Posted tagged ‘recruiting’

RPO, A Bright Future on the Path to Business Impact

September 7, 2012

Linda Merritt, HRO Research Analyst, NelsonHall

The future of RPO is bright with growth opportunities in every area of the world. According to NelsonHall’s “HRO Market Forecast 2012 – 2013,” RPO will remain the fastest growing area within HRO.

RPO is still evolving as a service line, moving from back-office paperwork administration to the front lines of recruiting, predictive assessment, and employer brand management. Contract renewals and extensions are now a regular part of the RPO news stream. Among those with announcements of renewals and extensions are:

  • Alexander Mann Services
  • Capita
  • Manpower Group
  • Novotus
  • Pinstripe.

RPO is not for the faint of heart

With great opportunity comes increased risk. Growth is seldom in a straight path upwards and RPO is also on the leading edge of any business downturn that impacts hiring. It is not uncommon to see up and down swings in revenues of 20% or more between good and bad years. RPO providers need to be ready to rock and roll incredibly fast and be flexible in responding to changes in demand while balancing its own core of subject matter expertise.

RPO is the trail blazer

It is hard for any business including HRO service lines to keep up with new technologies, global service delivery networks, social media, and open device access. To recruit highly skilled multi-generational talent anywhere on the planet, RPO needs the latest tools and technologies to bring capabilities to employers they could not easily and affordably duplicate.

RPO has a direct path to business impact

Dr. John Sullivan, a respected HR thought leader, recently said that RPO has the greatest business impact of any HR function. Dr. Sullivan is referring to The Boston Consulting Group’s (BCG) “Realizing the Value of People Management from Capability to Profitability” research that rates the relative business impact of different HR functions on growth and profitability.

This was a major study of over 4,000 respondents across 102 countries, comparing the difference in revenue growth and profit margins at firms with “very high capability” individual HR functions to the business impacts of “low capability” HR functions. The firms studied had been named to Fortune’s “100 Best Places to Work For” list at least three times in the last ten years; their stock price growth was then compared to the stock price growth of the S&P 500. The “best companies” with great HR saw their stock price increase an average of 109% when the S&P 500 rose only 10% over the last 10 years, up to 10 times higher. Wow!

BCG found that the top ten performing HR functions in rank order were:

  • Recruiting
  • Onboarding and retention
  • Managing talent
  • Employer branding
  • Performance management and rewards
  • Leadership development
  • Mastering HR process
  • Global people management and global expansion
  • Enhancing employee engagement
  • Providing HR shared services and outsourcing.

In addition to the good news for RPO, the broader picture is the need for integrated talent management and the boost for HR outsourcing. Great HR can and does directly support great business results, and great RPO and HRO can be a part of that success story.

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IBM Accentuates its RPO and Talent Management Offering by Acquiring Kenexa

August 28, 2012

Gary Bragar, HRO Research Director, NelsonHall

Although a bit smaller than the $1.9bn Oracle paid for Taleo (coincidentally at $46 per share as well) and the $3.4bn SAP paid for SuccessFactors, I believe that IBM’s acquisition of Kenexa, a cash transaction at $46 per share or ~$1.3bn and closing in Q4 2012, will have a much more immediate and larger impact than the aforementioned acquisitions.

Both Taleo and SuccessFactors were specifically acquired for their talent management (TM) technology. Beyond the strength of Kenexa’s technology, however, is the provision of TM services including:

  • Consulting
  • RPO
  • Employee engagement
  • Leadership development.

According to an IBM study conducted earlier this year, 71% of respondents cited “human capital” as the leading source of sustained economic value, above products and services innovation and significantly higher than technology. Kenexa, as a HCM and TM provider, will compliment IBM’s TM offering, which focuses on the full TM life cycle of attracting, developing, rewarding, and retaining talent. Specifically, IBM’s TM offering includes:

  • Recruiting
  • Learning
  • Performance management
  • Compensation
  • Succession management.

In addition to its multi-process HRO (MPHRO) offering, which includes TM, IBM also specializes in providing workforce strategy transformation, social technology, and analytics to predict and measure performance.

While RPO is part of IBM’s MPHRO offering, it also provides RPO on a standalone basis to GM. Kenexa’s RPO capabilities, however, will accelerate IBM’s RPO market share, making it one of the largest RPO providers globally with clients headquartered in North America, Europe, and Asia Pacific. Kenexa also delivers RPO services in Latin America including South America in ~25% of its contracts.

Kenexa’s BrassRing technology is one of the two most widely used applicant tracking systems in RPO contracts. Kenexa also brings its Kenexa 2x Recruit platform, which in addition to recruiting and learning contains the following performance management modules:

  • Goal setting
  • Competencies
  • Performance appraisals
  • Compensation
  • Career development and pathing
  • Succession planning.

NelsonHall estimates that Kenexa has more than tripled the size of its RPO business since 2006 with brand name clients including Ford and multi-regional contracts with Baker Hughes and Eli Lilly.

IBM’s price of $46 per share is a 42% premium over Kenexa’s August 24th close, but it will be well worth it. IBM is getting much more than software technology; it is getting assets, including human talent that can make a HCM difference. IBM’s plan is to combine its approach to social business, analytics, and TM to transform business processes to create smarter workforces with measureable business results. Given Kenexa’s record of growth and IBM’s experience with integrating acquisitions, this sounds like a good plan and a great business opportunity for both companies.

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Bridging Talent Management and Workforce Management with HRO

August 3, 2012

Linda Merritt, HRO Research Analyst, NelsonHall

One of the hottest topics in HR and HRO has been talent management (TM), including everything from recruiting and RPO to performance management and employee engagement. Major ERP vendors have snapped up TM software leaders to strengthen HR product lines, e.g., SAP and SuccessFactors; Oracle and Taleo. Very good moves and very on trend, but let’s not forget about the less flashy powerhouse: workforce management (WM).

TM and WM are both critical components of human capital management (HCM) and depending on definitions and models, there can be a lot of overlap. For my purpose here, TM is about the individual and the capabilities for a specific job position and WM is about groups of workers and managing multiple positions.

TM involves attracting, retaining, and developing people with the required capabilities according to requested volumes and performance management. WM involves workforce planning and forecasting the capabilities and volumes needed and day-to-day scheduling and time and attendance. It takes both processes to have the right number of people, with the right skills, in the right places, at the right time.

Let’s consider two more elements, HR analytics and ROI, that will also benefit from seamless HR systems and processes, which our dear HRO community can enable and deliver. Timely and accurate workforce data is a foundation block upon which HR is built. At least part of the drive for multi-country payroll has been to get better employee data, and there is an important feeder into payroll: time reporting. Today’s leading time and attendance systems offer great flexibility in capturing the detailed data needed for payroll plus analyses of productivity, labor costing, pricing, project billing, workforce planning, etc.

Everybody wants to tie HR and HRO to ROI. Lowering the cost of HR operations alone is not enough. We must show real impact in measurable business results. Simplifying a bit, TM supports improved business results through customer satisfaction and revenues generated; WM supports improved business results through optimizing SG&A via operations and reducing losses.

Many HRO offerings come in basic and advanced levels. HRO providers– ensure you offer both levels of time and attendance, scheduling, and attendance management services. Buyers – take the time to determine whether advanced workforce management services will not only provide better data, but will pay for itself through reductions in overtime and the impact of absences. Also, for many positions and industries, ensuring all customer-facing seats are filled at the right capacity, capability, and time has a direct link to productivity and revenues. Finally, don’t forget about compliance with wage, hour, and labor regulations where accurate records and proactive scheduling are a great defense against fines and losses.

HR and HRO in partnership can be the bridge to strengthen TM and WM across the entire human capital value chain.

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The Logic in Logica’s Focus on MPHRO

July 16, 2012

Linda Merritt, HRO Research Analyst, NelsonHall

Logica has long been an HRO service provider in the U.K. and Europe. With much of its HRO revenues from payroll, it has been a bit quiet on the multi-process HRO (MPHRO) front. So I wasn’t sure that I saw the logic in Logica’s increased investment in MPHRO capabilities, especially when there are other major MPHRO players already in the economy-constrained market.

The HRO group at Logica recognized the developing opportunity for MPHRO as some buyers, especially second generation HRO users and multi-country businesses, began to want more than just transactional low-cost contracts. This created space for an HRO partner to help clients transform HR to increase business and workforce agility in responding to rapidly changing market conditions.

Logica is emphasizing its transformational HRO capabilities by:

  • Assisting organizations to align their HR objectives and services with those of the wider organization and manage HR against business goals such as increased employee engagement
  • Change management and ensuring that change management is both carried out up-front and carried through to a detailed sub-process level using service simulations to promote operational change as necessary
  • Composing a common HR process taxonomy to be used as a common language across both outsourced processes and the retained HR processes
  • Program management and its real-time PMO tools.

In terms of process design, the company is looking to use a set of standard Logica HR processes for Logica-delivered processes; for client-retained HR processes, it will provide workflow tools. Logica is also looking to encourage innovation beyond minor process improvements by establishing jointly managed innovation funds and innovation groups with its clients.

In technology terms, Logica currently supplements Oracle’s PeopleSoft HCM 9.1 and Oracle’s E-Business Suite with specialist HR applications where necessary. It may also consider SAP-based HRMS implementations downstream.

To date, the investments are starting to pay off. BPO, including HRO, was the fastest growing segment for Logica in FY 2011, up 23.8%. In the last 12 months, Logica has also been awarded several major MPHRO contracts including:

  • BAE Systems:  a six year contract supporting 33,000 participants in the U.K. with a new single-tenant, hosted Oracle HR platform; payroll services; absence and attendance; employee care; and administration services in support of talent management functions including recruiting and learning
  • Ahold, a Dutch headquartered supermarket retailer: a nine year contract supporting ~100,000 participants in the Netherlands, Slovakia, and the Czech Republic with a new Oracle PeopleSoft 9.1 platform; HR administration services; HR service desk; and payroll services, which will be subcontracted to ADP.

Other MPHRO contracts were awarded by a British telecom and a Swedish financial services firm, both for five years.

Logica is well underway working its five year roadmap for services development, which includes strategic new services, increasing its partnership ecosystem, and practical elements like adding more mobile apps. Logica is also a relationship-focused partner, and that trust factor, along with results realization from the new wins, will help it continue to grow in MPHRO. Logical indeed!

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Countdown to the 2012 HR Technology Conference

July 10, 2012

Gary Bragar, HRO Research Director, NelsonHall

This year’s HR Technology Conference is just twelve weeks away. It will be held in Chicago from October 8–10. Be sure to check out the agenda, especially the new outsourcing track, which includes the following presentations:

  • Cisco Uses RPO to Hire Up to 15,000 a Year, presented by Mark Hamberlin, VP of HR Global Staffing at Cisco and Rebecca Callahan, President of Randstad Sourceright
  • Ericsson Outsources Global Payroll in Manila, presented by Mark Howes, HR Director of Asia Pacific at Ericsson and Mary Sue Rogers, Global Managing Director of HR Managed Services at Talent2
  • Benefits in a Time of Uncertainty, a panel discussion including Artell Smith from Aon Hewitt, Brian Johnson from Fidelity Investments, Norbert Englert from Mercer, Gail McKee from Towers Watson, and Tom Maddison from Xerox Corporation
  • Whirlpool Leverages RPO to Transform Talent Acquisition, presented by Lynanne Kunkel, VP of HR at Whirlpool North America and Rudy Karsan, CEO of Kenexa.

I’ve attended the conference the last two years and continue to find it an invaluable investment of my time to:

  • Attend presentations
  • View technology exhibits
  • Network with peers.

Presentations: In addition to Outsourcing, session topics include:

  • Strategic View
  • Talent Management
  • Social in the Enterprise
  • Workforce Analytics and Planning
  • HCM and Workforce Management
  • Recruiting
  • Expert Discussions.

Whether your company has outsourced or continues to do everything internally, there are bound to be several sessions that will teach you how to improve HR in your organization and be a better business partner. When I was on the buy-side prior to joining NelsonHall, I would attend such HR conferences to:

  • Learn about the broader industry
  • Think about how our HR outsourcing contract compared to others
  • Get ideas on improvements we could make.

Technology Exhibits: Since technology is changing so rapidly, it is often difficult to keep up with new applications that are available. The conference is a great way to get exposed to a broad-range of recent innovations, e.g., ADP’s Mobile Application, talent management offerings, etc. You can stop by any booth and see a demo; there is no pressure and vendors are excited about their new products and services and are happy to show you.

So here is your chance to make a difference at your organization; you might stumble onto a better, more user-friendly technology for example. Even if you are not the decision-maker, you can always tell your organization about it when you return and request a customized demo. Alternatively, if you are already outsourcing, you might see something that you don’t have and can bring it to your provider’s attention.

Network: The conference provides an opportunity to expand your network with others including HR practitioners, buyers, providers, analysts, etc. I also like to meet individually with companies I do business with and others I want to learn more about. In addition to the daytime events, there are evening socials too. HR deserves to have fun!

As a reader of my blog, you are entitled to a discount. Register for the conference and enter promotion code HRO12 to save $500.

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

ADP’s Meeting of the Minds, not just an Ordinary Event

March 19, 2012

I attended ADP’s Meeting of the Minds (ADP MOTM) that happened last week March 11 to 14 in Dallas. This was my first time attending, and I didn’t quite know what to expect until I arrived—well, how about ~900 enthusiastic ADP clients. This is an annual event of which ~30% of attendees were first timers.

Sure, there were a few ADP presentations and demonstrations on ADP’s latest products and services, but many of the sessions were not conducted by ADP and were instead facilitated by HR practitioners and clients. Professional development would be a good way to summarize it. As they say, everything is bigger in Texas—how about ~170 sessions that you could attend to learn about everything from Healthcare Reform to Payroll taxes, to RPO, to best practices across a number of services, and functions including shared services, recruiting, change management, etc. There were also hands-on training sessions, of which I attended Learning, part of ADP’s Talent Management.

I could write my entire blog talking about the keynote speaker, Emmitt Smith, and the fun social events, but I’ll shift gears to talk about HRO to keep with our blog focus.

To begin, it’s important to share ADP’s three priorities, as stated by CEO Carlos Rodriguez, that are important to advance ADP as a:

  • Technical leader
  • Service leader
  • Global leader.

Regina Lee, president of ADP’s national and major accounts, GlobalView, and ADP Canada, spoke about four key areas of investments that were made by ADP:

  • Integrated Human Capital Management: including Vantage HCM and Workforce Now
  • Talent Management: including the integration of performance management, succession planning, and learning. ADP’s talent management platform has over 100 clients
  • Benefits Administration and Healthcare Management: having acquired Workscape in 2010 to strengthen ADP’s benefits administration capability, in addition to Workscape’s talent management and compensation capability. On March 8, ADP announced it has entered into an agreement to acquire SHPS Human Resource Solutions (rationale is below)
  • HR BPO, including the acquitisition of The RightThing in October 2011 (further details below).

I’ll finish my blog focusing on Benefits Administration and RPO.

The Workscape acquisition has proven to be a success, with ADP adding ~100 additional benefits clients annually. SHPS will further strengthen ADP’s benefits administration offering with capabilities including:

  • Eligibility and enrollment
  • Spending accounts administration
  • COBRA administration
  • Absence management
  • Benefits advocacy.

SHPS will strengthen ADP’s leave administration and reimbursement account administration capabilities, including HSAs and HRAs, which have become increasingly important as more employers offer high deductible benefits plans to their employees. You can read about this in my recent blog.

The RightThing – coming off its best year in 2011 – was ranked by NelsonHall in its 2011 RPO report as the top U.S. RPO provider in terms of North American revenue, bringing in ~80 clients. Prior to the acquisition, ADP provided recruitment administration and technology, but it is now a full end-to-end RPO services provider. Expect an RPO contract announcement soon and much more to come as RPO will continue to be provided as a standalone service and now also in combination with ADP’s multi-process HRO services.

Gary Bragar, HRO 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.

IBM & Air Canada: Proof that Traditional MPHRO Contracts Are Not Endangered

October 14, 2011

Before blogging about other current events such as ADP’s recent acquisition of The RightThing, one final announcement from HR Tech to address further is IBM’s contract win with Air Canada.

Air Canada was an early participant for outsourcing HR services as part of its business practice. In early 2004, it awarded a 7-year multi-process HR outsourcing (MPHRO) services contract to Exult, which was acquired by Hewitt a few months later. Hewitt, and then “Aon Hewitt” since its acquisition, provided Air Canada’s ~36k employees with workforce admin, payroll, benefits admin, recruiting, and learning admin services, a very “traditional” MPHRO contract at the time.

In addition, Air Canada awarded NorthgateArinso with a 5-year contract for managed payroll services in the U.K. in late 2010.  Then it decided to shake things up by opening up its MPHRO contract for competition. Key to winning the contract would be a provider that would continue to drive innovative transformation and ensure lower costs.

Last week, it became clear that IBM was the provider that Air Canada was looking for when it signed a ~8 year MPHRO contract for Air Canada’s North American employees and retirees.  Services include HR contact center, employee data management, employee travel support, payroll, benefits admin, leave management, recruiting services with support from Manpower, and software application support for the HR systems used to provide the services.  This recently announced contract is proof that traditional MPHRO contracts are not endangered.

Several weeks ago, I discussed the four market segments of MPHRO that exist in the market.  Among the emerging segments such as “multi-country standardization” was the “client-specific shared service / transformation” group, which represents many of the traditional, transformative deals that occurred in the early to mid 2000’s such as Hewitt’s contract with Air Canada.  Although growth for this segment isn’t expected to be quite as high as the other emerging segments, it is still expected to increase modestly through 2015 contrary to popular belief.

IBM and Aon Hewitt are both leaders within MPHRO.  Within the shared service transformation segment, Aon Hewitt is ranked first in terms of revenue with nearly ~19% market share; IBM is ranked second with ~14% market share.  Aon Hewitt is also doing its part to keep this segment alive; earlier this year it signed a MPHRO contract of significant size with an unnamed financial services organization.

While all the focus lately is on the newer species of MPHRO contracts, specifically the multi-country standardization contracts, the four existing segments can and will continue to co-exist in the larger ecosystem.

If you’re a MPHRO provider focused on the shared service transformation market segment be sure to tout your contract awards and renewals, so everyone knows that this segment is alive and well.  We love to share the good news!

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

 

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