How workforce realignment forces strategic thinking in HR organizations.
The massive workforce expansion of the 90s has dramatically reversed with the combined forces of economic recession and global outsourcing. HR leaders are challenged to ensure that the workforce delivers on the corporate business strategy. At the same time, the dynamic economic environment is constantly forcing organizations to reshape the workforce. Many organizations that have traditionally focused on driving down costs by automating or outsourcing non-strategic, transaction processes are now looking at new approaches to create a flexible, sustainable workforce. Workforce lifecycle management (WLM) solutions are being deployed to extend internal mobility, improve the quality and timeliness of new hires, and increase the performance of the workforce.
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With workforce reductions in place, leading organizations are creating a performance-driven culture based on measurable results that are aligned with corporate goals. The aggressive recruitment of high-performing talent will intensify, making competition tough for organizations that dont excel in WLM. Key areas of interest for performance- driven organizations include pay-for-performance programs and succession planning initiatives that accelerate the performance and growth of employees. Organizations are migrating HR BPO vendors in pursuit of cost reduction and to enable HR to think more strategically about their human capital. Recent case studies show that high-performance organizations consistently outsource administrative HR functions. Organizations of all sizes have adopted global outsourcing strategies to maintain initiatives in cost reduction and margin improvement. Self-service is a key enabler driving WLM adoption. As workforce mobility increases, organizations are empowering employees to be more self-sufficient. Using employee selfservice applications has lessened dependency on HR to provide administrative support. Self-service applications provide a single destination for all HR issues, consequently increasing the use of WLM solutions. In addition, self-service applications enable employees and managers to track career development and progress, further enhancing the performance of the organization. As M&A activity continues to pick up, organizations continue to implement processes that accelerate integration. WLM solutions can help organizations define their internal hierarchy, making it easier to analyze workforce requirements. WLM solutions can also enable integration by quickly identifying the right candidates for the merged entity. In addition, WLM can rapidly eliminate redundancy in the workforce and create a more cohesive and progressive organization.
ACHIEVING SUCCESSFUL WLM
Understand your organizations key performance indicators (KPIs).
Organizations must understand the key attributes that drive their financial success and link those drivers with their WLM strategy. For example, highturnover organizations should define a strategy for talent management and improving workforce quality. Lowturnover organizations should center on performance management and improving employee development, pay-for-performance, and succession planning.
Assign an executive sponsor.
A vision for human capital that is sponsored from the highest levels within an organization is key to transformation and leading strategic initiatives. Take inventory of past technology investments in workforce and learning management and identify the future strategic fit toward a closely aligned, integrated approach. Build integrated WLM capabilities incrementally.
Combine your WLM strategy with your HR BPO strategy.
If your organization is currently considering HR BPO or is an early adopter, this is an opportunity to establish a WLM solution with minimal or no additional cash investment. Todays leading providers offer WLM functionality within their platforms. Some are building their own proprietary tools, whereas others are offering best-ofbreed solutions integrated with their own platform. Ensure the BPO supplier can establish an effective program that provides you with the tools and support you need to manage these solutions.
Adopting a WLM solution will not cure bad internal processes. Start by getting executive sponsorship that will spearhead the transformation process. Then begin due diligence immediately. Best-practice methodologies from HR service providers must be combined with technology and business transformation expertise. A WLM strategy should consider where an organization would like to be in several years. Although the integrated WLM approach is still in the development stage, it provides a great opportunity to create a leadership position for workforce excellence. [HRO]
The growth in the contingent portion of your workforce has spawned its own breed of provider, Contingent Workforce Outsourcing, or CWO.
Among the more startling developments at 2005s NY HR Week/HRO World Conferenceother than the huge 3,700-person crowdwas the advent of a new species of provider. This new life form calls itself several names. Often these names tout some special competitive advantage or differentiator. But for the sake of verbal economyplus the fact that we are completely allergic to providers who claim to be one-of- a-kind without any peer or competitorwe call this new evolved form of HRO life contingent workforce outsourcing or CWO.
In case this new handle throws you, here is our definition of a bona fide CWO provider. It denotes a provider who facilitates clients ability to aggregate and track spending, billing, and performance of more than one type of non-W-2 worker. This includes traditional temps plus independent contractors and consultants.
THE CALIFORNIA TAXABLE INCOME TRAP
As it turns out, the problem of tracking all flavors of contingent workers has been plaguing larger organizations for decades. But because consultants, temps, and contractors are never hired centrally, no one single point of accountability existed. In the 1980s and 1990s, several Silicon Valley giants such as Sun Microsystems, Silicon Graphics, Intel, AMD, and Apple were haunted by the California State Franchise Tax Board (FTB). Knowing that these big firms hired boatloads of contractors and that these 1099-type workers seem to have a particularly hard time filing tax returns, the California FTB assigned a SWAT team of staffers to involuntarily reclassify 1099s as W-2 workers and slap the big Valley employers with back payroll tax bills for the 1099ers. Oftentimes during this two-decade period, these big employers would have multiple tax bills for multiple millions of dollars, all assessed against their will. There were many cases where, even when the contractors paid their own taxes on time, the employers were forced to pay as well. Double the taxation, double the fun.
In response to clients cries for a quick fix, in the mid 1980s, temporary services developed a crude form of 1099 compliance called payrolling. It simply involved putting a would-be contractor on the W-2 payroll of a temp service. That would ensure that the workers payroll taxes were paid. The client would avoid getting whacked with one of those surprise payroll tax assessments. And the temp service would make a nice little markup on a highly-paid worker that the temp service did not even have to recruit. Many times, a large employer would simply ban the hiring of contractors or consultants unless they were payrolled.
Ultimately, however, independent contractors and consultants got wise to this taxable-income trap. Consultants simply refused to be payrolled because it took away their precious ability to write off expenses and lower their taxable income basis. Many of these wily contractors gave clients a draconian choice: Increase their base rate 25 to 35 percent in order to offset the negative earnings impact of payrolling, or pay the normal rate and let the contractor file his or her own 1099-type tax return. Clients relented. They needed these talented contractors. Just like that, the temp service payrolling solution became a tool too small for the job.
OUTSOURCERS PIONEER ANOTHER NICHE
Enter the CWO guys. Among the brave pioneers in this field, a standout is Gary Nelson and his firm ABE. Started in the mid 1990s, ABEs innovation was to run 1099ers through a 1099-compliance screen. Based on the IRSs 20-question test, ABEs screening service gave employers a way to test their contractors compliance. If the contractors passed the test, they stayed independent. If they failed, Nelson ran them through his W-2 payrolling service, charging a small markup over the wage and mandatory payroll tax. Nelson, owner of San Francisco-based Nelson Personnel, a $230 million temp service group, knew this was a nice little fix but less than the whole answer. He knew they needed a technology platform that would allow larger employers to track 1099ers, temps from several providers, and other contractors that seemed to breed like rabbits throughout the organization. His ultimate solution is called WorkforceLogic, and it enters a field that is brimming with potential and potential competitors.
The numbers tell the tale of the size of the CWO market. According to the Bureau of Labor Statistics (BLS), nearly 10 percent of the U.S. workforce can be classified as contingent. The BLS predicts that the contingent growth will outpace FTE growth by a 3:1 ratio over the next 10 years, and that by 2010, nearly 25 percent of the U.S. workforce will be contingent or part-time.
In fact, the fastest growing segment of the contingent workers is returning retirees. As the Baby Boomers continue to retire in mass waves, the BLS predicts nearly 50 percent of those workers will return to the workforce within three years of their retirement in an independent, temporary, or part-time capacity.
Employers who now use CWO warn HRO Today to avoid the assumption that the contingent workforce is primarily comprised of temps from traditional temporary service agencies such as Adecco, Manpower, and Kelly. In fact, this type of temporary worker represents less than 25 percent of the contingent workforce. Independent contractors represent nearly 60 percent. What is more, the independent contractor segment is growing faster than any other segment of the contingent workforce. Independent contractors are also more highly paid than traditional temps. On average, independent contractors or consultants working in large company environments earn double their temporary counterparts wages, and pose the greatest 1099 compliance risk for both payroll tax liabilities and Sarbanes- Oxley type violations.
WHY CWO? WHY NOW?
The business trends behind the up-tick in contingent work are inexorable. Retired employees with valuable skills are now hanging out a shingle. Employees who want a flexible lifestyle prefer to work as consultants. Two of the largest and most-talented segments of the U.S. workforce, retiring baby boomers and Generation Xers, are foregoing full-time W-2 jobs and opting to work as contingents. In addition, multi-earner families where one partner has company-funded employee benefits make it possible for the other partner to work freelance. With business expenses fully deductible, a 1099er can live life at a much lower effective tax rate than her W-2 counterpart. But by hiring this valuable and cost-effective source of talent, managers are diving into a domain that is much harder to run than if all the workers are W-2ers.
CWO is a toolkit that has evolved to handle the non-W-2 business wave. As contingent workers continue to grow at a double-digit annual pace as a percentage of the overall workforce, companies are feeling an ever greater need to have tools to manage this quickly-growing phenomenon. Capturing and managing data that allows managers to see and control their entire contingent and full-time workforces is a complex task that is now possible with contingent workforce management or CWO tools.
LEADING CWO* PROVIDERS
PrO Unlimited; prounlimited.com
*This includes managing traditional temporaries, independent contractors, service
workers, individual and small consulting agencies, and project-based workers.
Grainger needed an efficient way of accessing a consistent supply of high-quality staff. The solution? Recruitment Process Outsourcing.
W.W. Grainger was growing rapidly last year, chalking up record sales of $5 billion (an increase of 8 percent) and earnings per share of $3.13 (an increase of 27 percent). Its employee base was also growing rapidly immersed in the first year of an expansion program designed to improve customer service, Grainger was aggressively adding people to serve its 1.5 million business customers. The only problem with this stellar growth was the capacity of the companys staffing delivery model, which was struggling to fill nearly 600 jobs across 400 U.S. branches and 9 distribution centers within a 12-week timeframe.
TalentTrack Secures New Long Term Contract To Support Owens Corning HOMExperts' National Recruitment Efforts
TalentTrack announced that it has won a multiple year contract to provide recruitment process outsourcing services to Owens Corning HOMExperts nationwide.
Under the terms of the contract, TalentTrack will provide complete end-to-end recruitment outsourcing services to approximately 13 geographic markets. The total number of placements is anticipated to exceed 1400 technicians per year. According to Mark Melfi, Executive Vice President of TalentTrack, "We have a tremendous partner in Owens Corning HOMExperts. We look forward to helping them achieve their aggressive growth and financial business goals through hiring top talent into their organization in a timely and cost effective manner."
– Strong Execution of Goals Drives Companys Success –
Kenexa, a provider of talent acquisition and retention solutions, today announced that the National Football League (NFL) has implemented Kenexa Recruiter, Kenexa's Web-based enterprise applicant tracking solution. Kenexa Recruiter will streamline recruiting for the NFL's New York City headquarters as well as NFL Films in Mt. Laurel, N.J., and the NFL Network in Los Angeles.< ?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>
Jessica Kushner, Human Resources Generalist at the National Football League said, "Prior to implementing Kenexa Recruiter, we reviewed several vendors' solutions to determine the one best equipped to help us eliminate manual processes and streamline our recruiting efforts. Kenexa Recruiter came out on top for its ease-of-use, deep functionality and Kenexa's commitment to customer service."
WAYNE, Pa. (May 16, 2005) — Kenexa, a provider of talentacquisition and retention solutions, today announced that the NationalFootball League (NFL) has implemented Kenexa Recruiter, Kenexa’sWeb-based enterprise applicant tracking solution. Kenexa Recruiter willstreamline recruiting for the NFL’s New York City headquarters as wellas NFL Films in Mt. Laurel, N.J., and the NFL Network in Los Angeles.
Jessica Kushner, Human Resources Generalist at the National FootballLeague said, “Prior to implementing Kenexa Recruiter, we reviewedseveral vendors’ solutions to determine the one best equipped to helpus eliminate manual processes and streamline our recruiting efforts.Kenexa Recruiter came out on top for its ease-of-use, deepfunctionality and Kenexa’s commitment to customer service.”
Kushner added, “Kenexa provides the National Football League with anew, easily accessible resource to efficiently reach a broader, morediverse audience of applicants through NFL.com. It will help us tobetter identify those applicants who meet our basic job requirements,and give those applicants an opportunity to learn more about openpositions at the League Office, NFL Films and NFL Network.”
EL SEGUNDO, Calif., May 11 /PRNewswire-FirstCall/ — Computer Sciences Corporation
Underthe terms of the agreement, CSC will provide administrative, financial,human resources and procurement support services to approximately20,000 NASA employees, applicants, contractors and university partners.
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The time to think about the future is now.
Hype or dire prediction, HR professionals everywhere should always be on the lookout for state-of-the-art opportunities to find great employees not only for the HR department but also for the entire organization. You may recall a reference in previous columns to HR Management in the Knowledge Economy and its identification of the four major roles of the HR professional. Here I will ask you to keep two rolesrelationship builder and rapid deployment specialistin mind.
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Robert J. Grossman, a professor at Marist College (a bastion of quantitative research), published an article in the March 2005 issue of HR Magazine that separates the hype from the dire predictions of the looming disparity between the demand and supply of the U.S. workforce. The research concludes that the media hype asserting that by 2012 there will be 10 million more jobs than people to fill them should not be a concern. Although he does conclude with a hypothesis that has already been haunting usdo we have enough talent for an increasingly demanding workplace? The answer is a resounding NO!
Do you recall how, during the late 1990s, people were hired by all kinds of fast-growth firms just because we need bodies? I do. I witnessed unsolicited resumes without interviews turned into hires just because they need to be hired now. I also recall organizations unable to get products to market because they could not find people with the skills required. After reading Grossmans article and reviewing the Bureau of Labor Statistics research upon which that article heavily relied, I am convinced that the talent pool respite we have had of late is sooner or later going to be replaced by a long brutal global war for talent. There is already pressure on the lowest level jobs.
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So what does this have to do with HRO? As a relationship builder and rapid deployment specialist, the HR professional should be anticipating the scarcity of talentnot only in HR but also in the rest of the organization. Ongoing review of core versus commoditized activities should become part of the organizations DNA. External alternative sources to accomplish tasks, activities, and even entire functions should be on your radar screen so that they are continuously being evaluated in light of your organizations current and anticipated demands. Internally, you need to work closely with various key players to determine the climate and readiness for moving one or more additional activities to outside providers (or alternatively, determining if any should be brought back in-house.)
To test any and all assumptions, HR needs to be ever vigilant for opportunities to do the following:
* Enhance current service levels and relationships
*Identify additional potential avenues, including offshoring, for further exploration
*Ensure comprehensive due diligence and demonstrate your state-of-the-art knowledge about todays products and services
*Build a familiarity of best practices
*Identify the leading buyers and players (as well as those less so) in this ever-changing marketplace to determine who is doing what. Compare this years leading deals with last years. Recall last years players and major buyers. How are those deals doing? What has been learned? Are there any warning signs?
If we don’t find out what is and what isnt working, we are more likely to repeat the problems of these earlier adaptersbuyers and providers alike. If you spent some time at the 2005 HRO World conference in
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