U.S. Jobs Grow – How Will It Impact HRO

By now, most have heard last Friday’s favorable jobs news.

In the U.S., 243,000 jobs were added in January, bringing the unemployment rate down to 8.3%, and as noted on one of the staffing provider’s earnings calls last week, down to 4.2% for college graduates. Government jobs have contracted as expected, while the private sector had the gains in the services industry, specifically in leisure, hospitality, education, healthcare, and retail, and in manufacturing, including construction.

Also last February 3, Randstad reported a five-point rise in its U.S. Employee Confidence Index.  The index measures the workers’ confidence in their personal employment situation and optimism in the economic environment. This is the biggest increase since the survey started seven years ago.

With good reason to be optimistic, many RPO providers are realizing the gains with increased hiring volumes by existing clients. Even before this welcome employment news, 2011 had been a good year for HRO. In RPO, many vendors achieved significant growth, including Kelly OCG, whose RPO revenue was up 40% year-over-year from 2010; Pinstripe was up 58% y-o-y with 21 new contracts and extensions; and for Q4, Kenexa reported an RPO growth of 54% y-o-y.

But the benefits go far beyond RPO. Increased hiring bodes well for providers of payroll, benefits, and learning as the number of employees they serve increases. For example, ADP, who already pays 1 of 6 U.S. employees, announced the number of employees on its U.S. client payroll increased by 2.8% in fiscal Q2 2012, for the period ending December 31, 2011. Benefits administration providers including Aon Hewitt, Fidelity, and Mercer reported numerous contract awards in 2011. In MPHRO, in North America, ADP won several new contracts, while IBM was awarded a large MPHRO contract with Air Canada and NorthgateArinso awarded a seven-year MPHRO renewal by Fifth Third Bank. In learning, vendors including Raytheon, Xerox, and Accenture won several contracts. There are more updates to follow on learning as NelsonHall is currently conducting a global learning BPO market analysis.

However, a few words of caution by ManpowerGroup were given last February 3 that demand is expected to continue to fluctuate and it would be prudent for employers to adopt flexible workforce models that include: full-time, contingent, and virtual-skilled workers to ensure productivity.

There are a few key implications here:

• Providers who haven’t yet provided recruitment services that include RPO, MSP, and Contingent Workforce services would be prudent to evaluate doing so and/or consider partnering with a vendor that does
• Given the ManpowerGroup statistic that 52% of U.S. companies are struggling to fill key jobs, focus on the development and retention of talent is more paramount than ever. Buy-side organizations should be continuously monitoring employee satisfaction, reviewing attrition rates, conducting exit interviews to find out why people leave, and developing action plans to improve organizational effectiveness. If buyers do not have this capability, they may want to consider a talent management vendor who can help them, which has become a key HRO vendor focus and for good reason!

Gary Bragar, HRO Research Director, NelsonHall

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From Public to Private – RPO Can Help – Part 1

According to data from the Office for National Statistics in the U.K., in 2010, public sector employment fell by 132,000 jobs with local government accounting for the largest proportion at 66,000.  In Q4 2010 alone, 45,000 public sector jobs were lost, including 24,000 in local government, 9,000 in central government, and 8,000 in Civil Service.

It is estimated that an additional 330,000 jobs will be lost in the public sector over the next four years.  While this is, of course, not good news, especially for those workers directly impacted, employment in the private sector increased by 77,000 jobs in Q4 2010.  Thus, the article last week by Hays is timely in that more needs to be done to support workers who are transitioning from the public sector to the private sector.

Hays and the London Chamber of Commerce and Industry (LCCI) partnered to publish a report called “The challenges of transition: from public to private.” Public and private sector employers were interviewed and in the report the LCCI and Hays identified six important steps to ensure successful transition including:

1. Encourage better understanding – Coaching, mentoring, and peer-support schemes for public sector workers prior to, during, and after transition to the private sector should be encouraged. These would increase the retention of new employees and also enable the private sector to identify the skills available in the public sector.
2. Incentivize the private sector – The government should subsidize recruitment and training costs for private sector employers who hire public sector employees. One option would be to adapt the Redundancy Action Scheme in Wales, which gives employers a contribution to salaries and training if they hire someone who has been made redundant.
3. Identify regional skill gaps – Local enterprise partnerships and recruiters should work with trade associations and professional membership bodies to identify the skill shortages that will be created by future job vacancies and look at how former public employees can fill those gaps.
4. Review on-boarding procedures – Private sector employers should review their onboarding (induction programs for new employees) in anticipation of recruiting people from the public sector to ensure successful transitions.
5. Enhance existing support programs – Public sector employers should be more proactive in their support for workers facing the prospect of redundancy with practical job-seeking and career planning programs specifically designed to equip them for the private sector.
6. Promote self-reliance and resourcefulness – Public sector workers should be encouraged to work with recruiting experts who understand both the private and public sector and can provide free advice on CVs, job applications, and interviews.

Public sector employees have many skills that are needed in the private sector.  However, to shift such a large proportion of workers will require specialist help.  That is where RPO providers come in. Although the loss of jobs in the public sector is more of a current U.K. phenomenon, RPO providers can help in several ways in all regions.  In NelsonHall’s recently published RPO market analysis report, the following trends are occurring:

• Clients are seeking vendors that can help with their talent strategy and workforce planning. For example, vendors such as Hays provide workforce planning as part of their service offering and have seen an increase in the use of this service during the economic recovery.  Other vendors in the U.K. providing this are Ochre House in its contract with SAS and Carlisle Managed Solutions in its contract with Luton Borough Council.  In the U.S., Adecco’s recent RPO contract with SI includes employment branding, research, and talent market mapping.
• Clients are looking for vendors that can provide consulting services around workforce planning, such as Fosters did in its contract with Futurestep, which includes hiring for positions in the U.K.  Part of the vendor selection criteria included the ability to provide value-added services beyond recruitment, including workforce planning.

But, there’s more to the story than just identifying skill gaps.  Take the weekend to think about it and we’ll pick this up again.

To be continued.

Gary Bragar, Lead HRO Analyst, NelsonHall