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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HR Tech Another Success: Part I

Gary Bragar, HRO Research Director, NelsonHall

HR Tech was again a very worthwhile investment of my time. Here are some highlights of the new Outsourcing Track presentations I attended:

• Cisco Uses RPO to Help Hire Up to 15,000 a Year:Using a hybrid co-ownership model, the Randstad Sourceright recruitment team works alongside the Cisco recruitment team to provide services including sourcing, recruiting, and onboarding. Services provided are primarily in the Americas, but may expand into EMEA and possibly Asia where Randstad Sourceright has a presence. Using the hybrid model, Cisco has been able to cut its $120m talent acquisition spend in half.
  • Mark Hamberlin, VP HR Global Staffing, Cisco
  • Rebecca Callahan, President RPO, Randstad Sourceright
• Ericsson Outsources Global Payroll in Manila:Ericsson issued a RFI to 25 vendors, then created a short-list of 5, and ultimately selected Talent2. Managed payroll services provided by Talent2 for Ericsson in Southeast Asia and Oceania include 4,500 employees in 12 countries, which prior to outsourcing had 12 different payroll processes. Manila is the shared service center. Major benefits obtained by Ericsson thus far include: reduced risk management, minimized complexity of dealing with local tax laws, and ease of expanding into new countries.
  • Mark Howes, HR Director Asia Pacific, Ericsson
  • Mary Sue Rogers, Global Managing Director, HR Managed Services, Talent2
• Whirlpool Leverages RPO to Transform Talent Acquisition:Pre-RPO recruitment was decentralized and lacked consistency and methodology in its sourcing approach. Business partners were also spending a lot of time doing transactional work including screening and reviewing resumes. Kenexa’s RPO services include: sourcing, screening, administration, candidate management, creation of employment value proposition, and management of the candidate experience primarily in North America with some testing in Europe. KPI’s include: time to fill, quality of the candidate slate, diversity slate, and end-user satisfaction.
  • Lynanne Kunkel, VP of HR, Whirlpool North America
  • Rudy Karsan, CEO, Kenexa

Here are highlights from my RPO meetings:

• Pinstripe and Ochre House: Pinstripe has won 12 new RPO contracts YTD and its partner Ochre House continues to win new contracts in EMEA including North Africa and the Middle East as a result of its acquisitions of TAAHEED and Carmichael Fisher in early 2012.
• ManpowerGroup Solutions: New contract wins YTD include 40+ RPO deals globally in 20 countries. It has also expanded existing clients into new geographies including a U.S.-headquartered firm that expanded into China and Southeast Asia and a Spanish-headquartered firm that expanded throughout Europe and Latin America.
• Randstad Sourceright: Currently with ~100 RPO clients, it won 18 new contracts YTD. Four of its new wins are global deals as a result of the merger of Randstad and SFN Group, which was completed in September 2011. Its fastest growth has been in the mid-market.
• The RightThing, an ADP Company: Total RPO client count is at 80+. YTD wins include several enterprise and mid-market clients with ~50% as new clients and ~50% as existing ADP clients that added RPO services.
• WilsonHCG: Primarily serving large and mid-size clients, WilsonHCG also has small clients with <500 employees. The company has a 94% satisfaction rating with candidates and hiring managers across clients.

Stay tuned for my next blog where I will discuss additional meetings I had with Patersons, IBM, Hogan Assessments, SHL Assessments, Secova, ADP, Equifax Workforce Solutions, HireVue, and JobVite.

In the meantime, NelsonHall just published its fourth global RPO market analysis.

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Employment Branding: Business, Culture, and HRO

Yesterday, I participated in a very lively online Twitter discussion about employment branding. Branding is a common topic for businesses, particularly for corporate, product, and service identities. Employment branding is important to ensure the attraction and retention of employees that can deliver the business brand experience. Meghan M. Biro’s brand humanization concept is that it is all connected: the business brand, its culture, and its ability to attract and retain talent. That connectivity is a business opportunity for HRO, think RPO and employment branding services, and it is also an issue for HRO service providers as employers.

In an earlier blog this year, I concluded that HRO will not hinder and may even help clients achieve human capital leadership, using leadership and best place to work awards as evidence. Diversity award lists from DiversityInc.com and Diversity MBA magazine have just come out for 2012 and again we see recognition of HRO service providers including Accenture, ADP, and IBM, as well as many companies that use HRO. Here are examples from the world of RPO:

• Alexander Mann Solutions: Citi and Deloitte
• Futurestep: General Mills and Kaiser Permanente
• KellyOCG: GE
• Kenexa: Verizon and U.S. Navy
• ManpowerGroup Solutions: Wells Fargo
• Randstad SourceRight: AT&T and Capital One
• The RightThing, an ADP Company: Kellogg and WellPoint.

As part of my long running theme on talent management, I believe strongly that HRO vendors can and should be leaders in creating the agile workforces of the future. Part of being a leader is practicing what you preach, which is largely what corporate and employment branding is about.

In HRO service providers often need to scale up and scale down quickly, while still ensuring a full slate of experienced subject matter experts. On top of that, many HRO service providers base client care centers and processing centers in talent competitive markets, which often stimulates high turnover and brings together workforces from very different cultures. This is the second challenge of employment branding for HRO, as employers, each service provide needs to build a differentiated employment brand and corporate culture to attract and retain the talent needed to fulfill its business brand.

Part of developing an employment brand is determining what attributes make a particular employer a good place to work and developing programs to ensure those elements are in the workplace and recognized by current and prospective employees and are aligned with business outcomes. Sounds simple, but it surely isn’t.

Buyers, ask your HRO service providers about their workforce practices to see if they practice what they sell. Service providers, in addition to client testimonials, engage and leverage your own employees as brand ambassadors.

Linda Merritt, HRO Research Analyst, NelsonHall

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HRO Today Forum In Vogue

I found my attendance at last week’s HRO Today Forum to be very worthwhile. I presented my newly published research on the “State of the Learning BPO Marketplace,” including the emergence of social learning. While there, I took full advantage of attending many of the other sessions and meeting with several companies including: The Good Jobs, KellyOCG, Pinstripe, Randstad Sourceright, Kenexa, Aon Hewitt, Raytheon Professional Services, NorthgateArinso, Seven Step Recruitment, and Hays. Here are some of the highlights from the forum.

The Good Jobs: The Good Jobs is an online service that allows job seekers and employers an innovative way to find each other. Employers not only advertise job opportunities, but also their employment brand, culture, and corporate values to candidates. Job seekers can identify their life and work style priorities, and target those employers who meet their needs. Matching talent desired to employer desired will lead to employee engagement and retention in addition to business results, including increased productivity and lower cost by reduced attrition. No surprise The Good Jobs won the iTalent competition.

Where do Jobs Come From Panel: This panel was led by Prudential HR SVP Sharon Taylor and included Brink Lindsey from the Kauffman Foundation; Scott Case, CEO of Startup America; and John Haltiwanger from the University of Maryland. A few interesting data points from this session included the following:

• 90% of companies are small, but 65% of employees work for large companies
• 2003 – 2007 saw high job growth averaging 200,000 hires per month but it was not as strong as the 1990s
• From ~1977 – 2003, there were only 5 years that job growth exceeded layoffs for non-start-up companies, i.e. a net creation in jobs
• I missed the time period, but the point was that more jobs have been created in startups (3.5m) vs. established private sector companies (2.5m)
• The fastest growing businesses are also the most profitable.

Is Outsourcing Good for America Debate: Interesting points from the pro side included:

• 90% of outsourcing serves companies outside of the U.S.
• 95% of world consumers are outside of the U.S.
• 90% of what is made abroad gets sold abroad
• Foreign companies invest more in the U.S. (e.g. Honda, Nissan, BMW) than the U.S. invests abroad (it’s a 2 way street)
• The U.S. tax rate is one of the highest in the world adding to why some companies shift a portion of their business and jobs offshore.

Congratulations to all Bakers Dozen MSP winners led by Randstad Sourceright, Staff Management, Allegis Group Services, Adecco Solutions Group, The Bartech Group, Guidant Group, Advantage xPO, KellyOCG, Hyphen, Agile 1, Yoh, Hays Plc, and WorkforceLogic.

Congratulations to HRO Award recipients including providers NorthgateArinso, Pinstripe, Aon Hewitt, KellyOCG, and Evolv, Inc.; provider executives Cynthia Crose of IBM and Mike Ettling of NorthgateArinso; and buyer executive Chris Payton of Bank of America.

Gary Bragar, HRO Research Director, NelsonHall

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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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Three Forces Shaping HRO for 2012

As 2011 comes to a close, let’s look ahead to 2012 and the three current trends that will continue into the New Year and beyond.

HR SaaS has been around for years. Now that the breadth of cloud coverage is in the HR ERP space it is opening up the middle market for HRO at long last, and is swimming upstream into the large client market. HR mobile applications are proliferating and vendors will be hard-pressed to deal with the rising demand by clients and participants for more on-the-go functionality. What seemed like an innovative differentiator is quickly becoming a competitive requirement.

HRO globalization has long been on the agenda of many HRO vendors, mainly targeted by major multinational companies (MNCs), but there are only so many global MNCs. We are now seeing additional focus on regional service networks for multi-country companies. HRO activity in emerging markets is also picking up for MNCs and for in-country client services. Expect to see HRO acquisitions, partnerships, and new offices for sales and service delivery grow in 2012 as service providers continue to fill-in geographic footprints and service gaps.

The globalization of RPO will continue to be a big story in 2012. RPO vendors are gearing up to meet the demand and two of the largest acquisitions in 2011 included SourceRight (part of SFN Group), which was acquired by Randstad, and The RightThing, which was acquired by ADP.

The growing global RPO demand was illustrated in a big way by Kenexa when it was awarded with a five-year RPO contract by Eli Lilly and Company, which includes recruiting in Asia Pacific, Europe, and the Americas. NelsonHall estimates the deal to be worth more than $50 million, one of the largest RPO contracts to date.

HRO contract awards will continue to increase across Asia Pacific, with some year to year variability due to economic conditions. Three years ago, ~10% of contracts included Australia, with half of those for clients headquartered in Australia. Two years ago, it was ~11%, with about an even split of Australian-based clients. In the past year, the number has jumped to ~16%, with the majority of contracts for clients based in Australia.

China has also emerged as a client base for HRO, including for in-country services. As emerging market companies reach a fast-growth stage and expand their services internationally, the need for HR technology, processes, and delivery capabilities can outstrip the local talent base for HR. For example, Manpower made two acquisitions in China, REACH HR in South China and Xi’ and Fresco in Henan Province.

These are three of the forces shaping the future of HRO. Those HRO vendors that are able to update their portfolio of services and quickly and cost effectively invest in the acquisition or development of new capabilities will gain an advantage in the growing marketplace for HRO.

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

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Randstad Acquisition Frenzy… This Time in North America Acquiring SFN Group

A pretty big acquisition happened last week in the staffing and recruiting industry. Here is the backdrop.

On July 20, 2011, Randstad announced that it is going to acquire SFN Group to expand in North America. Randstad is headquartered in the Netherlands and SFN Group in the United States. It is a cash tender offer at $14 per share. Approved by both boards, the acquisition, now subject to regulatory approvals and a tender offer of at least 50% of SFN Group’s outstanding shares, equates to ~$771m. This is a premium of 53% over SFN Group’s closing share on July 19, 2011. The acquisition is expected to close in September 2011.

The Randstad Group will have combined revenues of ~$22bn / €17bn (pro forma as of March 31, 2011). In North America, the combined company will have $4.6bn in revenues (pro forma as of March 31, 2011) from the following service segments:

• 52% Staffing
• 39% Professionals
•   9% HR Services including payroll, managed services, and RPO.

Randstad, who already has sizeable revenue in North America, now becomes a major force. Randstad, which had full year 2010 revenues of €14,179m, obtained 13% of its revenues (or €1,848m) from North America, which equates to over $2.6Bn. The SFN Group had full full year revenues of $2,053m. Approximately 80% of Randstad’s 2010 revenues were in Europe.

So, is Randstad trying to conquer the staffing world via acquisitions? Its last acquisition was in August 2010, acquiring FujiStaff Holdings to strengthen its presence in the Japanese staffing market. Since 2006, Randstad has merged and partnered with five other companies in Japan to provide staffing services that include temporary and permanent hires, contract staffing, and internal recruiting for industries that include healthcare, real estate, and construction. Since 2005, Randstad has been acquisitive elsewhere  in growing its staffing business including in:

• U.K.
• Germany (3)
• Netherlands
• China
• Switzerland.

Randstad now also picks up SourceRight Solutions’ RPO business, which NelsonHall estimated as the third largest RPO provider in North America in its 2011 RPO market analysis report. SourceRight’s RPO business has had significant year-over year revenue growth in H1 2011. Its RPO business has primarily been in North America, but expect for it to expand into Europe by 2012. More to follow in a future blog…

Gary Bragar,  HR Outsourcing Research Director, 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

Holiday Cheer for Employees (HR and HRO Helping…Thumbs Up, HR!)

At this joy-filled time of year, it’s always nice to share some cheer. So, first up, my thanks to all our loyal blog followers for their interest and positive feedback…it keeps me and my colleague Linda motivated each week!

Now, some cheer for and from employees around the world. Although over the past year I’ve written several times about studies demonstrating high levels of employee dissatisfaction, Randstad’s Workmonitor‘s just-released results show somewhat of a turning tide heading into 2011.

Via an online survey distributed during November 3-17, 2010 to more than 400 participants per country, Randstad found:

• Employees expect their benefits and base salary to increase in 2011. (However, the bah humbug side to this finding is that most don’t expect a financial bonus at the end of 2010.)
• Job satisfaction has remained steady (although in Turkey it has increased.) I’ll take holding steady as a positive sign that perhaps the downward trend has stopped and job satisfaction will increase in 2011. By the way, the Netherlands has the highest number of very satisfied employees (I’m not going to touch this as to why, but I can say from my recent visit to the HRO Europe conference, people there are indeed very nice and friendly.)
• My favorite finding? Many employees have a New Year’s resolution of improving work-life balance. Yes, those throughout the U.S. and Europe want it, but those who want it the most are in Mexico, Chile and Argentina!

I really do think employee satisfaction will improve next year, albeit in baby steps. Why? In conducting my Learning BPO and RPO research this year, I’m told that many clients are now focused on talent management, and HRO service providers are helping them from consultative, training, implementation and ongoing feedback perspectives.

In 2011 we can revisit compensation and benefits to see what the average salary increases were and what benefits were improved. And let’s hope that the global economy recovers to help our 401(k) savings plans continue their resurgence back from 101 – 301 (k) levels to 401 and, better yet, 501 levels and beyond.

Wishing everyone a happy and safe holiday, and looking forward to your continued readership in 2011.

Gary Bragar, Lead HRO Analyst, NelsonHall