Towers Watson 2012 HR Service Delivery and Technology Survey Report


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This year’s HR Service Delivery Survey — our 15th annual — reveals the HRSD and technology plans, goals and progress of more than 600 participating companies across North America, Europe and the Middle East, and the Asia Pacific region. The results show that HR has big plans to make structural changes, continue investing in technology and align the function with business goals.

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Towers Watson 2012 HR Service Delivery and Technology Survey Report

  1. 1. Emerging Choices, Enduring Changes Creating Service Delivery Success in an Era of New Opportunity 2012HR Service Delivery and Technology Survey Executive Summary Report
  2. 2. “The world of service delivery and technology is perhaps the “ most ever-changing in the industry of human resources. Our goals and timelines are most often measured in weeks and days; our margin for error is nonexistent.”
  3. 3. Emerging Choices, Enduring ChangesCreating Service Delivery Success in an Era of New Opportunity Table of Contents About the Survey 2 Key Finding #1: The Structure “Push and Pull” 3 Key Finding #2: Shared Services Is Here to Stay 5 Key Finding #3: Keeping Pace With the Talent Imperative 6 Key Finding #4: Spending the Same or More (on More of the Same) 8 Form Follows Function: HR Structure and Shared Services 10 HRMS: Changes and Choices 13 Talent Management: A Mission-Critical Element 17 Our Take 21 Conclusion 23 Featured Figures Figure 2. Structure and process — Reasons for changing current HR structure 3 Figure 4. Structure and process — Use of HR shared services 5 Figure 5. Top HR service delivery issues — Top three frequency 7 Figure 6. HR technology spending in 2012 vs. 2011 8 2012 HR Service Delivery and Technology Survey Executive Summary Report 1
  4. 4. Thanks to significant global and organizational change — and a continued emphasis on talent management — HR service delivery professionals’ daily work has tangible and immediate implications for the workforce and the organizations it serves. This dynamism bodes well for the HR service good processes, to pitfalls around implementation delivery function because it provides a wealth of and governance — will arise along the way. The key opportunities to bring our organizations greater to making the right choices is to discern what the flexibility and agility, but it can also create rigorous most strategic needs are and match them with right process challenges. That’s why we’re heartened service delivery solutions. by this year’s survey results, which reveal that HR This is the most substantial and global version of has big plans to make structural changes, continue our survey to date. We are pleased to highlight the investing in technology and align the function with HR service delivery and technology plans, goals and business goals. progress that more than 600 organizations around Change is carrying the HR service delivery the world shared with us — along with Towers profession into the future, and organizations are Watson’s perspectives and prescriptions for HR expressing optimism about the plans they’re service delivery success. undertaking. Challenges — from failing to establish About the Survey Our 15th HR Service Delivery Survey explores the landscape of HR service delivery and technology trends, tools and tactics across North America, Europe and the Middle East, and Asia Pacific region. More than half (52%) of the 628 companies that participated were large and midsize organizations with more than 5,000 employees. Financial services is the most heavily represented industry, with just under one in five (18%) participants, followed by manufacturing (14%), high technology (13%), retail (12%) and a number of other diverse industries (Figure 1). Figure 1. Industry and employee population Industry Employee population 0% 5% 10% 15% 20% 25% 0% 5% 10% 15% 20% 25% 18% Large — More than Financial services (including insurance) Food and beverage 18% 18 20,000 3 34% Medium — Manufacturing Pharmaceuticals 48% 5,000 to 14 3 20,000 High technology Public sector and nonprofit 48% Small — 13 3 Fewer than Retail Transportation services 34% 5,000 12 2 Professional and business services Media and communications 8 2 Utilities and energy Property and construction 7 2 Health care Other 6 2 Chemical, oil and gas 52
  5. 5. KeyFinding #1 The Structure “Push and Pull” As new options emerge for effectively and efficiently deliveringHR services, organizations are including HR structure changesin the scope of possible adjustments.After experiencing several years of relative stability Figure 2. Structure and process — Reasons for changing current HR structurein the HR function, change is coming. A growing Do you anticipate changing your current HR structure in 2012 or 2013?number of all organizations (44%) — dramatically 44% Yesmore than last year’s 26% — indicate they will 56% No changes anticipatedchange their HR structure in 2012 or 2013. Ourexperience suggests that this is due to both “push” n = 612 44%and “pull” initiatives.Technological advances are providing the push. 56%To meet continuing pressures to be more efficientand effective, organizations are taking advantageof much that the constantly changing technologyand delivery landscape has to offer. Advancessuch as software-as-a-service (SaaS) are simplyimpossible to ignore. Conversely, those maintaining Reasons for changing current HR structurethe same HR structure as five or even three years 0% 20% 40% 60% 80% 100%ago risk missing various opportunities to realize new Realization of further efficiency potentialsefficiencies. 64Among organizations planning HR structure changes Realization of synergiesfor the year ahead, improving operations is a 54major theme. A significant majority (64%) wantto realize further efficiencies, while others are Quality improvementslooking to capture synergies across processes 51and investments (54%), improve quality (51%) and Cost savingsreduce costs (46%) (Figure 2). As you will read in 46the pages that follow, many companies plan toachieve these goals by turning to shared services to Globalization initiative 28develop more disciplined functions that deliver coreexpertise to the business. Change of business strategy 27 Business reorganization 26 Other 8 2012 HR Service Delivery and Technology Survey Executive Summary Report 3
  6. 6. We believe that this represents an evolving Structural Changes organizational perspective on HR — one that we’ve seen moving toward a more disciplined function A single HR function for the entire organization that develops and delivers core expertise in needed remains the predominant model, especially in areas specific to the business. single-country organizations (72%), as opposed to global ones (23%) with HR functions covered by HR is also growing into, and being led to, a more function and geography with corporate oversight savvy approach. Business units are operating as (28%). And while it depends on the size and scope more autonomous profit-and-loss centers — and (global or domestic) of the organization, most demanding specialized and dedicated expertise companies making changes will move to (or back in the form of centers of excellence (COEs) and to) a shared services environment (39%) or bring business partners — to support their increasingly additional services into an existing shared services aggressive business initiatives. organization (31%). Just over a quarter (26%) will outsource some or additional functions, particularly domains that are more siloed than the typical full HRO of days past (Figure 3). Figure 3. Structure and process — Anticipated changes to HR structure in 2012 or 2013 0% 10% 20% 30% 40% 50% Move to a shared services environment with HR COEs and HR business partners 39 Bring additional services into our shared services environment 31 Outsource (some/more) functions 26 Move to a single HR organization for the entire organization 10 Decentralize HR, allowing HR to be run by business unit or geography 6 Combine our HR shared services with other corporate functions 6 Bring (some/more) outsourced functions back in-house 4 Move away from a shared services environment 0 Other 17 Base: Those anticipating making a change (n = 271) The most common responses in the Other category include changes within existing framework (14), new structure yet to be determined (11) and increased centralization or regionalization (seven).4
  7. 7. KeyFinding #2 Shared Services Is Here to Stay Shared services is emerging as the most valued (and mostprevalent) practice for delivering HR services to the business,though single-process outsourcing remains a stabilizing force.Organizations have come to realize that developing the organization to focus on core processes, realizecapabilities and resources in-house for many core related organizational efficiencies and maintainservices is an accurate and effective HR service a level of effective governance along the way —delivery solution. Shared services allows companies especially for functions that focus on their key talentto maintain greater quality control, and create and management initiatives.adapt to new processes more quickly. The modelalso enables companies to allocate resourcesaccording to functional need and business cycle, Figure 4. Structure and process — Use of HR shared servicesbut can be both a blessing and a curse, since the Does your organization use an HR shared services (HRSS)/contact center to deliver HR services?process often suffers at the hand of speed. 0% 20% 40% 60% 80% 100%Rather than expecting generalists to cover thewaterfront of business needs, organizations are Yes, we have an internal onshore service center(s) 60again gravitating toward the shared services model, 46in which business partners draw support from skilled 40resources in COEs and service centers. Among large 17organizations, over two-thirds (70%) operate in-house Yes, we have an internal offshore service center(s)service centers, while 54% of midsize organizations 10do so (Figure 4). A full 70% of organizations making 8changes to their HR structure are focused on shared 2 3services as a primary initiative — and not oneorganization indicated a move away from such an Yes, we use an external onshore provider(s)environment for 2012 or 2013. 16 5A key part of this model working is an outstanding 5 4user experience where self-service is complete andeasy to use; portals have easy-to-find, searchable Yes, we use an external offshore provider(s)answers to questions; and case management tools 10keep track of issues. 1 0 0Outsourcing: In or Out? OtherOrganizations adopting outsourcing spiked to 26% 4from 17% last year. We believe that this spike 3 0can be attributed to niche and single-function 3outsourcing, which can be highly effective forspecific processes that require highly specialized, Nosustained expertise. Among the activities 29 43effectively outsourced can be pension, payroll, 57health and savings plan administration, relocation 75administration and other highly transactionalactivities. Our position is that these activities often Large — More than 20,000 employees (n = 109) Medium — 5,000 to 20,000 employees (n = 232)can be best left to specialized outsourcers, leaving Small — 2,500 to 4,999 employees (n = 83) Very small — Fewer than 2,500 employees (n = 200) 2012 HR Service Delivery and Technology Survey Executive Summary Report 5
  8. 8. KeyFinding #3 Keeping Pace With the Talent Imperative Talent and performance management remains the primary HR service delivery issue — although the full story is more complex than in previous studies. In years past, we’ve been highly encouraged by to create a meaningful career experience for their the importance of talent management to survey employees, and the supporting technology tools respondents. For six years running, HR leaders and that help deliver this experience, from online professionals have reported this as the key HR performance management systems to portals that service delivery issue for the year ahead (Figure 5), help manage employees’ careers. a finding we’ve understood to reflect how critical This phenomenon has created something of a the attraction, retention and engagement of talent heyday for HR service delivery and technology, which is to the organization’s future success — clearly has benefited from this focus in terms of technology a positive finding. Better yet, it suggests a strong advances and investments made. It has given alignment of the HR function with business goals HR service delivery professionals the long-term Because of a confluence of issues — including opportunity to contribute at a strategic level and demographic shifts around the world, a shortage offered the proverbial “seat at the table” in terms of of critical-skill employees and changing business helping to tackle the enduring talent management priorities — savvy organizations will focus on talent issues that the organization needs to solve. management for some time. This includes an As a discipline, talent management is here to stay for enduring emphasis on developing and implementing the foreseeable future. Demographic shifts around the strategies that create a meaningful career the world, the availability of critical-skill employees experience for employees. and changing business priorities have all converged This enduring emphasis on talent throughout the to guarantee that savvy organizations will indeed organization has led to a corresponding long-term focus on talent management for some time ahead. focus on the strategies that companies can use6
  9. 9. However, only a few talent management technologies A triumvirate of priorities vie for second place HR has a plethorahave become comprehensive, user-friendly and behind talent management, including streamlining of choices for talentintuitive enough to unite the many pieces of talent business processes, gaining more involvement in management sys-management for employees and line managers. The strategic business issues and recruiting (22% of tems in a crowdedresult is that HR has a plethora of choices for talent respondents indicate it will be a priority for the year marketplace ofmanagement systems in a crowded marketplace of ahead). These issues hint that the pendulum may solutions, nearly all of which are stillsolutions, nearly all of which are still transactional swing further in the business process direction next transactional andand siloed in their focus and experience. It’s as if year, as change continues and HR organizations and siloed in their focusHR is still experiencing the “noise” in the system — technologies keep evolving. and both the delivery and technological senses of theword — that will turn into music once the challengesare ironed out. (See Talent Management on page 17to explore these and related concepts further.)Figure 5. Top HR service delivery issues — Top three frequency0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50%Talent/Performance systems Introduce standard workforce planning process and tools 24 9 7 40% 2 3 5 10%Streamline business processes Systems integration 5 8 9 22% 3 4 3 10%Recruiting/Staffing services/systems Accuracy of data 7 8 7 22% 2 3 4 9%More involvement in strategic business-driven issues Deploy manager self-service functionality 9 6 7 22% 1 3 4 8%Training HR website/usability 4 9 6 19% 1 3 4 8%Implement a new HRMS Utilize additional HRMS modules 11 4 4 19% 2 3 2 7%Improve line managers’ people management capabilities Deploy employee self-service functionality 4 5 5 14% 11 4 6%Compensation services/systems Consolidate multiple HR systems globally 4 6 4 14% 1 2 3 6%Cost reduction related to HR administration Benefit services/systems 5 4 4 13% 1 2 2 5%Upgrade HRMS to a new version/system Create a global data warehouse 5 4 3 12% 1 2 1 4%Payroll/Time management services/systems Enable mobile access to HR self-service applications 4 5 2 11% 1 1%Define/Deploy human capital metrics and dashboards Other1 3 6 10% 2 2 2 6% First Second Thirdn = 606 2012 HR Service Delivery and Technology Survey Executive Summary Report 7
  10. 10. KeyFinding #4 Spending the Same or More (on More of the Same) HR technology spending remains steady and strong, and investments are directed mostly toward growth and new functionality. We’ve been heartened to see a consistent level of Among organizations that expect to spend more in increased HR technology spending over the past 2013 than in the previous year, over one-third (38%) several years (Figure 6), albeit with a reduced rise plan to deploy additional functionality from existing during the recession. Beyond the core costs of vendors; another 36% are looking to upgrade or owning and operating technology, it seems that not re-implement their existing HRMS, and 34% plan only is technology still seen as “needed to play,” but to expand their existing self-service offerings also that organizations understand the investment (Figure 7). These are healthy activities to undertake required to remain current, expand capabilities with increased funding and indicate an optimistic, and continue to improve operations. Over half of growth-oriented outlook. organizations (53%) report that their spending will stay the same as this year’s; another three in 10 (31%) will increase or significantly increase this investment, and only 16% expect a reduced HR technology budget for the year ahead. Figure 6. HR technology spending in 2012 vs. 2011 60% 50% 53 40% 30% 20% 21 10% 10 10 6 0% Much lower Lower About the Higher Much higher (> 20% (< 20% same (< 20% (> 20% reduction) reduction) increase) increase) n = 5998
  11. 11. Figure 7. HR technology spendingFactors accounting for increased spending in 20120% 10% 20% 30% 40% 50%We will be deploying new modules/functionality from existing vendors 38We will be upgrading/re-implementing our existing HRMS 36We will be expanding our self-service offerings 34We will be replacing older systems 33We will be implementing new vendors to automate processes for the first time 29We will be deploying new HR analytics/workforce planning capabilities 25We will be expanding existing functionality into new regions and/or business units 22We will be deploying or redeploying an HR portal 21We will be deploying or redeploying a data warehouse 12We will be implementing new call center support technology 9We will be implementing mobile access 7We will be moving to an internally deployed cloud-based architecture 4We will be bringing services and/or technology formerly outsourced back in-house 3We will be moving to an IT outsourcing approach 2Other 4Base: Those expecting increased HR technology spending (n = 189) 2012 HR Service Delivery and Technology Survey Executive Summary Report 9
  12. 12. Form Follows Function: HR Structure and Shared Services When companies show a desire to make shifts in HR structure, it usually indicates that significant, rapid change is occurring. But why is this motivation now 15% higher than in years past? The impetus for this change is, more often than Perhaps this is because the largest have already not, driven by a broad desire for greater efficiencies factored regional delivery into structural decisions. (Figure 8) and a willingness to be expansive in (Of course, how successfully they are delivering finding them. Companies right now are more likely to on change may be another story.) While regional be focused on realizing the synergies from already- differences can affect how organizations evaluate implemented process changes or investments structure changes, a significant number in all than they are on overtly saving money through cost regions cited efficiency. Additionally, more than half reductions. Organizations have largely committed of U.S. and Canadian organizations — and only to a path and are comfortable exploring delivery a third of Asia Pacific and European companies models that help them gain greater returns from — named cost as a factor. As mentioned, shared their decisions, and this puts HR structure next on services is reemerging as a solution after a decade the agenda. in which many organizations experimented with large- scale outsourcing and focused their investments on Surprisingly, few global organizations cite other aspects of their delivery models. globalization as an impetus for structural change. Figure 8. Reasons for changing current HR structure Middle East/ United Asia Pacific Canada Europe Africa States Location of headquarters (n = 66) (n = 15) (n = 45) (n = 9) (n = 133) Business reorganization 33% 13% 36% 44% 19% Change of business strategy 44% 7% 18% 44% 23% Cost savings 33% 53% 38% 33% 55% Realization of synergies 53% 47% 51% 33% 58% Realization of further efficiency potentials 53% 47% 56% 56% 75% Quality improvements 36% 60% 44% 56% 59% Globalization initiative 24% 27% 22% 33% 31% Other 6% 20% 4% 11% 8%10
  13. 13. The most prevalent structure for HR globally is a common structural change actions being takensingle function for the entire organization (Figure 9), across all regions (Figure 10). There are manywhile relatively consistent alternate approaches reasons for these changes. Done well, sharedare also used. In most regions, the second most services achieves the following:common model is a matrixed, corporate-overseen •• Improves the HR organization’s controlsHR function that varies considerably by the type •• Allows HR to manage the ebbs and flows of itsof business unit and, especially, the company’s business cycle more effectivelygeographic footprint. •• Enables HR to improve quality by providing moreMoving to shared services, and adding functions standardized and consistent processes andto existing shared services functions, are the most resourcesFigure 9. Current overall structure of entire HR function Middle East/ United Asia Pacific Canada Europe Africa States Location of headquarters (n = 196) (n = 37) (n = 91) (n = 24) (n = 268) Single HR function for entire organization 44% 78% 43% 79% 49% Separate HR function by business unit with 14% 3% 16% 0% 16% corporate oversight Separate HR function by geography with corporate 15% 5% 18% 8% 12% oversight Separate HR function by a combination of geography and business unit with corporate 20% 11% 18% 13% 20% oversight Individual HR functions (whether by business unit and/or geography) with no meaningful corporate 4% 0% 4% 0% 2% oversight Other 3% 3% 1% 0% 1%Figure 10. Changes to the HR structure in 2012 or 2013 Moving to shared Middle East/ United services, and adding Asia Pacific Canada Europe Africa States functions to existing Location of headquarters (n = 68) (n = 15) (n = 46) (n = 9) (n = 133) shared services Move to a single HR organization for the entire functions, are the organization 15% 13% 15% 22% 5% most common structural-change Decentralize HR, allowing HR to be run by actions being taken 15% 0% 2% 11% 4% business unit or geography across all regions. Move to a shared services environment with 49% 53% 30% 44% 35% HR COEs and HR business partners Bring additional services into our shared services 21% 20% 17% 11% 43% environment Combine our HR shared services with other 6% 7% 4% 11% 6% corporate functions (e.g., Finance) Move away from a shared services environment 0% 0% 0% 0% 0% Outsource (some/more) functions 24% 20% 17% 22% 32% Bring (some/more) outsourced functions back 1% 0% 4% 0% 7% in-house Other 9% 27% 26% 22% 16% 2012 HR Service Delivery and Technology Survey Executive Summary Report 11
  14. 14. One caveat: The model carries some risks. organization to carry out the HR responsibilities for Organizations need to design and implement which they’re accountable, and maximize the value shared services carefully and deliberately. It’s not and usefulness of the technology that underpins a panacea for reducing head count or disguising them. This means empowering line managers to failure to execute; rather, it requires transparency conduct HR activities directly — and without the and good governance. Moreover, organizations that constant need to be checked upon (of which HR is focus wholly on the structure — merely putting the frequently guilty). It also includes holding individuals “right” pieces in the “right” places — overlook a inside and outside HR responsible for upholding the significant element of the shared service advantage: same processes and standards. the process. Organizations approach governance and resources for shared services in various ways (Figure 11). Process Is Paramount Mixed ownership and double-hatting are common Throughout our history of conducting this survey, approaches used across different regions. Although we’ve observed that process (re)design can make virtual COEs and exporting HR operations are not or break the success of any HR service delivery or prevalent in any region, they are more common in technology decision. A proper approach to process the U.S. and Canada, where two to three times more design involves creating a workflow that enables organizations include these features in their delivery individuals and departments throughout the model. Figure 11. Features of current or soon-to-be-implemented delivery model Throughout our his- tory of conducting Middle East/ United this survey, we’ve Asia Pacific Canada Europe Africa States observed that pro- (n = 155) (n = 26) (n = 66) (n = 16) (n = 198) cess (re)design can Mixed Ownership — Some HR resources sit in make or break the business cost centers (e.g., business partners), 50% 50% 55% 56% 56% success of any HR but all resources are centrally coordinated service delivery or technology decision. Double-Hatting — Some HR resources take on multiple roles (e.g., one person shares COE and 43% 50% 45% 44% 41% business partner roles) Virtual COEs — Quasi-formal organization of HR resources exists outside the strictly formal 4% 12% 5% 6% 12% organization units in which they reside Shared Resource Pool(s) — Rather than dedicating resources (e.g., specialists) to a 21% 23% 15% 19% 16% specific center of expertise or HR department, they are assigned on a project-by-project basis Exporting HR Operations — HRIT operations and/or call center resources report to a function 6% 12% 5% 6% 13% other than HR or in a matrix between another function and HR Communities of Interest — Cross-functional teams dedicated to specific areas of focus are created for the purpose of career building and 19% 15% 14% 6% 23% also to leverage talent to deliver on various projects12
  15. 15. HRMS: Changes and Choices Adoption Figure 12. Is your organization currently implementing or planning to implement a new primary HRMS?More organizations (18%) intend to implement a newHR management system (HRMS) than we’ve seen Asia Pacific Canada Europe Middle East/ United Statesin the past (10%), which could indicate a number of (n = 193) (n = 37) (n = 91) Africa (n = 24) (n = 273)things. Yes 34% 32% 24% 42% 22% No 66% 68% 76% 58% 78%Select economies are improving; more organizationswant to enhance their HR administration and Figure 13. HRMS profile — Oracle (legacy PeopleSoft)reporting capabilities, and many organizations have Given the prospect of Fusion and Applications Unlimited, what are your plansbeen waiting to determine which way the HRMS for the future?marketplace will settle out. We also see significant 0% 10% 20% 30% 40% 50%regional variation this year (Figure 12). No change, same as before Oracle’s acquisition of PeopleSoftRegional Variation 26 Proceed cautiously until we understand better how Oracle is merging the PeopleSoftAmong the small number of Middle East survey product into Fusionparticipants, 42% plan to implement a new HRMS 20system. This suggests they are committed to Move aggressively to be as current as possible on PeopleSoft, but no plans for Fusionestablishing or enhancing HR administration and at this timereporting capabilities. In other regions, a high ratio 16(1:5 to 1:3) of organizations intend to implement anew HRMS system. Move to another ERP system solution (e.g., SAP Lawson) , 5Regional differences also extend to vendor choice. Move to an outsourced HRMSWhile a fair number of organizations in each region 2use Oracle/PeopleSoft and SAP, twice as manyU.S.-based organizations use Oracle (Legacy Moving to Fusion now 1PeopleSoft). As expected, SAP is deployed almosttwice as often in EMEA, and ADP products are more Plan to be on the upgrade path to Fusionprevalent in the U.S. and Canada, although they 1have some presence in Europe. Move to a third-party support provider (i.e., no further Oracle-developed upgrades) 1Workday’s prevalence is relatively low for existingHRMS implementations; however, it is represented Moving to Fusion within the yearin all regions except the Middle East. One-third 1(33%) of European companies and 40% of Asia Not sure yetPacific companies indicated that they use other 28HRMS products, compared to only 10% of U.S. n = 134companies — but there is no single system thatstood out for those organizations, as these appear organization, 9% run multiple instances of the sameto be regional solutions. version in different locations and/or for different business units, with the remaining 4% usingHRMS Application Highlights different versions throughout their organization.The following are highlights for key HRMS applications, Many legacy Oracle platform users are acting withincluding Oracle, SAP, Workday and HR portals. abundant caution — something we’ve seen before. Despite its new Fusion offering, most existingOracle (PeopleSoft) and SAP: Oracle customers (28%) are taking a “wait and see”Legacy Versus New Generation approach, and slightly fewer (26%) plan to makePeopleSoft no change, and continue to operate as they didForty percent of organizations running PeopleSoft before Oracle’s acquisition of PeopleSoft. One inare using version 9.1 — with another 42% running five (20%) are proceeding cautiously until they moreversion 9.0 or 8.9. While 87% of companies using fully understand how the legacy products are beingPeopleSoft as their primary HRMS use a single merged into Fusion (Figure 13).instance of that application throughout their 2012 HR Service Delivery and Technology Survey Executive Summary Report 13
  16. 16. SAP* have not fully developed upgrade plans, though for One-third (33%) of organizations running mySAP slightly different reasons: 2005 use enhancement pack 5 or later, while •• 40% of organizations running SAP’s enhancement smaller numbers run past versions (28% on pack 4 or earlier do not know what an enhancement pack 4 and 16% on enhancement enhancement pack is or don’t have plans for it. pack 3). While 73% of organizations using SAP as •• Well over half (62%) either have not heard of their primary HRMS use a single instance of it, 18% enhancement packs, or do not fully understand deploy multiple instances of the same version in the strategy or how it impacts their organization. different locations and/or different business units, and 9% use different versions of SAP throughout We believe the work ahead for SAP will entail a their organization. greater education and communication effort directed to its existing base, as well as to organizations SAP experiences a challenge similar to Oracle: A evaluating new technologies (Figure 14). surprising percentage of organizations running SAP Figure 14. HRMS profile — SAP Release of SAP R/3 currently in production 0% 10% 20% 30% 40% 50% 60% mySAP ERP 2005 (ECC6) with enhancement pack 5 or later 33 71 mySAP ERP 2005 (ECC6) with enhancement pack 4 28 mySAP ERP 2005 (ECC6) with enhancement pack 3 or earlier 16 mySAP ERP 2004 (ECC5) 9 4.7/Enterprise or earlier 14 n = 97 Plans to upgrade (for those on mySAP ERP 2005 [ECC6] with enhancement pack 4 or earlier) 0% 10% 20% 30% 40% 50% 60% Upgrade to mySAP ERP 2004 (ECC5) in 2012 9 Defer upgrade to mySAP ERP 2004 (ECC5) until 2013 2 Upgrade to mySAP ERP 2005 (ECC6) in 2012 17 Defer upgrade to mySAP ERP 2005 (ECC6) until 2013 5 Upgrade plans not yet defined 59 Evaluate other vendor options 8 n = 59 Almost three-quarters (73%) of organizations using SAP as their primary HRMS use a single instance of that application throughout their organization. In contrast, 18% have multiple instances of the same version of SAP in different locations and/or for different business units, while another 9% use different versions of SAP throughout their organization. *The 2012 HR Service Delivery Survey was fielded prior to SAP’s acquisition of SuccessFactors.14
  17. 17. Workday: A Next-Generation Model Figure 15. HRMS profile — WorkdayMost organizations chose Workday because of What were your top three reasons for selecting Workday?its user interface (58%), lower ongoing costs 0% 20% 40% 60% 80% 100%(53%) and global capabilities (42%) (Figure 15).Among the modules that organizations have User interface (e.g., ease of use for HR, employees and managers) 58implemented most often — or plan to deploy by theend of 2013 — are compensation, benefits and Lower ongoing costs (e.g., hardware, IT support, system maintenance, staff)performance management for succession planning 53(46% additional by the end of 2013 versus 7% Global capabilitiesimplemented now), onboarding (44% additional 42versus 6% now) and performance management(40% additional versus 33% now). No need to upgrade; we are always on current version 32In an ever-changing HRMS space, Workday clientshave rapidly adjusted to its SaaS model: Best fit our functional requirements 26•• Two-thirds of Workday respondents say they deploy significantly more self-service with Workday than Quicker to implement 26 with their prior HRMS platform.•• Two-thirds find the obligatory update (upgrade) Lower up-front costs process easy or manageable. 16•• 58% say they are comfortable applying these Predictable ongoing costs updates on their own. 11Workday’s success appears to reflect the continued Easier to manage on an ongoing basisrise of SaaS as a relatively user-friendly, cost-effective 11and efficient alternative to legacy systems. Other 5 n = 19 2012 HR Service Delivery and Technology Survey Executive Summary Report 15
  18. 18. Figure 16. HRMS profile — HR portal The HR Portal: The “All in One”What HR portal technology are you currently using?0% 10% 20% 30% 40% 50% HR has embraced the portal concept to deliver comprehensive employee and manager informationMicrosoft SharePoint in a customized manner — for virtually all 31 employees — from one source. A substantial 60% of organizations offer an HR portal to both HR andSAP portal 13 employees. Moreover, 20% are working to develop one — and only a smaller number (fewer than one inOracle (legacy PeopleSoft portal) five) have no portal plans at all. 10 The portal’s strong adoption level suggests that HRADP firmly believes portals can help retain and engage 5 employees in many ways — ranging from sharing theOracle (legacy Oracle portal) value of their total rewards packages to providing 4 real-time career management opportunities. Two portal technology approaches stand head andInfor (legacy Enwisen) shoulders above the rest: 3 •• 36% of organizations have developed their ownIBM WebSphere custom portal. 3 •• 31% use Microsoft’s SharePoint technology —Custom-developed portal which offers ease of use and customizability — a 36 solution that will likely grow over the coming yearsOther (Figure 16). 16 HR and communication functions maintain Approximately one-third of the other portals mentioned are provided through the company’s responsibility for the portal’s content almost HRMS/HRO vendor. exclusively (84%), which most often consists ofn = 355 knowledge-based information, internal HR team sites, and new employee onboarding information and functionality.Where is your primary HR portal hosted? 80% Installed product, residing in our organization’s data centers 20% 20% Hosted by a third-party vendor n = 358 80%Does your HR portal provide a personalized experience? 60% Yes 40% No n = 370 40% 60%16
  19. 19. Talent Management: A Mission-Critical Element One of our most consistent research findings, for the pastsix years, has been that talent and performance managementremains the top HR service delivery issue.This has held true in both boom years and during Figure 17. Talent management — Current delivery systemthe past recession — regardless of the size or Primary delivery system currently used for talent managementlocation of the organization. We believe this is due 0% 20% 40% 60% 80% 100%to continued demographic shifts that are changingthe composition of the workforce and impacting Compensation — Base pay (n = 562)employers’ ability to attract, retain and engage 44 18 2 8 28top employee talent and ultimately propel their Compensation — Variable pay/Bonus (n = 547)businesses forward. 35 22 2 9 32Talent and performance management systems have Total rewards statements (n = 414)a pyramidal structure. The core talent management 28 17 3 18 34elements comprise the base, while the more Compensation — Sales/Incentive (n = 448)advanced, cross-domain functions make up the 26 23 4 8 39middle and then narrow toward the pyramid’s peak. Onboarding/Joiner administration (n = 534)The challenge that HR service delivery professionals 26 12 3 12 47face is to integrate the sophisticated showplace Performance management (goal setting, assessment) (n = 570)functions many organizations desire with the 25 22 4 18 31elements already intertwined with their strategy and Learning management and training (n = 550)technology approach. 25 19 9 21 26A best practice is to integrate strategies, Recruiting/Staffing — Internal (n = 574)programs and systems — with the ultimate goal 21 14 6 27 32of organizations seeking to achieve optimum Compensation — Global grading/Job leveling (n = 466)effectiveness. That’s why new technology 21 14 3 14 48buyers often seek solutions that demand a trulycomprehensive, fully aligned approach to design, Workforce planning/analytics (n = 477)online coaching and guidance that — supported 19 17 4 5 55by change management efforts — will “move Competency models (n = 438)the needle” of organizational transformation for 16 19 3 11 51employees and line managers. But there’s a catch: Recruiting/Staffing — External (n = 557)The objective of creating a smooth-running HR 16 11 6 36 31service delivery machine is not readily achievable Career development/Planning (n = 494)through the technology vendors in today’s 15 17 3 13 52marketplace. Compensation — Plan design and analysis (n = 517)As Figure 17 shows, a majority of organizations use 12 17 4 9 58their HRMS or a custom solution for compensation, Succession planning (n = 493)including base pay, variable/bonus pay and total 9 17 3 12 59rewards statements. Organizations also typically Compensation — Market analysis/Survey management (n = 515)use these methods (albeit to a lesser extent) for 7 14 6 27 46onboarding, performance management, learningmanagement, recruiting and job leveling. In nearly Current Custom/ Best-of-breed Best-of-breed Manual/all cases, HRMS is the far more predominant (and HRMS In-house- technology technology Paper-basedeffective) solution over custom-built approaches. system developed tool (on-premise) (SaaS/Hosted by vendor) 2012 HR Service Delivery and Technology Survey Executive Summary Report 17
  20. 20. Figure 18. Talent management — Effectiveness of technology An alarmingly high percentage of organizations stillEffectiveness of technology in helping meet talent management objectives use manual or paper-based systems. This is to0% 20% 40% 60% 80% 100% be expected in newer and more qualitative areas of emphasis like succession planning and careerCompensation — Base pay (n = 381) planning, but excellent technologies are available to 26 52 15 61 aid in the aforementioned areas. Moreover, when itTotal rewards statements (n = 258) comes to areas like compensation that are highly 26 50 16 71 transactional and require a high degree of accuracyPerformance management (goal setting, assessment) (n = 374) and timeliness, such outdated approaches are a 25 52 14 81 cause for concern.Onboarding/Joiner administration (n = 258) Talent Management Technology 23 45 18 12 2 Effectiveness: The Bottom LineCompensation — Market analysis/Survey management (n = 253) 23 53 15 81 Organizations’ talent management strategies and their HR service delivery approaches — alongRecruiting/Staffing — External (n = 368) 22 53 10 13 2 with the tools they use to support employees and managers alike — are now even more personalized,Recruiting/Staffing — Internal (n = 369) executed in real time and easy to use. But whether 21 51 12 13 3 these methods are effective is another matter.Compensation — Variable pay/Bonus (n = 346) While 78% of organizations rate their base 21 54 15 7 3 compensation management solutions as very orCompensation — Plan design and analysis (n = 197) somewhat effective, more than one in five are 19 48 21 9 3 neutral or dissatisfied with their delivery method.Compensation — Global grading/Job leveling (n = 221) Performance management and external recruiting 19 52 19 82 show effectiveness ratings of 77% and 75%, respectively, but the situation slides downhill fromCompensation — Sales/Incentive (n = 251) there. Effectiveness levels drop to unacceptably low 18 51 21 82 ratings of just over half for more complex processesLearning management and training (n = 384) such as workforce analytics and planning, as well as 17 52 16 13 2 career management and planning. Figure 18 revealsSuccession planning (n = 193) effectiveness percentages for various processes in 12 51 26 92 more detail.Competency models (n = 202) 11 54 25 7 3Career development/planning (n = 224) 11 50 25 11 3Workforce planning/analytics (n = 198) 10 41 27 18 4 Very Somewhat Neither Somewhat Not at all effective effective effective nor ineffective effective ineffective18
  21. 21. Further analysis reveals that, for a number ofprocesses, best-of-breed applications deliver thehighest effectiveness results. These systemsare wholly designed and dedicated to administerspecific processes, and are often bundled togetheras specific modules within a purpose-built softwaresuite. Specifically, best-of-breed solutions are mosthighly effective for performance management,onboarding and compensation administration(Figure 19). Not surprisingly, manual and paper-based systems exhibited the least effective resultsfor all processes.Figure 19. Talent management — Average effectiveness of technology Average effectiveness of talent management technology Current Custom/In-house- Best-of-breed Manual/ currently in place HRMS developed tool technology Paper-based Recruiting/Staffing — External 3.46 3.43 3.99 2.80 Recruiting/Staffing — Internal 3.49 3.42 4.02 2.94 Onboarding/Joiner administration 3.56 3.63 4.16 2.52 Compensation — Market analysis/Survey management 3.55 3.62 4.08 2.88 Compensation — Plan design and analysis 3.46 3.60 4.08 2.98 Compensation — Global grading/Job leveling 3.69 3.65 4.04 2.70 Compensation — Base pay 4.01 3.74 4.10 2.97 Compensation — Variable pay/Bonus 3.80 3.74 4.05 2.87 Compensation — Sales/Incentive 3.70 3.71 3.96 2.66 Total rewards statements 3.97 3.66 4.10 2.67 Performance management (goal setting, assessment) 3.88 3.65 4.19 2.83 Learning management and training 3.58 3.53 3.85 2.87 Career development/planning 3.60 3.37 3.68 2.66 Succession planning 3.64 3.57 3.65 2.61 Workforce planning/analytics 3.35 3.19 3.64 2.51 Competency models 3.61 3.47 3.85 2.50 Note: Effectiveness is measured on a 1 to 5 scale, where 1 is not at all effective and 5 is very effective. Gray indicates effectiveness score for the technology is statistically higher than those for all other technologies. Teal indicates effectiveness score for the technology is statistically lower than those for all other technologies. 2012 HR Service Delivery and Technology Survey Executive Summary Report 19
  22. 22. Figure 20. Talent management — Career management process Career Management:and program effectiveness Whose Job Is It, Anyway?At our organization, we want: When it comes to managing employees’ careers, 30% Employees to take ownership a majority of organizations (61%) prefer that 9% of their own careers employees and managers take joint ownership 61% Employees and managers 30% of this activity, with half as many organizations to have joint ownership (30%) believing that career management is the 9% Managers to guide employees’ careers responsibility of the employee. Either goal has n = 535 an inherent paradox in that the supporting tools and processes provided to both employees and 61% managers enjoy less than 50% effectiveness in all cases (Figure 20). This ranges from a high of 49% for career mobility across geographiesEffectiveness of career management programs and functions, to a low of 24% in managing the0% 20% 40% 60% 80% 100% effectiveness of career programs.Employees at our organization are frequently able to move across organizational boundaries, Regional differences exist in the area of careergeographies, functions and business units (n = 564) management. While joint ownership between the 8 41 30 18 3 employee and manager is again most prevalent,Our organization measures the effectiveness of our career management programs (n = 560) the U.S. and Canada (headquartered organizations)3 21 32 37 7 are much more likely to indicate that the career management process requires employees to takeOur company has developed effective tools and resources for career management (n = 569) ownership of their own careers — 38% for the U.S. 3 32 35 27 3 and Canada, compared to 22% for EMEA and AsiaEmployees understand how they can influence their careers (n = 569) Pacific (Figure 21). In contrast, 16% of Asia Pacific2 38 37 21 2 and EMEA respondents indicated that the managerOur career management programs support our attraction and retention goals (n = 565) is responsible for guiding an employee’s career,3 34 38 22 3 versus 3% of U.S. and Canada companies, reflecting perhaps a more paternalistic approach to career Strongly agree Agree Neither agree Disagree Strongly disagree management in general for Asia Pacific and EMEA. nor disagree MeasurementFigure 21. Regional differences in career management process Most regions’ talent management program United States/ Asia Pacific/ effectiveness ratings are in line with aggregate Organizations headquartered Canada EMEA results. However, we see significant variation in the U.S. and Canada (n = 271) (n = 264) regarding measurement of career management Employees to take ownership of their own careers 38% 22% programs. Almost one-third (32%) of Asia Pacific and Employees and managers to have joint ownership 59% 62% European organizations said they measured program effectiveness, but less than 20% of organizations in Managers to guide employees’ careers 3% 16% other regions said they did. This suggests a more rigorous process in Asia Pacific and EMEA.20
  23. 23. Our Take The fact that organizations are continuing to emphasize talentand career management is quite encouraging to us. The question,however, is whether they will be successful at it in the long term.Companies that rely solely on technology to implement theirprograms will be far less effective than those that deploy it as simplyone part of a more holistic plan. Leaders must provide strategicinput, and managers need to steer programs using proper processes,governance and the necessary metrics. And correct alignment withthe business strategy — and solid change management to makeit happen right — will help ensure that programs are effectivelydelivered at all levels. 2012 HR Service Delivery and Technology Survey Executive Summary Report 21
  24. 24. Employee and Manager Self-Service We probed deeply. Our survey tracked the availability and prevalence of employee and manager self-service applications. We followed the movement of self-service — from a new and innovative development, to an established and ubiquitous way of completing many basic employee processes — and from a modest presence, to an established foothold in the more complex realms of HR service delivery for basic manager processes. We explored globally. The survey’s worldwide reach reveals greater variability regionally than any other area (Figures 22 and 23) to illustrate how self-service success depends on many factors — from existing functionality, to effective implementation, to solid change management and communication practices that provide support. Breakouts. Specific regional breakouts for self-service trends — including prevalence now and future implementation plans — provide further details in each region covered by this survey. Figure 22. Employee self-service functionality in place now (employee location) Asia Middle East/ Latin United Pacific Canada Europe Africa America States Change personal data 46% 58% 51% 47% 37% 78% View pay stub/pay slip 44% 54% 40% 33% 22% 84% View total compensation and/or benefit statement 31% 36% 33% 27% 19% 54% View vacation/sick-time usage and balances 55% 51% 46% 40% 26% 73% Update skills, competencies, education, certifications 36% 41% 39% 41% 34% 53% Update performance goals and results 52% 55% 54% 52% 48% 64% View career ladders/job-level definitions 21% 28% 24% 23% 21% 27% Identify/Enroll in learning and development opportunities 41% 45% 43% 41% 38% 64% Review career development possibilities and priorities 22% 27% 27% 23% 25% 31% Begin onboarding or joiner administration before start date by updating 18% 17% 18% 18% 13% 32% personal data, taxes, benefits, orientation, etc. via the web Offboard or leaver administration as employees exit the organization 23% 16% 18% 19% 12% 19% Figure 23. Manager self-service functionality in place now (employee location) Asia Middle East/ Latin United Pacific Canada Europe Africa America States Register/Approve training classes for employees 42% 42% 41% 40% 33% 58% Change salary (e.g., off cycle) 25% 40% 32% 31% 31% 48% Determine bonus/variable compensation 31% 48% 42% 38% 39% 48% Make/Extend offers 22% 30% 27% 23% 26% 39% Initiate/Approve job requisitions 39% 48% 43% 39% 37% 62% Perform succession-planning activities 20% 28% 24% 25% 26% 28% Promote employees 28% 39% 33% 31% 32% 46% Review/Update employee performance 54% 57% 56% 55% 50% 65% Search existing employee population for suitable candidates 21% 22% 18% 26% 16% 20% Terminate employees (voluntary, retirement) 27% 38% 31% 30% 30% 48% Terminate employees (involuntary) 23% 33% 27% 25% 24% 42% Transfer employees 29% 36% 28% 30% 29% 44% View scorecard of key human capital and business performance metrics 15% 13% 14% 13% 10% 15% Workforce planning (project future workforce demand and supply) 12% 12% 10% 13% 9% 9%22
  25. 25. Conclusion Reaping the benefits of continued changeThis year was a watershed for this research — and portal options for employees and establishing betterour discoveries are encouraging. We think they should talent management technology for managers, tobe heartening for your HR organization as well. establishing effective shared services, to structuring HR organizations optimally across geographies.In 2012, we collected our largest sample size(628 participating organizations), and were able Organizations around the world appear upbeatto achieve our broadest global reach, to reveal the about their prospects for change. Even as thegrowing importance and acceptance of best-in- talent and HR service delivery sands keep shifting,class HR service delivery practices. Perhaps more HR continues to move forward with these strategicsignificant, we think, is the level of enduring change, initiatives. The rest of 2012 and 2013 offer theincremental success and future opportunity that the potential to position HR organizations worldwide forresearch illuminates. success.Companies are equipping themselves to move forward We look forward to sharing the results with you inusing new structures, functionality and increased future studies.efficiencies that will improve and broaden bothprocesses and execution. There’s a lot more workto be done — from discovering more user-friendly 2012 HR Service Delivery and Technology Survey Executive Summary Report 23
  26. 26. About Towers WatsonTowers Watson is a leading global professional servicescompany that helps organizations improve performance througheffective people, risk and financial management. With 14,000associates around the world, we offer solutions in the areasof employee benefits, talent management, rewards, and risk andcapital management.Copyright © 2012 Towers Watson. All rights