HR Technology - State of the Industry

This is a reply to Jeff from the talentism.com blog, who in his post about quality vs cost, invited me to comment about waste in systems and technology.

The Seven Wastes are (defined by Taiichi Ohno, Toyota’s Chief Engineer ):

1 - The Waste of Overproduction

2 - The Waste of Waiting

3 - The Waste of Transporting

4 - The Waste of Inappropriate Processing

5 - The Waste of Unnecessary Inventory

6 - The Waste of Unnecessary Motions

7 - The Waste of Defects

As I think about this, there are so many areas of waste in HRMS and point solutions that it’s hard to decide where to start. Then I add in the HRO and outsourcing factor and it becomes even more confusing.

It’s ugly…

Unfortunately, most waste is political. In the HRMS world, HR as an administrative center does seem to be pretty low on the totem pole. Operational and lately finance systems have really had more focus (read: Funding) over many years. Add to that the fact that HR hasn’t really had a seat at the table until recently, and political power has not been on HR’s side. Add to that the fact that HR and PR are often separated into different silos (HR and Finance) and you have ever increasing political struggles that now include policy and procedure. Let me just ask: HOW HARD CAN IT BE TO GET A MANUAL PAYROLL CHECK APPROVED??? We haven’t even gotten to the systems waste yet!!!

Jeff’s insight is right on when end users get caught between buyers and the vendor. Add in another twist when the buyer is IT or purchasing departments. We have seen too many times (especially in the ERP 90’s) IT and HRIS departments building large teams of programmers just to support HR. In recent years, many organizations switched to “vanilla” software philosophies where HRIS no longer creates customizations and end users still don’t get what they need as they are forced to live with the system as delivered.

But it gets better…

I actually think that momentum has been changing in the favor of HR For a few years now. The systems are getting deeper, HR strategy is more focused and on target, and systems are focused on catering to the workforce – both user and employee level. A few years ago, you had to pick. Oracle for finance, so we might as well do Oracle for everything. Now, you can take Oracle for Finance, SAP for SCM, and find another HR system altogether – tie the whole thing up on the back end and nobody feels any pain. Then wrap your TAS, TMS, learning and portal solutions around HRMS and pump the whole thing into a data warehouse.

Before it gets worse again…

We were getting so close to a valid and achievable systems model and then we had to drop the HRO ball on everyone. The systems people just got outsourced along with the entire recruiting staff, the HRO vendor wants another $5M to finish implementing the portal, and the generalists are running amuck in confusion!!!

But I’m feeling positive… (or What's my point!!)

Listen, I don’t know if HRO is the right model for everyone, and I don’t know if it will pan out for anyone. What I do know, is that even though we keep playing with process (now in an HRO state), the systems really are a beacon of hope. A couple years ago we were customizing systems to automate our processes which were themselves modified for the systems sake. Today, we configure systems so that they conform to our strategies - not vice versa.

Waste? Sure there’s wasted energy. But I tell you what… I’d rather be in HR technology today than even just 2 years ago. And what else? 2007 and 2008 are going to be a couple years to watch out for.

What's a portal?

Usually I'm right there with the 3 major consulting firms (Mercer, TP and WW). However, this time I'm not quite sure if Mercer get's what a portal is vs a web page.

Joe Loya and Debbie Slappey of Mercer said here:

In the past 10 years, many organizations grasped that the Web could transform the way they manage their HR activities — and many were quick to create HR portals on their intranets. Today, few HR portals are living up to their creators’ aspirations, and many, in fact, are simply “link-farms” to enrollment forms, vendor pages, outdated material, basic benefits information and change-of-address forms.

Clearly Mercer has a different definition of what a portal is. I'm sticking with Plumtree's explanation here. Basically, a portal brings together a large set of data within what are called portlets or pagelets depending on the specific technology you're using. Either way id doesn't matter. The portal and portlets will read your log-in information and retrieve data from other data sources using the permissions defined by your log-in. So when you go to your Yahoo or MSN homepage and read news, e-mail summaries, maps and whatever, that's a portal. Sure, you might have to launch another area to do more detailed stuff (like reading the entire article), but the fact is, you set a preference to have certain articles presented to you on the page. The HR portal is the same thing. The portal retrieves the relevant data and presents it. The portal does not simply provide hyperlinks.

You've heard me rant about vendors misuse of HR terminology for the sake of sales. For example, my favorite one is Talent Acquisition systems that call themselves Talent Management (to me a much broader category). I think Mercer does the same here. Their "new HR portal" is at first glance a total comp statement that might bring together 401(k), benefits, payroll, etc.. People... a total comp statement is not a portal. The data within the statement is not a dynamic reflection of real time data.

I'll give Mercer the second one. The DHL example really does look like a valid portal experience. Unfortunately, the title of the paper " Companies may be missing the whole picture on HR portals" turns out to be a sales pitch about total comp. I think the authors doe a great disservice to their employer (a great consulting firm) by misdirecting their audience and not really understanding the technology. Clearly these are comp consultants who should not be teaching the world about portals.

What's up at Hewitt?

Jason also posted this about Hewitt recently. I actually don't have a further comment other than I've been seeing lots of laid off Hewitt associates filtering through other organizations. Anyone know the full extent of these layoffs and to what organizations? Are they really trimming the consulting business that much?

Accenture's place in HRO

Jason of the Human Capitalist posted some analysis of Accenture's seeming decline in the HRO world. While we differ slightly in our HRO rankings, I think we'll see some interesting developments as Accenture begins to play in the mid market space. They are currently courting several prospects in the sub-20K employee market with what I consider an odd assortment of software partners. The obvious ones are WorkBrain, RecruitMax and Success Factors. However, their HR/PR suite for the mid market is quite a bit more surprising. (hope to post this later in December if they release data publicly).

What is even more surprising is how agressively Accenture is controlling scope. The mid market is a tough game to play. Companies think they are large and deserve the services of a $500M contract. But then they don't want to spend the money. ADP has long had the best lock on this market. Nobody understands how to sell to it better, so the big guns better be ready for a competitor they see little of in the Fortune 500 space.

Jason is right though - Accenture better get a big win soon before momentum shifts again.

Business Case for RPO

(where RPO = Recruitment Process Outsourcing)

Jeff Hunter of the Talentism.com blog has a very interesting post on the causes of RPO. His experience is the same as mine... internal recruiting organizations with highly positive feedback are getting outsourced more and more.

While I like Jeff's conclusions about how to improve the recruiting function's control over the outsourcing decision, I'm not sure that's persuasive to an executive. The solution is for recruiters to be more accountable for the new hire's success. Jeff argues that the recruiting function looks to find people, not fill positions. The long term objective of filling positions is left to the hiring manager, and the recruiter does not have sufficient stake in the new employee. I've argued in the past that new hire onboarding belongs to the recruiting function, and that onboarding is a process that should last from the date of offer acceptance until possibly 6 months after the hire date. I'm not sure how much longer a recruiter could reasonably follow an employee's onboarding without growing the recruiting staff.

So far I agree with Jeff. Here's where I disagree. Each of these arguments is simply a matter of scale.

First, I believe that executives see two things in RPO. The first is cost reductions. The RPO organization might be able to hire recruiters to recruit for multiple organizations. Therefore, the productivity of each recruiter should be higher.

Second, I think time to hire is critical to executives. RPO organizations will have an easier time creating a pool of candidates that is ready to interview. When a job requisitions reaches then, they should be able to quickly move on known candidates, rather than taking time to advertise for the specific job. Their presence in the market is powerful: they command many more job requisitions, and therefore, they have a much larger, more captive candidate base than any single company possibly could.

So I think the trend towards RPO is growing and picking up momentum. However, this really should allow the smart recruiting manager/director of talent or whatever to focus on things like onboarding.

Getting Even (off topic - HR politics)

OK, this is not a HR tech post, but I thought it was very interesting.

I got this from BostonWorks which cited WAGEproject.org. This issue of gender pay differentials should be treated very seriously by HR professionals and especially compensation. It's sad to think that even in this century, we are going to struggle with this problem (and race too I'm sure) for decades if not for longer than that.

Women Are Getting Even (WAGE) is a great brand. It suggests that we are getting closer to that elusive equity, but also that women are getting more aggressive (which I agree with). I truly believe that most HR organizations really do care about pay equity, but we are often hampered by managers who don't have the same priorities.

As technology progresses and we are able to better measure skills and competencies vs. job requirements, hopefully we'll be able to tie actual wages to a person's abilities. However, this takes both time and money to roll out, and only the big HR organizations can afford this stuff. Technology brings hope to me, because personal bias is too hard to overcome alone.

(ok - that's my rant for the 4th quarter...)

Oracel Fusion and the current Oracle HRMS

I loved (and have also discussed) this from another blog:

FUSION
I just wanted to make a few comments on the Fusion product. I apologize, but I'm still trying to get more clarity around the scope of this release/product, but it appears to be software that will be similar to middleware, where several applications can run on the same Fusion software. I'm not sure what this means in terms of modifications to the current tech stack, but I'm sure there will be some major changes. The scope of this release is very concerning. I can't comprehend how they are going to seemlessly get all of the suites (Oracle, PeopleSoft Enterprise, PeopleSoft Enterprise One) to operate on the same software. What a daunting task. I can't help but hope that Fusion doesn't stand for:

Fouled
Up
Software
Inoperable
On
Networks

Anyway, I'm keeping the faith and hoping for the best!!!

The same blogger (Patch Adams) also had a post recently about Oracle HRMS. As many of us in the HRMS world have concluded, Oracle HRMS isn't the greatest thing out there. This post gives a decent comparison of PeopleSoft and Oracle HRMS.

HRO Updates

A couple of news items crossed my path that I thought were interesting.

First, Arinso recently got certified in their SAS 70 Type 2. I'd like to just say that if you're a public company in the U.S. going for full HRO (with benefits and payroll), please ask to see if your vendor has their SAS 70 Type 2's. I'm not sure what they were certified on, but it looks like it's only payroll processing controls. I'm not sure as I'm not a finance guy, but don't they need to certify not only gross to net, but timekeeping, tax filing, garnishment processing and other payroll processes individually? It also begs the question if they have already done their benefit SAS 70. Since these are also large employer expenses, they will definitely hit the bottom line. Maybe a finance person who's actually read Sox can weigh in.

Second, it's been pretty obvious in my HRO posts that I don't take Ceridian seriously. They were recently awarded an HRO contract for 8000 employees in the U.S. and Canada.

Ceridian will be responsible for a wide range of processes for 8,000 PHH employees in the U.S. and Canada, including HR and payroll management, benefits, time and attendance, talent and acquisition management, COBRA, Flexible Spending Account services, tax filing, work-life and employee assistance program (EAP), and HR compliance. In its role as HRO provider for PHH and its other HRO clients, Ceridian provides functional support of multiple HR and benefits functions, and in turn alleviates recurring administrative tasks and cost burdens for its client companies.

I'm actually surprised that Ceridian can put together that broad of an offering. While I really doubt they will be able to handle it in the back end (other than herds of people duct taping the thing together), it is an impressive assortment of services for this company. As the HRO mid market grows (currently dominated by ADP), we'll see if Ceridian can build some momentum.

SuccessFactors TMS review

So after being told that my talent management “scorecard” was incomplete and inadequate, I visited one of the SuccessFactors webinars and got a high level overview. Keep in mind that the opinions here are simply those gained from a 1 hour presentation and I don’t know what I don’t know – these are just first impressions.

That said, the first impressions were rather good. In fact, I’m quite positively impressed. First of all, I really like the on-demand software model. Vendor hosts everything and rolls out modules to clients as needed similar to the salesforce.com or workday.com model. Secondly, they sport a pretty impressive client list. I won’t name them here, but you can check it out at successfactors.com. Third, I love any product with dashboards. Dashboards are a great way to tell managers (who never have enough time) how they are doing on key metrics on a single page. I’m not a communications expert, but navigation and layout seemed pretty intuitive to me.

In terms of functionality, SuccessFactors is really a workforce performance management play with some other stuff. Succession, performance, compensation, employee surveys are all core functions with goals and competencies wrapped around the whole thing (and then analytics further wrapped around that). All in all, a very nice package. Their performance and succession modules were very robust, but I felt a bit disappointed in the comp management side. Granted I didn’t see all there was to see.

Rant:

I should note here that I’m always disappointed in the comp side of TMS products. Compensation is similar to LMS and LCMS. The functionality needed there is so extreme that you really need specific software. So even though when I talk about integrated TMS as talent acquisition, succession, LMS, performance, comp… there are certain grouping of functionality that easily fit together, and others that require more specialization. So this isn’t really a critique of SuccessFactors since I believe none of the TMS vendors to LMS and Comp that well unless its their specialty.

OK – back to reality. What’s wrong with comp? Well, nothing really. It’s basic comp. This means that you can post merit increases, do some stuff with variable pay and non-cash incentives. When I talk about full comp functionality (that nobody but Hewitt, Mercer, Towers Perrin and Wyatt have) I’m talking about full global compensation databases with job categorizations and the whole shebang. SuccessFactors is not competitive with the big comp players, but sufficiently competitive with the other TMS players.

So all in all, I have very positive first impressions of their TMS suite. I’m hoping to see more of them (perhaps in a vendor selection) in real practice.

HRO Buying Process Guide

Prior Post updated to include real links to the publisher. I had the text of the entire series, but only 4 of 6 links below. You'll have to look for the other 2.

This is a 6 part series in The Edge's Financial magazine - a daily and weekly magazine in Malasia. It was written by Leo Fernandez, a Hewitt employee. When I was writing this, The Edge had let their domain name expire. Therefore, understanding that I'm violating 1000 copyright laws, I'm posting 5 of 6 articles in pdf form. The pdf preserves the copyright mark of the publisher and names the writer, etc... At such time that the publisher wants this removed from this blog, I will do so immediately one I receive an e-mail. I will do the same if requested by the author or by Hewitt. I will not check to see if the Edge gets their domain back.

Exciting times ahead for HRO
Choosing the right partner
No shortcut to success
Management: When partners really partner

Wharton: The Trade-off between Talent and Disruptive Behavior.

OK - this is way outside of my comfort zone and expertise. However, Wharton pushed out a great article on the Tyrell Owens debate called 'One for All' or 'One for One'? The Trade-off between Talent and Disruptive Behavior.

There are a couple of factors here. First off, what is the tradeoff between talent and disruptive behavior. We do often find that talent comes with a fair share of arrogant and egotistical people who believe their way is the only wat. It really depends on your ogranization and the culture you are trying to achieve. Sales oriented organizations might be more forgiving of these types of disruptions and the conflicts they bring. Service and production facilities might desire more peaceful operations. I think that heavily sales oriented, entrepreneurial companies are willing to put up with more crap.

Second of all, I wonder what T.O. is doing to his "brand" as he creates these disruptions. Sure, he might be the "best" at what he does, but he can only do his job in a heavily team orented environment. In Tom Peter's "a brand called you" is T.O. destroying his brand be being over the top? I'd love to hear Regina or another branding expert comment on this.

Is ADP HRO #2 in the industry?

A recent ADP press release had a few interesting new facts.

Apparently, 32 multi-national corporations have signed on for ADP's HRO platform based on SAP. This is far more than I thought it would be, and in addition to ADP's standard platform (ADP Enterprise) for U.S. domestic populations, I think this easily puts ADP in the #2 spot for total sales.

One other note was that these 32 companies provided service for 190,000 employees. This fits in with what we know about ADP HRO being a mid-market solution. If you average it out, we're talking about 6,000 employees per company. These might be $20-100M contracts, but nowhere near the $300M to $1B contracts that Accenture, IBM and Hewitt are after (over 7 years). So number 2 in volume of sales certainly does not equate to revenue in this case.

TPI and Equaterra merging

Jason posted this about TPI and Equaterra merging today (or yesterday). I've also been hearing rumors for some time about one of them getting bought by a consulting firm, but I suppose this is better for them. Check Jason's blog for more info.

For those of you who don't know, TPI and Equaterra are the biggest names in vendor searches and are quite well known in HRO and service delivery circles

www.worstreview.com (off topic)

I got this from Successfactors.com. Not much there yet, but should be funny/interesting when it gets going.

HR/PR Outsourcers - New Rankings

A reader recently wrote to me requesting my thoughts on payroll outsourcers and their HR products. This was written for a 500 employee organization. I'm posting because I don't think I've ever ranked payroll outsourcers. Here are my verbatim comments below:

I have not done any rankings purely on HR/Payroll outsourcers. Most of my knowledge would also be with larger organizations. However, below are my brief opinions in no particular order (not sure if they are on the blog or not). I only talk about national vendors below. Smaller regional vendors will provide better overall service quality, but their compliance standards
are questionable (tax primarily).

1. ADP will almost definitely be the most stable environment for you regarding payroll processing. Their tax, garnishment and print/distribution processes are overall better controlled than their competitors.
2. ADP products have changed fairly significantly over the last 3 years. PCPW is being phased out for newer and better internet products. These products will also include decent self service (as will Ceridian).
3. If you are in a growth mode or think you will close in on 1000 employees in the next 5-7 years, do not consider PayChex. Period, end of statement. Otherwise, you can look at them but their HR is terrible and technology is very last century.
4. Ceridian will allow more flexibility on the HR side. If you can manage an upgrade to their eSource platform, they will have much better HR functionality than ADP will. ADP has superior HR functionality that they only sell to larger organizations (over 1000 employees).
5. Ceridian HR (see #3 above) must be used and implemented very carefully. Their product set has been pieced together over the years and is not truly integrated from a database architecture standpoint.

On the Customization comment:

1. I find a significant difference between customization and configuration. Configuration is the changing of table values (for example adding cost centers, jobs or location codes). Customization is actually modifying/creating a table and adding core functionality that was not there before.
2. Don't customize!!! Find a product that is sufficiently configurable to meet your needs. If you need to customize, Ceridian is more flexible. However, I've been to many companies that have customized their software and basically screwed up their whole PR process. Once again, ADP has stricter controls. For something like PR, this is a good thing.
3. Your needs below (allocations, dept numbers) should fall in the config category. Either ADP or Ceridian should work fine.

Rankings for HR (500 employee company) (keep in mind I'm focused on Fortune 1000's and have a bias regarding what I think is decent software)

1. Ceridian eSource
2. ADP (don't remember the product name - and remember we're not talking about ADP Enterprise here)
3. None (PayChex isn't even worth mentioning)

Rankings for PR (you are going to be hostage to whichever processing center you are close to. Some processing centers within the same vendor will be better or worse than others.) You didn't mention what size organization you were 3 years ago. If you have grown, you might be able to expect slightly better service, but the real leap in service quality happens at
around 1000 employees.

1. ADP
2. PayChex
3. Ceridian

Follow-up on HRO providers

In my post for Fidelity HRO, I listed my top 5 HRO vendors. A consulting colleague (of unknown firm) who works closely in the HRO space e-mailed me this follow-up:

interesting view of the top 5 hro providers. i play heavily in this space as a hr consultant and not sure i would classify the same way.

true global hr bpo providers:
IBM - just because they are IBM... but limited experience to date
Hewitt - 800 lb gorilla
Convergys - well kept secret
Accenture - waffling commitment to hro - maybe doing a deal with hewitt?
ACS - low cost provider. would like to see them do something real after mellon. have been quiet and having contract problems.
ExcellerateHRO - wanna be... no real success.... TP relationship is interesting, but not so sure the marketplace has seen the power of it yet

others providing niche services but not really offering true HR BPO
ADP - payroll plus
Fidelity - hr/ben/pay for us clients
Arinso - pan-european payroll plus
etc

Thanks for the follow-up, it will be great to continue this discussion as the industry evolves. ADP is really the only player I might disagree on. They might be pulling together the HR side of HRO and their international offering is growing on SAP. However, the HRO and international salespeople are silo'd and the offerings may not be compatible.

Fidelity HRO comments

Edited on 11/03/2005: This evening, I received an e-mail from Workforce Magazine requesting that I remove some text of the Fidelity HRO article from my post. In my attempt to be a "good citizen" the text has been removed, but you can still hyperlink to the article. Here you go:

I found this article on Fidelity HRO on the Workforce.com website. As with other articles on specific vendors, I found it to be somewhat misleading. Chances are, Workforce.com interviewed a PR or marketing person for the article and simply reprinted the statements. I've publicly criticized other articles and corporate press releases in the past, so obviously I have no problem doing so now.

For example, the article states that Fidelity provides 2 or more services to over 100 companies with more than 10,000 employees. The first of these services could be 401(k) and the second could be ESPP. There is really no way of knowing how Fidelity characterizes "services" and if they are indeed HRO types.

What (if anything) do I agree with? It says that some analysts say Fidelity is in the top 3 or top 5 of HRO providers. My top 5 are Accenture, ACS, ADP, ExcellerateHRO, Fidelity and Hewitt (in alpha order). There are actually many HRO vendors looking for that 5th spot and are very close and I named 6 because in my opinion 3 of those 6 are tied for spots 4,5,6.

The last paragraph of the article talks about how Fidelity built it's own system and is courting the SAP and PeopleSoft users of the world. I'll just state that I don't have full confidence in Fidelity's build-out. They use the Oracle database as a platform and basically created code and tables from the ground up. Early installations went poorly and the functionality was incredibly weak but I have some confidence that the database is much improved. However, I don't know that it's SAP quality yet.

Hewitt for sale?

Somewhere in my last 100 posts I mentioned that Hewitt was in a fairly weak operational position and might be an aquisition target. I'll have to admit that I didn't really believe it, and honestly I still don't. They are the undisputed leader in HRO at the moment, and their laser-like focus on this market should get them out of any growing pains they have.

However, I should mention that I found this text in Yahoo! finance:

Leder reported that Hewitt Associates (NYSE: HEW - News) filed an 8-K form granting 65,000 restricted shares to four company bigwigs and "change in control" severance agreements to some 24 executives. She notes that, "The agreements are fairly standard.... But they're probably worth paying attention to, since we've all seen this type of pattern -- expanding the number of folks covered by change in control agreements -- as an almost routine event when a company is prepping itself for a sale."