BenefitsEngaged Workforce

CEO’s Corner:What’s with the 73 Percent?

HRO Today’s CEO find that despite all the whining among big global buyers, they are surprisingly happy about their outsourced vendors.

by Elliot Clark

Seventy-three percent. I was shocked. I looked at the statistical analysis a second time. It made sense, but it did not. Seventy-three percent is a pretty interesting number.

If I batted .730, I would be the greatest baseball player ever. A national leader such as the U.S. president with a 73 percent approval rating would be the most beloved in history. A 73 percent is not even a terrible college GPA (if you want to be in a profession such as publishing, you’ll get by). No, 73 percent, depending on the measurement, is pretty good.

You see, it’s all about Question 26. Did I mention Question 26? That appeared on our Enterprise HRO Buyers survey, whose findings you can read starting on page 32. The question read: “Overall I am very satisfied with my provider.” We then asked for a ranking on a scale of Strongly Agree (5), Agree (4), Neutral (3), Disagree (2), and Strongly Disagree (1). Notice the question is designed to have some hyperbole in the “very” satisfied category.

The answer was a little surprising. Seventy-three percent of respondents agreed that they were very satisfied. The mean was 3.7 out of 5. Now, here is my problem. I have attended all the wakes and listened to the mournful dirges and eulogies of the past few years. But the bad news for the local embalmers is that the enterprise HRO product is alive and actually quite viable.

Now, this is not to minimize the pain and the suffering of the early adopters. It was a hard-fought road to get to this point, and this rating for the overall industry is very good—73 percent good.

The overall industry rating drops if we move to another question: “My provider has overall improved HR functions since we have outsourced.” The result showed 47.4 percent agree that the enterprise HRO providers have improved operations, and 39.5 percent are neutral. The overall mean was 3.47 out of 5. One way of looking at the data is that 86.8 percent feel that enterprise HRO providers have either improved or, at least, not harmed operations. Some CFOs on Wall Street might be very happy with this “neutral but cheaper” outcome even if the HR purists in the house see its obvious downsides.

This follows historical patterns. In the early days of railroads, many were bankrupted during market shake-outs, and the strongest players survived. In the early days of the radio industry, it was nearly an extinction event as an estimated 80 percent of related companies perished. We recently saw this with the dot.bomb business failures. Early market pain is a natural evolutionary process. What we see from this data is that the enterprise HRO industry has come of age. There are those that tout HRO’s unhealthy aspects and threats to the body corporate unless we imbibe their magic tonics. Most of these naysayers produce data supporting a sales pitch for related consultative services, and this message may be hurting the industry itself.

I am tired of dwelling on the past. The scores on our survey were very good, and the distance from Accenture, our overall best performer, to the lowest performers was small. It was akin to a horse race in which one length separated first place from last, and, in some categories, the winner only won by a nose. All providers are doing better than “rumor has it.”

So as we peer into the future, enterprise HRO is here to stay. As early deals have stabilized, the references are improving, and a new round of deal announcements will be in the offing. Based on our survey, we are predicting good things for the future of enterprise HRO.

Tags: Benefits, Engaged Workforce

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