{"id":560,"date":"2006-08-22T01:00:56","date_gmt":"2006-08-22T09:00:56","guid":{"rendered":"https:\/\/systematichr.com\/?p=560"},"modified":"2006-09-26T06:34:47","modified_gmt":"2006-09-26T14:34:47","slug":"russ-fradin-the-new-ceo-at-hewitt-associates","status":"publish","type":"post","link":"https:\/\/systematichr.com\/?p=560","title":{"rendered":"Russ Fradin: The New CEO at Hewitt Associates"},"content":{"rendered":"

Last week<\/a> I promised to write about measuring risk related to group benefit plans and techniques on evidence based cost avoidance (when I put it that way, it sounds so boring!)\u00a0 I\u2019m sorry, but some other news broke last week that I felt compelled to comment on.\u00a0 I\u2019ll get back to measuring risk next week.<\/p>\n

Last week, Hewitt Associates announced that it has appointed Russell P. Fradin<\/a> as the company’s new chairman and chief executive officer, beginning September 5, 2006.\u00a0 The announcement came the week before a rather disastrous 3rd quarter earnings report<\/a> in which the company posted a net loss of $202 million or $1.88 per share.<\/p>\n

The announcement was seemingly timed to help mute the bad news that was coming.\u00a0 Indeed, the stock<\/a> has taken a 10% hit since earnings were announced which offset the stock rise after the Fradin announcement.<\/p>\n

But what can Russ Fradin do for Hewitt?\u00a0 According to the press release<\/a>, he\u2019s the right man for the job:<\/p>\n

\u201cPreviously, Fradin spent more than seven years in various executive positions with Automatic Data Processing (ADP), including president of its global employer services group, where he doubled revenues to $4.5 billion, improved profit margins resulting in operating income of over $1.3 billion and pioneered the company\u2019s entry into total human resources outsourcing for small businesses.\u201d<\/p>\n

First, I\u2019d like to point out the very interesting parsing of words in the press release.\u00a0 Hewitt has a very sticky problem here.\u00a0 They have just announced the appointment of the top job in their company, but it is going to someone who used to run the competitor.\u00a0 Interesting thing is that Hewitt does not like to lend credibility to ADP as a competitor.\u00a0 Hewitt\u2019s paradigm has always been that they are without peer.\u00a0<\/p>\n

So read the press release carefully.\u00a0 Hewitt has hired someone who knows the BPO business and HRO in particular.\u00a0 He knows how to grow profitability and revenue. And the kicker?\u00a0 He cut his teeth in the small business market.<\/p>\n

This isn\u2019t quite accurate.\u00a0 I first met Russ when ADP was in full acquisition mode.\u00a0 He was working on acquiring Mercer\u2019s administrative capabilities in benefits.\u00a0 They were also going after J&H\/KVI\u2019s outsourced business.\u00a0 This came after the Health Benefits America and Williams, Thatcher Rand acquisitions.\u00a0<\/p>\n

It was the continuation of a very clear strategy of expanding market share, product offerings and revenue.\u00a0 Much of this expansion set the stage for, and was the beginning of, the move into HRO in the National Account (over 1,000 life) space.\u00a0 It would actually be interesting to calculate how much revenue growth during Fradin\u2019s ADP tenure was organic and how much was acquisitive growth.<\/p>\n

So despite the claim of Hewitt in the press release, it would seem that Fradin actually set the stage for ADP\u2019s explosion into the large employer market through diversified acquisition.\u00a0 It didn\u2019t come without cost, however, as ADP gave up its 40 year string of double digit earnings growth during Fradin\u2019s reign.\u00a0 They also saw stagnant and\/or declining share price.\u00a0 In the end, Fradin didn\u2019t like the ADP succession plan that was developed, and moved on to Bisys.<\/p>\n

Bisys was reeling from accounting issues, and during his time at Bisys, Fradin saw the stock price plummet over 35%.\u00a0 It is hard to pin that on Fradin, who was brought in to right a ship that had previous accounting irregularities.<\/p>\n

What the recent history may tell us, however, is how Fradin might approach the daunting task which is Hewitt.\u00a0 On the most recent earnings conference call, the outgoing CEO acknowledged serious difficulty in delivery especially in recruiting and payroll.\u00a0 He and the CFO indicated that they had taken on too much too quickly.\u00a0 Perhaps Hewitt\u2019s board thinks Fradin is a payroll guy who can get things moving.<\/p>\n

They reality is, though, that Fradin is a strategy guy in the McKinsey mold.\u00a0 He won\u2019t be able to right the operational ship.\u00a0 What he can do is come up with ways to either consolidate operations \/ service offerings or acquire market share while enhancing revenue and delivery capacity simultaneously.\u00a0<\/p>\n

My personal prediction is that Fradin will oversee the \u201cprettying up\u201d of the balance sheet and work to divest Hewitt of the outsourcing business itself.\u00a0 Consulting will remain behind, a shell of its former self.\u00a0 I give it 18 months.\u00a0 If it happens this way, it will be truly unfortunate.\u00a0 As a privately held company, Hewitt was the undisputed leader in its field.\u00a0 As a public entity it has lost its mission and what made it so good.\u00a0 Back in the day, you would never have heard that Hewitt took on too much too fast.<\/p>\n

I hope I\u2019m wrong.\u00a0 I hope that Hewitt can once more be at the top.\u00a0 As for Fradin, the rumored succession plan at ADP would have had him as the COO when Gary Butler takes the reigns, and CEO when Butler retires.\u00a0 I wonder if he\u2019d rather be the COO at the currently growing and profitable ADP, or CEO at a listing ship.<\/p>\n

About the author<\/strong> \u2013 Donald Glade is President and Founder of Sourcing Analytics, Inc.,<\/a> an independent consulting firm specializing in helping companies optimize their HR \/ benefits \/ payroll service partnerships through relationship management, financial analysis, and process improvement. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Last week I promised to write about measuring risk related to group benefit plans and techniques on evidence based cost avoidance (when I put it that way, it sounds so boring!)\u00a0 I\u2019m sorry, but some other news broke last week…<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[5,6,31,3],"tags":[],"class_list":["post-560","post","type-post","status-publish","format-standard","hentry","category-adp","category-hewitt","category-outsourcing","category-vendors"],"_links":{"self":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/posts\/560","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=560"}],"version-history":[{"count":0,"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/posts\/560\/revisions"}],"wp:attachment":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=560"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=560"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=560"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}