Thousands gather annually in New York in the spring to get more than an academic discussion of outsourcing at NY HR Week. They get down and dirty with buyers, providers, and other industry thought leaders in an all-out, two-day HRO festival.
How do you capture and keep the attention of some 4,000 high-level HR professionals for two days? Try sending them to HRO World as this year’s NY HR Week, which encompasses HRO World, drew a record number of attendees and exhibitors.
Punctuated by cutting-edge speakers, lively panel debates, and myriad HR vendors exhibitions, the world’s largest conference exclusively for HRO covered a wide range of topics, everything from the experiences of large, enterprise-wide buyers to debates on offshoring to HRO adoption in the public sector. HR pros also had the opportunity to hear from one critical voice of the profession urging them to change their approach to managing human capital and to make HR a more strategic partner in business.
Held on April 26 and 27, HRO World New York at the New York Hilton drew about 4,000 attendees and 158 exhibitors. The fourth annual event was the largest yet since it first began in 2003.
In a somewhat conciliatory keynote speech, Keith Hammonds, the executive editor for Fast Company magazine, told a packed auditorium of HR executives to adopt a more meaningful role at their companies by shifting their focus. The journalist stirred up a hornet’s nest last August when he wrote the scathing article, “Why We Hate HR,” ridiculing HR managers’ role at their companies. AT HRO World, however, he said HR can transform its role by following five important lessons: know your business; measure impact; make fewer rules; focus less on firefighting; and fight evil management. He said HR managers should develop a stronger understanding of their company’s business and learn more about finance and change management. Further. he noted that HR needs to help management understand that talent is driving the future of their organizations, and HR can play a pivotal role. While Hammonds did not back down from the assertions he first made in his article, he said the HR profession can effect important changes to their organizations.
Hammonds was only one of several keynote speakers at the conference. Sharon Taylor, the senior vice president of HR at Prudential Financial and the chair of the HRO Association, delivered a first-person account of rolling out outsourcing at one of the largest financial services companies in the world. Reflecting on the 2001 HRO engagement, she highlighted five lessons learned from the experience. They were: be clear in your direction when adopting HRO; be prepared for bumps in the road; be ready to trust whoever you bring along; the new frontier requires new skills; and be prepared to be a pioneer.
Even though HRO is now well established, Taylor said the industry is still immature and has many kinks to work out. “I argue we are still in the pioneering stage,” she said, pointing out that managers need to use HRO as a tool with values beyond cost savings.
In addition, she emphasized that “old school” HR skills are “not going to cut it” in a new age of human capital management. She contended that effective leaders will be business savvy and entrepreneurial. And there must be sacrifices because not all retained HR professionals will fit into the new model.
The DuPont Experience
A new model is indeed what DuPont had in mind when it signed with Convergys to a $1.1 billion, 13-year global HRO contract in late 2005. The company sent its two most senior HR executives to HRO World to explain why they chose to adopt such a comprehensive outsourcing program. HR Director Ernie Lareau, who delivered a keynote address on the second day of the conference, explained that DuPont needed to fundamentally transform its HR practices. The massive organization, which has more than 60,000 employees across the globe, lacked transparency and standardization in its HR operations and saw outsourcing as one answer to the problem. While cost savings is often the reason for outsourcing, it was not the primary one in DuPont’s decision, he pointed out.
“Cost is a benefit of the decision. It’s not the driver of the decision,” he explained. “HRO was not the driver. We were looking to transform DuPont human capital.”
The company’s pick of Convergys, he added, came after consideration of several factors, including the vendor’s global footprint, demonstrated experience with large deals, demonstrated maturity in areas that DuPont had gaps, and could deliver lower costs. Even though the company had operated a shared-services center in Spain, he said the outsourcing accord could further drive those costs lower from a ratio of one HR professional for every 60 employees to 1 to 300.
Jim Borel, the senior vice president of HR at DuPont, added that HR had become mired in transactional activities and lost its focus on strategic issues such as transparency of information. He noted that the company didn’t even know exactly how many employees it had at any one point. Even though HR managers often complain about not being invited to the leadership table, he said they often aren’t prepared to sit there.
“Our HR leaders not only have to be at the table but we must have the information and tools to fully do that work,” he said. “HR is a strategic partner.”
Borel and Lareau were just two of many HR leaders to share their outsourcing experience at HRO World. Patrick Cataldo, director of HR planning at Capital One, shared his company’s enterprise-wide HRO rollout and offered some practical advice to other companies pondering HRO. For instance, he suggested buyers begin by measuring their internal costs to serve as a baseline for measuring outsourced engagements; they should identify opportunities for improvements; and define the “to be” state. After these steps are taken, then implementation can begin.
Some of the benefits as a result of outsourcing, he pointed out, include reduced risks and costs; operating a variable-cost model; and access to data. But they don’t come easily, he noted, adding that strong governance, a thorough implementation plan, and investments in people—internally and externally— are necessary.
Even as many buyers spoke about their enterprise-wide outsourcing programs to one vendor, others such as Deveri Ray, first vice president and manager of payroll at Washington Mutual promoted the idea of selective outsourcing to a variety of best-of-breed providers. The banking giant use service providers such as TALX, ExcellerateHRO, and others to handle a variety of functions such as health and wealth, relocation, and W-2 processing. She said the drivers behind her company’s approach is it’s assured of best practices and productivity gains.
While buyers at the conference offered much advice to their peers, providers also had gems of wisdom to hand out. In the Provider Presidential Debate, 13 officers with the industry’s largest HRO provider discussed trends and issues affecting HR and outsourcing. Reflecting on topics ranging from sourcing advisors, market hype, and the mid-market, the providers at times also took jabs at each other as well.
The first round of 40-minute conference sessions focused on the HRO buyer experience. Pulled from the pages of this magazine, Jay Whitehead, publisher and president of HRO Today, in one session sat down with two top executives from American Express and Lockheed Martin—both companies are members for The Buyer’s Group, the organization of buyers dedicated to sharing their experiences.
As a Six Sigma expert, Dave Lamb, VP of HR service capabilities at American Express, is no stranger to transformation. His responsibility includes cost savings and productivity enhancements. The company recently partnered with ACS to improve service goals and remove errors in its system serving 60,000 employees.
Earlier this year, Lockheed Martin renewed its HR BPO contract with ACS, which services more than 345,000 Lockheed employees and retirees. ACS’ employee service center handles more than 40,000 calls a month and processes more than 60,000 web-site contacts on behalf of its client. Warren Pfister, director HR customer services at Lockheed, is responsible for its HRO deal.
In another session, panelists explored a growing HRO segment: mid-market HRO. For instance, Celanese, a Dallas-based chemicals company, decided to outsource after a major merger in 2001. The company’s Chris Gonser spoke about the maturation of Celanese’s ongoing five-year contract for full-service HRO offered to its 5,500 employees by ARINSO International.
After the merger, Celanese moved its headquarters from Summit, NJ to Texas, which created a decentralized structure, explained Gosner. HR policies and practices varied at all of its 33 sites, creating inconsistencies. Celanese’s goal in outsourcing was to streamline and standardize HR, build an efficient and effective organization, create a performance culture, reduce cost of delivery, and become best-in-class.
Neel Joshi, senior director of business development at ARINSO, discussed the process of getting Celanese on board. From its Atlanta-based shared-services center, ARINSO developed a detailed program to handle benefits administration, offer enrollment support (ongoing or annual), and provide general support for Celanese employees. Other services offered included data administration, data integrity maintenance, and data entry. Along with payroll processing—from end-to-end time validation to off-cycle printing—ARINSO set up a hosted solution managed by Celanse on an SAP platform.
Celanese’s employee self-service program follows a lean, Six Sigma approach and offers multiple service delivery channels. Depending on the issue, employees move along a track, from contact agents who handle customer service by phone, e-mail, or fax to subject matter experts responsible for payroll, benefits, and other transaction services, to operations services, application maintenance outsourcing, and finally infrastructure service outsourcing. Self-service is offered in five different ways.
Trendsetters Speak Out
One of the most popular panels was the HRO Trendsetters Panel, which included Neil McEwen, partner, PA Consulting Group; Tony Lee, chief alliance officer, Adicio; Karen Roberts, SVP, Aon; Mark Hodges, co-founder, EquaTerra; Richard Dunphy, HRIT practice lead, Hexaware Technologies, Jim Edgar, EVP, Citistreet; Ed Hansen, partner, Morgan Lewis; Richard Crespin, CEO, the Delve Group, Inc.; and David Rhodes, partner, Towers Perrin.
According the panelists, outsourcing as a global force is unavoidable. Hodges said he believes outsourcing creates the innovation that some organizations lack. Crespin added that a short-term pain such as job loss will be balanced by the positive long-term effects.
McEwens said it was time to look externally for value, while Rhodes pointed out that clients are looking for strategy. Hodges added that while clients want to be able to analyze and harvest value, he also warned that HRO has reached a capacity shortage, and providers can’t take on many more clients.
Based on the number of session focused on RPO deals, recruitment process outsourcing is a hot segment for HRO, especially since it drastically cuts time to fill. However, once the economy cools, there are doubts whether RPO will continue to grow as quickly. Crespin, who oversees the HROA and the RPO Alliance, said he believes the segment will continue to gain momentum.
Lee added that he expects a talent shortage during the next three years, bolstering the demand for RPO. McEwen said as the market matures, there will be more consolidation and a greater focus on quality.
One of the larger case study sessions covered the RPO arrangement between Kelly HRFirst and Wyeth, the global healthcare company with 44,000 employees in its pharmaceutical division. Wyeth chose Kelly after considering three providers, and the vendor helped the company save $800,000 in recruiting costs after screening 32,200 candidates, yielding a 14.5 percent fill rate.
The Wyeth story was just one of many discussions about RPO and the broader HRO industry. With more buyers entering the BPO market, the number of case studies discussed at HRO World as well as the number of deals struck at the venue is rising. As one longtime industry observed, the conference remains the most important event for the global HR outsourcing industry.
HRO Pioneer Feinberg Chosen for person of the year; Accenture and Hewitt get nods as providers in 2006
Harry Feinberg, the founder of HRO Today and a pioneer in the HR BPO industry, took home the top prize of Person of the Year at this year’s HRO Association Annual Awards held during NY HR Week. Feinberg, who helped found the association and an early advocate of HRO, was chosen for his contribution to the industry.
He was among 15 winners at the second annual awards dinner, which is held to honor the outsourcing market’s leading buyers, providers, and thought leaders. The other winners included: StraightSource for RPO provider of the year; Prudential Relocation for relocation provider of the year; ADP for payroll provider of the year; Accenture and Hewitt for large market provider of the year (this marks the first time a tie has occurred in any category); NiSource and IBM for mid-market customer relationship of the year; Bank of America and Fidelity for large market customer relationship of the year; Karen Bowman of Convergys for provider executive of the year; Tim Palmer of EquaTerra for sourcing advisor of the year; John Halvey of Milbank Tweed for sourcing attorney of the year; Jim Borel of DuPont for buyer executive of the year; and Andrew Kris, SBPOA, for thought leader of the year.
“The theme of this year’s Gala is ‘Be Bold.’ All the nominees we honor here tonight have done something beyond the typical in serving their employees, clients and colleagues,” said HROA Executive Director Richard Crespin. “Each nominee has certainly achieved some level of commercial success, but that’s not sufficient to be nominated or win one of these awards. Our nominees have all done something significant in advancing our industry.”