How stock market trends are affecting HRO providers
December 6, 2007
 By Will Manuel, vice president of Sales, Ceridian HRO |
| The volatility of the market is having its impact as more and more companies engage in spinoffs and divestitures. But what's interesting is how this trend dovetails with another: the movement toward HR outsourcing as a way to increase efficiencies. Here's how HR executives are discovering the power inherent in an environment of undeniable change.
The spinoff trend Divestitures are going strong and show no signs of abating. There were 31 spinoffs in 2006 with a market value of $120 billion versus 27 spinoffs worth $55 billion in 2005, according to the analysts from Spin-Off Advisors in Chicago. (1) A volatile market environment reinforces the trend as organizations engage in this activity in order to focus on their core business and keep share values solid in an increasingly volatile market. This is where HRO comes into play. A second trend in full swing: Human Resources Outsourcing Over the last 10 years a growing number of Fortune 500 companies have taken action to outsource their human resource administration and systems. Today, over 60 percent of these organizations outsource their HR administration. (2) The EquaTerra Pulse Survey of the second quarter of 2007 revealed that future market demand predictions for HRO are still positive at 62 percent, but down 20 percent year over year with an average of 72 percent. Of all the functional areas researched, HRO has the highest demand in the service provider area at 53 percent. The survey stated that the drivers for outsourcing were cost reduction, process improvement and upgrade/enhance IT apps/systems. The trend toward HRO reflects the kind of solutions available today: flexible, scalable and integrated. Companies see real returns: reduced cost of ownership, transforming HR into a higher-performance, more strategic organization and improvement of operational efficiencies. In my years working in this industry, I've also learned the value of HRO on the human side of the equation: employees who are well taken care of are more productive. There's no way to ignore the importance of the service center contacts, because morale soars when employees know they're working with professional, caring people they can trust. When two trends mesh With the growth of HR outsourcing and the growing trend of divestitures, an interesting question arises: how do spin-off organizations manage HR administration when there are fewer than 10,000 employees in the resulting workforce? After all, the parent company rarely wants to keep the administrative functions of the divested company -- and the new company can't always afford to implement enterprise technology like SAP, Oracle or PeopleSoft. Then there's the fact that many providers to the Fortune 500 are not able to scale to an economical model for companies with less than 10,000 employees. No, companies with around 10,000 employees are more likely to use their own proprietary system or a provider with a proven one-to-many model as technology vendors for their HR operations. (3) So, one answer is to combine the trends. Offer HR outsourcing as a very real solution to the divested company. In fact, spun-off, mid-market organizations best lend themselves to HRO providers like Ceridian; we own proprietary technology and a multi-tenant model that is suited for relatively smaller organizations. This is where Ceridian steps in to fill a very real need. We're particularly well positioned to create efficiencies in an arena where powerful trends mesh. After all, sixty percent of our client base is divestitures, and our abilities have created solid success for these spin-offs. Manage the realities. Uncover fresh potential. HR executives who are in divestiture and spinoff situations face a high level of choice and complexity. The challenges of structural change intensify if scalability issues arise, timeframes tighten and employees continue to expect the same level of benefits that they received from the parent company. As they prepare to work long hours to manage such change, HR executives often confront an environment that is both cluttered and chaotic. In their May 2006 Webcast, Unlocking Shareholder Value with Sales and Divestitures, Deloitte Financial Advisory Services described the potential inherent in situations like these. "While the historic proportion of total M&A deals that are a result of divestitures has remained with the 30-40 percent range over the past 30 years, the number of divestitures in general has risen significantly over the past two years. The fact is that a company can potentially achieve real operational and other practical improvements from divestitures." A successful enterprise will respond to spinoff scenarios with speed and assurance, and HRO partners must respond in kind. Look to Ceridian to help you create power in divestiture situations. We get you up and running quickly. We help you provide employees with the access and benefits they expect. We bring the technology -- and the consultative confidence -- that comes from years of experience with organizations just like yours. In a time of change, how you pay employees and administer their benefits should be your last worry. Make the most of converging trends: capitalize on a powerful approach to HRO -- one that successfully integrates processes, people and technology. Contact me for more information. Will Manuel is the vice president of Sales and Client Solutions for Ceridian's Human Resource Outsourcing (HRO) business. He brings nine years of HRO experience in business development, account management and HR consulting to Ceridian. In his position Manuel leads a team focused on assisting companies between 2,000 and 20,000 employees with their human resource initiatives. He works with organizations evaluating systems and administration for payroll, human resources, benefits, recruitment and human capital management. He is a graduate of Clemson University in Financial Management. Prior to Ceridian, Manuel worked with ACS/Mellon and Convergys where he had similar responsibilities. Sources:
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