Hewitt associates...Attempting to be different in a crowd

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  • 1. HEWITT ASSOCIATES ATTEMPTING TO BE DIFFERENT IN A CROWD
  • 2. INTRODUCTION Hewitt Associates was an American provider of Human capital and Management consulting services to help companies manage their total HR and employee costs, enhance HR services, and improve their workforces. It operates 500 offices in 120 countries and had about 29,000 employees providing consulting, outsourcing, and insurance brokerage services.
  • 3. HISTORY • On October 1, 1940 Ted Hewitt formed Edwin Shields Hewitt and Associates as an insurance brokerage specializing in financial planning for business executives. The first client was Parker Pens. Hewitt has historically maintains a client retention rate of 95%+ . Company’s first regional office was opened in Minneapolis, Minnesota , in 1959 followed by expansion into Toronto, Canada, in 1974. Hewitt first office overseas opened in 1985. In 2002 , the company went to public on the New York Stock Exchange, selling 11.15 million shares to the public , and the stock is part of the Russell 2000 index. In June 2006 longtime Chairman and CEO Dale Gifford announced his resignation. Russ Fradin joined Hewitt as CEO and Chairman of the board beginning September 5, 2006. This was the first time Hewitt hired an external CEO.
  • 4. GROWTH STRATEGY • Prior to 2000, most of Hewitt's growth was organic. Acquisitions of and joint ventures with very small boutique firms, primarily defined benefit plan actuaries and human resources consultancies, were typical. In 2000, Hewitt began growing through larger mergers and acquisitions. The first of these was the announcement, in late 2000, of a plan to integrate its UK and Ireland business with Bacon & Woodrow, a leading retirement and financial management consultancy in the UK. • In June 2003, Hewitt announced the completion of the acquisition of Northern Trust Retirement Consulting, L.L.C., expanding its portfolio of outsourcing clients. Later in 2003, Hewitt acquired Cyborg Worldwide, Inc., expanding outsourcing capabilities to include payroll services. • On October 1, 2004, Hewitt completed the acquisition of Irvine, CA - based Exult Inc., a company specializing in Human Resources Business Process Outsourcing or HR BPO. This move was to ensure Hewitt would remain competitive within the HR Consulting and Outsourcing space, in which HR-BPO was a rapidly growing area. • As of early 2010, Hewitt had approximately 2,600 clients, making it the world's largest provider of multiservice HR business process outsourcing (BPO), and it claimed to be the only firm fully integrated HR outsourcing and HR consulting. Hewitt's clients included over half the Fortune 500 and a third of the Fortune Global 500. Hewitt had 86 offices in 37 countries and employed over 27,000 employees.
  • 5. PRODUCT AND SERVICES • HR CONSULTING SERVICES ( 29% ) :- Hewitt’s consulting services enable companies to confront complex business challenges. This includes… • Creating and managing retirement programs. • Designing and delivering health plans that rein in costs. • Improving the performance of the workforce and solving the complex HR issues . • Provide tailored employees communication services. • HR OUTSOURCING SERVICES ( 71% ) :- Enable clients to focus on their core activities , maximizing value and effectiveness across the full range of HR programs.
  • 6. TOTAL REVENUE Outsourcing ( $ 2,046.9 Mn) • BPO / Payroll ( $ 536.0 Mn) • Benefits Outsourcing ( $ 1510.9 Mn) Total Revenue Consulting ( $ 927.6 Mn) • Benefits ( $ 695.7 Mn) • Talent & Organizational consulting ( $ 231.9 Mn)
  • 7. VISION GLOBAL VISION • Hewitt wants to be the best in the People Business , bringing together our broad capabilities in unique ways to provide unparalleled result for client , associates and investors. ASIA PACIFIC VISION • In 2011 Hewitt will be the most sought after management consulting firms in Asia Pacific . “ We will be profitable $ 150 million business , with best talent and recognized as the best employer in the region.”
  • 8. CORPORATE VALUE HOW DO VALUES LEAD TO THE VISION Collaboration Teamwork leverages our individual talent to serve our client and their people exceptionally well. “ Winwin” relationships are our goal as we work with clients, other associates, business partners, and services providers Integrity Ethical behavior, honesty and integrity are fundamental characteristics of our conduct in all aspects of our work People We treat people with respect and dignity. We build positive trusting relationships through open communication, sharing and valuing diverse perspectives Excellence We all have the responsibility to deliver quality and innovation in our work through personal initiative and continuous development of skills and knowledge, with strong support from the firm.
  • 9. CORPORATE VALUE… • Who Should We Hired ? • What Does Growth Mean ? • How Should Leader Act and Behave ? • What Does Success Mean to Hewitt And Its Employees ?
  • 10. HR SERVICE VALUE CHAIN Strategic HR Consulting Recruiting and Staffing Employer Data Management ( HR BPO) Benefits Outsourcing Performance Management Relocation Employee Development Promotion
  • 11. POSITION OF HEWITT IN THIS VALUE CHAIN • Hewitt does not provide services for Recruiting and Staffing to avoid creating conflict among their clients jostling for same talent pool. • Primary part where Hewitt is presently focusing is HR-BPO Outsourcing. • 70% of Hewitt’s business comes from the Outsourcing and of it 75% comes from HR-BPO outsourcing.
  • 12. SUCCESS FACTORS • Cost saving for the client. • Thorough understanding of the legal aspects. • Top quality of HR consultants . • Security of client data.
  • 13. CRITICAL SUCCESS FACTORS Critical Success Factors Wts Accenture Fidelity Convergys Mercer IBM Hewitt Mean Cost saving for the client .4 8 8 7 7 7 9 7.7 Top quality HR consultant .2 8 6 6 8 8 8 7.3 Security of information .3 9 7 6 7 7 8 7.3 Understanding legal aspects .1 6 6 7 6 7 7 6.5 8.1 7.1 6.1 7.2 7.2 8.3 7.4 Weighted Score Score out of 10
  • 14. SCORE OUT OF 10 Cost saving for client 40% Top quality HR consultants 20% Security of information 30% Understanding of Legal aspects 10%
  • 15. SCORE OUT OF 10 Cost Saving TOP Qul HR Consult. Security of Info. Understnding legal aspects 35 30 25 20 15 10 5 0 Accenture Fidelity Convergys Mercer IBM Hewitt
  • 16. PROBLEMS IN 2006 • HR – BPO revenues declined by 19% year over year in fiscal 2006 significantly impacted the termination of its Bank Of America contract. • The decline was attributed to taking on too many contracts ( Thus not properly vetting and modeling them ), and issues with payroll, recruiting, and global contracts. • Even the average revenue per participant in the BPO business reduced by 21.4% suggesting that there has been a major pricing pressure in the industry. • Hewitt’s consulting business was also experiencing recent margin pressures due to increased incentive compensation costs resulting from unfavorable trends in consultant turnover.
  • 17. THE KEY TRENDS OF FINANCIALS OF HEWITT Clearly there has been pressure on the firms margin in the last few years. This is due to the following reasons. • Consulting business is facing pressure due to rising attrition, and burgeoning salaries of the consultant. • BPO business is facing pressure on pricing front, as the clients, are not accepting price hikes, and are unable to recognize the differentiation offered by Hewitt. Margin under squeeze Burgeoning consulting salaries Hard to crack BPO clients
  • 18. P & L STATEMENT Particulars 1999 2000 2001 2002 2003 2004 2005 2006 Net Revenues 1058 1281 1476 1716 1981 2200 2832 2789 EBITDA 238 274 283 281 327 356 340 86 Deprecation 77 91 97 -122 -149 -133 -151 -150 Operating Income 161 182 186 159 178 223 234 -64 PBT 156 182 183 145 161 208 174 -61 Net ( Loss ) Income N/A N/A N/A 82 95 123 107 -117 2000 2001 2002 2003 2004 2005 2006 21% 15% 16% 15% 11% 29% -2% 15% 14% 13% 9% 9% 10% 8% -2% Net Profit Margin ( Before Tax ) 15% 14% 12% 8% 8% 9% 6% -2% KEY FINANCIAL METRICS Particulars 1999 Revenue growth Operating margin
  • 19. FUTURE CHALLENGES Where Hewitt need to improve • Innovation and Entrepreneurship :• Networking :-
  • 20. VISION 2010 Revenue $ 10 Bn Company Gross Margin 40% Geographic Diversity 40% non US revenues Client Diversity 20% of revenues from mid-sized companies Cross Selling Bring 40% BPO clients under consulting net
  • 21. THANKS