LINCOLNSHIRE, Ill. –(Business Wire)– Feb. 4, 2005 — Hewitt Associates (NYSE: HEW), a global human resources services firm, announced today it has signed a contract with The Thomson Corporation (NYSE: TOC; TSX: TOC), a global integrated information solutions provider, to provide HR business process outsourcing (BPO) services.
Under a five-year agreement, Hewitt will provide certain HR BPO services in the areas of benefits, compensation, payroll, learning and development and recruiting for Thomson’s 28,000 employees in the United States
Telecom support company ManTech streamlines their recruitment process.
When telecommunications support company ManTech decided to streamline their recruitment, they realized the first thing they needed was a clearer communication process.
As a government contractor providing innovative technologies and solutions for national security programs and supporting the advanced telecommunications systems that are used in Operation Iraqi Freedom and in other parts of the world, ManTech International Corporation recruits professionals whose qualifications range from PhDs to ex-military intelligence. ManTech has developed a secure, collaborative communications system for the Department of Homeland Security and provides extensive, advanced information technology support to the National Security Agency and other intelligence community customers.
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NO CLEAR COMMUNICATION
With more than 5,500 employees in 280 locations and 30- plus countries worldwide, ManTech decided in 2000 to streamline the recruiting efforts of our 17 business units with a Web-based system. Prior to this, our recruiting efforts were managed separately by individual units. Our affirmative action plans were handled by local HR departments, and all documentation was paper-based and filed separately at each site. Additionally, we are required by the federal government to collect data for reporting Employee Equal Opportunity (EEO) and for complying with the U.S. Department of Labors Office of Federal Contract Compliance Programs (OFCCP). With such a fragmented system, the auditing process would often take weeks. In addition to meeting EEO and OFCCP objectives, we also sought to simplify our processes, reduce the cost and time associated with our complex recruiting requirements, and gain a competitive advantage by hiring and retaining the most qualified candidates.
After a thorough evaluation process, we selected BrassRings Web-based recruiting system, < ?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />
A DIRECT LINE TO SUCCESS
ManTech has quickly and successfully completed five government audits and conducted more than six EEO/OFCCP surveys during the past three years. Having a single data collection point has reduced the hourly requirement for completing each of the surveys by more than a week. As a condition of having federal contracts, the OFCCP requires a contractor to engage in a self-analysis to discover any barriers to equal employment opportunity. Prior to the implementation of the BrassRing system, only 20 percent of all ManTech applicants volunteered gender and ethnicity information. Today, because of our improved application process, more than 80 percent of all job applicants self-identify, giving us fast access to the information we need to comply with federal government requirements and virtually eliminating the time and cost once spent compiling that information on paper. With the new Web-based system, ManTech is also able to check requisition statuses daily, fill open positions quickly, and determine the dollar return on each position filled. The system was recently put to the test when the company needed to hire a large number of people quickly due to the launch of a new business unit. We held a number of job fairs where all hired applicants required high-level security processing, which meant that each interview and job offer needed to be passed through the appropriate security channels. Using our new system, ManTech was able to screen applicants and present signed offer letters to desirable candidates in less than two hours. Our outsourcing relationship has been beneficial and has enabled us to not only compete for talent more effectively, but also save time and money while doing it. [HROT]
Gas and electric company Cinergy makes an HRO power play
When Ohio-based electric and gas company Cinergy started expanding into new areas of opportunity, they knew it was going to take a lot of energy especially on the part of the department that was staffing the company. By teaming with an HRO provider for staffing and recruiting administration, Cinergys HR department found the power to push their Recruitment strategy to a whole new level.
When Bharat Kannan first called Cinergys Steve Allen, the companys general manager of organizational development and staffing strategies, in May 2004 to pitch the idea of outsourcing Cinergys employment recruitment and staffing services, Allens less-than-receptive response suggested a long-shot opportunity, at best. But, Kannan, an articulate, passionate proponent of human resources outsourcing, is a persistent fellow. Steve understood the value proposition, but did not seem overly interested, recalls Kannan, a senior sales consultant at Aon HR Outsourcing. He didnt think the strategy presented a good cultural or business alignment. But, he agreed to meet with me in Cincinnati to elaborate on my position.
Cincinnati, Ohio, is headquarters to Cinergy Corp., a public utility serving 1.5 million electric customers and 500,000 gas customers in Ohio, Indiana, and Kentucky. Nearly 7,700 employees work at Cinergy, a fast-growing Fortune 500 company that recently has spread its wings into 15 other states to market non-traditional utility services. The expansion had strained the companys recruitment and staffing functions, and Allen was open to other ideas. We were just keeping our heads above water in the current situation, he says.
In his meeting with Kannan, Allen explained that he was satisfied with the companys staffing and recruitment department, but felt the personnel were tied up in administrative tasks and detail-oriented responsibilities. We had a traditional model, but as we looked out over the horizon at our future strategic needs in terms of staffing and recruitment, we knew we needed more efficient processes that would not require adding more people, Allen explains. When Bharat started talking about the process improvements Aon could offer, a light went on.
Kannan, who ended up making five trips to Cincinnati, recalls the deal clincher as a single sentence. I told Steve that Aon wasnt interested in taking over the strategy associated with recruiting and staffing, just the operational and administrative transactions, he says. The strategythe institutional knowledgeis what you have and I dont, I said. Why should your people be pushing paper when there is a better way for HR to operate?
Six months after his initial telephone call to Allen, Kannan closed the sale. In November 2004, Cinergy signed a three-year agreement to outsource the vast majority of its hiring needs to Aon. Our ultimate goal with the outsourcing strategy can be summed up in two wordsbetter hires, says Allen. We wanted to broaden the quality of the pool of applicants for our staffing needs, and determined that an external centralized staffing function for sourcing and selection best meets this need.
Cinergy is not fixing a broken staffing and recruitment model, says Kannan. The truth is that Cinergy had a good staffing and recruitment department, he explains. What they didnt have was standardization, access to high-end technology, and the breadth and depth needed to access candidate pools. They were doing a good job, but they wanted to do an even better one, particularly with respect to diversity.
Cinergy is the second major power utility to engage in a business process outsourcing strategy in recent months. In May 2005, Texas utility TXU announced a 10-year, $3.5-billion outsourcing arrangement with provider CapGemini Energy covering HR, IT, finance and accounting, and other business processes. While the Cinergy-Aon agreement only covers a single aspect of HR, Cinergy is no stranger to outsourcing. The utilitys 401(k) benefits processing and all medical and dental claim processes are handled by outsourcing service providers.
Cinergys Chief Administration Officer Fred Newton points out that these partnerships all have one ultimate goal: We are focusing on people, processes, and systems. Our objective is to develop our people, improve our processes, and build our systems to meet the strategic needs of Cinergy.
Like many companies that turn to outsourcing experts to administer internal processes, Cinergy was challenged by the need to upgrade technology to continue to provide high-touch recruiting and staffing services to business unit managers. For us to buy the technology we needed was an extremely expensive proposition, Allen says. A service provider like Aon, on the other hand, which represents the needs of many clients, can purchase state-of-the-art technology and leverage the cost by deploying it on behalf of these clients.
Aon HR Outsourcing boasts several major client relationships, including Daimler- Chrysler, AT&T, Verizon, and hundreds of others. The firm uses a centralized recruitment model that employs HR shared-service centers to do the most administrative and repetitive transactions, like scheduling job candidates for interviews and posting positions to job boards, explains Kannan. Such tasks, when standardized under one roof and conducted by experts in that individual area, produce superior cost efficiencies. Our service centers support all our clients, leveraging technology enhancements as they come along. While it would be financially questionable for Cinergy or other clients to invest more than a million dollars for a state-of-theart document imaging system or applicant tracking software, were able to leverage the revenue coming in from all our clients to buy the technology they need but may be leery of buying on their own.
While Cinergy would be able to tap world-class recruitment and staffing technology, cost savings were not the main driver in the companys decision to outsource. ROI was definitely part of the criteria (for outsourcing), and we expect a 10 percent return on the strategy within the second year, explains Allen. But our decision was based more on the opportunity to improve quality as we looked strategically into future years at our staffing needs. Weve grown remarkably in recent years and continue to grow fast. We want to be sure that, as we grow, we hire only the best people. For example, we have a power and gas trading and marketing organization and want to improve the quality of the candidates we bring in. Aon gives us that ability.
Cinergy is no different than other clients when it comes to realizing that HR outsourcing is more than about cost savings, maintains Gary Budzinski, president of Aon HR Outsourcing. Companies that embrace the philosophy of benchmarking their future needs against current infrastructure will achieve greater long-term success in attracting and retaining top-quality talent, Budzinski says. What impressed me most with Cinergy was their internal handle on what could be culturally accepted from a change perspective with respect to outsourcing. Rather than take a cost-reduction focus, they allowed business process improvement and cultural acceptance sell the engagement. We continually strive to bring these sorts of forward-thinking clients into our family.
As Allen became more comfortable with the idea of outsourcing recruitment and staffing, he brought Aon in to make a presentation to the companys user council, which is comprised of business unit heads, each with ongoing recruitment and staffing needs. I wanted them to be comfortable with the idea as well, Allen explains. We took the council through the process, showing them how they would benefit by the ability to mine a greater breadth and depth of talent. This was important because we had grown from a tri-state utility into a company that, through various small acquisitions and growth initiatives, now provides services in 18 states. Our traditional staffing and recruiting methods were becoming out of date and the user council knew that.
I remember Steve brought up the fact that the [recruitment and staffing] department might be doing fine with 400 hires, but with the company growing at the rate it was, it would find it would be difficult to support more than 500 hires. This would likely require the hiring of more staff to administer this need, Kannan says. He asked, What would happen then to this staff if the company needed to ramp down the number of its hires? Would the staff no longer be busy? Kannan notes that Cinergy was also interested in being involved in more cuttingedge technology, for example digitizing candidate files in order to search a greater populace of diverse candidates.
Allen explained to the user council both the cost savings and quality aspects of outsourcing. Aon would leverage the best practices of each of its clients for the benefit of other clients. Meanwhile, Aons variable pricing model, which is based on costs per hire and is not a fixed fee, would ebb and flow with the companys growth. You hire 100 people in October, you pay one amount; you hire 50 people in September, you pay a lesser amount, Kannan explains. There are no minimum requirements.
The council soon became as comfortable as Allen with the promise of outsourcing, which offers the ability to find a diverse pool of candidates with the skills we need and the talents we require as we continue to grow and engage in related businesses, Allen asserts. People are the essence of this company and we want the best. Now, we had a more opportune methodology to find the best.
More effective human capital is the essential ingredient for companies in achieving competitive advantage, says Budzinski. We help companies achieve superior, tangible business results by enhancing the performance of their human resources.
Cinergy hasnt outsourced recruitment and staffing as much as the administrative and operational aspects of these processes. Cinergy continues to deal with issues like candidate competencies, behavior, and workforce makeupthe pure, strategic part of recruitment and staffing, explains Kannan. HR continues to go to the heads of commercial business units and ask questions like Where are you headed, human capital-wise, in the next 18 months? or What will your employment needs be post-acquisition? Are you considering more MBA types? Will you have more volume processing around recent college graduates? The difference is that we pick up from there. We do things like digitizing thousands of files going on Internet job boards, keeping in line with ongoing compliance issues and other legalities surrounding recruitment, scheduling interviews with job candidates, and so on.
The basic steps involved in recruitment remain much the same, whether a company outsources or retains traditional internal processes. A Cinergy business manager identifies a staffing need and creates a job requisition that must then be approved by hiring managers for financial purposes. Once approved, needed job skills are identified and individuals meeting these qualities are sought. What we do is conduct the search for these candidates, screen them using standardized behavioral interview techniques and then test them, based on guidelines established by the Edison Electric Institute for the energy industry, Kannan says. After the testing phase, we schedule the interviewsa time-intensive process known to cause much duress in HR organizations. We take the pain out of the process. We also handle the final step notification of job acceptance or decline.
While each of the steps typically is taken by a single person at a traditional executive search firm, the recruiting at Aon is broken into different segments. We have experts in testing focusing on that function, and experts in interviewing specializing in that, Kannan notes. Each of these people works with several clients and is rigorously trained in that clients program. This divisional labor strategy gives us great flexibility in bringing on new clients.
Cinergys relationship with Aon is still burgeoning. At present, Aon personnel are meeting with business managers throughout Cinergy to talk about future needs and how they can best service those needs. Both companies also are in the process of synching up their recruitment technology systems. Im very, very involved with our IT people right now, Allen laughs. The live date is February 15, 2005.
Cinergy is also in the process of establishing a governance system, whereby Aon executives and Cinergy HR staff meet on a quarterly basis with Cinergys user council to assess performance and address small problems before they erupt into major ones. We expect a few bumps in the road but nothing that cant be ironed out easily, says Allen, a complete HRO convert now.
Although a newly-established relationship, both parties have the energy and drive to make it a powerful oneand one that will do well by Cinergys employees. Allen sums up, Aon will just be able to do a lot better sourcing of job candidates than we did previously.
Big Brother is watching–HRO users and providers beware.
As it turns out, Big Brother is watchingHRO users and providers beware.
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Federal privacy law is expanding with the Security Rule under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the privacy and civil liberties procedures established under the Intelligence Reform and Terrorism Prevention Act of 2004 (IRATPA) one for electronic health information, the other for virtually all personal information that could be discovered in homeland security and anti-terrorism investigations. For HRO customers, employees, and service providers, each law will impose new obligations and safeguards.
HIPAA SECURITY RULE
The HIPAA Security Rule reinforces the Transactions Rule and the Privacy Rule, which focus on the privacy of protected health information. The HIPAA Security Rule takes effect on April 21, 2005, for all covered entities except small health plans. In the private sector, all private health plans, healthcare providers, and healthcare clearinghouses must assure their customers that the integrity, confidentiality, and availability of electronic health information that they collect, maintain, use, or transmit will be protected. The goal is to ensure the integrity and confidentiality of the information and to protect against any reasonably anticipated threat or hazards to security or integrity of the information and unauthorized use or disclosure of the information. The HIPAA Security Rule will be an additional compliance requirement for HRO deals. There is no specific federal security standard, but only one that adopts reasonable and appropriate precautions. The enterprise customer cannot simply dump the HIPAA compliance obligation upon the service provider. As a best practice, HRO customers and their providers should review the design and implementation of the processes involved in compliance, and establish periodic reviews to deal with changes that might be needed. The costs of such periodic changes should be discussed as well.
PRIVACY AND CIVIL LIBERTIES
Under IRATPA, executive departments and agencies must appoint a bevy of new privacy and civil liberties officers to protect against abuses of constitutional and statutory rights. Within the National Intelligence Department, a Civil Liberties Protection Officer, reporting directly to the Director of National Intelligence, will be appointed to meet constitutional, technological, and statutory mandates. To protect constitutional freedoms, this officer will be responsible for compliance, review, and assessment of complaints and other information indicating possible abuses of civil liberties and privacy in the administration of national intelligence programs. As a counterbalance to the increasing centralization of powers in the war on terrorism, a Privacy and Civil Liberties Oversight Board will be established within the Executive Office of the President as part of an enhanced system of checks and balances to protect the precious liberties that are vital to our way of life. In addition, Congress recommended each executive department or federal agency with law enforcement or anti-terrorism functions designate a privacy and civil liberties officer.
PRIVATE SECURITY OFFICERS
In the private sector, enterprises that either hire their own private security officers or rely upon service providers to do so will now be subject to new regulation. A private security officer is an individual other than an employee of a Federal, State, or local government, whose primary duty is to perform security services, full or part time, for consideration, whether armed or unarmed and in uniform or plain clothes. IRATPA authorizes prospective employers, after getting written consent from the prospective employee, to submit fingerprints for an authorized criminal history record information check for prospective private security officers. The employer must disclose the results to the prospective employee.
CRIMINAL HISTORY CHECKS
The new law opens the door to new regulation of access to criminal records in support of lawful employment beyond private security officers. The IRATPA law calls on the Attorney General to recommend to Congress any legislative improvements for the conduct of criminal history record checks for non-criminal justice purposes. As part of this process, commercially available databases will be reviewed as possible supplements to government records. Privacy rights will need further consideration, based on principles of employee consent, access to the records used if employment was denied, the disposition of fingerprint submissions after records are searched, an appeal mechanism, and penalties for misuse of the information. Employerswhether or not they outsource any HR administrative functionshould review and update their employee handbooks and the rules applicable to third parties having access to HR information.
The top recruitment process outsourcing companies.
When we started pulling together the first-ever HRO Today list of the Top 13 Recruitment Process Outsourcing (RPO) providers, we thought the challenge would be in gathering the data. The true challenge, we discovered, was defining what data to gather. What services make up a true, end-to-end RPO offering? What is the difference between an RPO provider and a staffing or placement company that serves as the primary recruiting arm for a client? In pulling together this special section on recruitment and RPOs, we surveyed 17 major providers in the staffing/RPO field and their clientsin-house HR executives who bought their services. Heres what we discovered.
RPO IS STILL LARGELY UNDEFINED: DOES SCOPE MATTER MORE THAN VOLUME?
One of the most common constructive comments (i.e., criticisms) of the industry as a whole is that RPO is still not clearly defined. There are two schools of thought. For the first school, providers and buyers alike, RPO is defined by the volume of recruiting services a provider does for a company, rather than the type of the placements. If a provider is handling the majority of the recruitment and placement for your company (volume), then they consider that the recruitment process is, in effect, outsourced.
For the second school, RPO is a scope-based identifiersignifying the number and variety of recruitment services a provider offers: Do they source candidates, plus screen, plus handle initial interviews, plus work with hiring managers on job descriptions and needs, plus consult on job offers and on-boarding? In the volume versus scope argument, HRO Today counts itself among the disciples of scope. In identifying which are the true RPO providers, scope (quality) matters more than volume (quantity).
IF SCOPE COUNTS MORE, QUALITY COUNTS MOST
Pinning down the rapidly evolving RPO market is a challengeas both buyers and providers struggle with definitions of what recruitment entails. But a common theme among all respondents was that quality counts. Again, the definition of quality varied: to some, it meant improving the speed and cost of the recruitment function; to others, it meant offering a larger variety of services and more variety in sourcing. But all agreed that RPO should improve time to hire, increase the quality of the candidate pool, and improve EEO compliance. And as youll see in our RPO Users Weigh In section on page 32, quality was ranked as the most important requirement for an RPO provider.
RECRUITMENT AND RPO ARE TOP PRIORITIES
Another interesting result of the survey was that despite the current jobless recovery, HR departments are worrying about upcoming labor shortages and the impact that will have on their recruitment function. Almost 75 percent of in-house HR managers surveyed reported that they were extremely or somewhat worried about the projected skilled-labor shortage for the United States. For those taking the survey, RPO is expected to partially solve this problem.
THE HOW TOs OF RPO
For help in defining RPO, identifying criteria for providers, and for some advice on making the transition to outsourced recruitment, we contacted the newly forming RPO Association (RPOA). The RPOA is in the process of being founded by providers and HR consultants in order to educate the market on RPO and establish common metrics and comparative information for RPO. Check out the sidebar Is Your RPO Provider Really Providing All You Need? to see their preliminary list of criteria for RPO providers. For more information on RPOA certification and updates to their mission statements and guidelines, visit www.rpoassociation.org.
REQUIRED READING FOR RECRUITMENT AND RPO RANKINGS
So as you dive into our special recruitment and staffing feature, remember that like many of the people who have already taken the RPO plunge, one size may not fit all. Thats why this special section is set up to provide you with a variety of resources: a broad listing of recruitment and staffing providers (Recruitment Resource Guide); a more in-depth listing of providers specializing in RPO (The Lucky Thirteen); and feedback from in-house HR who have gone the RPO route (RPO Users Weigh In).
As the jobless recovery finally drops the less, companies are looking for new approaches to recruitment.
In the 1956 William Whyte Jr. classic The Organization Man, there was only one way to work: for the same company, forever. By 1991, when Paul Leinberger and Bruce Tucker wrote The New Individualists: The Generation After The Organization Man, the model had changed: rapidly changing markets forced individuals to have several careers over a lifetime. And by the time Bruce Tulgan wrote Winning The Talent Wars in 2001, labor markets had become, in his words, hightech, high-speed, knowledge-based and superfluid. Tulgan exhorted us to staff the work, not the jobs, create as many career paths as you have people, and, above all, outsource recruiting. If we ignore Tulgans advice, we do so at our own peril.
Re-engineering recruiting has been a corporate and government obsession since America got its first whiff of staffing shortages during the dot-com days. Employers had a temporary reprieve from the manpower drought during the most recent recession. But now the war for talent is rearing its ugly head again. And with the population leveling out and the economy continuing to expand, there is no end to the talent shortfalls in sight. Get ready for staffing scarcity for the rest of your HR career.
So how can an HR manager find good people in a rapidly changing market when the nature of the work and jobs are rapidly changing too? This issue of HRO Today focuses on the HRO response to this market phenomenon: recruitment process outsourcing, or RPO. At the April 2004 HRO World Conference, there were dozens of exhibiting companies with RPO solutions. Five different speakers talked about their experience. Kelloggs Cydney Kilduff, an outspoken booster of the RPO phenomenon, talked about how she partners with her provider to gain the bandwidth necessary to manage the changing nature of her work needs while filling the jobs.
But what is RPO? Isnt it just another one of our acronym-obsessed magazine labels for the same old thing? While we admit that we have a certain tendency to create an acronym for everything (anyone for a QLBQuick Lunch Break?), we insist that RPO is the new flavor of recruiting. Face facts, folks. In order to get the work done that needs to be done, you will continue to need people. But the job of recruiting is simply moving too fast to handle it all in-house. Dont try this at home; this is a job for professionals.
The technology and breadth of job-market coverage required today to handle the recruiting task is simply amazing. HRO Today has spoken with two multinational organizations (covering 500 geographic job markets) that have each catalogued more than 12,000 different types of worka number that is increasing by a rate of 1,000 per yearrequiring 10,000 different types of employee skillsets. To handle the recruiting needs of either of these organizations in-house would require a team of recruiters larger than most national armies. Consider the extreme case of the Transportation Security Administration (TSA). They had to hire 67,000 people in 9 months to be deployed in 429 airports at 1,750 departure points. Only by striking a comprehensive RPO partnership with CPS and Accenture HR Services, could the TSA have had a prayer of completing its mission.
RPO is a continuum of work-definition and jobfilling services that goes beyond the traditional filla- spec recruiting service. At the front end, it is helping define the work needs, translating those needs into requests for jobs, and designing a career path for each individual (a departure from the one-career-pathfits- all model). On the market side, RPO helps establish market rates for labor, market-by-market (a change from the employer-set wage rate model). In filling jobs, RPO goes beyond the traditional screen-and-pass-along model to psychological profiling and behavior-based interviewing methodologies. And in keeping jobs filled, RPO includes retention, reassignment, and replacementa step usually skipped by traditional recruiting firms.
RPO is the future of recruiting and staffing and an essential building block in any organizations HRO strategy. We are happy to feature it in this issue of HRO Today.
The first-hand pros and cons of recruitment process outsourcing.
We asked clients of RPO providers (Managers, Directors, and VPs of HR for a variety of companies) to tell us what they look for in a provider, and what they see as current recruitment trends. Here are their responses:
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