Posted tagged ‘training outsourcing’

HRO (and overall BPO) Total Contract Values up in Q1 – Q3 2010

October 14, 2010

During NelsonHall’s recent quarterly BPO Index Call, our CEO John Willmott stated overall BPO contract values were up for all BPO sectors, including HRO, both on a rolling twelve-month basis from 2009 – 2010 as compared to 2008 – 2009, and up year-to-date Q1 – Q3 2010 as compared to Q1 – Q3 2009. This is all good news, but not a surprise given that we are beginning to see some recovery from the recession.

Looking specifically at HRO, total contract value (which includes the value of the full term contract plus any renewals) in Q1 – Q3 2010 was up nine percent. The growth came primarily from North America, while Europe declined as it is coming out of the recession a bit slower and clients in that region continue to be more cautious about outsourcing their HR processes. Although its total contract values isn’t as large as in North America, contracts are still being awarded in Europe, e.g., wins in Q3 by Logica, Midland HR, HR Access, Raet and CPH Consulting, as recently cited by my colleague Linda.

HRO growth in Q3 2010 was particularly led by RPO, similar to numerous other points during these tumultuous times. But here, I’d like to take a quick look at why the learning services market is starting to recover (please see Linda’s October 5 blog entitled, “Recapping the Not-so-Dog-Days of HRO’s 2010 Summer” to see a few of the recent learning contract awards.)

In learning, providers are introducing new training offerings largely focused on certified training courses, primarily technical areas including IT. Training is coming back to life, and the initial emphasis is on strengthening direct job-related skills. Making sure IT professionals can keep up with professional certifications can also be a way to build engagement and head off turnover as the employment market improves. There was also some introduction of new leadership development courses, perhaps indicating a return to a focus on the future by investing in management skills development. Finally, social learning is continuing to make inroads, and Expertus introduced its new platform, ExpertusONE, which facilitates communities of practice, expert networks and mentoring, in addition to normal learning system functions. Other new learning offerings introduced in Q3 included those from Raytheon Professional Services, QA and Edvantage Group.

It will be interesting to see, at the end of Q4, which HRO processes, regions and industries are the leaders and laggards. But much, much more to cover before then, including my “Targeting Learning BPO Market Analysis” to be published later this month.

Gary Bragar, Lead HRO Analyst, NelsonHall

Some Holiday Time HRO Cheer: Some Companies will Return to Better Benefits in 2010

December 17, 2009

Per a USA Today article on December 11, 2009, many companies have announced they will reinstate suspended benefits and/or increase some of the benefits they provide to their employees in 2010. Named companies include FedEx, JPMorgan Chase, American Express and Motorola.

During the current recession, many companies reduced 401 (k) contributions and lowered merit increases and bonuses, if they indeed provided them at all. And bah humbug, some companies even reduced salaries and/or employee hours.

The good news is that two thirds of the companies that did not give pay raises this year plan to do so in 2010. And one third that cut back on their 401 (k) matches plan expect to reinstate or increase company contributions next year. While FedEx and others may not offer 401 (k) matching and other benefits on par with previous years, any step in the right direction is still good news!

So what does this mean for the HRO industry?

First, Defined Contributions (DC) Administration represents the largest share of Benefits Outsourcing revenue for providers, and over half of all vendors get paid per transaction, in addition to per participant per month. The net here for providers is that more transactional changes results in more revenue. Dealing internally with these transactional changes may not, on the surface, seem like a big deal. But as a former programmer and systems administrator, I know first hand that all such changes must be fully tested and is a huge administrative burden. Thus, with buyers happy to get out of performing this type of transactional work, a return to better employee benefits likely means happier times for providers, buyers and their employees.

Second, consistent with several of my recent blogs, the fact that some companies are beginning to again invest in training and developing their employees is driving an increase in the pipeline for learning services agreements, and has resulted in some recently signed contracts. And even though significant hiring volumes may not return for some time, attracting and retaining top talent is showing signs of increased importance, and thus most RPO providers are also reporting substantially improved pipelines.

Finally, the today-released results of a Hackett Group study, which stated earnings are significantly higher for companies with strong talent management capabilities, underscores the importance of reinstating and increasing employee benefits in order to retain existing high performers and attract key talent in the future. Ala, more opportunities for HRO providers and for smart buyers that are re-acknowledging the value of outsourcing key functions such as learning and hiring.

While my blog today started out focusing on a return to better employee benefits, much of the success in today’s competitive (although still economically limping) environment is attributable to how employees are treated, developed and managed. Given the pipeline increases and contract awards we are seeing in the learning, RPO and SaaS talent management, I’m optimistic for a happy and healthy New Year!

Gary Bragar, Lead HRO Analyst, NelsonHall

Learning Outsourcing: Smart Companies Preparing for Competitive Advantage Post-Recession

November 10, 2009

A recurring theme in a variety of our more recent blogs is an expectation of increased HRO activity in 2010 and beyond for a range of HR processes. This uptick – yes, just uptick, not monumental increase – is evidenced by smart organizations’ preparation for competitive post- (or edging toward post) recession stance.

Take learning outsourcing. A recent Workforce Management magazine article, in which the soon to be released results from a joint Bersin & Associates/Workforce Management study of more than 1,400 U.S.-based organizations were discussed, found that nearly four in 10 large companies outsourced learning support functions to compensate for staff cuts.

NelsonHall’s 3Q09 HRO Confidence Index found that pipeline growth for outsourced learning increased from 2.3 on a scale of 1 – 5 in Q1 to 4.0 in Q2. Why this up-swell in outsourced learning, despite dreary near-term economic conditions? Let’s remember that learning was one of the faster growing areas of HRO with a strong list of benefits, including:

•  Ability to focus on the critical importance of developing high potential employees and leadership with the reality of significantly reduced in-house training staff

•  Reduced training expenses, ranging from 10 to 15 percent for administration-only outsourcing contracts to 30 to 50 percent for full learning BPO arrangements utilizing offshore content development and/or administrative resources

•  Increased visibility and control over learning spend

•  Improved learning evaluation and measurement through access to learning analytics and customized reporting facilities

•  Reduced time to competency in jobs with high turnover

•  Ability to deliver global learning programs at a lower cost through established provider networks

•  Ability to more effectively track and integrate both formal and informal learning networks

•  Improved post-training support and analysis, e.g., evaluations three months after course events, and mentoring programs for new employees

The new Bersin/Workforce Management study indicates that training student hours, budgets and staffs were all cut during the downturn. As companies prepare to return training to the forefront, they are unlikely to return to the previous levels of spend and staff in the near term due to continued uncertainty. Learning outsourcing can help bridge the gap and bring its own advantages, as noted above, to buyer organizations.

Gary Bragar, Lead HRO Analyst, NelsonHall

The Cost of NOT Training New Hires – Option: Learning Outsourcing

September 24, 2009

A recent Human Resource Executive e-newsletter article, entitled “Ill-Prepared Workers?” cited per a just-released Conference Board report that a little under 50 percent of the employers who participated in the 2009 survey provided any workforce readiness training for newly-hired entry-level workers. The article and report further stated that the most common training technique these days was allowing employees to read materials on the intranet.

The report went on to say that employers which provided no such opportunities thought it was not their responsibility to do so, that the finger usually points to schools, but that most of the gaps seen in new hires were not about academic skills but rather centered on behaviors such as “creativity”, “ethics” and “professionalism”.

The sub-head of the article read, “In the past, most entry-level workers learned their skills on the job, but such training programs went away long ago. These days, most employers expect schools to prepare students for the workforce – and then they are disappointed with the abilities of their new hires. There is probably no easy resolution to the disconnect.” I have a slightly different view on this issue.

Obviously many work-related skills can be learned in school, but specifics’ relating to an employer’s operating procedures, or behaviors such as creativity or professionalism, require on the job training and support. Very few new hires can hit the ground running in a new job. Further, per NelsonHall and others’ research, the top reasons employees leave their current employer include dissatisfaction with their supervisor and leadership, and lack of training and developmental opportunities. And when you factor in repeated employee cost-to-hire, proper training of new hires is a much less expensive and valuable investment.

How can this be achieved? Outsourced learning (LBPO) can offer an effective middle ground to provide low-cost yet effective Web-based training for basic job skills and employee development. For the newer generations coming into the workforce, online training does need to be engaging and well-designed, but there is a lot of expertise out there. The use of social media can be another relatively low-cost way to form internal communities to engage those new to the workforce. All the outsourced and Web-based choices make more training options affordable to companies. And if the right balance of early training can bring new workers to competency faster and reduce turnover, it will more than pay for itself – whether the new hires are destined to remain with their employer for their lifetime career or just a few more productive months in high volume entry-level jobs.

Per our research, we expect LBPO contract activity to pickup by 2010 as the economy recovers and organizations’ financial positions improve, enabling the critical investment in its people to develop and retain its talent.

But in order to make this a reality, company leaders need to fully support training initiatives and, well, know how to lead. Thus, I was impressed with Kenexa’s new leadership and development offering program announced on September 17. The offering includes:

 • An audit to assess the capabilities of existing leaders

• Online leadership assessments for hiring, developing and promoting top leaders

• Developmental tools to improve leadership skills

A final thought. New entrants into the HR workforce might want to pursue their first career with an HRO provider where they’ll get significant on the job training. As HRO contracts carry high stakes, outsourcing providers have a highly vested interest in making sure their associates are well-trained.

Your thoughts?

Gary Bragar, Lead HRO Analyst, NelsonHall

Utilizing Analytics to Improve the HRO Experience – It’s Time to Step Up the Game

July 29, 2009

HR analytics – which we define in our latest market analysis as “a method of tracking, measuring, analyzing and assessing HR and business performance for the purpose of making more informed strategic decisions, improving financial outcomes and monitoring goals” – have never been more vital than in today’s economic climate. Organizations must have data-based insights into their HR cost structures, how to optimize their diminished workforces, their cost per hire, employee cost as a percentage of sales, labor costs by department across various locations and myriad other considerations.

But whether leveraged by in-house staff or an HRO provider on behalf of its clients, most HR analytics today are focused on operational reporting such as basic, aggregated headcount data, and tactical metrics including quality of hires and sourcing effectiveness. HRO providers can  step up their competitive game by addressing the main drivers of HRO analytics – justifying the outsourcing business case,  providing HR ROI and becoming an integral partner in not just process performance but in business intelligence.

To do so, per the findings from our just completed study, “HRO Analytics: Utilizing Analytics to Improve Outsourcing Experiences”, HRO providers must address factors including:

•  Demonstrate the effectiveness of the function or process such as sourcing effectiveness within recruitment or a new communications strategy within benefits administration services

•  Deliver analytics around not only quantity,  but also effectiveness, of recruitment, learning and benefits, e.g., utilization of various benefits programs offered and why they may vary across geographies

•  Prove the return on investment in the relevant HR function, e.g., ROI of a specific training program or reduction in recruitment cycle time

•  Assist in prioritizing HR activities and determining what should be provided with an appropriate budget, such as a particular training course which increases sales capabilities

•  Provide insight into how to improve workforce performance and increase employee productivity

When reviewing the findings from our HRO Analytics market analysis, my colleague Helen Neale observed the following: “Indeed the surprising finding from the study was the low incidence in the use of higher level analytics within multi-process HRO arrangements, which, given their focus across a number of process areas, particularly within talent management, would provide a perfect platform for enabling HR through analytics. However, it seems the struggles providers are experiencing with developing a business model that works has impacted the value-added services originally promised in these contracts. NelsonHall expects the next wave of multi-process HRO contracts, which are more focused on payroll plus basic transactional and HR IT services, should enable a more robust platform for developing higher level analytics solutions. This will help, in the longer term, to prove the ROI of payroll plus multi-process HRO.”

Of course, implementing a robust, high-level HR analytics initiative requires an up-front investment by buyers and providers, in terms of both cost and time. But these can be mitigated by ROI achieved by the buy-side, and increased client satisfaction and development of repeatable solutions on the sell-side.

We believe that as the economy recovers, HR contracts will be likely to adopt more strategic level uses of analytics to justify HR spend, prove ROI for specific HR initiatives, and reduce costs associated with pain points in the organization. HRO providers are continually being asked by their clients to provide more value-added services, and suppliers can prove that value by moving outsourced HR analytics up the value chain.

Gary Bragar, Lead HRO Analyst, NelsonHall

Will We See An Uptick in Learning/Training Outsourcing When The Recession Eases?

July 15, 2009

The top driver for outsourcing the learning function is training-related cost savings, to the tune of 10 to 50 percent, depending on the extent of services outsourced and the use of offshored services.

Just last week General Physics Corporation announced a multi-year outsourced training agreement with a leading global software corporation. Among the few other bright notes in the outsourced learning space: IBM won a three year e-Learning services deal with Tianjin Economic Technological Development Area, Raytheon Technical Services was awarded a learning services contract with the U.S. Navy, and ACS engaged in an LBPO initiative with Hertz.

But new learning BPO (LBPO) contracts have largely stalled in the past year. Why? Training is often one of the first line items organizations nix when expenses must be reduced, and the recessionary state of the worldwide economy has had such a severe impact on bottom lines that short-term thinking has prevailed and training budgets have been slashed.

Still, organizations recognize both their new and existing employees are their most critical asset, and that having a ready supply of top talent will help them capture greater market share, achieve their business objectives and beat the competition. Leading edge movers will want to leverage their competitive advantages, including their people, to help make their turnaround happen ahead of the market. Others will be ready to return a focus and funding on learning when we exit the downturn.

We believe there will be an uptick in LBPO contract activity starting in the latter part of 2009 into 2010, particularly by 2Q10. Businesses will still be very cost sensitive, and the pricing and value advantages of LBPO should help restore life to this market. To take advantage of the coming opportunities, our 2008 “Targeting Learning BPO” market analysis indicates LBPO providers will need to demonstrate their ability to:

•  Manage learning while budgets are falling, including utilization of analytics to illustrate the business value of and ROI from specific outsourced learning programs

•  Maximize learning spend by leveraging feedback mechanisms to monitor and prove performance levels, and utilizing technology to monitor the quality of learning content

•  Reduce learning costs by buyers’ typically expected 15 percent for administration and vendor management by employing methods such as use of offshore resources as appropriate and lower cost delivery modes including virtual classrooms and e-Learning

The bottom line is that developing talent remains a major issue for most organizations today. And because the top people development challenge is cost pressures, organizations must make certain they have the right people getting the right learning opportunities, whether through in-house or external third-party trainers, to meet today’s competitive “get it right the first time” imperative.

Gary Bragar, Lead HRO Analyst, NelsonHall