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Global HR Transformation 2009

Conducted by HROA in association with ADP


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


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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


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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


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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


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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


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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.

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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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

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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


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RESEARCH FINDINGS

Figure 22:
HR outsourcing practices by process

Global HR Transformation 2009 HROA © 2009


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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

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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

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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

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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

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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

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RESEARCH FINDINGS

Figure 27:
HR shared services by process, 2007, 2008 and 2009

Global HR Transformation 2009 HROA © 2009


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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.

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RESEARCH FINDINGS

Figure 28:
geographic management of HR processes

Figure 29:
HRIS and HRIS centralisation

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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

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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

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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


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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


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