SAP and SuccessFactors, Let’s Not Forget About the Basics of What Makes Talent Management Effective

Much has been written and tweeted about SAP’s announcement last December 3 that it will acquire SuccessFactors for $3.4 billion. Granted that SuccessFactors is a provider of talent management software, but software alone does not get at the core of what makes for effective talent management. That is why it is very intriguing to me – now that Twitter and blogging are “in vogue” – that all the excitement has been centered on the SaaS over the Internet buzzword “cloud.”

Don’t get me wrong, SaaS talent management is a great enabler, and terrific for SAP to have, providing employers with the tools to do performance management. But talent management is about attracting, developing, and retaining the best talent. Good recruitment technology helps attract candidates and software can help in doing performance management, but it is not going to develop and retain talent for you — now that would be a breakthrough if it did! As most of us are keenly aware, thanks to data provided by the likes of Randstad and Manpower (http://bit.ly/ujuMhC), there is a talent shortage and employers can help themselves by engaging and retaining the talent that they have. To do so requires the good old fashioned basics that the cloud cannot replace.

Organizational change is not going to happen if continual investment is not made in people as well as technology. Having conducted retention studies and managed employee programs, I can tell you first hand that the top reasons why talent leaves typically include:

• Dissatisfaction with supervision and/or leadership
• Lack of recognition
• Lack of developmental opportunities
• Lack of a career path
• The desire for more challenging and engaging work
• Work/life balance.

Money by itself is not a motivator!

Call me old school, but I’m much more excited when I see things like:

• Cornerstone sponsoring a Ken Blanchard webinar on the 14th of December: Helping People Win at Work, including the use of performance reviews to develop people, how to set clear goals, provide year-round coaching, and build an engaging performance-based culture
• PageUp’s webinar last week showing  global employers how to retain critical talent with career planning
• Contracts awarded to Kenexa for employee engagement surveys, including with Unilever for 140,000 employees globally, to not just conduct surveys, but help with action planning to act on any issues identified to improve employee engagement
• Many of Ochre House’s RPO contracts also include: KPIs to reduce attrition, accomplished by conducting exit interviews, providing a dashboard with reasons why people leave, exploring problem areas in depth, and making recommendations to client leadership. In addition, OchreHouse often conducts employee satisfaction surveys and has a “Keep In Touch” program for recruiters to keep in touch with new hires to ensure successful transition and retention.

I’m just beginning to conduct my next global learning BPO market analysis. My Q4 2010 study found that companies are just beginning to invest again in leadership and performance management to increase employee engagement and retention. I’ll be looking for evidence that this is happening.

Employers, are you making the investments needed in your employees?

Gary Bragar, HRO Research Director, NelsonHall

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The Only Certainty is Uncertainty: Managing the Impact of Health Care Reform on HRO

A now perennial concern for U.S. employers is the cost of providing health care to employees. It is number one on the list of the “2011 Top Five Total Rewards Priorities,” a study sponsored jointly by Deloitte and the International Society of Certified Employee Benefit Specialists (ISCEBS).  Here are the top five for this year:

1. The cost of providing healthcare benefits to active employees
2. The willingness of employees to pay for an increasing portion of benefit plan coverage and to manage their own reward budget
3. The ability of reward programs to attract, motivate and retain talented employees
4. The ability to adjust to and comply with current and future provisions of Health Reform legislation
5. Clear alignment of Total Rewards strategy with business strategy and brand.

Employer uncertainty on the requirements and cost of compliance with U.S. health care reform continues to the point where “the only certainty is uncertainty,” according to the study. In the meantime, 65% of 242 respondents said they had no plans to change employee-sponsored coverage. Only 9% of employers indicated that they plan to drop employer-sponsored coverage and pay the penalties with the expectation of further legislation and required changes. Lastly, about 20% of employers said they would consider converting to a defined contribution plan for health care and encourage employees to join an exchange.

Eight-five percent of employers are highly certain that an impact of health care reform will be higher costs for both the employer and employees. Seventeen percent are also concerned they will fall in competitiveness with peers in other countries.

If most employers are planning to change health care benefits at this time, what are they doing? They are closely monitoring the situation with 73% reporting they will re-evaluate benefits due to health care reform in the next 12 months.

Uncertainty is also an opportunity. Besides the obvious opportunity for continued benefits consulting, there are other opportunities for HRO. For example, total rewards statements are more than nice fluff. With effective communications, employers can help employees appreciate the full value of their wages and benefits, support the case for understanding cost shifts to employees, and even help with the attraction and retention of talent. Also, dependent audits have been a good foot-in-the door technique the last couple of years, ensuring value benefits go to only covered employees. Finally, absence management is another growing HRO service line with great potential to assist employees in difficult times and impact the bottom line when well-managed.

In core benefits administration, highlighting expertise in monitoring, understanding, and implementing regulatory benefits changes shows clients they will have a capable partner in their corner, no matter the changes ahead. Being the knowledgeable resource of choice in the midst of health care reform uncertainty and rising costs can be a leverageable factor in attracting new clients and deepening the relationship with current clients.

Is your HRO provider the rock you can rely on in times of uncertainty?

Linda Merritt, Research Analyst, HRO, NelsonHall

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Building HRO Business Value

The hockey great, Wayne Gretzky, said “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”HRO service providers and HR leaders each dream of demonstrating business value. There lies strategic relevance and pricing options above commoditization, as well as long-term relationships.

To continue our search for guideposts for the journey, this week we’ll take a look at NorthgateArinso’s 2011 Talent Management Survey. The survey analysis highlights the need for talent management(TM) tools that are integrated with workforce data to gain optimum advantage. Sixty-one percent of the global organizations surveyed have at least one TM program installed, but 64% do not have the TM tool(s) integrated with their HRIS for workforce and payroll, missing out on rich and relevant data sources.

The study also provides hints on where HR and HRO need to “skate” to be great and not just good. Overall, 60% of the respondents agreed that HR contributes to the company’s development and transformation capacity on a daily basis. Looking at data for only HR respondents, the number increased to 82%. HR sees itself as further along than other business leaders. I have always said that strategic is what your senior executives say it is – so know where their strongest interests lie to close the gap.

TM elements include performance management, succession and career planning, recruiting and staffing, compensation, and learning. Certain TM elements are of particular interest as 90% see the identification and retention of top talent as business critical for the next three years, making performance management, succession, and career planning of top concern. Also, TM is considered most critical in areas including sales, marketing, and customer relations, as well as R&D. The TM focus varies by company size. Smaller companies are concerned about enabling growth and larger companies are more focused on the strategic alignment of HR as a driver in the fulfillment of business objectives.

Moving into the TM space will be increasingly important for multi-process HRO providers. Whether the TM tools are built in-house, come from major ERP sources, or are well integrated from a leading supplier partner matters less than that the tools are present and well-supported.

There is a myriad of TM software companies that specialize in one or more TM elements. Few TM software providers currently offer a full suite of TM tools that equal some of the best single solution systems for compensation or learning, for example. There is more HRO value in combining tools and services, and if you can add consulting as well, even better. There needs to be a plan on how to bring all elements together across vendors and technologies or even the silos within HR.

Clients, whether you go best of breed with multiple vendors or use a fully integrated system from one, do you have the HRO partners that will help you advance in the journey to full business value creating strategic partnership?

Linda Merritt, Research Analyst, HRO, NelsonHall

ManpowerGroup Solutions Analyst Day – It’s All About Talent

On June 8, 2011, ManpowerGroup Solutions held its first analyst day where it talked about multiple services, including its RPO business, which is currently providing recruitment services in ~35 countries, including for eight global clients, which range in scope from two to ten countries. ManpowerGroup Solutions has a center of excellence in the U.S. to share best practices so it provides a consistent experience and doesn’t reinvent the wheel for each implementation. It is smart enough, however, to recognize that the greatest satisfaction for the hiring manager comes when services are delivered locally. Thus playing to its strength of having the ability to deliver RPO locally, with a total company presence in ~82 countries.

In Q1 2011, it closed 37 RPO deals: 8 in APAC, 9 in EMEA, 2 in LA, and 18 in the U.S. For the next eighteen months, it’s focus includes driving consistency of operation and customer experience and improving the client’s employment value proposition via improved employer branding and candidate experience.

ManpowerGroup Solutions still has the largest RPO deal to date in the industry, a $200m contract with the Australian Defense Force to provide full end-to-end services from sourcing through onboarding for 8,500 – 10,000 new hires annually. Approximately 300 personnel are employed onsite to support the contract which includes a marketing team of 22 people providing services that include social media and employment branding. There is also an 80 seat call center to proactively manage relationships with candidates and 90 I/O psychologists.

Other highlights of the day included a presentation on ManpowerGroup Solution’s Tapfin business, a MSP that handles over $3.3bn in managed services spend and administers 221 MSP programs globally.  This was followed by a demo of Workforce Scan, a consulting process to help model future scenarios of emerging supply and demand gaps in the availability of talent needed by taking a 5, 10, 15, or 20 year timeframe view.

There was also an announcement of a new contact center offering to help existing client centers increase productivity, improve customer service, and retain talent through a set of services including: talent sourcing; program and process management; best practice and benchmarking consulting; and talent-based outsourcing for center-based and distributed workforces such as virtual / work-from-home models. NelsonHall will cover more on this recent announcement in our tracking service and next HRO Industry Insight Newsletter.

According to its new Workforce Strategy Survey, almost a quarter of employers across 36 nations admit their workforce strategy does not support their business strategy or have any idea if it does. More than half of this group is doing nothing about it, which sounds like more opportunity for RPO providers to help employers with workforce planning.  I’ll share more on this topic next time!

Gary Bragar, Lead HRO Analyst, NelsonHall

Healthcare on the Global Stage – What is HRO’s Role?

Health and welfare have been linked not just to healthcare and productivity costs, but to global economic development. In the HRO community, we tend to think of healthcare in terms of the impact on employer costs. Current U.S. healthcare reform reminds us it is an issue of national importance. We need to think even bigger.

According to a joint collaboration that began in 2009 by the World Heart Foundation, World Health Organization, and the World Economic Forum, employers are the best placed to encourage the healthy lifestyles that can positively impact chronic diseases, which are viewed as a global threat to human lives and continued economic growth and development.

Wellness is more than a “nice to do” program; it is an economic imperative, a competitive advantage, or a liability for employees, employers, and countries.

Whether the majority of healthcare expenses are borne by employers or the government, it is part of the total cost of doing business. In a study reported by HR Magazine, illnesses impacted by lifestyle cost the U.K. £17.7bn annually and could escalate to £33bn by 2025. And that is just the costs of three problems: obesity, alcohol abuse, and smoking!

Leading multinational companies are addressing health and welfare benefits from several perspectives: value-based care about employees, healthcare and benefits costs, productivity and the cost of absence, and talent attraction and retention.  Many aspects of benefit plans will continue to be shaped by local influences, but with an eye to overall equity across a global workforce.

The long view is sometimes needed to show wellness ROI. Lifestyle behaviors are not easy for many of us to change. For example, in the U.S. it has taken many years but there has been a significant reduction in smoking and smoking-related deaths.

Determining the optimum balance of centralization and decentralization and establishing a corresponding governance system is equally important as selecting the right delivery systems. HRO providers tracking client outcomes are in a great position to help build business cases for wellness and share best practices on what works and how to determine results. Clients, look for HRO vendors with a broad range of experience in change management that can help your organization move forward.

As a linchpin in the healthcare value chain, top tier benefits service providers can bring a powerful cross section of approaches including: research, consulting and design, investment financial advice and services, benefits administration, employee communications and decision support tools, emerging total absence management and employee advocacy services, third party vendor management, and analytics. HRO benefits leaders can also become influential advocates on the national and international stage impacting policy and regulations for millions.

Are you and your benefits vendor partner ready for the global healthcare stage?

Linda Merritt, Research Director, HRO, NelsonHall

From Public to Private – RPO Can Help – Part 2

Last week, I discussed the importance of identifying skill gaps needed and eluded that there was more to the story.  Have you considered what else is important?

Matching talent to available positions is just half of it.  It’s also important to let prospective candidates know about you and what it would be like to work for you.  This is where employer branding comes in.

Although employer branding is an emerging service, some providers such as Hays have been helping its clients with this for quite some time.  For example, Hays has a 3-year contract with Santander for end-to-end RPO services including employer branding for all Santander U.K. retail locations. Contracts are also beginning to be awarded specifically for employment branding.  For example, Alexander Mann Solutions was awarded a contract earlier this year for employment branding and recruitment advertising by U.K.-based E.ON.

Other services that RPO vendors can provide to help with the transition include:

• Outplacement services that include career workshops
• Robust onboarding and retention services such as Ochre House’s “Keep in Touch Program.”

The services that RPO vendors can provide are indeed important.  Manpower recently issued its 6^th annual Talent Shortage Survey with its findings that a third of employers worldwide can’t find qualified talent despite the over-supply of available workers.

RPO service providers who track and understand the market for talent on a multi-country basis will have the opportunity for an expansion of services into workforce strategic planning and workforce management based on the availability of key skills and capabilities in mature and emerging markets. By leveraging its base of recruiting and staffing expertise and global data, RPO can move into a linchpin position in the talent management supply chain linking learning, career development, mobility, and contingent labor.

RPO vendors are needed more now than ever, and the opportunities for RPO provider growth are as great as the world around us.

Gary Bragar, Lead HRO Analyst, NelsonHall

Recruit and Retain Employees with a Creative Benefits Package

Kudos to the Affinity Federal Credit Union.  In the Spring 2011 issue of the Affinity Connections magazine, there was an article titled “Recruit and Retain Employees with a Creative Benefits Package.”  We often write about recruitment and benefits in our blogs and this article makes the simple yet important tie-in that you need an effective benefits strategy for attracting and retaining talent.  I couldn’t agree more!

It’s not just about the money, but about benefits that include:

• Health, disability, and life insurance
• Tax saving ways to pay for health expenses and child care
• Retirement plans
• Opportunities to continue education
• Flexible working hours, etc.

The article points to a 2010 study done by MetLife on employee benefits trends.  It states employers greatly underestimate the loyalty factor of retirement benefits, non-medical benefits (i.e., dental, disability, vision, life, etc.), and work-life balance programs.  I would also add in retirement savings plans since there are fewer pension plans and great doubts about what will be there for social security, particularly for the younger generations.

The major benefits, which are also the most expensive, are retirement plans, health insurance, and paid leave.  But, employers need to be creative and think out of the box at more cost-effective options.

The study states that 61% of employers and 56% of employees say that work-life balance programs are effective at improving productivity at work.  Examples of such programs include flex working hours and access to financial planning resources, such as Aon Hewitt’s integrated advisory offering to its DC plan participants through its subsidiary Aon Hewitt Financial Advisors.  Other ideas include:

• Flexible working hours
• Flexible spending accounts
• Employee assistance programs (EAP)
• Matching donations
• Educational opportunities including on or offsite employee training & seminars, tuition reimbursement, and paid time off to attend classes.

As the economy recovers, turnover will increase.  As the talent marketplace becomes more competitive again, it is important to see that offered benefits are utilized.  A benefits outsourcer or HRO provider can help with data mining to analyze benefit utilization patterns across key positions and geographies.  Also, total rewards statements help employees see the full impact of their benefits.  Modern benefits communication and decision support tools help participants know about and make optimum choices.

Outsourcing vendors, not just benefits providers, but also RPO providers who are helping their clients with talent management including attraction and retention strategies, should be engaging with their clients to ensure that they have a better benefits package than their competitors!  How do you stack up?

Gary Bragar, Lead HRO Analyst, NelsonHall

HRO: Mobility is a Link in the Talent Management Value Chain

Mobility outsourcing is largely a standalone service from specialty providers. ACS, a Xerox Company offers global mobility as part of its multi-process HRO (MPHRO) suite of services while most MPHRO providers do not.

On one hand, it makes sense to leave mobility services to specialty providers because relocation is dynamic with constant changes requiring depth of knowledge and it rides the leading edge waves of economic tides. According to Worldwide ERC’s 2010 Transfer Volume and Cost Survey, relocation is trending up again after the severe trough in 2009. Although it will take some time to reach pre-recession levels, up is good and mobility is joining recruitment outsourcing as an indicator of recovery. For example, Cartus went from $320m in revenues in 2009 to $405m in 2010 and managed 148k relocations. Even in the downturn, it proceeded with the acquisition of Primacy in 2010 and the combined entity added 140 new clients and expanded services with 300 existing clients.

On the other hand, leaving mobility services solely to specialty providers can leave a weak link in the value chain. The answer for most HRO service providers is to ensure inclusion of a strong mobility vendor in the preferred and integrated supplier ecosystem.

Mobility matters because of the continuing evolution of talent management which includes a growing awareness of the link with mobility. While one would think the link is obvious, it is not always managed as an integrated component of succession planning, talent acquisition, and retention, especially on a global basis. In many HR organizations relocation is under the purview of compensation and benefits and talent management is elsewhere.  Add in multiple vendors and a consultant or two and you have a situation needing a bridge of connectivity.

Who will bridge the gap? Mobility providers have really increased their pace of innovation and made strides in becoming strategic advisors in order to survive the recession. The use of new services like pre-decision relocation assessments increased from 9% to 40% since 2007. In addition to administering the relocation process and paperwork, the relocation specialist may help the client decide on a temporary rotational assignment with the lower cost of temporary living versus a permanent relocation with a home sale in a down market. Or they may advise a transferee on renting versus buying, all based on knowledge of client policies, costs, and local markets. It is this group that is raising their eyes over the fence of talent management and going, hmm.

I am not predicting that a mobility provider is going to leap into full scale talent management tomorrow. I do see a new player in the mix for client mind and wallet share. If you are a HRO vendor with talent management as a major offering, think about more than just which technology to use. Do not let mobility be a missing link in your HR value chain.

Linda Merritt, Research Director, HRO, NelsonHall