The HR Marketplace - Overview

I wanted to comment on some interesting research from HRMarketer.com. They put out the “Marketing and Selling in the HR Marketplace: Winning Strategies and Tactics” paper this month which contains great insight.

First a note on the marketplace:
The top 0.1% (930 out of 1.2M) of companies employ about 30% of the workforce. These are organizations with over 10K employees and are relatively difficult to market to. However, when that market has been successfully penetrated, incredible revenues from volume are probable. A similar number of companies (934) employ between 5000 and 999 employees and constitutes an additional 6% of the workforce. You can see from these statistics why top tier companies are trying to penetrate the mid-market and straying away from old philosophies that only the Fortune 1000 was worth selling to. In total, about 40% of the total workforce are employed by organizations with over 1000 employees.

For HR vendors whose source of business is derived from employee volume (HRO vendors, traditional outsourcers like ADP and Ceridian, and many software vendors) increasing volume with fewer sales would be extremely attractive. In the right sales model, sales acquisition costs (incrementally per additional employee) could also be significantly less expensive.

Below, I’ve graphically highlighted from HRMarketer’s published text. Unlike previous diagrams I’ve made, this is wholly agree with their categorization of the market. However, I’ll use it for illustration purposes.

(click for full size image)


I have also moved some of these “pillars” around as I see them. Granted I’m biased as a consultant, but indeed I think most of you would acknowledge that few vendors provide the strategic and objective expertise that a consulting organization will.

(click for full size image)


My simple view of the HR world is that HR organizations (with or without their consultants) need to navigate these “trends” that are occurring in HR. We see constant shifts in these trends, and senior HR management must determine which are useful to their organization. It’s also important to identify which trends have been recycled and re-branded. In many cases a “new” trend has indeed existed for some time and may have been implemented (unsuccessfully). Once the strategies have been formulated, the tactical data framework may be sought out. I separated outsourcing and HRMS from consulting because these are less advisory services, and more data services. For obvious reasons, HRMS and Outsourcing data services reside at a higher level than the point solutions. Once again, for the point solutions, I don’t agree with the categorization, but won’t change what HRMarketer has done for this purpose.

Cisco Systems uses games to help teach employees

We’ve talked a lot about the use of games and the next generation of employees. Cisco is employing this strategy, but their gaming/learning technology is still in its infancy (as shown by the fact that they are modeling on a monopoly-like concept… a game that is 30 years old (or more). Monopoly may lengthen the attention span of 30 and 40 somethings, but will it captivate the Gen-Y’ers?

New HR-XML Certifications

There are many new names on the list. Some are quite surprising such as Oracle, Brassring and Recruitmax who all should have been on the list earlier.

If you are unfamiliar with the HR-XML Consortium, they are publishing XML standards so that a single XML layout may apply to a large industry segment. For example, SAP and Oracle could use the exact same XML layout and send the file to Brassring or Recruitmax. There’s no such thing as a “custom interface” if these standards are in force.

New HR Technology Blog

OK, It may not actually be so new as he's been around since June, but along with Michael Specht and myself, there's another HR Technology blogger. Jason Corsello of the Yankee Group has some excellent content. I look forward to collaborating and discussion these issues with him in the future.

Oracle Fusion - More details

It appears that there is more information leaking out of Oracle these days regarding Fusion. First of Siebel CRM is not in the current plans for Fusion. The Siebel acquisition was made after the initial Fusion architecture decision and has not yet been included. Second, the first wave of Fusion applications that will be made available will be HR, Financials and Manufacturing. I don't know if HR incudes payroll, but I expect it does not.

Success Factors TMS

Brent (of unknown origin) sent me a note about Success Factors:

Hi. I've been looking at your blog as I'm doing research on talent management systems, and I noticed that SuccessFactors is not included anywhere. Is this because you don't see it as a tms or is it just lower on the list?

Brent

My list of TMS systems is generally confined to ones I consider to be major players. However, there would obviously be vendors in this market segment that I'm not sufficiently familiar with or have not worked with yet. There will also be emerging players as time goes on. Success Factors is one of these. Thanks, Brent, for bringing them up and I'll see if anyone I know has enough knowledge to help me with a review.

At first glance, they seem to have a solid client base with fairly comprehensive functionality. Seems they lean towards workforce planning and performance but lack the learning and compensation side of TMS. I'll see if I can do a review on these guys depending on who I know.

HRO or PEO?

HR.com seems to have shown their considerable lack of understanding regarding HRO. While they are actually a very good source of information, I see them as similar to SHRM. Both of these organizations cater to mid-sized organizations and are rather unsophisticated from that standpoint. Article Here.

Although the jury is still out on the real benefits of staff function outsourcing, preliminary research suggests it is working reasonably well for some clients. In fact, there are reports that HR cost savings have reached a whopping 10-20 percent in some organizations! Pardon my sarcasm, but that amounts to a paltry $50,000-$100,000 saved for every $500,000 of HR budget.

If you have been in the market for HRO, you'll have noticed that nobody wants to talk to you unless you have 5-10K employees. All the real HRO deals we've seen involve 20K employees and up. When was the last time you saw an organization with 20K employees and a $500K budget? OK, when was the last time you saw an organization with 5K employees and a $500K budget? Right... NEVER!!

The facts are that HRO can't even be implemented for under $1M these days and even that's a stretch. Most real deals are implementing for $3M and up... 6 times our HR.com guy's budget. Accenture (et. al.) are just now trying to get into the mid market for HRO. They don't have a client yet, but the target market will be under 10K employees. This mid-market offering will implement for around $2-3M and will probably cost $1M/year. (costs are a guess - As far as I know - they haven't even sold a deal yet)

This HR.com guy is talking about HRO savings for an organization that does not exist because they are not a client any HRO vendor would take!!! 10-20% of your budget? Yeah... any smart company would take that because the real budget for a real potential HRO client is NOT $500K.
In fact, the HR.com guy might be confusing what we call PEO's (Professional Employer Organizations) in the U.S. for HRO. PEO's are quite similar, except for the fact that they are aimed at very small to to small organizations. I'd be surprised if there's a company with over 1000 employees using a PEO. Getting back to HR.com's numbers, it would not be unlikely for an organization smaller than 1000 employees to have an annual budget of $500K.

OK - I'm done with my rant.

Post Update:

Steven Levy from the Electronic Recruiting Blog e-mailed me this comment:

You realize that HR.com has a penchant for making broad brush statements that are not supported by facts? One might wonder if they believe that HRO is a viable alternative for any org. Hmmm - could it be that their strategic focus is on orgs that are maintaining in-house capabilities versus outsourcing???

Nice blog.

Steve

I've resorted to posting comments mannually? There has to be another way. Perhaps Michael Specht can help me. His HR Blogs community seems like the way to go. Perhaps that's my next step.

New HR Technology Products

I won't be there, but next week's HR Tehnology Conference will be host to dozens of product unveilings and launches. Here's just a peek of what's coming:

• Authoria ( http://www.authoria.com/ ) The knowledge-based and Talent Management Suite vendor will make a major announcement, with details to be released at the show.
• CyberShift ( http://www.cybershift.com/ ) Focused on helping large, complex organizations manage their workforces, workforce management software and services provider CyberShift will discuss details of its agreement with HR outsourcing provider Ceridian to offer its workforce optimization solutions to select Ceridian HRO clients.
• Enwisen ( http://www.enwisen.com/ ) Enwisen will unveil AnswerSource Total Compensation Statements, which allow companies to send up-to-date, personalized, year-round total rewards statements to employees. AnswerSource Total Compensation Statements can be deployed in weeks and refreshed year-round for less than a one-time printed statement.
• HRsmart, Inc. ( http://www.hrsmart.com/ ) HRsmart will unveil version 8.0 of its applicant tracking system with new features that include an hourly recruiting module with kiosk functionality, an integrated survey tool, enhanced EEO compliance tools and seamless integration for assessment, job distribution, resume spidering, background checking, drug testing and other tools.
• iCIMS ( http://www.icims.com/ ) iCIMS, Inc. will announce an integration alliance with CareerBuilder that will allow iCIMS' 275+ clients to access CareerBuilder.com directly from its own iRecruiter interface and facilitate job posting there, as well as improve candidate sourcing from CareerBuilder.
• Kenexa ( http://www.kenexa.com/ ) Kenexa will unveil its Infinity Survey System created for large companies to conduct ongoing pulse surveys and for small to mid-sized companies to run company-wide surveys. It comes with a best practices library with validated survey items and has a reporting function that determines what is driving engagement within an organization.
• Knowledge Infusion ( http://www.knowledge-infusion.com/ ) Knowledge Infusion, strategic HCM consultancy in San Ramon, CA, will be launching new consulting services that will expand the company's current portfolio of service offerings and help PeopleSoft HRMS customers plan their next strategic move.
• Plateau Systems ( http://www.plateau.com/ ) Plateau Analytics 5.5 provides information and analysis to increase workforce productivity, ensure compliance, and reduce costs. Thousands of daily transactions are aggregated into a high-level snapshot that provides macro-level visibility. The solution provides comprehensive, turnkey learning and performance management reporting.
• Recruitmax ( http://www.recruitmax.com/ ) Recruitmax will announce Balance, a total compensation management solution that combines manager self-service compensation planning with back-office administrative and analytical tools for compensation specialists to manage base salary and incentive processes.
• Saba ( http://www.saba.com/ ) The Learning Management and Talent Management Suite vendor will make a major announcement with details to be announced at the show.
• Sage Software ( http://www.sage.com/ ) Sage Software will showcase Sage Abra HRMS version 8.0, the latest version of its HRMS for mid-sized organizations. This version features support for multiple databases, including Microsoft SQL Server, MSDE and Visual FoxPro.
• SAP ( http://www.sap.com/ ) The ERP and HRMS vendor will make a major announcement, with details to be released at the show.
• Webhire, Inc. ( http://www.webhire.com/ ) Webhire will introduce TalentScope, a new service designed to maximize online recruiting by helping talent managers reach passive candidates faster and with greater accuracy. Webhire simplifies the process of buying keyword ad placements by offering a turnkey package customized to the jobs customers are trying to fill, monitoring results of the campaign and automatically reporting those results back to the employer. Additionally, the company will be making two more major product announcements at the conference.
• Workbrain ( http://www.workbrain.com/ ) Workbrain will announce Workbrain 5, the latest version of the company's fully integrated workforce management solution. With version 5, Workbrain has added new and enhanced products and services to enable the world's largest and most complex organizations to align long-term workforce planning with daily operations to optimize workforce performance. Workforce Intelligence Institute Workforce Intelligence Reports link staffing, leadership, planning, performance, training and retention investments to 30 financial, marketing and operational outcomes for better decision support.
• WorkForce Software ( http://www.workforcesoftware.com/ ) WorkForce Software will unveil version 6.0 of its enterprise time and attendance software, with full international capabilities, including support for multiple languages, currencies and data formats. Workscape ( http://www.workscape.com/ )
• Workscape will make a major new product announcement at the HR Technology Conference.

MS Windows Workflow

Michael posted this on Moscrosoft's beta workflow engine. Quite interesting I think. While I'm pretty sure I'm not quite technical enough and thus won't download the entire beta for trial, the MS write-up on MSDN didn't make me do backflips. I'll admit this is a good start though, and that it's hard to make me happy.

Windows Workflow Foundation will be used across many future Microsoft products including The Microsoft Office System, BizTalk Server and the Microsoft Dynamics Products (previously known as Microsoft Business Solutions products). Most applications can benefit from the asynchronous state management features of the workflow model, the rapid development features of the designer, the potential for end-user flexibility, and the increased visibility into run-time code execution.

First: Having a workflow engine that cuts through MS Office is a wonderful thing. No more turning on track changes and e-mailing things back and forth. However, I'm surprised that MS SQL Server is not listed here. If all we're talking about is the workflow of files rather than deep integration with stored data, then I think MS hasn't gone far enough.

Second: Notice that they use the term "asynchronous" for their workflow engine? I'm not sure how you write code in 2005 that uses an async transaction methodology.

The major difference between database workflow engines is they trigger off of data events. This could be someone saving data into a specific field (new hire event), data changing in an aoutomated fashion (increase life insurance rates on someone's birthday). Microsoft's workflow seems less data dependent and more of a management function.

Selecting a Performance MS whitepaper

HR.com's whitepaper by RecruitMax is an okay overview of selecting a PMS system. In my opinion, it was a bit functional in nature. Here are my highlights:

• Define expected outcomes: it was only one sentence, but keep in mind that when chaning systems, it's the best time to reengineer processes. Know beforehand if you want to recreate your current process and spend money on customization, or if you want to go vanilla. Determining this prior to your search (and definitely prior to implementation!) is critical.
• Establish a selection team: Know your governance structure. How are decisions going to be made? Who is responsible for the decisions and ultimately the stakeholder? What is the corporate philosophy regarding policies and procedures?
  

2005 HRO Trends and Insights

Disclaimer: yeah... Hewitt could be considered a competitor of the firm I work for. If you read the rest of my blog, I generally consider them to be a vendor though.

Hewitt's 2005 HRO trends and Insights published in June (2005) caught my eye for some interesting analysis if you read between the lines.

• The survey was conducted with 129 employers with about 2/3 of them below 10K employees. While the average size of the respondents had 15K employees, this tells me that there are some very large HRO clients out there, but the majority of the prospect base for new sales will be in the mid market arena. (see my previous post where I say the mid market is where the action will be).
• Hewitt may be misdefining HRO. Any vendor will do this to inflate their numbers and mislead the prospect base regarding the number of clients they serve. While Hewitt has been in the benefits and DB/DC industry for a long time, I would not consider a 401(k) client a HRO client. Their stats that the respondents averaged from $1M to $45B in annual revenues leads me to believe that the $1M respondents are pure benefit or only 401(k) clients. A $1M client can't afford real HRO.
• Hewitt surveyed current and the potential outsourcing picture in 3 years. DB and DC outsourcing is obviously high at the 70-85% rate.
• Surprising to me was that the current payroll outsourcing rate is only 30% and they project it to increast to 50%. Considering that ADP pays about 25-30% of the U.S. workforce, and Ceridian and Paychex probably pay another 20%, I'm wondering where Hewitt got their current numbers. I do agree that PR outsourcing will grow as it becomes more acceptable to the large employer market.
• Also surprising to me was that they did not measure HRMS outsourcing since an HRO vendor that gets control of the HR systems infrastructure for an organization really can dicatate what's important for their clients to focus on. New offerings in technology (the aquisition of a talent management suite) can easily be rolled to their client base.
• I was really dissappointed in the "lessons learned" section. I presonally think my list of lessons learned is much better. Their lesson that more due diligence and reference checking in the vendor aquisition process is clearly a vendor issue. From the 3rd party view, the major problem in HRO relationships is clearly the lack of measurable and comparable processes for a before and after standpoint.

Anyway, read the survey for yourself.

Superior Staffing Performance

There was no way I was paying over $2000 for this survey, but the high level key findings were readable. If you're curious about a specific industry, then this might be for you.

There were a couple of key findings that I thought were interesting. First, the creation of a talent pool to draw off of and the ability to forecast future recruiting needs was a significant indicator of leading companies.

Second, technology is not highly utilized even though it's available. While most leading organizations use ATS of some sort, only half use automated screening of candidate profiles. The automated screening could be an automated search so the recruiter doesn't have to use key word searches manually, or they could be candidate tests (on-line) that filter for suitability. This type of pre-screening was found to lower time to fill (a requisition) by 2 days.

Leaves Administration and Absence Management

I was reading the July/August copy of newsbriefs from ISCEBS and noticed a survey on absence management.

The results stated (could not find a web link to this) that only 12% of companies track the cost of absenteeism and an average cost of $260 per day of employee absneteesim.

The complete integration of absenteeism is quite difficult. Benefits, staffing, HR and payroll must share data well in order to understand the true costs. Most organizations are so lacking in this area, that absenteeism is often unknown for all associates. For example, exempt employees self manage their vacation and sick time, and their supervisors don't always monitor the accuracy of time taken. It's even worse when you have employees who work at home often and you can't manage the time actually worked.

Then take into account the vacation/sick time which is easily (I didn't say well) managed through an automated time and labor system like Kronos. Add to that disability management that Benefits is doing. Add to that the temporary and contract labor force that the staffing department is handling. And of course leaves of absence that are often tracked by HR somehow. Now it's possible that your organization has centralized the processing and tracking of each of these missed work days, but more often than not, I see a complete lack of integration when I visit organizations.

More and more, HRO vendors are trying to bundle "leaves management," absence tracking and staffing into their package of functionality. At this time however, I simply don't see any good solutions on the market, and unless you have an integrated ERP or data warehouse, its difficult to retrieve this data. This would be the ideal model considering the HR silo'd nature of absenteeism. A data warehouse and a few cognos cubes run the metrics which are them presented on the Manager Self Service portal in some sort of a metrics dashboard. Hmmm... how many of you have SAP? Perhaps Oracle Fusion will get us there as well?

Blogging Spam

This is an FYI post: I have officially eliminated comments from this blog. The amount of spam comments in the last few weeks has become unmanageable.

Hewitt BPO leads the industry?

While Hewitt clearly has the biggest name and the most large clients right now, I'm not so sure if they are the clear leaders as this Hewitt press release indicates.

Let's face it,

• Hewitt doesn't seem to be making a great profit on this stuff yet
  
• they are still working out the kinks in their functional processes
• the Cyborg HRMS acquisition still reamains to be well integrated, but at this point, I'd suggest that Cyborg was a mistake
• Hewitt can't implement any new clients due to bandwidth constraints.

In the mean time, you have many organizations starting to focus on the mid market, or they have already been there. The mid market is where the HRO companies are going to make their mark and survive or die. It's true that Hewitt has done well here, but keep an eye on ADP and Accenture.

Workday.com = Salesforce.com?

Post edited on November 01, 2005. Workday.com actually contacted me about some inaccuracies in my original post.

I recently wrote about Dave Duffield and how he intends to bring workday.com to the market in the same style that salesforce.com's CRM has become a company to be reckoned with. I love "I told you so" moments, and here's one where Craig Conway has joined the Salesforce.com BOD for the next couple of years. Make your own inferences about the ties between Conway and Duffield.

Craig Conway, formerly CEO of PeopleSoft Inc., has been named to the board of directors at Salesforce.com Inc.

With the addition of Conway, the board membership at the San Francisco software maker (NYSE: CRM - News) increases to seven members; the number of independent directors on the board increases to six.

Arinso Service Center diagram

Arinso has a very nice whitepaper on service centers. They segregate the strategy and the service center organizations in a very nice visual. I just thought this was a very shareable pictoral. Here it is…

IBM HR Transformation for HRO

I have written about this before, but IBM has put out a nice white paper on how an organization should prepare for HRO and how to set pre/post implementation expectations. http://www-1.ibm.com/services/us/bcs/pdf/ge510-4016-hr-bto-risk-strategies.pdf

This is certainly not new news, but it’s possibly the best documented public paper I’ve seen on the topic.

The failure of most HRO engagements (measured by satisfaction – not implementation failures) is that the client organization goes in with bad expectations.

– They don’t know what is going away and what processes stay.

– They don’t know who is going away beforehand.

– They don’t understand the metrics in their current state and can’t compare themselves once in the outsourced state.

– They don’t have good internal project management.

– They don’t have good governance.

The list goes on and on.

A good consulting organization will not only do the vendor selection. If allowed to, consultants will coach the client on expectations, help them understand their current state, and assist with PM and governance. Having said that, go to a real HR consulting firm to do that work...

Work Life balance and the next generation

Business Week had this article about work life balance. While it’s not in my general realm of technology, I think it has some loose lessons in terms of learning and the capabilities of the next generation. The collaborative nature and the ability to multi task are things that emerging generations will improve upon greatly. Obviously I won’t post the whole article, but it was interesting.

http://www.businessweek.com/magazine/content/05_40/b3953607.htm

But maybe balance is the wrong image. Instead, think transformation. Just as businesses are shifting from Industrial Age hierarchies to collaborative networks, so, too, is the American family undergoing a parallel social revolution. Parents and children are no longer on the same schedule -- unlike the way things were a generation ago. With many educated mothers and fathers working longer hours, they are linked to their kids by a web of cell phones and e-mails

At the same time, kids are taking the initiative to pursue more activities and are using information technologies to nurture their own electronic networks of relationships, from friends at school to cousins in distant cities. "The catalyst for change has been the same in the work hemisphere and family time," says Julie Morgenstern, a time management consultant and founder of Task Masters in New York. "It's technology."