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

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“Up”ing Employee Engagement in Benefits Administration

Last week we spoke in one of my blog posts about benefits administration outsourcing as it relates to cost reduction for buyer organizations. And reducing benefits-related expenses and the cost for administering them is, of course, critical in today’s challenging economy.

But just as important is employee engagement in making benefits decisions. Why? If employees –young, ‘tweener or boomer age alike – are not properly engaged in making their own benefits decisions, they cannot make the right choices for their own, unique current and potential future circumstances.

Consider the 25 year old employee for whom retirement is many years away. Contributing to a 401(k) is likely not top of mind, especially given today’s low-return market. But by not making minimal contributions, they’re missing out on company matching which will, over the years, add quite a bit to their retirement pot! Or consider the older worker, perhaps five years away from retirement, who is trying to determine the best going-forward defined contributions plan for his or her unique circumstances.

It’s all about making sure employees have the right financial products and benefits in place to maximize their reward, but in as cost effective a manner as possible for both employees and employers.

So what can you do, via an outsourcing services provider, to “up” employee engagement in benefits administration? Just a sampling:

•  Personalize communications per employee, such as providing details on specific health conditions on landing pages that are relevant to each individual employee

•  Improve communications by tailoring promotions on available options per audience type, e.g., emailing younger employees and sending postcards to older ones

•  Provide better decision support, education, scenario modeling and health information system tools and resources, thus reducing the need for call center-based support

•  Offer financial modeling capabilities which enable participants to see, in real-time, how changing savings can effect retirement assets in real-time

•  Enable proactive linking of benefits decisions to life events, e.g., having a child, getting divorced, etc.

•  Improve access/promotion of self-service, encouraging employees to utilize all the tools and resources available to them to make the right choices at the right time

•  Provide access to online financial guidance resources and wider financial planning communications programs

•  Improve integration with wellness tools across process areas, e.g., completion of a health risk assessment provides a credit within payroll systems

To shed more light on this topic, I’ll be hosting a webcast “Utilizing Benefits Outsourcing to Enhance Participant Engagement” on Wednesday, May 27, 2009 @ 11:00am EDT, 16:00 GMT, 17:00 CET. The goal of this informative, complimentary session is to help you gain deep insights into the benefits outsourcing landscape, and provide you with some real-life examples of where outsourcing benefits has improved both participant engagement and benefit costs, creating a win-win company-employee situation.  Please click here to register today.

Until next time, happy sourcing!

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall

Is the HRO Sector Regaining Confidence?

A Financial Times article published earlier this week stated, “Services sector companies in European and emerging markets have recovered much of the confidence lost as the global recession took its toll, providing another sign of green shoots after a bruising six months.”

NelsonHall’s Q1 2009 Global Outsourcing Confidence Index study – which monitors quarterly changes in industry confidence in a range of ITO and BPO processes – found the same, yet on a global basis. The Index determined there is a significant net increase in confidence in the outsourcing sector over the next 12 months, as represented by a score of 122 (a score of 100 on the Index represents no change in confidence, while a score lower than 100 means a confidence drop.)

But is the HRO sector following suit in the confidence department?

Not quite. Our Q1 2009 HR Outsourcing Confidence Index study shows HRO is perhaps missing a sock and a shoe as compared to the relatively full-dressed overall outsourcing market. The study found that 30 percent of HRO providers were slightly more confident, 20 percent were as confident and 50 percent were less confident in their HRO business in 2009 than they were in 2008. This equates to an HRO Confidence Index of 93, a bit less than the neutral 100 percent.

Many factors are contributing to this lower confidence level including: the continuing decline in transaction volumes and the extent of frozen decision-making within organizations due to today’s economy; buy-side expectations for cost reduction certainty in the first year of the contract; and buyers’ reduced willingness to take on long-term transformational deals that require significant up-front investment and their requirement for providers to take on more of the financial risk.

Our Recommendations for Providers to Raise Confidence among HRO Buyers

Get even closer to and expand business with your existing clients, explore opportunities to reduce costs both for your clients and your own organization and introduce user-based pricing.

Our Recommendations for Buyers to Increase HRO Confidence and Results

In addition to making certain you obtain from your provider the expected value through cost-related KPIs, also consider performance-related KPIs that will have a longer term impact on the health of your business. For example, assess outsourced learning courses in the context of ensuring that graduates can gain and apply new skills faster; this has a much longer-term impact on overall business performance than making sure your cost per hour of learning delivery is low. And make sure you have your ducks in a row before outsourcing. Going down the “outsourcing your mess for less” route can have dire impacts on the success of your outsourcing engagement and on your bottom line.

Until next time, happy sourcing!          

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall

FYI – If you’re a service provider interested in participating in our next quarterly HRO Confidence Index, please email me at: helen.neale@nelson-hall.com.