Infographics Suck

I was riding my bike around Marin (north of San Francisco) this fall, it was a bit cloudy, grey and not as bright as usual.  Just the week before, I had purchased a new pair of lenses for my sunglasses, just for this occasion, and I was absolutely stunned at the difference it made to my ride.  I felt like I was seeing the road and the vistas for the first time.  Indeed, it was simply the first time I was seeing the views with a Yellow #20 lens.  The reality is that I’d done this exact ride dozens of times before.  I commented my amazement to my riding buddies, how different everything was, brighter, more cheerful, and happy.  But alas, it was just the Yellow #20 versus my usual middle grey.

The current world seems to be in love with the infographic.  Hell, I’m in love with the infographic.  They are pretty, colorful, easy to understand, present only the key pieces of information that you need.  In 45 seconds, every one of us can be conversant in a topic with a very defined point of view.  Well, actually, this is exactly the problem.  You see, while the infographic is a very valuable tool, we should all realize that it’s there as a precision marketing tool.  It is there just to provide a point of view, not a complete conversation.  Here are a couple of things you can do to combat “infographic conventional wisdom.”

  • Take infographics with a grain of salt – statistics are useful, but remember that there is a whole book called “how to lie with statistics.”
  • Question everything – we don’t always look at the source, nor do we ponder the alternative points of view when looking at these things.
  • Evaluate the publisher – if the infographic comes from a vendor, just remember it’s a marketing tool.
  • Rely on research – infographics will continue to be a good source for quick summaries, but research with full commentaries still outvalue the quick infographic by far.

So why am I writing this in an HR blog?  As buyers of HR technology and services, if we are not already flooded with infographics, we will be quite soon.  We love these things for good reason – they are so easy to use, and marketers know it.  Hell, I’ve been known to produce an infographic when I’m presenting a business case to a steering committee.  The problem is it’s too easy to take them without full context and conversation.  90% of the time they are a single point of view only, and an alternative vendor may have statistics proving why their own software is better in exactly the opposite direction.

This great infographic from http://visual.ly/effectiveness-infographics.

InfographicsSuck

 

 

 

 

 

 

 

 

 

Cedar Crestone HR Technology Survey: Create a Winning HR Function

All too often, I get an industry report to read and end up saying to my colleagues, “wow this is crap.”  Case in point, at the end of 2012, I got a widely read industry report that rated a halfway decent HCM provider’s payroll engine to be better than one of the major payroll outsourcers.  They stated that a vendor’s almost non-existent compensation functionality was a top pick.  Each year, I go through the CedarCrestone HR Technology Survey, and hope there is something wickedly out of sync with conventional wisdom.  Each year, Lexy proves why she is the queen bee of HR surveys and is meticulously above reproach.  I just can’t stand it.

What’s great about this particular survey is that it’s not just gathering data and spitting it back out at you.  I know we all care how many people are buying Workday versus Fusion versus Employee Central versus … this year.  I know we all are interested how many of us are still on premise with our core HCM.  That’s so not the point.  What Lexy does is far more interesting.  She takes all of this data and compares it to company profiles.  What’s the correlation of profitable companies to those people who are running Software X or Technology Y?  This makes up the part of the report I’d like to chat about.  Lexy published 7 habits, and I’m going to summarize so you’ll just have to ask CedarCrestone for the report to read the whole thing.

The attributes that defined successful companies were pretty much higher than usual revenues per employee, profits per employee, operating income and return on equity.  Pretty good measurements.  I’m not sure if CedarCrestone evaluates which is causal, but they do evaluate correlations, so in that sense, go after what you can control, which in our case is the HR side.

  • User Adoption – “If you build it, they will come.”  What a load of crap – wasn’t that some baseball movie Kevin Costner was in?  I don’t remember, but it certainly does not apply to HR technology.  Instead, we have to implement ridiculous change management strategies just to get our managers and employees engaged with us.  If not, we only hear from them when their payrolls are wrong, or to complain about the vacation policy.  The reality is that organizations who successfully implemented solutions, had good change management programs resulting in high user adoption also ended up being among the more successful companies.
  • Buying Habits and Governance – Governance always seems to play into things.  I’ve found that the few organizations that are great at governance tend to be awesome places to work, make good decisions, and have high employee engagement.  So I’m stretching Lexy’s observations here, but basically when I reflect on her finding that successful companies have more technology and spend less per employee, I almost immediately translate that into good governance.  How do you get to better utilization of what you have, and only buying what you need after all?
  • Technology Decisions – There was also a couple of themes that I translated into low maintenance overhead, but also the ability to use industry best practices.  It kills me when I walk into a client that is so highly customized they really don’t know what they are doing anymore other than accepting new requests and implementing full time.  Most of these organizations don’t even know why or what the business case is – they just do it.  Successful companies are correlated to low customization, which is also correlated to SaaS purchases.
  • Data – One would automatically think that successful companies are good with data.  It seems obvious.  The survey actually points out a couple of great tactical elements to get you there.  The first one was integrated talent management with your core HCM product.  Companies that were there tended to have a significant advantage than others.  The second was the utilization of mature business intelligence models, along with the deployment of that data into manager’s hands where agile business decisions can be made.

At the end of the day, HR just wants to be heard.  Interestingly enough, there are elements of shoring up our own house as well as focusing on outcomes here.  If we make bad decisions and have crappy governance, well that’s problem number 1.  But if we also have crappy user adoption and poor data, we’ve also lost the game.

Note – nowhere in this did we correlate functionality to success!

The Technology Does Not Sell

Years ago, there is a motorola executive was speaking to a group of students. He asks the students to answer a couple of simple questions, “who among you owns a motorola cell phone?”. A small group of students raise their hands. He continues to as them, “who among you own a Nokia cell phone?”. The large population of remaining students raise their hands. They go on to discuss why the students own Nokia cell phones, and the executive explains how much better Motorola’s technology is than Nokia.

I should mention here once more that this was all years ago.  I now own a Motorola Droid 2 Global on the Android platform, after having owned the Motorlola Droid 1 and the Droid 2.  Absolutely love these phones.  I don’t know about you, but I have basically owned the popular cell phones of whatever era we were in (iPhone excepted since until very recently it was not available on my wireless provider of choice). I had that huge motorola flip phone in the late 90s, had the nokias like everyone else around the turn of the century, been given the blackberries by my employers, and I’ve been on the motorola droid for the last couple of years.

Phones are popular not because of their technology. They are popular because of what they do for us. Sometimes its the image. We all remember theMotorola Razer (or something like that – i didn’t own one of those) that everyone loved because they were small. We remember the nokias because at the time they were the simplest to use. We realize that many of us bought iPhones even though they were useless as phones in the US. The point being that the choices had almost nothing to do with technology. We sacrificed the ability to make phone calls on a phone so we could buy an apple product that had apps.

The point is this, if you have to explain why your product is better, your product has failed, and you will fail in marketing it. All too often, we deploy new HR systems and tell our clients (employees and managers) how great it will be that they have new tools and self service, only to find out that they hate the new system since they can no longer delegate manual tasks to their assistants – that we have actually just given them more work. We continuously fail in our change management programs for a large number of factors, but one of those facts is definitely hat we are trying to sell the wrong thing. It’s not about what they can do with the technology, it’s what the technology can do for them. (I am feeling like a Kennedy at the moment i suppose.)

In a perhaps more appropriate appropriate approach, applications like alert management must be acknowledged to put more activity on the individual manager’s proverbial table. Indeed, many a survey have shown that manager activity either stays the same or increases any time we give them more technology, but we keep advertising how much easier their lives will be. Instead, we should be owning up to the fact that their lives get busier and more complex, and that’s not a bad thing. The whole point of modern human resources is t hat we continuously get better at managing our people. What are our direct managers if not people managers? Sure, they have to manage activity and process, but it’s the people who have to execute those activities and processes. The technology enables managers to actually do their jobs better, and sometimes just to do their jobs. The fact that more work comes with doing jobs that they are supposed to have been doing all along is merely a byproduct of the technology. sure, you get more work, but now you can do it effectively. In the end, you’ll have happier people, they will stick around longer, have stronger capabilities, and you’ll look really really good.

Or, you can be like Motorola a decade ago when Nokia was cleaning their clock. Instead, give them something they can use, and understand easily. “It’s your job, dammit, and we’re going to make you better at it.” If we have to explain the technology, we’ve already failed.  Today, Motorola has transformed the market and you see Motorlola and iPhones everywhere, but not so much Nokia anymore (in the US).  Turns out that the technology is important, but it’s really about the experience.

Evaluating the Demo

I’ll admit that a while back (wow – are we going on 10 years now?) I was an SC.  You know – those guys from the vendors that the salespeople count on to demonstrate product during the sales cycle.  SC’s are a highly valued commodity.  They are highly trained product experts that must float between the functional world that many of the HR practitioners in their audience live in, the technical world that many IT people in their audience live in, and the sales world that they are part of.  I mean seriously, how many people do you know that can have a functional, technical and sales conversation all at the same time?  The best SC’s are truly rare, have extraordinarily hard jobs, and in my humble opinion are actually quite underpaid for what they bring to the table.

I was attending the HR Demo show in December (put on by the one and only John Sumser) and it was really quite interesting watching back to back to back demos.  It was even more intriguing to listen to the commentary and watch the twitter feeds at the show.  Personally, I watched 3 demos (I was only there for the first day).  Not in any order, there was a horrific demo of a terrific product.  There was also a middling demo of a middling product, and a terrific demo of a fairly poor product.  However, I’m not sure that the verbal or twitter commentary really reflected this.  Part of this is the varying degrees of capability in driving through to what the core product capabilities are from either a functional or technological perspective, and reading past the SC’s ability to sell (that is after all what they are there for).  Let’s face it, a 1-hour demo of a product is designed and probably scripted to show all the best that a product has to offer.  The best SC’s are going to show all the flash in a way that looks incredibly simple.  Even if the product is absolute crap (I’m not saying I saw anything that was), the sales job is to convince you that you can do everything you need to do within the product and that the capabilities are not only sufficient, but that you love them.

At the same time, the technologists in the room are looking around at the exact same demo and not listening to a word about functionality.  Instead, they are watching the screens, table driven values, background integration, web architecture and all sorts of other things that are not being explained verbally.  Thus, I can watch an incredibly dry presentation but still come out of it saying, “wow, that was cool” while the functionally driven people in the room might be saying, “wow, that sucked.”  Functionally, if we are talking about core HR, I’m going to say that the product capabilities of the best demo and the worst demo were within 5% of each other.  However, technologists and functionally driven practitioners are going to come out of a demo with different perspectives.  Unless you are an analyst or have a specific background, I’m not sure that you’re going to be able to pull together these perspectives in a single individual.  That’s why, even though some HR people get a bit tight, we invite very broad teams of HR, IT, Finance, etc to watch demos.

As a parting thought, here are a couple of hints when you ask questions during the demo:

  • When the SC says, “Our clients handle that situation by using this functionality over here” means that it’s a workaround.  No matter how good and convincing the demo was, it’s a workaround and does not really exist.  You should also be aware that many of the workarounds that SC’s come up with are totally legitimate, but that the implementation groups may not be aware how to implement them.
  • When an SC says, “We suggest that you handle the situation this way” means there is a band aid.  You might be exiting the application, or using a workaround, but be in no doubt that once again the functionality does not exist.

Differentiation in SaaS

A while back, I was an SC for a large vendor organization.  It was a lot of fun highlighting the great stuff in my applications (actually – those were the fun parts).  But our jobs were to help find solutions as well as workarounds to things that could simply not be done.  Given this is a decade ago when functionality had not really arrived yet, Still, the differentiation between applications back then was about who had more functionality.  The depth of any HR application varied widely between vendors.  Today’s world is vastly different.

Is there really any differentiation in between SaaS vendors/  I mean, they all seem to say the same thing.  Everyone talks about great service, they all like to say how you don’t have to customize anything anymore, and every SaaS application is “versionless.”  The core things taht many of the SaaS vendors sell no longer really apply – SaaS vendors are so often competing against other SaaS vendors rather than legacy server based technologies where these were indeed valid arguments and true differentiators.

I’ve also argued that the days of functionality are pretty much over.  Vendors simply can’t compete on feature-functionality anymore.  Once again, there was a time when it was important, but today’s reality says that every vendor is going to have 98% of what you need, and the other 2% are probably nice to have’s that you can live without.  The truth of the matter is, feature functionality ruled in the days of long ago (what, all of 5 years?) when HR was the center of the HR universe.  We needed better transactions, more efficient processes, better storage spaces for more and more data.  That’s not true anymore.

Today’s center of the HR universe has transformed into employee’s and managers.  Those groups don’t need feature functionality.  In fact, it’s a Google and Apple world where minimalism and ease of use reign supreme.

The true differentiators for vendors is also evolving.  No longer is it feature-functionality, great service, or being versionless.  Today’s differentiation comes in the form of the analytics framework and how capable HR can be at delivering data to managers.  it’s about what I have called “enterprise digital interactions”  (social media) to help employees connect, collaborate and learn, it’s about how well you can use technology to create the simplicity that end users crave.

The problem is that feature functionality is easy to demo.  Whether analytics are really easy to create and consume, if end users will adopt digital interactions, or if the usability was hiding under a layer of slick demo style is sometimes hard to discover.  At the end of the day, these are the features that are differentiators today.  Feature functionality does not prove much anymore.  It’s about pushing your future vendor partners during demos, inviting end users (employees and managers) for a full court press during demos, and figuring out how to ensure that all the flash that your future partners are trained to demo is not all that you see.

Taleo versus SuccessFactors

At the end of 2009, Bersin did a great analysis of the two organizations that I can’t really beat.  It’s a nice objective and score by score view of the vendors that is based in good factual data, and I’m going to take a different approach, but you should read Bersin’s post first.  From my point of view, the discussion of the two vendors is quite simple, and the decision around to who has the advantage is also quite clear.

Let’s start with their roots.  It’s quite clear that Taleo is based on recruiting roots while SuccessFactors has the Talent Management side.  Both have ventured into each other’s strong suite, with Taleo having an incredible launch into performance a couple of years ago.  However, as time has gone on and the market has assessed the product, it may actually have been too much innovation for the average HR department to adopt and absorb.  I still think it’s one of the coolest products out there, but the change may have been too radical or restrictive.  Traditional performance vendors that were more flexible in allowing people to stick with processes that were somewhat similar to their current states might have been more comfortable during the selection process.  While we all say we want drastic change, when functional HR people really get down to business, I’m not sure it’s true.

SuccessFactors on the other hand has been reaching into recruiting.  Their first couple of sales came in 2009 and the product is in its infancy.  What Taleo has spent a decade developing, SuccessFactors has been at for a few short months and the product shows its weaknesses.  At the same time, Taleo’s recruiting product shows the immense configurability and options that the market wants, but does not get with the Taleo Performance module – sort of a contradiction.  SFSF’s Talent side gives the depth and maturity that simply isn’t there on the SFSF recruiting end.

Next, looking at their market presence, you decide who has the advantage.  While Bersin points out that SuccessFactors is in every RFP for Talent Management, Taleo is also in every RFP for Talent Acquisition.  This is not scientific at all, but I’m going to say that SuccessFactors has the advantage here.  My argument is that recruiting is not so much more complex than performance, compensation, succession, mobility, etc, and that Taleo has much more to build.  I’m also going to say that traditional recruiting is much more of a commodity, and that the Talent Management side is often seen as more of a business transaction.  Recruiting does not come out of commoditization until you get to mobility strategy, and that is generally a TM function than TA (granted cross functionality).  Its generally going to be easier for SFSF to build TA than for Taleo to improve the TM functions.

Lastly, looking at leading the market segments they specialize in, I’m going to say that Taleo has a pretty healthy lead in the TA market, and while SFSF is omnipresent, they don’t have quite the dominance simply due to the larger number of players.  Still, I think overall I’m looking at SFSF to be positioned better in the remainder of 2010 as the economy picks up steam and budgets continue to return.

Consulting Models

I was actually asked by a client recently to increase the scope of my project – or at least the staffing model we were using.  There are a more than a few consulting models, but I think it generally boils down to a couple of easy examples.  There are differences in philosophy I suppose, and perhaps I just don’t understand one of them, but I also don’t understand why people are so willing to waste money.

Some of the large consulting firms are well known for hiring masses of kids right out of college.  These new associates are paid premium salaries (I think these positions go for between $55-65K now), and can bill in the neighborhood of $200+ per hour for management consultants and not quite so much for implementation work.  Their work is supposed to involve lots of learning on the job, but it’s well known that the first couple of years can typically involve carrying the bags for partners, getting the partners coffee, and being general gophers.  These firms are also known for staffing larger teams with a few of these newer associates.  I consider this to be a bit bloated.

The model of any firm I have ever been with is more typical of the HR space, but certainly most common with the smaller boutique firms.  The staffing in the HR consulting industry tends to be much leaner, with a small core team of experts, perhaps some mid level consultants, and nary a “newb” in sight.  I’ll admit that I miss having my assigned note taker who will record every letter of the conversation and then transcribe it into semi-meaningful documentation, but on the other hand, with a crisper model, every dollar paid is a high quality dollar.

When organizations go out to bid for HR technology consulting, sometimes procurement teams or IT staffs are in charge of the selection.  Procurement sometimes is persuaded by lower average bill rates and larger teams that come with the systems integrators.  IT is often more comfortable with the guys that implemented their ERP system.  Unfortunately, these vendors don’t always know HR or have the same level of subject matter expertise that the HR firms do.

I suppose this is an unintentional plug for HR consulting firms in general.  I’ve seen it work very well where we do the strategy work and partner with a systems integrator who does the implementation.  At the end of the day, there is no trading the level of deep subject matter expertise that HR consultancies have.  Large consultancies have incredible depth between HR and total rewards with deep compensation and benefits consulting practices.  Smaller boutiques have incredible depth in HR technologies and vendor knowledge.  Depending on what you need, you’ll always find a great answer in one of the HR firms.

The Vendor Demo Test Drive

I must say that Jim Holincheck wrote a quite persuasive piece a couple months ago on why vendor scripted demos will go away.  In today’s environment of SaaS applications, it’s so much easier for organizations to set up sandboxes for potential customers to play around in rather than the old model where client server applications forced vendors to show prospects the tools in a demo environment.  (wonderful analogy to follow by the way…)

Consider the following scenario.  Let’s say you were going to buy a car and you were unsure which car to buy.  Maybe there are three or four that are in the size and price range you want (your short list, if you will).  You would likely go to dealers for each car and do a test drive.  You would get behind the wheel and drive the car and get a feel for how it operates and what you like and do not like (or would like to change depending on the options) about the car.

Now, let’s think about it how it would work if a car test drive was like selecting business applications.  In this case, you would have the car salesperson drive (demo) the car for you while you sat in the passenger seat and asked questions.  You could have each car salesperson drive the car along the same route (scripted scenarios) to see how each car handles the course you have outlined.  You would be able to compare “apples to apples” and probably gain some insight into what differentiates each car in terms of the driving experience.  However, you would not really know how well the car you select drives until you actually buy it and drive it home from the lot.  ((Holincheck, Jim, December 10, 2009.  “The End of the Scripted Demo Era.”  Retrieved from http://blogerp.typepad.com/ on December 24, 2009.))

But as is my way, I’m going to play devil’s advocate, and honestly I’m persuaded by my own argument.  Giving up the control to the demo is just too risky for an application vendor.  The main purpose of the vendor demo is no longer to evaluate feature functionality.  Most vendors that get short listed are going to be able to meet 90% of the feature functionality that any customer needs.  The remaining 10% is customization, workaround, or just called a loss.  It almost does not matter what the feature functionality is anymore, we’ve gotten over the functionality battles and are now in the usability battles.  The new purpose of the demo is that potential clients get to see the overall usability of the system and how end user employees and managers would interact with it.

Here is why the pre-contract sandbox is risky.  When you put an application in the hands of HR for evaluation, the entire tone of the evaluation shifts.  Now, HR practitioners and evaluators are sitting around looking at feature functionality.  And they are looking at it with the lens of what breaks and goes wrong without having the vendor SC sitting there telling them how it works or what other clients have done as a workaround.  Top it off with the thought that the SaaS system is not sufficiently configured to run through the potential customer’s use cases, and you have functional and process failures galore.

I hate to say it, but I think the proper IT resources get the fact that a sandbox is just a sandbox.  But your core HR practitioners don’t have the same application experience and can’t remove themselves from the core of their day to day functional activities.  I’ll echo a couple of Jim’s last words in his post:  “Am I way off base?”

UFO’s: Unfinished Objects

I’m not sure who first coined the term “shelfware.”  Most of our IT departments have all sorts of stuff we have purchased that we intend to implement but just haven’t done so yet.  Or we have implementations that we have abandoned, or we have technology and strategy roadmaps that are mid way through because we ran out of funding, or got stopped by a temporary glitch we didn’t have the mental will to push through.  All in all, we have too much in the way of “shelfware” whether it’s actual software or just projects sitting around.  And we don’t finish enough of them.

As a consultant, I’m always glad for the role I have.  To be completely honest, I’m a strategist (whatever that means).  I’m not good at the detailed stuff – testing and QA always drove me crazy, and I’m a really bad coder – because I like shortcuts and don’t like to figure out where I missed a semicolon.  In one sense, I’m really glad I don’t usually have to stick around for the implementation of what I come up with.  It’s nice to hand off to people at application vendors or system integrators to run an implementation because they are much better at that stuff than I am.  At the same time, it’s incredible to me the amount of strategy projects that get held up or never get going after I leave.

In most cases, organization’s are just not staffed well enough to handle additional project loads.  The realities of day to day operations cause them to lose focus, and these organizations also seem to have issues with using external consultants to do implementation work.  Granted it’s the most costly way to go, but it’s also the easiest way to maintain your focus on the plan.  Internal PMO organizations don’t usually like to play around with HR stuff, and that’s a shame.

Lexy Martin had a post a while back about unfinishable objects.

I’ve noticed, however, that in my studio I have a few UFOs — a quilter’s term for “unfinished objects.” I like to think of myself as not a quitter — as someone who finishes what I start. The UFO from that class, I’ve decided will never be finished as originally planned at that class. And, oh my…it feels good to recognize that. I declare it totally unfinishable! Of course, I will go through some doubts: 1. Is it unfinishable because my techniques are not up to it? 2. Is it unfinishable because I didn’t like the teacher and she did not help me to excel? 3. Is it unfinishable because…. You know what, I don’t need to know the reason. What I do know is that by declaring that one effort unfinishable,I feel ever so much more creative! Plus, it frees up one of my favorite fabrics that I want to use in another quilt project that is to be a gift for dear friends.  ((Martin, Alexia, December 22, 2009.  “Giving yourself permission not to finish frees up energy – another quilting/work intersection.”  Retrived from http://lexymartin.blogspot.com on December 25, 2009.))

The first is what I already mentioned above.  Sometimes I need to plan better for an organization that is just not willing to approve an ongoing project with an external implementor.  Organizations that really want to implement SAP on their own after deciding it’s the best fit for them…. Well… perhaps it’s my fault that I only told them 9 times and not 10 times that it’s really unwise to try to do it inhouse.  That’s a bit tongue in check, but the reality is that perhaps it’s my fault that even with the best intentions, internal project teams fail to get funding that they need and just can’t handle the workload themselves.  That comes to Lexy’s second point.  Consultants often don’t provide a backup plan.  We put so much time into preparing a business case that justifies the first option that when an organization can’t implement an ERP or global service delivery model (or whatever), that we didn’t tell them what’s next.  Maybe just putting their 15 different payrolls on ADP was the right way to go, and they would have gotten funding for it.  Not to avoid any mea culpa’s that should be coming my way, but consultants don’t always have the organizational knowledge to know how well you’ll be able to navigate through the approval and funding processes, we’re almost always guided by your judgment and the judgment of the executive sponsors.  If you say you can do it, we kind of believe you.

That brings us to the last point.  Sometimes, instead of blindly plugging along in the current state, or leaving a project on the shelf and pretending you’ll get to it eventually, you just need to get back to square one and start over.  Usually, it’s not really square one, most consultants will have brought a number of good models for you to go after, and it’s just a re-evaluation of the new best fit with the new funding realities in mind.  The point is, not to let anything sit there and fester while you do nothing.  There was a good reason to tackle a project to begin with, and that reason is still there, whether it be service delivery, technology, process or anything else.  Declare it a loss, and reevaluate the project so you can get going again.

UFO’s: Unfinished Objects

http://lexymartin.blogspot.com/2009/12/giving-yourself-permission-not-to.html

I’m not sure who first coined the term “shelfware.” Most of our IT departments have all sorts of stuff we have purchased that we intend to implement but just haven’t done so yet. Or we have implementations that we have abandoned, or we have technology and strategy roadmaps that are mid way through because we ran out of funding, or got stopped by a temporary glitch we didn’t have the mental will to push through. All in all, we have too much in the way of “shelfware” whether it’s actual software or just projects sitting around. And we don’t finish enough of them.

As a consultant, I’m always glad for the role I have. To be completely honest, I’m a strategist (whatever that means). I’m not good at the detailed stuff – testing and QA always drove me crazy, and I’m a really bad coder – because I like shortcuts and don’t like to figure out where I missed a semicolon. In one sense, I’m really glad I don’t usually have to stick around for the implementation of what I come up with. It’s nice to hand off to people at application vendors or system integrators to run an implementation because they are much better at that stuff than I am. At the same time, it’s incredible to me the amount of strategy projects that get held up or never get going after I leave.

In most cases, organization’s are just not staffed well enough to handle additional project loads. The realities of day to day operations cause them to lose focus, and these organizations also seem to have issues with using external consultants to do implementation work. Granted it’s the most costly way to go, but it’s also the easiest way to maintain your focus on the plan. Internal PMO organizations don’t usually like to play around with HR stuff, and that’s a shame.

Lexy Martin had a post a while back about unfinishable objects.

I’ve noticed, however, that in my studio I have a few UFOs — a quilter’s term for “unfinished objects.” I like to think of myself as not a quitter — as someone who finishes what I start. The UFO from that class, I’ve decided will never be finished as originally planned at that class. And, oh my…it feels good to recognize that. I declare it totally unfinishable! Of course, I will go through some doubts: 1. Is it unfinishable because my techniques are not up to it? 2. Is it unfinishable because I didn’t like the teacher and she did not help me to excel? 3. Is it unfinishable because…. You know what, I don’t need to know the reason. What I do know is that by declaring that one effort unfinishable,I feel ever so much more creative! Plus, it frees up one of my favorite fabrics that I want to use in another quilt project that is to be a gift for dear friends. ((Martin, Alexia, December 22, 2009. “Giving yourself permission not to finish frees up energy – another quilting/work intersection.” Retrived from http://lexymartin.blogspot.com on December 25, 2009.))

The first is what I already mentioned above. Sometimes I need to plan better for an organization that is just not willing to approve an ongoing project with an external implementor. Organizations that really want to implement SAP on their own after deciding it’s the best fit for them…. Well… perhaps it’s my fault that I only told them 9 times and not 10 times that it’s really unwise to try to do it inhouse. That’s a bit tongue in check, but the reality is that perhaps it’s my fault that even with the best intentions, internal project teams fail to get funding that they need and just can’t handle the workload themselves. That comes to Lexy’s second point. Consultants often don’t provide a backup plan. We put so much time into preparing a business case that justifies the first option that when an organization can’t implement an ERP or global service delivery model (or whatever), that we didn’t tell them what’s next. Maybe just putting their 15 different payrolls on ADP was the right way to go, and they would have gotten funding for it. Not to avoid any mea culpa’s that should be coming my way, but consultants don’t always have the organizational knowledge to know how well you’ll be able to navigate through the approval and funding processes, we’re almost always guided by your judgment and the judgment of the executive sponsors. If you say you can do it, we kind of believe you.

That brings us to the last point. Sometimes, instead of blindly plugging along in the current state, or leaving a project on the shelf and pretending you’ll get to it eventually, you just need to get back to square one and start over. Usually, it’s not really square one, most consultants will have brought a number of good models for you to go after, and it’s just a re-evaluation of the new best fit with the new funding realities in mind. The point is, not to let anything sit there and fester while you do nothing. There was a good reason to tackle a project to begin with, and that reason is still there, whether it be service delivery, technology, process or anything else. Declare it a loss, and reevaluate the project so you can get going again.

Agility Methods and Project Governance

Governance and scope creep is always one of the major problems in any project.  Limited resources and continuous demand from non-project needs both elongate projects and spread resources too thin.  I was speaking with a technology friend about project governance methods and he pointed out that his organization used a strict “agility method” that I found quite amusing.  While it’s quite a nice structure for governance, I found it anything but agile.  His organization’s agility method included strict adherence to published timeframes for tasks and a strict ban on management interference in project tasks.

I rather like the thought of management not being able to request an already used resource and shifting the focus of that resource until the task is complete.  In this method, if management needed to change the resource’s task, they would need to justify to a governance committee the reasons why, and the governance committee would be instructed by policy only to allow changes under the most dire of circumstances.  You can see why I think this is a wonderful project management tool.  The absolute prevention of scope creep not only controls cost and timing, but when your resources are often working more than full time, often management requests don’t mean that work gets shifted, but rather that work gets added.  This is unfair to your resources since projects often can’t really get pushed, and the resource can’t say no to management.

On the other hand you can see why I find this agility method amusing.  It’s anything but agile.  What the agility method does is ensure that once a project has been approved, staffed, and funded, nothing can change it’s course.  Until task completion, the project resources are pretty well committed, and only after large chunks of tasks are completed can periodic review of velocity and direction be reviewed.

From what I understand, there are many types of agility methods, and I’ve only heard of one of them.  What I do seem to know generically is that the method seems to provide a working structure that allows projects to be completed in the most efficient manner with the least interruption.  The actual agility policies that are created may differ than the one I described above, but in the end, I’m not sure “agility” is the word I would have used.

Real Lesson From Despair.com: Dysfunction

The only consistent feature in all of your dissatisfying relationships is you. ((Despair.com))

I often see organizations who have many vendor relationships that are either marginally successful or complete failures. What these organizations never enjoy hearing is that they are partly to blame for these failed relationships. While I’ll always admit that failure is an equation that two parties contribute to, if an organization consistently fails in its vendor and outsourcing relationships, thy have a core governance problem. Most organizations that put sufficient energy into their vendor governance and define how they will operate in their relationships and make decisions have adequate or good relationships with vendors. While there may be poorly performing relationships somewhere in your vendor portfolio, if they are all bad, look inward ay yourself or your vendor management team, and stop with the excuses that vendor mistakes give you.

The Struggles of Vendor Integration

Oracle owns PeopleSoft, Sieble, and countless others.  Kenexa takes Brassring and Webhire.  ADP acquires someone every year or two.  There are some obvious things these vendors need to do to integrate the acquired companies.  Bill Kutik of HREonline has a great “Cynic’s Six Steps to Application Integration.”

  1. Press Release Integration
  2. Collateral Integration
  3. Portal Integration
  4. User Interface Integration
  5. Data Integration
  6. Interoperability  ((Bill Kutik, April 9, 2007.  “A Cynic’s Six Steps to Application Integration.”  LRP Publications.  Retrieved from HREonline on April 9, 2007.))

As usual, you’ll have to go check the link to view all Bill’s comments, but as buyers of these products, we need to understand how the vendors have managed processes 3-6 while wading through the confusing mess that is often steps 1 and 2.  Let’s face it, has any of your favorite vendor’s application suite been as integrated as they said it was?  Having come from a vendor, I can tell you that it’s all in the “interpretation” of the word integration.  After all, you organization is so unique that the vendor’s standard not-real-time batch interface could never be expected to work out of the box.  But the point is that they absolutely have integration down as shown my the fact that they have an interface that doesn’t work.  See, the technologists never explained to the marketing people that the customer reality is different than the vendor reality.

But let’s say you spoke with TalentSoft prior to their acquisition by MegaSoft.  It’s entirely possible that your TalentSoft salesperson simply told you that they would maintain their independence, cutting edge development path, and innovative and responsive style to solving client issues.  This is of course a very skilled salesperson.  What you should be thinking in your head is, “are you kidding me?!?”  The thought that MegaSoft would allow TalentSoft any leeway in making operational decisions is ludicrous.  First, MegaSoft is going to take over the executive management tier of TalentSoft.  Second, they will restructure all sales operations and processes to enhance cross selling.  Third, they will try to integrate application development and customer servicing organizations.  What will be left will not be TalentSoft.

Maybe this is the way it should be.  Perhaps when you bought PeopleSoft, what you really wanted was Oracle.  But really, if in 2 years, PeopleSoft HCM really is well integrated with Oracle financials, or Brassring really will effectively share competency models with the rest of the Kenexa offering, isn’t that better?  As Bill states, “Look under the hood. Be cynical.”  ((Ibid))  Steps 1 and 2 are nice, but the real changes that steps 1 and 2 state don’t happen for quite some time.

Where are the HRO Successes?

Because much of my practice focuses on helping companies and HRO providers improve the outsourcing relationship for cost, quality and service levels, in my job I see many broken HRO relationships.  It’s the nature of the business.  So it comes as no surprise to see the article published online at Workforce.com yesterday: ACS, Delta Change Terms of $120 Million HRO Agreement

In addition to eliminating recruiting, absence management and employee travel call center support, ACS will have to make two separate cash payment to Delta totaling $7.7 million “in settlement of certain disputes regarding Affiliated’s performance of the services.”

Invariably, many of the service related problems experienced by the top tier providers track back to problems with initial setup, implementation, governance structure, misalignment of expectations or ambiguity of responsibility in the retained organization.  I’ve seen the problems and helped fix them. 

Today, I’d like to put the call out to hear from practitioners out there who have seen it done right from the beginning.  Either e-mail me your experience, or post it here.

We see so much advice provided on Blogs and in industry publications on how to implement correctly, it begs the questions “is it ever done just right”, and “out of all the advice given, is there one or a set common success factors observable in real life experience.”

I’d love to highlight true success in this space.  The fact is it’s much easier to talk about the HRO failures being experienced.  Yes, we learn from failure, but let’s learn from success also.

I hope to hear from you!

About the authorDonald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

HRO – Success and Partnership

The success rate of HRO contracts is bad to dismal. That isn’t to say that companies are not saving money, or that vendors are providing bad service levels. But often, companies are dissatisfied with their overall relationships. The key indicator for satisfaction is not service delivery or cost savings (although those are drivers). The key indicator is how well you’ve structured your partnership around the contract.

Partnership goes both ways. There must be some form of understanding about the core strategy and direction of the contract from the outset – beginning from sales. This is really about understanding the “spirit” of the relationship. From the vendor perspective, it means that understanding the goals should translate into not being and nickel and dime store – not everything is actually out of scope. While certain services are not spelled out in the scope of work (SOW), the spirit of the contract and the philosophy of what was agreed do between the negotiators in the sales process may not have made it to the SOW. In reality, there will always be some disagreement about what’s in the SOW and what was actually purchase/sold in spirit.

From the customer side, it’s the understanding that a win/win is possible. Nobody really wants their vendor to go out of business, but in their particular case, they want a cost model that is too good to be true. It’s also understanding that sometimes things go wrong. They went wrong when the processes were in-house, and the new outsourcer will have some glitches too.

I’ve heard companies say “if you don’t come down hard on them, they won’t do the work.” The problem is that if you do “come down hard” they won’t go above and beyond the call of duty when the time comes for that. I use the term “vendor” a lot because it’s the easiest descriptor. In truth, partner is the correct term – and the important one if you want success in HRO.

Hewitt’s Lessons Learned

From time to time companies exhibit moments of organizational maturity not often enough seen in the market.  This week’s moment comes to us courtesy of Hewitt Associates’ Mike Wright, global HRO sales co-leader, during his presentation last month at the Conference Board’s 2006 Human Resource Outsourcing Conference in Chicago.

Thank you (again) to Jessica Marquez at Workforce.com for bringing this to our attention with her fine and timely reporting in a piece entitled Hewitt Shifts Course After Recent Missteps.  I write about it today not merely as a follow up to my previous articles here and here, but rather because Mike Wright’s comments are shocking in their clarity and instructive anyone looking at the HRO business today.

The article and Wright’s comments actually provide material for me to do a multi-part series over the next two months, but come to think of it, much of what is said I’ve already written about.  In any case, it’s refreshing to see a service provider to recognize these lessons that Hewitt has seemingly learned (that’s learnt for those of you across The Pond):

  • Clients need to be intimately involved in the conversion process
  • Aligning goals and expectations (managing expectations) is also crucial to success
  • Clients need to take a close at the staffing and delivery model in the Retained Organization to maximize economic benefit
  • The “lift and shift” model doesn’t work!
  • Full customization is a rat hole; think “one to many” or “flexibility in a box”
  • HRO should be more about a two-way dialogue and less about “Yes, we can do that”
  • Service providers could do well with a dose of humility every now and again

I’d like, now, to take a closer look at each of these lessons.

Client involvement

Wright acknowledges that in the past, Hewitt has had a tendency to try to plow through problems encountered in an insular way.  After all, as the leader in outsourcing they could figure out the solutions, right?  Now, Wright stresses the importance of involving the client in the process more, including having customers visit its service centers and offer ideas on how to address problems.

For many of us, this is not a revolutionary idea.  In fact, as a standard, I recommend that clients retain legacy staff long enough into the “post-implementation shake out” to have staff at the vendor service center for at least a month after go-live just to walk the floor.  They should be listening in on phone calls, recommending improvements to process, reviewing help text, performing culture training, etc.  This is true client involvement that can help ensure a successful relationship from the beginning.

Aligning Goals and Expectations

As I’ve written before, managing expectations is critical to success.  After all, at its root success is defined as a function of the attainment of expectations, isn’t it?  It’s about more than just hitting the SLAs that have been agreed to.  It’s about determining the SLAs in a collaborative way.  It’s about determining roles and responsibilities.  It’s about defining the future state and being nimble enough to make adjustments to it.

Unfortunately, I don’t think it’s about putting language in the contract mandating staff reductions at the client in the post implementation world as Mike Wright suggests.  This draconian measure will do nothing to foster collaboration, review, trust and understanding.  Perhaps more helpful would be to agree to independent post implementation review to assure that an end to end structure that is “set up for success” has been created. 

No client wants or should be expected to agree to staff reductions before the new environment has been entered in to.  In fact, many times it is the second or third year when the environment is stabilized and staff reductions are fully realized.

Post Implementation Staffing

To elaborate further on the prior point, one of the primary ways in which clients fail to attain the financial goals set out in outsourcing is to make the necessary changes to the internal environment after outsourcing has been implemented.  Too many times staff and functions are retained which create redundancies in process, add cost and increase risk.
This basic concept has been noted and highlighted in the cost findings of TCO studies I have conducted.  Collaboration and clear definition of roles and responsibilities are the way to address this, not mandated staff reductions.

The “lift and shift” model doesn’t work!

From the Marquez article: “Probably the biggest lesson learned for Hewitt is that the “lift and shift” model, whereby it would just take over a buyer’s HR processes and attempt to do them cheaper, doesn’t work, Wright said.”

Ummmmmmm……I’m shocked!  Really?  Can this be so?  You mean you can’t do it better / faster / cheaper on day one for 20% less than it costs me now?  Say it ain’t so!!  You mean you won’t bring me additional cost savings / scale / leverage / best practices in year two?

OK, I am showing my bias here.  This has been my belief for years.  Ever since I saw PwC try to implement lift and shift years ago for an unnamed Atlanta based client (some of my readers are cringing as they remember the fiasco, I’m sure).  The approach is rife with inherent weaknesses and problems.  Also, as we are seeing throughout the market, it also dooms the service providers to deep financial losses.  So what is the answer:

One to Many Processing

For providers to make money, and clients to get the best service and best practice that is promised, it is my belief that the “one-to-many” model is an absolute must.  Flexible, scalable, and leverage-able systems and process that isn’t reinvented with every client can allow for true improvement in process and does not make every system enhancement or upgrade a one-off fire drill for every client.  How can a service provider claim economies of scale if every implementation is a one off, unique environment?

As I said a few weeks ago, for Hewitt to turn the corner (if they aren’t on the auction block), I believe the answer is flexibility in the Cyborg box.  It is a risky venture, but one I believe can be the best answer to ADPs as yet un-challenged Enterprise-based outsourcing model.

HRO is not about “Yes, we can do that”

Of course, when we begin talking about a one-to-many model, over-customization is just not possible.  Trade offs will be made, and the vendor will have to say no.  The Culture of Accommodation can begin to be broken! 

Service providers could do well with a dose of humility every now and again

Again, from the Marquez article: “I come to you pretty humbly this morning,” Wright told attendees, noting the troubles the company has had.

Anyone who knows Hewitt realizes that this could not have been easy for Mike.  In fact, it would not have been easy for representatives of most service organizations.  I can only imagine that the commitment to speak at the conference was made before the very public “challenges” Hewitt has recently faced. 

Humbled is one way to think of it.  In her subtitle, Marquez says “older and wiser.”  I actually like that.  But whatever you call it, if Mike’s comments and position are shared by others in the organization, we will see Hewitt attain the next level of what I like to call organizational maturity.  If so, let the competition beware!
 

About the authorDonald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

100% Claims Audits Revisited

Nearly one year ago, Double Dubs graciously asked me to be a regular contributor on this most amazing blog of his.  I think all of us can agree that what he has built here is impressive.  He has created a reference tool for HR professionals (both in and out of the technology space) to come research and learn.  He provides links and footnotes for us to delve as deeply as we care to delve into his posting of the day.

When he asked me to contribute, he wanted me to comment on items such as vendor management and total cost of ownership (TCO).  He wanted his readers to be able to learn about getting the most out of their vendor relationships.  He wanted to explore the financial aspects of HR service delivery as well.

For me, the perfect opportunity to do this is provided in the area of health claims administration.  I believe we are seeing an almost “perfect storm” scenario: out of control costs, questionable independence in placements, ineffective vendor management of claims processing, lack of accountability/auditability, risk management challenges, Sarbannes/Oxley, HIPAA etc.

The fact is, from a TCO and vendor management perspective, most companies don’t know what inaccurate claims are costing them, and ineffective vendor management is the rule rather than the exception.  I assume you can tell by my last three postings that I am generally dissatisfied with business-as-usual claims audit from an effectiveness, independence, and general utility perspective.  I have been impressed with the recognition by individuals in the market place of a driving need for claims audit services which provide real value to companies by helping to quantify and contain costs and provide the tools to better manage vendor relationships.

Last week’s post highlighted a company doing just that.  This blog, I believe, should be a place people can come to learn about trends in the market, services being provided, technologies being developed, and yes, vendors providing the services.  This is why last week’s post highlighted a specific company which is demonstrating “the intersection between HR Strategy and HR Technology.” 

HR Best Practices is demonstrating that intersection, and my purpose in highlighting them last week was not, in the words of Romain, for “marketing/commercial intentions.”  As they say, I’ve got no dog in that hunt.  As for responses to posts by vendors, I would hate to think that this would become a place of edited or censored comments.  I believe the source should be considered any time a comment is made.  I also believe those in the vendor community can provide great value by commenting here themselves.  It enables us to learn straight from the horse’s mouth, so to speak.  Of course, we wouldn’t want the space to be filled with rumor and innuendo posted by anonymous screen names.  That would result in a devolvement in all we hope to accomplish here.

All that being said, I did get a private e-mail response to last week’s post alerting me to another company providing seemingly similar, if not identical services to those highlighted last week.  A representative of Independent Healthcare Initiatives contacted me, and after  rescuing the e-mail from a seemingly overaggressive spam filter, I learned quite a bit that the readers here can probably benefit from.

I visited their website, and viewed the testimonial video. The IHI messaging is very similar to HR Best Practices.  IHI also provides an ROI guarantee: actually waiving fees if they can’t demonstrate cost savings.  I am looking forward to receiving a presentation over the web.

For me, this is what it’s all about: identifying a need in the marketplace and filing it!  Here now are two companies who have done just that.  They also stand by their services with ROI guarantees.  For a company wanting to contain costs and better manage their vendors it certainly wouldn’t hurt to consider the 100% audit approach.

I’d love to develop a roster of companies providing these services.  Again, as I requested last week, please drop me an e-mail or respond directly to this post to let us all know about what is going on in this space!

About the authorDonald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

A Technological Approach to Claims Audit

The last two weeks I wrote about the ineffectiveness of traditional claims audit and the inherent conflict of interest some companies face when they perform such audits.  This week I’d like to introduce a company that brings a different approach to the industry: HR Best Practices.

HR Best Practices was founded by Howard Gerver five or six years ago.  I first met Howie 3 years ago at the 2003 HRO World Conference.  From the beginning, I could tell he was one of those people who just plain “get it”.  Since then I’ve found out more about his company and approach to health care claims audit.  I believe it’s unique.  If anyone reading this knows of other companies taking a similar approach, I’d love to know about them.

Essentially, HR Best Practices employs proprietary financial management and reconciliation tools to perform 100% audit of claims for three primary purposes:

  • Cost Recovery
  • Cost Containment
  • Cost Avoidance

For Howie, claims audit is ROI driven.  In fact, depending on the situation, I’ve seen HR Best Practices offer something I haven’t seen anywhere else in the industry: an ROI guarantee.  The flexibility of the approach makes it applicable to all types of claims data. The audits can be geared towards areas such as point-in-time eligibility, dependent audit, coordination of benefits, subrogation, disease management, cost benchmarking, etc.

There are a couple of White Papers available on thier Website here and here which give some really good information and further insight on the approach and application of the technology.

As I look at it, I definitely believe it is the approach of the future, making the traditional claims audit obsolete.  I assume there are other companies taking this approach, but haven’t run across them yet.  As I said earlier, if there are others offering this comprehensive approach, let us know. 

For now, it seems a no-brainer that this is the way to go to get a guaranteed return on investment and demonstrable cost recovery, containment and avoidance as a result.

About the authorDonald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

Independent Consulting: Perception or Reality?

Last week, Barbara Martinez wrote a very in-depth article which appeared on the front page of the Wall Street Journal (September 18, 2006; Page A1).  A subscription to WSJOnline is necessary to view the article, but I encourage you to read it if at all possible.  In the article Ms. Martinez writes about independence in the health care industry with regards to product placement and claims audit. More on that in a moment, in the meantime, allow me to digress.

Enron.  The word means different things to different people.  For people working in the audit and professional services industry, it has a very personal meaning.  The Enron scandal affected hundred of thousands of lives: perhaps millions.  Tens of thousands of Enron and Arthur Andersen employees lost their jobs directly as a result of the scandal, and the ripples continue to be felt today. 

The limitations placed upon the provision of professional services firms provide to they also audit has left the consulting practices of the Big Four audit firms in tatters.  For example, at PricewaterhouseCoopers, the firm had to choose between providing audit services or actuarial services.  The choice was easy.  PwC resigned as actuaries for up to 60% of their actuarial book of business. 

The Enron case was the classic juxtaposition of perception versus reality.  Just because a firm derives millions in revenue from consulting services, does it necessarily follow that the corporate audit will be completed with a wink and a nudge?  Sarbanes-Oxley thinks so, evidently.  Of course, David Duncan didn’t help the perception any when he shredded all those work papers, did he?

So how does this relate to the article written by Ms. Martinez?  The parallels are striking.  By my read, there are two main points made in the article:

  • Consultants who are engaged to select heath insurance providers often have an inherent conflict of interest because of the compensation they receive from the providers
  • Consulting firms that receive significant fees from claims payers also have claims audit as a core service offering thereby creating a significant conflict of interest.

Now, just because there is a conflict of interest, does it follow that services provided are of any less quality?  In a Kissingerian sense, it doesn’t matter.  If Enron taught us anything, it’s that perception supersedes reality.  Ms. Martinez gives example after example of serious conflict which leads us to the conclusion that there is something seriously wrong in the industry.  When search consultants receive 15 times their consulting fees in provider compensation from the health carrier, the perception will always be that the recommendations were at a minimum clouded by payments.  At worst, the recommendations were directly bought and paid for by the carrier.

In her first example, Ms. Martinez tells of the $517,000 a consultant received from UnitedHealth Group after they were selected as the health insurer for the Columbus Ohio School District.  The consulting fees paid by the District?  $35,000.  For their $35,000, the School District expected (and contractually agreed to) fully independent consulting in the best interests of the District.  The consultant did not disclose the “commission” arrangements, and his insurance license was ultimately suspended for three years by the Ohio Department of Insurance.

This type of situation is not new in the industry.  We frequently saw it with 401(k) plan placement also.  Brokers get paid through commission.  It’s when there is less than full disclosure that the perception turns.

The perception turns big time when we see that the firms that are engaged to perform traditional claims audits are also receiving significant revenue from the firms they are auditing.  Ms. Martinez gives a striking example in which Mercer is engaged by Suffolk County, NY to audit claims paid by Express Scripts.  After initially estimating that Express Scripts had over billed by $1.1 million, Mercer later adjusted that number to just $14,000.  Mercer, by the way, also had consulting arrangements with Express Scripts which were evidently not disclosed.  The kicker?  Suffolk County fired Mercer after they found only $14k in over billings and brought in a different auditor that found and recovered $865,000 in over billings.

The perception in this case is that Mercer did not find the over billings because there was a financial disincentive to find any.  Mercer would certainly put its relationship with ExpressScripts at risk if it had found the $865,000 themselves.

In this case the reality may be, however, that traditional claims audits (as discussed last week) are just unable to find the real problems lurking in claims data.  Without 100% audit, are auditors really looking for a needle in a stack of hundreds of thousands of claims forms?

Perhaps it doesn’t matter.  Whether it’s an inability to find the problems or unwillingness due to conflict of interest, this story does not bode well for Mercer or the other traditional firms who derive revenue from the companies they audit.  Full disclosure should be the norm here.  If you are a purchaser of these services, let the buyer beware!  Ask for the disclosures, do the research and make informed decisions about who to trust.

And just one side note to Barbara Martinez:  We enjoy your work as a “comic-book superhero, defending the downtrodden from the greedy.”  We look forward to seeing more of your in depth reporting. 

About the authorDonald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

 

Relationship Management – Measuring Satisfaction

How do you know when an outsourcing initiative has been successful? At what point can you sit back, look at all that has been done and actually congratulate yourselves on a successful implementation, transition and effective and stable ongoing processing environment.

I think back to the system person I dealt with on a 401(k) conversion one time. This particular provider had gone through a major conversion to a new recordkeeping system and this system person was very proud. He claimed a perfect conversion. “Not a penny was lost. All financial data reconciled to the penny!”

Of course, I had been engaged to determine what went wrong. For while the financial data was in tact, the issues log was longer than the toilet paper lines in the former Soviet Union. Loans weren’t getting processed in a timely fashion, allocation percentage changes were getting lost, and deduction changes were taking much too long to post.

What was missing in this particular conversion was adequate training on the new systems. The people who had to actually process information didn’t have the tools and training to ensure continuity. The clients of this record keeper certainly wouldn’t agree with the system guy’s evaluation, and neither would the participants.

To me, this is where the rubber meets the road: satisfaction. All sorts of metrics can be tracked: speed to answer, case resolution time, system availability, and scores of others. For me, all of those metrics will take care of themselves and should actually take a back seat to satisfaction of the participant/employee and the employer.

Unfortunately, this can be a problematic measure when a new outsourcing relationship is begun. How fast can a new environment be expected to attain superior levels of satisfaction? One month? Three months? Six months?

Certainly, to expect a service provider to score great on satisfaction surveys on day one is unreasonable. It takes time for participants to get used to a new environment, and satisfaction surveys can reflect experiences they may have had in the old environment.

It is for these and other reasons that I am a firm believer in establishing a baseline for satisfaction at the employee level BEFORE the new environment is entered into. By establishing a baseline, improvement in satisfaction can be tracked over time. Success, at least in terms of the all important satisfaction, can be measured and evaluated.

A satisfaction score of 57% may sound dismal, but it takes on new meaning in the context of improvement from a 34% in the month before.

In terms of overall relationship management, this provides a meaningful basis for partnering with your outsourced provider. For service providers reading this, consider recommending this baseline, and conducting the survey as part of the implementation plan. Establishing a satisfaction baseline can protect all parties involved.

But this isn’t just about protecting yourselves. Ultimately, the participant employees benefit from this satisfaction-centric approach.

So if you are entering into a new environment, be it insourced, outsourced or other, please consider establishing a baseline for satisfaction in the old environment. You’ll be glad you did!

About the author – Donald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

How Much Can Outsourcing Really Save?

I set this article aside some time ago with the intention of commenting on it at some point.  Now is as good a time as any.

The story, “Survey: Outsourcing saves less than claimed” is based on a survey conducted by TPI.  The gist of the story is summed up in the lead:

“Outsourcing of information technology and business services delivers average cost savings of 15 percent, a survey found on Thursday, disproving market claims that outsourcing can reduce costs by more than 60 percent.”

Now I don’t know about anyone out there reading this blog, but I’ve never really heard claims of 60% savings through outsourcing.  So I went to Google and started looking for myself.  Then I went to Yahoo and continued looking; and darned if I couldn’t find any study or article or blog entry or anything claiming that companies can save more than 60% through outsourcing.

In all, I tried about 20 search strings.  Now granted, some of the searches yielded a lot of results, but the first few pages didn’t show anything so I moved on.  If any of the 1.2 million people reading this article can cite a study claiming such huge savings, please let the rest of us know.  And when you do, you’ll win the door prize for most effective web search guru.  Of course, people do tend to exaggerate at times.  For instance, I know that just slightly over 800,000 people are reading this now.  That’s nowhere near 1.2 million.  So maybe our friends at TPI were just exaggerating. 

Maybe they’ve seen claims of massive savings from offshoring (for a refresher on the difference between offshoring and outsourcing, click here).  I hesitate to believe that TPI, one of the leaders in the sourcing consulting business, would confuse offshoring with outsourcing.  But even if they did, I found this article which claims “that India’s wage rate for computer programmers is 15% that of a programmer in the United States. But in that same article, we hear from an industry expert that ‘Realistically, a company might expect to save about 20% through outsourcing.’” 

The TPI study article goes on to say that “savings range between 10 percent and 39 percent, with the average level at 15 percent.  These are very interesting numbers to me.  Why?  Because I have conducted three Total Cost of Ownership (TCO) studies over the past three years.  In all, over 260 companies have participated.  Each of the companies had over 1,000 employees.  In other words, these weren’t small companies.

The studies looked at the TCOs of delivering payroll services, HRIS, and benefits administration in both the inhouse and outsourced environments.  In the weeks to come, I will write more about TCO and the studies specifically.  What I want to point out today is that the studies showed that on average, outsourcing saved 17% on benefits administration and 37.5% on payroll administration.  The TPI numbers, as I said are very interesting to me.  They validate what I have seen with my own research.

For goodness sake, the “Lift and Shift” BPO outsourcing model typically goes for a cost minus 15%- 20%.  So where does that 60% claim come from?  Maybe it was just an uninformed middle manager at a company that was in the process of outsourcing who made the claim.  Maybe it was a bad business case someone once saw.

Wherever it came from, the healine Survey: Outsourcing saves less than claimed does everyone a diservice. 

Headlines like this really get to me for many reasons.  I’ll talk about these in the weeks to come as well, but the biggest reason is that very frequently, the most effective outsourcing is really cost neutral as savings which are realized can be very effectively “reinvested” in the transformation of the HR function.  And especially important in the success of any major outsourcing initiative is the proper management of expectations.  How many people out there see this headline and simply think outsourcing really doesn’t help companies achieve their goals?

Shame, really.  Maybe someone out there can shed some light on this 60% claim and together – 800,000 strong – we can educate the public on the real benefits that outsourcing can bring when done right!

About the author – Donald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.