Shake up at Hewitt

The rumors have been around in the market for some time now, but this past week it showed up in print:

What does surprise Pramuk and other experts, however, is that Hewitt doesn’t have a successor in place for Salvino. “That certainly could be hinting at a sale of its HRO business,” he says.

Marc Pramuk, v.p. of research at Everest Group, was referring to the announced departure of Michael Salvino, co-leader of Hewitt Associates’ HR outsourcing sales and accounts group. The quote appears in an article on workforce.com by Jessica Marquez. The announcement comes on the heels of the announced resignations of Hewitt’s CEO Dale Gifford and Bryan Doyle, president of the HR outsourcing business.

By any standards, the three departures signal a major shakeup at the recognized leader in total benefits administration and major player in the HRO market only two years after the merger of Hewitt and Exult was announced. At the time of the announcement, the merger was regarded as nothing short of a defining moment in the history of HRO. HRO Today magazine had this to say at the time:

“For prospective HRO buyers, Hewitt’s acquisition of Exult makes convincing management to endorse HRO a much easier task with a combined Hewitt/Exult HRO business, than it was to select either separately. And as a combined entity, the new company represents a much more formidable competitor than they previously did.”

And only one year ago, Brian Doyle had this to say:

“I don’t think HRO really took off until Hewitt and Exult merged. I think before then, we were only seeing some early adopters and a steady but lumpy increase of HR BPO deals, that was certainly the case in 2004. In 2005, we’ve seen a significant uptake in the number of deals.”
And now, while the marriage is still intact, the honeymoon is clearly over. While the union may yet last longer than a typical Hollywood wedding, if the paparazzi could stalk companies, they’d be all over this relationship. I haven’t seen the Las Vegas line, but put the over/under at 18 months and take the under.

When the merger first took place it appeared to be the perfect marriage. Hewitt was regarded as the gold standard in benefits outsourcing; setting the paradigm in how total benefits administration was delivered. Over time, they were offering more and more outsourcing of HR programs such as service award administration and employee discount programs.

Exult on the other hand had the most mature of the practices and model of BPO for HR. Hewitt would be able to expand its brand into broad HR outsourcing and gain significant market share.

The orders started pouring in! It would appear, however that the orders came in too fast as the linked articles on workforce.com suggest. Reportedly (and allegedly) implementation became more and more difficult, and now, perhaps Hewitt isn’t competing effectively for the current
HRO opportunities.

The rumors had been that Hewitt might be looking to jettison the HRO business, and that Accenture would be the taker. This last article brings ADP and Fidelity into the mix. The thinking is that another major market player will have better luck in turning the Exult HRO model to profitability. If Hewitt couldn’t turn a profit with it, however, I don’t think ADP or Fidelity could either.

Hewitt was the best at turning administration into profitability. Fidelity and ADP are the best at turning high volume transaction processing into profit. The real problem, in my opinion, is that HRO, or BPO for HR is neither solely administration nor high volume transaction processing.

When Hewitt offered services outside of its core model, the troubles began. Now, it is hard to tell what the model is. Is it HRO based on Cyborg? Is it a lift and shift of your PeopleSoft or SAP platform? Is it a one to many or a one off model?

Mike Hager, of Hager Strategic, defines HRO as. “Transformational outsourcing where the client’s existing systems and processes are completely replaced by the vendor who migrates all HR processes currently being supported by HR internally, to the vendor’s proprietary technology and service platform.” The market seems to be defining it differently these days, but that was always Hewitt’ strength. It’s what it got away from with the Exult model.

Defining its model for the future is the question that will need to be answered by the new leadership as Hewitt tries to respond to shareholder demands. In the meantime, the market needs to answer the question of how BPO applies in the HR space. Can it be a profitable service offering for the providers thereby providing clients with a stable, efficient, quality, and risk mitigated alternative or will it evolve into something totally different in the years to come?

In the final analysis, we may very well see that the Hewitt-Exult merger did indeed change the way the market views HRO, but not in the way in which people may have thought only one year ago.

About the author – Donald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

It’s Offshoring, Not Outsourcing!!!!

I am taking a break this week from my discussion of vendor management in order to use this particular platform to rant a bit about a pet peeve of mine. As the title suggests, it’s to rant about the misuse of the word “outsourcing” when people are really referring to “offshoring”.

Today, I read this article from the Washington Times:

Special correspondent John Zarocostas in Geneva interviewed John J. Sweeney, president of the AFL-CIO, last week on the sidelines of the International Labor Organization’s (ILO) ministerial conference about the challenges of globalization and outsourcing and the prospects for employment. The conference began May 31 and runs through Friday.

The millions of people who read this blog and these words will undoubtedly cringe when outsourcing is mentioned with such derision. OK, well yeah, I know millions aren’t reading this blog, but millions are employees in THIS country in the outsourcing industry in some capacity. We on this blog work in HR and many of us owe our livings to outsourcing.

I know many who frequent this site work with brand name outsourcing providers right here in the Good ‘Ole US of A!

On a nightly basis we hear from Lou Dobbs about how America is going down the tubes because of the “Outsourcing of America.”

PLEASE, PLEASE PLEASE, we must do something about this! We who make our livings in outsourcing, whether it be HR, payroll, benefits, finance, accounting, transportation, logistics, information technology or whatever (for goodness sakes, I even outsource my lawn maintenance!!) must do what we can to change the vernacular in this country. Write to Lou Dobbs and educate him. Let him know the proper word is OFFSHORING! He should be talking nightly about the “Offshoring of America.”

Let me get you started:

Dear Mr.Dobbs,

My name is _______ and I am proud to say I am a gainfully employed taxpayer working for an outsource provider in the _____ industry right here in the USA.
I watch your program on a regular basis and marvel at how you have been able to single-handedly foster a national dialogue on the dangers of outsourcing and the “Outsourcing of America”.

The only problem, sir, is that you are misinformed. Early on in your crusade someone misled you. You see, outsourcing is good. Millions upon millions of people in this country work in the outsourcing industry. Every company in America outsources one thing or another to an American outsourcing company.

I believe the word you are really looking for is “Offshoring”. You see, that’s when jobs are shipped over seas. Please consider changing the name of your nightly segment.

Respectfully,
Donald Glade (insert your name)

When the vernacular is changed, maybe then we in the outsourcing industry will get our just due! We will be looked at as creators of jobs within our borders. We will be revered for the tax base we provide. We will be thanked for our consumerism! Never again will we be embarrassed to say what we do for a living. Never again will our children be the victims of scorn and ridicule from the kids whose parents lost jobs because of OFFSHORING!

Join me on this mission if you will. Take up the banner of outsourcing! Proclaim proudly from the mountaintops: Outsourcing is good!

About the author – Donald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

Relationship Management V – Implementation

I was talking with a client this week about the implementation of an outsourced solution to payroll, HRIS and benefits administration that he would soon be going through.

He has every intention of engaging third party assistance with the implementation. He’s seen things go very wrong for companies who attempted to go it alone with their outsource providers. How or why implementations go wrong and fail can be debated. We can talk about bad project management, unrealistic time frames, faulty technology and the like, but that really isn’t the topic of this week’s posting.

No, I’d like to talk about the successful implementation.
Successful implementations happen every day across the HR spectrum. Client and vendor teams put in the hard work to make it happen. Sometimes third parties are involved to help with data cleanup, project management or other tasks, and sometimes they aren’t. Regardless at the end of implementation, oftentimes one person can be identified who just would not allow the project to fail. He or she could be on the client or vendor side (or with the third party) and can be recognized for the Herculean effort that ensured success.

At the end of the implementation you can also usually point to a person (maybe the person mentioned above), or a group of people, who, to put it bluntly, no one wants to continue working with.

Let’s face it, implementations can be hell. Nerves get frazzled, tensions run high, people put in long hours without recognition or compensation, and once great working relationships can be forever damaged.

Thinking about it, maybe it is a great idea that most service providers have implementation teams separate from ongoing processing. You will also commonly see account managers turn over within a year of completed implementations to allow for a “fresh approach.”

The human toll of a successful implementation is high. And it can often lead to a strained relationship from the start. We already discussed how expectations can already be out of whack post-implementation. This just makes it even harder.

Why am I telling you all this? Well, this series is about relationship management. Give relationship management a chance to work. Don’t start your relationship off in a hole.

What can you do to avoid this? Hire third party assistance to help with the implementation. If nothing else, let them be the bad guys! Let them be the ones who have to constantly badger people to hit deadlines. Let them be the ones to hold the mirror up to the team. Let them be the ones the client and vendor talk about behind their backs. Let them become the ones you love to hate.

And when all is said and done, and the implementation is completed and successful, let them be the ones you thank for keeping the client and vendor from each other’s throats. You’ll be glad you did.

Just think of it as pre-marriage counseling.

About the author – Donald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.