 2011 with dozens of new clients added YTD in countries that include: U.S., Mexico, Costa Rica, Nicaragua, Australia, China, Hong Kong, Malaysia, Taiwan, India, Vietnam, Japan, U.K., Israel, Belgium, Finland, Poland, Netherlands, Sweden, and France.
• ADP’s demo of Vantage HCM, which is initially targeted in the U.S. for organizations with 1,000 – 20,000 employees.  I was impressed with the performance management capabilities and the overall ease of use, which included setting goals, identifying competencies, weighing performance to goals, linking performance to compensation, succession planning, etc. I could easily see how this platform can make an organization’s talent more effective, especially when combined with project management and implementation consultation.
• Kenexa’s recent announcements that include: launching Social Solutions for Recruiting and its new performance management suite, 2x Perform, which integrates performance management, succession planning, and compensation; a partnership with Skillsoft to integrate its e-learning content and SkillPort platform with Kenexa’s talent management platform and 2x Perform; a partnership with The Brooklyn Group to increase RPO presence in Australia; and a partnership with HR GlobBlog for global talent advice.
• SourceRight Solutions, whose revenue has been growing from both new contract wins as well as existing clients increasing hiring volumes, with the biggest news that Randstad completed its acquisition of the SFN Group for ~$771m last month. SourceRight will be the RPO arm for Randstad and with combined company revenue of ~$22 bn, of which ~80% are in Europe, expect great opportunities abroad as well as continued success in North America.
• Mercer’s Human Capital Connect, which combines talent management technology for performance management, succession planning, and compensation. It uses the PeopleFluent platform and a client success team that does a readiness assessment and stays with the client for life. Since its launch in mid-2010, a few major clients have been won, but names cannot be disclosed.

I attended twelve other meetings, demos, and presentations I’ll write more about in a future blog, but for now common themes are that HRO is thriving and that vendors are introducing new offerings for clients to improve talent management. Yes, technology combined with consultation is important and is most effective by organizations trained in how to do performance management.

Gary Bragar, HR Outsourcing 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.

RPO Continues Its Stride in Q2 2011

If you didn’t pay attention to the news and only looked at the recent financial results reported by staffing and RPO providers, you’d think that everything is fine with the global economy.  Let’s take a look at a few of the highlights including year-over-year revenue growth in Q2 2011 compared to Q2 2010 and some numbers of contracts awarded:

• Talent2 (fiscal year 2011 for period ending June 30) +26%, RPO +57%
• Kelly Services +16%, KellyOCG + 22.5%, and RPO ~+50%
• Kenexa +59%, RPO + 45%
• Manpower + 24%, ManpowerGroup Solutions +21% with 37 RPO deals closed in Q1 and 31 new RPO contracts awarded in Q2
• Pinstripe won or extended 15 RPO contracts in H1 (revenue not reported)
• SeatonCorp +20%, PeopleScout +95% with 9 new RPO contracts signed.

Why was growth and the number of contracts awarded so high when the sad reality of the news headlines is that there are debt problems, slowdown in GDP growth, and a continually high unemployment rate?   Well, that is precisely why!  There are several reasons including:

• Organizations who have had to downsize are turning to RPO because they don’t want to invest in hiring recruiters and associated staff only to potentially downsize again (i.e., it’s better to outsource recruitment to a vendor that can provide variable pricing and who can scale up or down quicker than the client)
• Obtaining  better quality of candidates and quality of hire from an outsourcing specialist
• Allowing HR to work as a strategic partner and in-conjunction with the RPO vendor to engage employees and retain talent (instead of focusing on hiring)
• Wanting to get out of the technology management business, which isn’t usually a client’s core competency
• Reducing time to hire, improving hiring manager satisfaction, etc.

In addition to revenue growth from new contracts and renewals, growth comes from existing clients that have increased their hiring volumes. Other sources of growth are from contracts won in prior quarters that take several months before fully ramping up.

RPO does not look like it is going to slow down anytime soon.  In NelsonHall’s HR Outsourcing Confidence Index, published in June, pipeline growth reported in the prior quarter was higher for RPO than all of the other HRO services.

At NelsonHall, we’ve seen an increase from buyers wanting to know who we see as the leading RPO providers by country and region. Buyers, are you evaluating outsourcing recruitment, if you haven’t done so already?

Gary Bragar,  HR Outsourcing Research Director, NelsonHall

ManpowerGroup Solutions Analyst Day – It’s All About Talent – Part II

In my blog last week I wrote a bit about RPO and briefly about the broader content presented at ManpowerGroup Solutions Analyst Day June 8^th.  Now I’d like to take a broader view. A takeaway for me is there is no doubt in my mind that ManpowerGroup truly gets that there is a talent shortage globally, which is rapidly getting worse, and is actively helping its clients to attract and retain talent. Though unemployment rates may be high, there is a mismatch between availability of skills and demand for skills. Access to talent is going to be critical for companies to succeed! Estimates are that unemployment levels of skilled talent are 4-5% while unskilled talent is nearer the 20% range.

According to ManpowerGroup’s 2011 Talent Shortage Survey, 34% of employers are having difficulty filing vacancies. In the U.S. 52% of U.S. employers experience difficulty in filling mission critical positions. This is not just high-tech positions we are talking about but includes manufacturing, where an ever-increasing number of workers are retiring. It’s not just a U.S. problem, it is a global problem, including countries such as Japan, China and Australia, where 30,000 engineers are needed. As an example, to help solve the Australian problem, engineers in India are being looked at in addition to partnering with educational institutions to develop those skills.

At the end of the analyst event we were given a booklet written by ManpowerGroup, called “Entering The Human Age, Thought Leadership Insights”. In the introduction written by ManpowerGroup CEO Jeffrey Joerres, it states that “a new era is upon us, the Human Age, when optimizing human potential will be the single most important determinant of future business success and growth. From 2011, 10,000 baby-boomers will turn 65 every day for the next 19 years. To thrive and grow, companies and governments will need to engage and motivate older workers to remain in the workforce longer, and find a way to engage and train their youth, particularly by aligning training and education systems with the skills required by employers”. Sounds to me like an opportunity for learning providers to be ready to help! There is much more valuable information and insight to be had at http://www.manpowergroup.com/humanage/index.html

In sum a very worthwhile day and if you are an RPO provider, Learning BPO provider and/or anyone in the talent management business, you are in the right job to help your clients succeed in the new Human Age.

Gary Bragar, Lead HRO Analyst, NelsonHall

ManpowerGroup Solutions Analyst Day – It’s All About Talent

On June 8, 2011, ManpowerGroup Solutions held its first analyst day where it talked about multiple services, including its RPO business, which is currently providing recruitment services in ~35 countries, including for eight global clients, which range in scope from two to ten countries. ManpowerGroup Solutions has a center of excellence in the U.S. to share best practices so it provides a consistent experience and doesn’t reinvent the wheel for each implementation. It is smart enough, however, to recognize that the greatest satisfaction for the hiring manager comes when services are delivered locally. Thus playing to its strength of having the ability to deliver RPO locally, with a total company presence in ~82 countries.

In Q1 2011, it closed 37 RPO deals: 8 in APAC, 9 in EMEA, 2 in LA, and 18 in the U.S. For the next eighteen months, it’s focus includes driving consistency of operation and customer experience and improving the client’s employment value proposition via improved employer branding and candidate experience.

ManpowerGroup Solutions still has the largest RPO deal to date in the industry, a $200m contract with the Australian Defense Force to provide full end-to-end services from sourcing through onboarding for 8,500 – 10,000 new hires annually. Approximately 300 personnel are employed onsite to support the contract which includes a marketing team of 22 people providing services that include social media and employment branding. There is also an 80 seat call center to proactively manage relationships with candidates and 90 I/O psychologists.

Other highlights of the day included a presentation on ManpowerGroup Solution’s Tapfin business, a MSP that handles over $3.3bn in managed services spend and administers 221 MSP programs globally.  This was followed by a demo of Workforce Scan, a consulting process to help model future scenarios of emerging supply and demand gaps in the availability of talent needed by taking a 5, 10, 15, or 20 year timeframe view.

There was also an announcement of a new contact center offering to help existing client centers increase productivity, improve customer service, and retain talent through a set of services including: talent sourcing; program and process management; best practice and benchmarking consulting; and talent-based outsourcing for center-based and distributed workforces such as virtual / work-from-home models. NelsonHall will cover more on this recent announcement in our tracking service and next HRO Industry Insight Newsletter.

According to its new Workforce Strategy Survey, almost a quarter of employers across 36 nations admit their workforce strategy does not support their business strategy or have any idea if it does. More than half of this group is doing nothing about it, which sounds like more opportunity for RPO providers to help employers with workforce planning.  I’ll share more on this topic next time!

Gary Bragar, Lead HRO Analyst, NelsonHall

Staffing and RPO Surpassing 2010 Y-O-Y Results

As bullish as I’ve been on RPO, results reported to date for staffing and RPO providers have exceeded even my expectations.  As we all know, 2009 was a down year for hiring, but then there was a big turnaround in 2010 and in RPO, most vendors I interviewed for my recently published RPO report said that revenue and hiring are back to pre-recession levels. Although hiring has picked up in the U.S., I don’t think any of us would say it is going gang-busters yet.  But in comparison to overall staffing results for Q1 2010 that averaged ~12% revenue growth, Q1 2011 has about doubled thus far.  Let’s take a look at some Q1 2011 results to date and how they compare year-over-year to Q1 2010:

• Manpower up 24%
• Hays up 18%
• SeatonCorp up 25% and its RPO business PeopleScout is up 103%
• CTG up 22%
• SFN up 6% and its RPO business in SourceRight Solutions is up 83%
• Randstad up 22%
• Kenexa up 59% and its RPO business is up 56%.

I do believe that the rest of the year will be strong for staffing, but it’s hard to believe that RPO will maintain quite the same momentum.  That said, hiring will improve and I agree completely with Manpower’s findings on May 6^th stating that  U.S. companies must hire again as workers are stretched to the max doing more with less.  In my view, it’s been this way long before the recession, mostly in part to how Wall Street rewards companies for their performance, but we’ve reached a tipping point and I’m almost certain this is not just a U.S. phenomenon.

But instead of just reading about it, come join us at the HRO Forum in Las Vegas May 24 – 25 that combines the HRO, RPO, and MSP Summits along with the HR Demo Show.

As a speaker, I’ve been extended an offer to invite buy-side HR execs with a 60% discount and also an offer for a limited number of RPO buy-side practitioners to be able to attend all four Summits for free, get reimbursed for travel up to $500, and get 2 hotel nights for free. If you are interested, then send me an email at gary.bragar@nelson-hall.com and I’ll send you the info/codes to register.

Gary Bragar, Lead HRO Analyst, NelsonHall

HRO – How the Garden Grows

Everything seems pretty moderate and modest in the garden of HRO so far this year. After the abundance in 2010, perhaps that is not so bad. Reasonably steady business gives service providers a breather and a chance to attend to growth opportunities by leveraging current capacities while cultivating new capabilities selectively.

In benefits outsourcing, the contract levels were good with some key wins and renewals. Fidelity continues its blossoming growth with major 5 year renewals for total retirement outsourcing contracts with HP and BP, and a new defined contributions contract with the University of Oklahoma. In the U.K., Mercer was awarded a 7 year defined benefits renewal by Saint-Gobain and it won a new pensions administration client, Loomis UK.

RPO saw a smaller crop of new awards, but is still growing, especially in North America and the U.K.  My colleague, Gary Bragar, will be heading off soon to the RPO Summit as a presenter and I look forward to hearing the latest views.

Smaller M&A and partnership activity remains perennial, continuing the pattern of growing footprints in terms of geography and specialized services. GP was the most active with the acquisitions of Ultra Training in the U.K.; RWD Technologies with offices in the U.S., U.K., and Colombia; and Communications Consulting in China. Manpower Group acquired Web Development Company in India to add to its IT recruiting in Asia Pacific. Finally, Raytheon Professional Services partnered with Baptist Health to increase training in healthcare systems.

With the blooming of HRO platform managed services, we have two trends. First is the belief that the time for HRO mid-market is finally here. Vendors are confident enough to invest in and launch new platform service offerings specifically for the mid-market. The second is growth into new fields beyond the base of payroll and HR administration systems. Examples of both trends:

• Payroll – NorthgateArinso launched agoHRa for companies with up to 500 ee’s per country
• Learning – IBM launched the mid-market Smart Business Learning Services and has launched Smart Business Learning Content Services
• RPO – Mid-market grew from c. 20% of total revenue in 2008 to c. 33% in 2010
• RPO – SourceRight Solutions launched RPO One for organizations with 100 – 5,000 employees, providing a dedicated service team, pre-configured ATS, and reporting and analytics.

Contract activity adds evidence that customers agree these services are desirable options. NorthgateArinso was awarded a 5 year managed payroll services and HR software contract by Historic Scotland utilizing ResourceLink Aurora. Historic Scotland is responsible for data entry, while NorthgateArinso will handle processing, pay runs, and produce electronic payslips. Edvantage Group won a 3 year managed learning services contract with Rieber & Son in Norway, which included Learning Gateway, Edvantage Group’s SaaS LMS, and e-learning courses. Edvantage Group also recently announced two contacts for its SaaS LMS. 

Learning has been slower to recover. Hopefully, 2011 will be the year for its bountiful harvest.

Linda Merritt, Research Director, HRO, NelsonHall