Alice in Wonderland 2010 – HRO Providers Help Clients Shrink and Grow

Many are scurrying at a furious pace to publish 2010 HR and outsourcing trends and predictions, including the NelsonHall HRO team. My 2010 HRO list will be published in the next issue of HRO Today magazine, and Gary is providing RPO insight to several publications.

One of my predictions is that we are facing a spendless recovery in the HRO industry. Given the persistent uncertainty of the strength of the recovery and continued high levels of unemployment in many areas, cost will remain the leading HRO decision criteria factor. More contracts will get signed in 2010, although most will be smaller in scale and scope, and face deep scrutiny by risk adverse buyers.

What is the recipe for doing business in such a cautious environment? One way is to learn from HR trends and predictions to see how we in the outsourcing community can support clients as their needs and pressures change.

Mercer’s Human Capital group has published its list of the top five human capital issues for 2010. While presented by Mercer Australia, the issues highlighted are common to businesses around the world:  

 1. Foster growth in a new workforce context

2. Be smarter with benefits as pay packets matter again

3. Restore equilibrium in Executive Remuneration

4. Mitigate turnover risk and restore employee engagement

5. Develop well-rounded leaders who can maintain momentum and/or pick up the pieces

I was reminded of Alice in Wonderland by a comment Ken Gilbert, head of Human Capital at Mercer, made about the first challenge noted above: “Success in 2010 will be defined by organizations’ ability to ‘shrink and grow’ – maintaining a focus on costs while growing talent, workforce productivity and the bottom line.”

Wow. Alice grew very large and shrank very small, but she was not asked to do both at the same time. As budgets remain constrained and business demand starts to increase for targeted talent, HR will be looking for assistance from its partners to recruit, train and retain new employees both effectively and cost efficiently.

The benefits of improved recruiting will be as ethereal as the Cheshire Cat’s grin if turnover increases too much. Employee engagement and leadership development will be important elements in capturing growth opportunities, and throwing money around like the Mad Hatter at a tea party is not an option.

For example, targeted analysis of workforce and performance data will be needed to help focus attention and limited resources in the most impactful areas. Also, learning opportunities are needed to develop specific workforce skill sets, and as effective tools for increasing engagement. Careful planning, collaboration and curriculum management can achieve both goals while still reducing overall expense.

Buyers, be sure to share 2010 workforce goals and challenges with your HRO providers so they better understand your needs. Providers, review the services you provide to your clients and identify how they support current and returning business needs. Where might a little bit of proactive consultation show how your current or new services will help the client organization shrink expenses and grow business results at the same time?

If you want to keep your head, this is not the time to pitch a grand transformation plan. Whether it is building a closer relationship through better utilization of current services, or growing the relationship through very precise projects and new services, it is time to help Alice find the wonder in Wonderland.

Linda Merritt, Research Director, HRO, NelsonHall

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

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