TBO providers must help their multinational clients perform a strategic balancing act as they confront effects of the economic downturn that differ by locale.
By Jeff Miller
Since the onset of the global recession more than a year ago, the challenges facing multinational companies have never seemed more complex. Although cost concerns have outweighed all others no organization can afford to rampantly reduce headcount, salaries, and benefits—actions that could produce a major disadvantage once the economy turns around.
In this unstable financial environment, many organizations have struggled to maintain a strategic balance between corporate fiscal responsibilities and employee relation concerns. And although we see signs of recovery in today’s markets, it is clear that there is still a long way to go in terms of realigning and redefining the global benefits delivery model.
Even before the downturn, multinationals were interested in a new model for the administration of their HR and benefit programs, but found it difficult to implement. While they knew there was tremendous value in the seamless delivery of services across benefit domains and international borders, the process itself was time consuming and often lacked infrastructure. Although the advantages of implementation remain, the effects of the recession have raised the stakes for outsourcers to better understand how to deliver a global solution to meet the needs of their clients.
The recession has altered the playing field. According to Mercer’s recent survey of global HR leaders that was released as part of its Leading Through Unprecedented Times initiative, organizations face more fragmented market realities than before. In the U.S., the UK, and Europe, for example, diminished consumer demand has made it difficult for companies to grow or, in many cases, survive. For the survivors, this means significantly less money for sustaining salary increases, incentives, training, and benefits, making it difficult to maintain the workforce levels they will need once the market recovers.
In general, events of the past year point to the need for outsourcers to be more responsive to the strategic needs of multinational companies when it comes to managing their benefit programs. To the extent that companies are changing benefits on a regional level—eliminating the match on their 401(k) programs, reducing training and development opportunities, altering compensation and incentive structures, or changing health benefits—outsourcers must work closely with multinationals to provide strong, compelling employee communications and promote self-service tools. And as more legislative and regulatory changes are instituted in the various locales, outsourcers must be able to ensure compliance.
Lessons and Challenges
If economies and organizations are in flux to an unprecedented extent, their outsourcing partners must provide high levels of delivery. For example, for our Total Benefits Outsourcing (TBO) business model, we were able to create a template for meeting global service delivery challenge before the recession took hold, thanks to a joint survey conducted with Harvard Business Publishing. Based on nearly 60 interviews with senior-level HR executives, we learned what they wanted from their global benefits outsourcers and have found their responses valuable as we navigate through the recession.
We learned that 45 percent of HR executives surveyed had taken on global responsibilities within the last several years, yet many admitted that they still spend the majority of their time on local and regional issues. In addition, many benefits administration processes remain a local responsibility, with outsourced transactions varying widely by region due to regulatory differences. Administration amounts to a patchwork of local systems and vendors around the world, often with multiple vendors in each region.
At the same time, systems remain largely decentralized, making it difficult to accurately pinpoint the number of employees in each location, the benefits offered in each country, and the total cost of these benefits. While capturing these details is critical, it continues to be a challenge.
We have a strong sense of what multinational companies need in terms of a global service delivery model for their HR and benefit programs. The challenge for the outsourcing industry is to ramp up the evolution of its systems to meet those needs, and to deal with the complications of a global recession that varies from market to market. While the financial environment has changed the landscape for outsourcers and global organizations alike, what hasn’t changed is that our TBO solution stood tall as a strategy for multinational success. It promises efficient management of global benefits and ensures a degree of workforce competitiveness and stability. At this unique moment for our industry, it is our responsibility to execute this solution better than ever.
Jeff Miller is president of Mercer’s outsourcing business. He can be reached at firstname.lastname@example.org.