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ADP - Global HR transformation 2009

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Are we really able to change before we have to? This question is probably on many people’s minds as we confront more and more transformations and crises that have major impacts on the way we do …

Are we really able to change before we have to? This question is probably on many people’s minds as we confront more and more transformations and crises that have major impacts on the way we do business and, most important, on our everyday lives.

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  • 1. Global HR Transformation 2009 Conducted by HROA in association with ADP
  • 2. TABLE OF CONTENTS Introduction ......................................................................................................... 4 About the survey ................................................................................................ 5 Executive summary ............................................................................................. 6 Research findings................................................................................................. 8 HR transformation status ........................................................................... 8 HR transformation outcomes ................................................................... 16 Outsourcing and shared services ............................................................. 20 HR management practices ......................................................................... 30 About the survey participants .......................................................................... 32 About the sponsors ............................................................................................ 34 Global HR Transformation 2009 HROA © 2009 3
  • 3. INTRODUCTION Back to basics…once again! Are we really able to change before we have to? This Of course, much remains to be resolved and reading question is probably on many people’s minds as we this report surely helps the reader to understand confront more and more transformations and crises trends in the HR market and dive deep in that have major impacts on the way we do business organisations around the globe. Not only does it offer and, most important, on our everyday lives. a snapshot of HR organisations at one point in time, but it also integrates comparisons and analysis with There are always signs before any modification in the past data, which gives a broader perspective to the environment, but very few can or have the will to whole project. This dual vision has contributed greatly interpret them. Think of the fall of the Berlin wall in to its success over the years. 1989, the Asian financial crisis in 1997 or, more recently, the U.S. credit crisis that plunged the world’s Finally, The Global HR Transformation Report is also a economies into hard times. wake-up call to all the stakeholders in the HR industry, be they final users, providers, market analysts, or I’m sure you know many other examples as well. We advisors. The message is clear: the best way to deal have to prepare ourselves to go through more and with uncertainty is to work on setting up standards more unforeseen transformations. Good or bad, the that will define what our industry should be in the near world and the way we are managing our economies future. This is an imperative to progress and put are changing, and we’d better be prepared to face together solutions that will better enable HR Managers these changes. to face changes and challenges in their companies’ So, what lesson to take away from all this turmoil? To markets. remain humble and work hard together to find New challenges lie ahead. It is up to us to leverage this solutions that will enable us to avoid the mistakes of report to find innovative ways to meet them. the past and head in a better direction. This is one of the reasons why we have been supporting the Global I wish you a rewarding read, HR Transformation Report for so many years. Like any transformation, improving your HR Hans Jansen Department’s performance is not something you can Vice President, Multinational Sales improvise, especially in troubled times. As you will ADP Employer Services International read, the percentage of companies that declare they are in a transformation stage may be declining slightly compared with prior years, but their level of maturity has clearly risen. Internal reengineering of processes is now a significant part of the transformation strategy, and companies progressively anticipate better the time required for change and what outcomes to expect from their transformation. Global HR Transformation 2009 HROA © 2009 4
  • 4. ABOUT THE SURVEY This year’s survey – our sixth annual edition – examines trends in human resources (HR) transformation practices (which we define as any concerted effort to change and improve HR operations, whether through outsourcing, shared services, internal reengineering, or a combination of these strategies) in organisations around the globe. The 2009 report provides insights into market trends and changes, particularly in light of the recent global economic situation, and offers perspective on future plans. In addition to discussing transformation status and strategy, our report addresses: • Reasons organisations transform, and the barriers that limit their transformation • Transformation timing, cost and satisfaction • Impact of recent global economic changes on transformation plans • Engagement of external resources and experience • Current and future transformation scope • HR outsourcing and shared services strategy, budget and provider selection The survey received responses from 188 executives around the globe in varying stages of HR transformation. For a full breakdown of respondent demographics, please visit the “About the Survey Participants” section of the report. Global HR Transformation 2009 HROA © 2009 5
  • 5. EXECUTIVE SUMMARY HR transformation continues to be a significant Although it remains the least likely strategy, phenomenon, although down from last year outsourcing has experienced a near double increase between 2008 and 2009, from 7 to 12 percent, and is a Whilst 81 percent of respondents say they are/have/ more common strategy amongst mid-sized than in plan to transform HR, 2009 was the first time in four larger or smaller organisations. years that we saw a decline in respondents saying they are transforming HR. This year, only in the mid-market Cost reduction/management leads the reasons companies did we see an increase in the number that why organisations transform expect to transform HR. The top reasons companies transform have remained Cost was a main factor for those organisations virtually unchanged over the past several years, not planning to transform HR, a significant although they regularly change order. Cost topped the difference from last year 2009 list, up from number three in 2008. Other top reasons freeing internal HR staff to focus on strategic For those respondents with no plans to transform HR, issues, and to add or improve service for line satisfaction with the current organisation and/or managers and employees. solution remains the top reason not to make a change. However, cost, which no one cited last year, is the Hurdles to HR transformation remain number two reason this year, with 40 percent of those unchanged over six years of research who are not transforming HR citing it as a main In the six years we’ve been conducting this research, reason. Additionally, we saw a near doubling in the the main hurdles to HR transformation have remained percentage of respondents who say HR simply isn’t unchanged. Skills of existing HR staff has been at the enough of a priority to merit a transformation effort. top of the list from the start; internal bureaucracy, lack HR transformation response to the recent of adequate technology, and underestimation of economic downturn is mixed resources required have rounded out the top four. There is no real commonality of response as to how This year, however, did see a reversal of a trend that the recent global economic downturn has impacted we’ve noted in the past couple of years; it appears for HR transformation efforts; the highest percentage the first time this year that hurdles may be declining. indicate there has been no impact, but nearly as many HR transformation most often takes three say they have accelerated their efforts. Generally it's years and generates cost saving in the 25 larger organisations that are accelerating their efforts percent range in response to the downturn. HR transformation most often takes three years – Organisations most often employ a hybrid slightly longer than anticipated. At the same time, approach to HR transformation, although that transformation generally generates savings in the 25 strategy saw a decline in 2009 percent range, which is only slightly less than A hybrid approach of internal reengineering, shared anticipated. services and outsourcing remains the most common HR transformation efforts have the greatest impact on HR transformation strategy, although both it and a organisational management issues – rather than predominant shared services strategy declined, whilst service, technology, or staff/manager job performance internal reengineering increased. improvement; they have less positive impact s in two areas that organisations say are key reasons to transform: reducing/managing cost and freeing internal HR staff to focus on strategic issues. Global HR Transformation 2009 HROA © 2009 6
  • 6. EXECUTIVE SUMMARY HR outsourcing saw an overall decline this year, HR outsourcing annual budgets are most often but an increase in pockets of respondents less than US$1M; many say they anticipate increases, but that number has declined Outsourcing of HR processes saw a slight overall decline between 2008 and 2009, but results show Respondents most often budget less than US$1M significant variations among specific groups. For annually for HR outsourcing. The highest percentage example, the smallest saw a decline in HR outsourcing of respondents say they anticipate increasing their HR activity, whilst larger ones experienced a slight outsourcing budget; however, that percentage has increase. dropped from 55 percent in 2008. At the same time, many fewer say they plan to decrease their HR Although American organisations are still more likely outsourcing budget. than others to outsource, they indicated a significant decline in outsourcing activity in 2009, whilst Asia Shared services continues to be comparatively Pacific organisations indicated a significant increase. uncommon HR outsourcing, as always, is focused on Shared services continues to be uncommon, although transactional processes not in quite the decline we saw in 2008. Whilst we noted a decline in shared services in 2008 – and The 2009 data continue a trend we’ve found since we posited whether it was a trend in the making – it started this research: transactional HR processes – appears to have been an anomaly. This year we see a payroll, benefits administration, HRIS – are most likely mix of growth and decline across HR processes to outsourced, whilst strategic processes – managed through shared services. performance appraisal, employee communications, career & succession planning – are least likely. Like outsourcing, transactional services are more likely to be managed through shared services than are Top provider selection criteria remain strategic processes. unchanged through industry change and growth Use of shared services varies by size and The top four provider selection criteria have remained location unchanged since 2006, although they have changed order. In 2009, the top provider selection criterion Across most processes, the largest organisations are was functional coverage and expertise, followed by less likely to be managing individual HR processes proven ability to meet service levels, price, multi- through shared services, but the most likely to be country capabilities, and specialisation in relevant managing the entire HR function through shared functions. services. Many organisations are continuing to “go it HR is a local business alone” when it comes to making outsourcing HR processes are most often managed locally, versus decisions, although they are collecting more regionally or globally, a finding that cuts across size and information geography. An increasing number of respondents say they develop Most organisations maintain a common HRIS and use their own process to identify and select their provider(s). The vast majority of organisations have common HRIS, generally managed at the domestic level. The use of RFIs appears to be on the rise, whilst the issuing of RFPs remains common. Global HR Transformation 2009 HROA © 2009 7
  • 7. RESEARCH FINDINGS HR TRANSFORMATION STATUS WHO is transforming HR headlines Whilst HR transformation continues to be a significant phenomenon – 81 percent of respondents say they are/have/plan to transform HR – 2009 was the first time in four years that we had a decline in respondents saying they are transforming HR. The sole group that saw an increase in HR transformation in 2009 was organisations between US$1B and US$10B. Across all regions respondents indicated a decrease in likelihood to transform HR; EMEA experienced the greatest decline, with 17 percent saying they have no plans to transform, versus 7 percent in 2008. 40 percent of respondents who have no plans to transform HR cite cost as a main reason – significant because no respondents cited it in 2008. findings A considerable percentage – 81percent – of the Americas, a finding that has been steady across all respondents have transformed, are in the midst of years of our research. At the same time, EMEA transforming, or have completed HR transformation. experienced the greatest decline in HR transformation, Whilst still significant, that number has dropped for with 17 percent saying they do not intend to the first time in four years, down from a high of 90 transform versus 7 percent in 2008. percent in 2008. Although we have both more Asia Pacific respondents organisations As we’ve found in the past, and more smaller companies in our 2009 respondent transforming HR companies of less than pool than in the past, we find this trend still holds, as US$1B are considerably less both the smallest and largest organisations are a bit 81% likely to be transforming HR than are larger organisations, less likely to be transforming, and all geographies report less likelihood to transform HR. and this year that finding was even more notable with For those respondents with no plans to transform HR, a full quarter of the smallest companies saying they satisfaction with the current organisation and/or have no plans to transform HR. (Although it must be solution remains the top reason not to make a change, noted that three-quarters planning to transform HR is a reason cited by over half of respondents this year. still a sizeable number.) However, significantly, cost, which not one single Companies between US$1B and US$10B are the only respondent cited last year, is the number two reason group whose HR transformation participation is this year, with 40 percent of those who are not growing, with 95 percent saying they’re transforming transforming HR citing it as a main reason. HR versus 91 percent in 2008. Another significant change is a near doubling in the Companies based in the Asia Pacific region are less percentage of respondents who say HR simply isn’t likely to be transforming HR than those in EMEA or enough of a priority to merit a transformation effort – up to 29 percent this year versus 15 percent in 2008. Global HR Transformation 2009 HROA © 2009 8
  • 8. RESEARCH FINDINGS Figure 1: where organisations are in their transformation process, by region Figure 2: while still prevalent, HR transformation has declined across most groups less than US$1B – more than year all US$1B US$10B US$10B 2008 % transforming HR 90% 81% 91% 95% 2009 % transforming HR 81% 74% 95% 93% respondents with no plans to respondents with no plans to transform transform who say cost was a who say HR’s low priority was a major major factor in that decision factor in that decision 2008 0% 2008 15% 2009 40% 2009 29% Global HR Transformation 2009 HROA © 2009 9
  • 9. RESEARCH FINDINGS HR TRANSFORMATION STATUS WHERE organisations are in HR transformation headlines Respondents have experience in HR transformation; over 70 percent have been transforming HR for more than a year. findings The highest percentage of respondents (34 percent) Respondents from EMEA have a bit organisations with have been transforming HR for one to two years, and more experience than their counter- more than 1 year 70 percent have been transforming HR for a year or parts in HR transformation; 80 percent of experience transforming HR more. Not surprisingly, generally the larger the of them report launching their HR company, the longer they have been transforming HR. transformation programs more than a year ago. 71% IMPACT of the economic downturn on HR transformation headlines There is no real commonality of response as to how the recent global economic downturn has impacted HR transformation efforts; the highest percentage indicate there has been no impact, but nearly as many say they have accelerated their efforts. findings There is a mix of response concerning the impact of On the other hand, over half of all respondents in the recent economic downturn on HR transformation organisations of US$1B and larger say the economic efforts. The highest percentage (42 percent) say there downturn has caused them to accelerate their efforts. has been no impact to their efforts; another 38 Next most common is no impact, followed by a percent say they’ve accelerated their efforts as a result limited number who say they have decelerated their of the downturn, and the remaining 20 percent say HR transformation efforts. they have decelerated their HR transformation efforts. Asia Pacific organisations’ response varies from their Company size has some bearing on this issue. Nearly counterparts’; they are considerably more likely than half (48 percent) of organisations under US$1B say the others to say that the economic downturn has caused economic downturn has not impacted their HR them to accelerate their HR transformation efforts (58 transformation efforts. Only 22 percent say the percent). situation has caused them to accelerate their efforts; about a third (30 percent) say they’ve actually decelerated their efforts as a result of the downturn. Global HR Transformation 2009 HROA © 2009 10
  • 10. RESEARCH FINDINGS Figure 3: Figure 4: organisations are experienced in HR transformation impact of the economic downturn on HR transformation plans Figure 5: impact of the economic downturn on HR transformation plans, by size Figure 6: impact of the economic downturn on HR transformation plans, by region Global HR Transformation 2009 HROA © 2009 11
  • 11. RESEARCH FINDINGS HR TRANSFORMATION STATUS HOW organisations are transforming HR headlines A hybrid approach of internal reengineering, shared services and outsourcing remains the most common HR transformation strategy, although both it and a predominant shared services strategy declined, whilst internal reengineering increased. Whilst still the least likely strategy, outsourcing has experienced a near double increase between 2008 and 2009, from 7 percent to 12 percent. Outsourcing as a predominant strategy is more common amongst respondents in the US$1B to US$10B range than in larger or smaller organisations. findings The predominant strategy for transforming HR likely to be using a hybrid approach, but they are also remains a hybrid approach of internal reengineering, more likely to be focusing on outsourcing as their shared services and outsourcing; however, the use of predominant strategy than are either their smaller or that strategy saw a decline between 2008 and 2009 larger counterparts. Shared services is more common bringing it much closer to reengineering, the strategy amongst the largest respondents. that saw the greatest increase. Shared services as the Strategies vary significantly by region. American main strategy saw the greatest decline, down to 20 respondents are most often reengineering HR, percent from 30 percent citing it at a main strategy. followed by employing a hybrid approach. They are Outsourcing experienced a near double increase – least likely to be making use of shared services. from 7 percent to 12 percent – although it remains European organisations, on the other hand, are most the least common predominant strategy. commonly employing a shared services strategy, Perhaps not surprisingly, the smallest organisations are followed by reengineering and hybrid approaches. most likely to be transforming HR through reengineer- Finally, Asia Pacific companies are equally employing ing and least likely to be using on outsourcing strategy. hybrid and reengineering approaches. No one is Respondents in the US$1B to US$10B range are most predominantly employing outsourcing. WHY organisations transform headlines Cost reduction/management leads the reasons why organisations transform, up from number three in 2008. Reasons companies transform has remained virtually unchanged over the past several years. findings The main reasons organisations transform HR have in 2007.) Other top reasons remain freeing internal remained fairly constant over the past several years, HR staff to focus on strategic issues, and to add or although “to reduce or better manage” costs has improve service for line managers and employees. retaken the number one spot having dropped to Whilst there are slight variations based on size or number three last year. (2008 may have been an geography, none of them stands out as particularly anomaly; cost savings was the top reason to transform significant. Global HR Transformation 2009 HROA © 2009 12
  • 12. RESEARCH FINDINGS Figure 7: how organisations transform HR Figure 8: changes in the shared Year hybrid reengineering outsourcing predominant HR services transformation 2008 strategy year over % predominantly using 44% 19% 30% 7% year 2009 % predominantly using 35% 33% 20% 12% Figure 9: why organisations transform HR To access external sources of talent, expertise or technology To facilitate reporting To benefit from a new technology to empower line managers To concentrate resources on core business To align the organisation on common objectives To respond to organisational changes To add and/or improve service for line managers and employees To free internal HR staff to focus on strategic issues To reduce cost or better manage the cost of internal processes Global HR Transformation 2009 HROA © 2009 13
  • 13. RESEARCH FINDINGS HR TRANSFORMATION STATUS WHERE HR is centralised headlines Centralisation is split relatively evenly amongst the domestic, regional and global levels, although where HR is centralised depends upon company location and size. findings Where respondents centralise HR is a nearly equal are most likely to centralise at the global level, and the split amongst domestic, regional and global, with a very largest companies are most like to centralise at the slight edge for domestic. regional level. Size does appear to have some impact where an The Asia Pacific region presents the only notable organisation centralises HR, at least to some extent. geographic difference in centralisation of HR. Asia The smallest companies are most likely to centralise at Pacific respondents are equally likely to centralise HR the domestic level, companies of US$1B to US$10B domestically or globally – 43 percent for each – but unlikely to centralise regionally. HURDLES to HR transformation headlines Over the six years of research on this topic, skills of existing HR staff has remained the top hurdle to HR transformation. In 2009, almost all hurdles declined, reversing a trend of the last couple of years. findings Over the six years we’ve been conducting this councils – and that had only a very slight increase) research, the main hurdles to HR transformation have experienced a decrease. That is, fewer respondents remained unchanged. Skills of existing HR staff has noted almost every hurdle this year versus what they remained at the top of the list from the start; internal noted in prior years. This change is driven in part by bureaucracy, lack of adequate technology, and respondent demographics. This year we had more underestimation of resources required have rounded Asia Pacific respondents, and those respondents out the top four. selected hurdles in much lower numbers than in 2008. This year, however, did see a reversal of a trend that Regardless of how long an organisation has been we’ve noted in the past couple of years; it appears for involved in HR transformation, all say skills of existing the first time this year that hurdles may be declining. HR staff is the top hurdle. Those companies that are Last year we noted that 7 of the 10 identified hurdles earlier in their transformation next most often note received higher responses between 2006 and 2008. internal bureaucracy, whilst those with more This year, all but one (opposition from worker’s experience next most often cite an underestimation of resources needed. Global HR Transformation 2009 HROA © 2009 14
  • 14. RESEARCH FINDINGS Figure 10: Figure 11: HR centralisation HR centralisation, by region Figure 12: HR centralisation, by size domestic level regional level global level Figure 13: hurdles to HR transformation Global HR Transformation 2009 HROA © 2009 15
  • 15. RESEARCH FINDINGS HR TRANSFORMATION OUTCOMES TIME and SAVINGS headlines HR transformation most often takes three years – slightly longer than anticipated. HR transformation generally generates savings in the 25 percent range, which is only slightly less than anticipated. findings As we’ve found in the past, HR transformation takes Similar to time to transform slightly longer than anticipated to achieve – but only results, organisations often miss slightly longer. Across all respondents, those their cost savings results, but responsible for transforming HR expect to take in the generally by a slim margin. On average number of range of just under two years, but actually take three. average, expected savings are in years to transform Half of all respondents met their transformation timing the 24 percent range, and actual expectations, but nearly half (45 percent) took longer than anticipated; the remaining 5 percent are beating are just under that. However, across all respondents, whilst over 3 their expectations. half (57 percent) say they met expectations, nearly a quarter (24 The most common reasons respondents cite for taking percent) fell below expectations, longer than anticipated to achieve HR transformation and the remaining 19 percent met include: expectations. • Resistance to change and lack up support internally Among those who exceeded • The cost of transformation and funding expectations, 80 percent set goals average cost constraints at 25 percent or less; among those savings • Lack of upper management support and decision- • making The impact of the economic downturn whose results fell below expectations, 45 percent 25% • Execution problems established goals of 26 percent or more. Global HR Transformation 2009 HROA © 2009 16
  • 16. RESEARCH FINDINGS Figure 14: actual versus expected time to transform Figure 15: Figure 16: accuracy in estimating time to transform accuracy in estimating cost savings Figure 17: actual versus expected cost savings Global HR Transformation 2009 HROA © 2009 17
  • 17. RESEARCH FINDINGS HR TRANSFORMATION OUTCOMES OUTCOMES versus expectations headlines HR transformation efforts have the greatest impact on organisational management issues – rather than service, technology, or staff/manager job performance improvement. HR transformation efforts most often fail to meet expectations in two areas that organisations say are key reasons to transform: reducing/managing cost and freeing internal HR staff to focus on strategic issues. findings Respondents report the best results from their HR At the same time, HR transformation performs worst transformation efforts in organisational management in a couple of the areas earlier identified as main areas: improving response to organisational change, reasons to transform, namely reducing/managing costs aligning the organisation around common objectives, and freeing internal HR staff to focus on strategic and concentrating resources on core business issues. issues. In those areas, 34 percent and 41 percent, In each of those areas respectively, say performance has fallen below best results in HR transformation: three-quarters or more expectations. of respondents say organisational performance has met or exceeded their Organisations also note that HR transformation often fails to meet expectations in benefiting from or management expectations. accessing technology, talent and expertise. worst results in HR transformation: freeing HR staff to focus on strategic issues Global HR Transformation 2009 HROA © 2009 18
  • 18. RESEARCH FINDINGS Figure 18: transformation efforts versus initial expectations To access external sources of talent, expertise or technology To facilitate reporting To benefit from a new technology to empower line managers To concentrate resources on core business To align the organisation on common objectives To respond to organisational changes To add and/or improve service for line managers and employees To free internal HR staff to focus on strategic issues To reduce cost or better manage the cost of internal processes Global HR Transformation 2009 HROA © 2009 19
  • 19. RESEARCH FINDINGS OUTSOURCING AND SHARED SERVICES OUTSOURCING practices headlines Outsourcing of HR processes saw a slight overall decline between 2008 and 2009, but results show significant variations when viewing response broken down by both respondent size and geographic region. ♦ Smaller organisations saw a decline in HR outsourcing activity, whilst larger ones experienced a slight increase. ♦ Whilst still most likely to outsource, American respondents indicated a significant decline in outsourcing activity, whilst Asia Pacific organisations indicated a significant increase. The trend to focus HR outsourcing on transactional versus strategic processes continues unabated. findings Just under 60 percent of all respondents currently Whilst we saw an overall decline between 2008 and outsource or plan to outsource HR processes, down 2009 in organisations that say they are outsourcing, slightly from 65 percent in our 2008 research. The breakdowns by size and geography reveal a more smallest organisations, those under US$1B, are least dynamic situation. For example, the overall decline is likely to be outsourcing HR processes – just under half actually driven by smaller organisation; not only are say they currently do or plan to. Respondents from they the least likely to outsource HR processes, the Americas (64 percent) are more likely than their organisations under US$1B also are the only ones to counterparts in EMEA and Asia Pacific (56 percent for indicate a decline in outsourcing activity. In fact, that each) to outsource HR processes. decline is fairly dramatic, from 64 percent in 2008 indicating they were or planned to outsource to 49 percent in 2009. Respondents larger than US$1B indicated an increase in the same response from 70 percent to 75 percent. A geographic breakdown of response provides an equally contrasting result. Whilst respondents from the Americas continue to be more likely to outsource than their counterparts in other regions, the percentage of American respondents who say they are outsourcing or plan to outsource HR processes declined by nearly 20 points between 2008 and 2009, from 83 percent to 64 percent. At the same time, Asia Pacific respondents outsourcing of HR processes increased by an even greater amount, rising from 33 percent in 2008 to 56 percent in 2009. EMEA respondents noted a slight decline from 60 percent to 56 percent. Global HR Transformation 2009 HROA © 2009 20
  • 20. RESEARCH FINDINGS Figure 19: HR outsourcing declining overall, but ... year all 2008 % outsourcing HR 65% processes 2009 % outsourcing HR 59% processes Figure 20: increasing at larger organisations, declining at smaller less than US$1B – more than year US$1B US$10B US$10B 2008 % outsourcing HR 64% 74% 65% processes 2009 % outsourcing HR 49% 80% 67% processes Figure 21: and varied by region year americas asia pacific emea 2008 % outsourcing HR 83% 33% 60% processes 2009 % outsourcing HR 64% 56% 56% processes Global HR Transformation 2009 HROA © 2009 21
  • 21. RESEARCH FINDINGS OUTSOURCING AND SHARED SERVICES OUTSOURCING practices, continued Findings, continued The 2009 data continue a trend we’ve found since we Variations based on geography: started this research: transactional HR processes – • American respondents more often outsource payroll, benefits administration, HRIS – are most likely leave than do their counterparts elsewhere, whilst to outsourced, whilst strategic processes – perform- EMEA respondents are comparatively unlikely to ance appraisal, employee communications, career & outsource leave. Asia Pacific respondents fall succession planning – are least likely. between the two. • Asia Pacific organisations are less likely to Variance among respondents based on organisational outsource HRIS than their counterparts in other size is limited – regardless of size, companies generally geographies, and more likely to outsource training & development. follow the trend noted earlier. Notable variations • American respondents indicate that it is less include: common for them to outsource recruitment those in other regions. • The largest respondents (greater than US$10B) are less likely to outsource HRIS than are their smaller counterparts and more likely to outsource stock option administration. • The smallest respondents are less likely to outsource expatriate and relocation. Global HR Transformation 2009 HROA © 2009 22
  • 22. RESEARCH FINDINGS Figure 22: HR outsourcing practices by process Global HR Transformation 2009 HROA © 2009 23
  • 23. RESEARCH FINDINGS OUTSOURCING AND SHARED SERVICES SELECTING a provider headlines In 2009, the top provider selection criterion was functional coverage and expertise. The top four selection criteria have remained unchanged since 2006, although they have changed order. An increasing number of respondents say they develop and use their own process to identify and select their provider(s). Larger companies are more likely to engage a consultant/sourcing advisor, up to 65 percent in 2009 versus 50 percent in 2008. The use of RFIs appears to be on the rise, whilst the issuing of RFPs remains common. findings internal and external resources RFIs and RFPs An increasing number of respondents say they develop It appears that organisations are increasingly issuing and use their own process to identify and select their requests for information (RFIs), up from about half in provider(s), up to 87 percent from 70 percent in 2008. 2008 to 65 percent in 2009. The largest companies As more organisations engage in outsourcing and outpace smaller organisations in their likelihood to outsource fewer processes at one time, this number is issue an RFI at nearly 80 percent versus closer to 60 likely to rise. The smallest companies are somewhat percent for organisations of US$10B or less. Again more likely to use their own processes than are their here, Asia Pacific organisations are considerably less larger counterparts; 92 percent of these smallest likely to issue RFIs than their counterparts in other organisations say they develop their own processes, regions. versus 82 percent of larger ones. The issuing of requests for proposals (RFPs) is more Asia Pacific respondents, likewise, more often develop common than RFI requests (as it has been over the their own processes than do their counterparts in past several years) at 76 percent overall, only slightly other geographies. increased from 2008’s 73 percent. As with RFIs, the largest companies, at 84 percent, are more likely than Just over half (51 percent) of organisations say they smaller organisations to issue an RFP. Asia Pacific engage a consultant or sourcing advisor, virtually organisations are somewhat less likely than their peers unchanged from last year’s 49 percent. Larger to issue an RFP, but at 67 percent, this number doesn’t companies more often engage consultants; 67 percent vary as much as it does for RFIs. of organisations of more than US$1B in revenue say they engage consultants/advisors versus 56 percent for provider selection criteria US$1B - US$10B organisations, and 38 percent of The top several provider selection criteria have those with less than US$1B. Fewer than a fifth of Asia remained unchanged over the time we’ve been Pacific organisations engage consultants/advisors, conducting this research, although they have regularly making them more than three times less likely to do swapped places among the top three or four spots. so than their counterparts in EMEA and the Americas. Functional coverage and expertise is the top criterion in 2009, up from number three in 2008, and proven Global HR Transformation 2009 HROA © 2009 24
  • 24. RESEARCH FINDINGS ability to meet service levels is number two this year, The largest organisations’ criteria vary a bit more. up from number three last year. Price holds the third Whilst the top two match the overall choices, spot this year – 2008 appears to have been a bit of an references and reputation rank much higher with this anomaly, when price jumped from the number three group, in third place; flexible contract terms and spot up to number one for the first time – and multi- financial viability round out the top five for that group. country capabilities and specialisation in relevant Again, all respondents regardless of location, rank the functions round out the top five. top two criteria in the top two spots. Whilst EMEA All respondents, regardless of size, include the same and the Americas companies generally don’t vary two criteria in the top two spots. Smaller and mid- significantly from the overall rankings, Asia Pacific rank sized organisations generally rank the same criteria flexible contract terms number three, and multi- among the top five as the overall rankings above. The country capabilities lower than their counterparts, at smallest companies (less than US$1B), not surprisingly, number 12. rank multi-country capabilities lower than their larger counterparts. Figure 23: provider selection criteria ranking CRITERION 2009 2008 2007 2006 Functional coverage and expertise 1 3 2 1 Proven ability to meet service levels 2 4 1 2 Price 3 1 3 4 Multi-country capabilities 4 2 4 3 Specialisation relevant functions 5 8 7 7 References/reputation 6 5 5 6 Guaranteed cost savings 7 7 6 5 Cultural match 8 12 8 9 Financial viability 9 6 9 12 Flexible contract terms 10 9 10 8 Existing relationship 11 10 14 13 Unique provider (consulting, implementation, processing) 12 14 13 10 One stop shop (functions other than HR) 14 13 11 14 Size and market position 13 11 12 11 Global HR Transformation 2009 HROA © 2009 25
  • 25. RESEARCH FINDINGS OUTSOURCING AND SHARED SERVICES BUDGETING for HR outsourcing headlines Respondents most often (38 percent) budget less than US$1M annually for HR outsourcing. The highest percentage of respondents (42 percent) say they anticipate increasing their HR outsourcing budget; however, that percentage has dropped from 55 percent in 2008. At the same time, many fewer say they plan to decrease their HR outsourcing budget. The largest organisations are more likely than their counterparts to be decreasing HRO budgets Asia Pacific respondents are most likely to increase budgets, Americans to decrease, and EMEA respondents to remain unchanged. findings Respondents most often (38 percent) budget less than do and what they actually do. Despite the fact that the US$1M annually for HR outsourcing, followed by largest percentage of respondents say they anticipate US$1M – US$10M at 35 percent. Nearly 90 percent of increasing their HR outsourcing budget, actual budgets respondents budget US$20M or less on HR do not appear to have increased over time. outsourcing. Only the largest respondents (those with more than Compared with 2008, there is a higher percentage of US$10M in revenues) vary from the general profile respondents budgeting less than US$1M; however, above. About the same percentage of those largest nearly the same percentage is budgeting less than organisations expect to increase their HR outsourcing US$10M in 2009 as in 2008. budget. However, a smaller percentage than overall – 29 percent versus 41 percent – anticipate their As has been the true for the entire time we have budgets staying the same, and a larger percentage – 24 undertaken this research, in 2009 the highest percent versus 16 percent – intend to decrease their percentage of respondents (42 percent) say they are budgets. likely to increase their HR outsourcing budgets over the next several years; however, that percentage has In terms of geographical perspective, Asia Pacific decreased by more than 10 points since last year. A organisations are more likely than their counterparts significantly smaller portion than in prior years say to plan to increase their HR outsourcing budgets, and they plan to decrease their HR outsourcing budgets none indicate that they expect to decrease those over the next several years. The percentage of those budgets. American respondents are more likely than who say their HR outsourcing budget will remain the their counterparts to expect to decrease their same – 41 percent – has grown the most, by more budgets, whilst EMEA companies more often say they than three times since last year. plan no change than do their counterparts in other regions. As we noted last year, the numbers above indicate a disconnect between what people say they expect to Global HR Transformation 2009 HROA © 2009 26
  • 26. RESEARCH FINDINGS Figure 24: HR outsourcing annual budgets Figure 25: HR outsourcing annual budgets, 2008 and 2009 Figure 26: Changes in annual HR outsourcing annual budgets Global HR Transformation 2009 HROA © 2009 27
  • 27. RESEARCH FINDINGS OUTSOURCING AND SHARED SERVICES SHARED services headlines Shared services continues to comparatively uncommon. Whilst we noted a decline in shared services in 2008 – and posited whether it was a trend in the making – it appears to have been an anomaly. This year we see a mix of growth and decline across HR processes managed through shared services. findings Shared services continues to be comparatively clear correlation between increase/decrease and type uncommon; there are only two processes – HRIS (54 of process; in other words, transactional processes percent) and payroll (52 percent) – which more than were as likely to increase as decrease. half of respondents say they manage through shared Across most processes, the largest organisations, services. Like outsourcing, transactional services are those with revenues of more than US$10B, are less more likely to be managed through shared services likely to be managing individual HR processes through than are strategic processes. As a result, career & shared services; however, they are the most likely succession planning and assessment & performance group to be managing the entire HR function through appraisal, for example, are among the least likely to be shared services. Mid-sized companies, US$1B – managed through shared services. US$10B, are generally more likely to manage HR We noted last year that shared services had declined processes through shared services, particularly payroll across the board, and we questioned whether this was and health & welfare benefits. the beginning of a trend or simply and anomaly. Whilst Across almost all processes, Asia Pacific respondents it remains unclear whether shared services is truly on are more likely to be managing processes through the decline, it does not appear that shared services is shared services than are their counterparts in other on as significant a decline as the 2008 numbers seemed geographies. to indicate. Just about the same number of processes showed increases as declines this year, and there is no Global HR Transformation 2009 HROA © 2009 28
  • 28. RESEARCH FINDINGS Figure 27: HR shared services by process, 2007, 2008 and 2009 Global HR Transformation 2009 HROA © 2009 29
  • 29. RESEARCH FINDINGS HR MANAGEMENT PRACTICES CENTRALISATION of HR process management headlines HR processes are most often managed locally, versus regionally or globally, a finding that cuts across size and geography. findings Across all respondents, all HR processes are more Across all companies, regardless of size, local likely to be managed locally than either regionally or centralisation of HR is still most common. However, globally. Global management of processes, though not surprisingly, the largest companies are more likely significantly less common than local, is next most than others to centralise globally, whilst the smallest common. Leave, pensions administration, health & centralise locally more often than do their larger welfare management, and recruitment are most likely counterparts. to be managed at the local level, whilst HRIS, There is limited difference in management by expatriate & relocation administration, stock options geography compared to the overall numbers. administration are most likely to be managed globally. COMMON hris headlines The vast majority of organisations have common HRIS, generally managed at the domestic level. findings 80 percent of organisations have a common HR HRIS, but the highest percentage of the smallest information system (HRIS), whether it is centralised at organisations (44 percent) manage their HRIS at a a domestic, regional or global level. Among those who domestic level. Mid-sized companies (US$1B – do have a common HRIS, most often respondents say US$10B) are the most likely to have a common HRIS, they manage it at the domestic level (38 percent), at 95 percent; 41 percent say they manage that HRIS followed by the global level. Only 11 percent say they at a domestic level. manage their HRIS at the regional level. EMEA respondents are less likely than their The largest organisations are considerably more likely counterparts to have a common HRIS – 29 percent than their smaller counterparts to manage their HRIS say they do not. That said, all respondents, regardless at a global level; however, almost a quarter say they do of geographic location, follow the same pattern, most not have a common HRIS. The smallest organisations commonly managing their HRIS at a domestic level, are more likely than others not to have a common followed by a global level. Global HR Transformation 2009 HROA © 2009 30
  • 30. RESEARCH FINDINGS Figure 28: geographic management of HR processes Figure 29: HRIS and HRIS centralisation Global HR Transformation 2009 HROA © 2009 31
  • 31. ABOUT THE SURVEY PARTICIPANTS Figure 30: total survey respondents 188 Figure 31: Figure 32: headquarters location breadth of operation Figure 33: Figure 34: revenue (US$) number of employees Global HR Transformation 2009 HROA © 2009 32
  • 32. ABOUT THE SURVEY PARTICIPANTS Figure 35: industry INDUSTRY % INDUSTRY, cont. % Consulting / Business Services 15% Media 3% Technology, IT, Electronics 15% Transportation 3% Manufacturing 13% Education 3% Finance, Insurance & Real Estate 11% Hotels, Restaurants, Catering 2% Health Care / Pharmaceuticals 6% Oil & Gas 2% Public Administration 6% Construction 2% Other Services 5% Other 2% Mining & Utilities 4% Consumer Goods 1% Retail & Wholesale Trade 4% Food & Beverage 1% Telecommunications 4% Figure 36: function Figure 37: title Global HR Transformation 2009 HROA © 2009 33
  • 33. ABOUT THE SPONSORS ADP Who We Are Automatic Data Processing, Inc. (Nasdaq: ADP), with nearly $9 billion in revenue and over 585,000 clients, is one of the world’s largest providers of business outsourcing solutions. Leveraging 60 years of experience, ADP offers the widest range of HR, payroll, tax and benefits administration solutions from a single source. ADP’s easy-to-use solutions for employers provide superior value to organizations of all types and sizes. ADP is also a leading provider of integrated computing solutions to auto, truck, motorcycle, marine and recreational vehicle dealers throughout the world. What We Do ADP Employer Services, part of ADP, Inc., serves clients in more than 50 countries worldwide. As a leading provider of HR services, ADP Employer Services’ offerings – from basic payroll processing to being your payroll and personnel administration department – are fully compliant with languages, currencies, social regulations, and adapt seamlessly to companies’ structural and business needs. With its suite of HRO solutions, ADP is well positioned to serve the needs of multinational companies that are looking for outsourcing services from one source. More Information Additional information on ADP at: www.adp.com Global HR Transformation 2009 HROA © 2009 34
  • 34. ABOUT THE SPONSORS HROA Who We Are The HROA is the definitive independent organization for those who purchase, provide, or participate in HR transformation, shared services, and outsourcing. Our membership encompasses over 7,500 HR executives, including the largest 50 buyers, the top 30 providers, the leading sourcing advisors and attorneys, and HR Transformation thought leaders. What We Do Events and Networking The HROA produces a variety of strategic, highly interactive conferences and webinars for executives, managers and practitioners in the HR transformation, shared services and process outsourcing communities. Research & Standards As the only independent organization representing all participants in the industry, the HROA acts to improve the practice of HR Transformation by overseeing and accelerating the development and adoption of effective industry standards and practices. As part of this process, the HROA gathers broad- based input from across the industry and works to develop lasting industry consensus and to arrive at conclusions that balance the various commercial interests of all participants. More Information For additional information about the HROA or to join, visit www.hroa.org or contact Adam Bleifeld at info@hroa.org or at +1 202 905 0351. Global HR Transformation 2009 HROA © 2009 35