What do Benefits Administration Clients Want from HRO?

Linda Merritt, HRO Research Analyst, NelsonHall

What HRO clients want falls into several buyer profiles based on familiarity with outsourcing and organization maturity. The NelsonHall Targeting Benefits Administration (BA) market analysis was published earlier this summer by Amy Gurchensky, and I noticed Amy included differences in client decision drivers by whether they were new to outsourcing or were already experienced in outsourcing. The concept crosses all types of HRO services and matches my running conversations with service providers. Let’s take a look at the following three buyer profiles through the lens of BA:

• Standard buyers
• Experienced buyers
• Progressive buyers.

Standard buyers: otherwise known as first time outsourcers are looking for reduced operating costs, better compliance with regulations, a way to transfer or minimize risk, updated technology and best practices, and improved participant communications channels. Employee and manager self-service and reducing HR administrative burdens are also popular drivers in the initial decision to outsource.

Experienced buyers: otherwise known as second generation outsourcers already have the basics in place and may be ready to broaden the scope of services, obtain more flexible technology, or increase participation in process streamlining to enhance efficiency and improve participant engagement. Changes may include adding new BA services or even consolidating vendors, but it can also include the decision to change to another vendor completely. Cost is still the number one concern, so contract renewals will not be a slam dunk. Providers who are on the ball with changing client needs and increased sophistication should be ready for thorough discussions on price, service, and value.

Progressive buyers: or sophisticated buyers may be ready to use the firm foundation they have built with their outsourcer to create the greatest possible business impact. In BA, this may include total benefits outsourcing where either pensions or retirement plan services are combined with health and welfare services under one vendor to:

• Lower total costs
• Simplify vendor management
• Integrate technologies across the services
• Improve the participant experience.

This is the time to bring out the most sophisticated offerings and analytics and focus on business value; leverage the value of benefits in employee attraction and retention; and optimize total program cost. Once again, existing BA vendors will be vulnerable to pricing concerns and client perceptions about the provider’s top-end capabilities and client retention will remain at risk.

As HRO matures and more clients gain experience in managing outsourced services, expect to see client needs change over time. Service providers can and do quickly tell which HRO profile a new prospect falls into by the language used, initial discussions on services, and outsourcing objectives, etc. It can be a bit harder to see when an existing client, even one satisfied with day-to-day services, is moving from one buyer profile to another. For clients new to BA, if you intend or even just hope to move up to the sophisticated buyer level, consider if the vendor who meets your initial needs will also meet your needs as your organization matures.

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