Taking HRO best practices to the mid-market

Human resources outsourcing (HRO) looks set to take the mid-market by storm - and ADP is leading the charge.

ADP Employer Services is the world’s leading provider of Payroll, HR and Benefit administration solutions for companies of all sizes. As Greg Secord, VP of Marketing and Business Development for its National Account Services group says: “We’re probably the original HR outsourcer.” And with HRO increasingly becoming a standard business practice, the future for companies such as ADP is bright.

“We’re very HR-focused,” says Secord. “We started out as a payroll organization, and have been in this business for over 55 years – in fact, we think payroll is probably one of the most important aspects of any HR solution. If you pay your people inaccurately then the rest of it doesn’t really matter.” The fact that ADP now pays one-in-six private sector workers in the US is testament to this belief in the importance of the basics. But the company offers much more than just payroll capabilities; it also handles a wide range of employer-related functions that require extensive processing, record-keeping, technology and up-to-date best practices.

“We offer 401(k) retirement services, benefit administration, health and welfare administration, tax and compliance solutions, flexible spending account administration, expense management – the whole package,” says Secord. “We also offer full-service HR administration. In fact, our enterprise HR application is ranked number one in terms of market share in the United States, so I think we’re using great products to deliver excellent business process services in the HRO environment.”

In fact, Secord has spent the past decade helping ADP bring products and services to market that meet changing customer needs. “I think HR outsourcing has really progressed in the last few years,” he says. Originally viewed as a convenient way to relieve the burden of running certain resource-intensive business process functions, outsourcing is settling into what Secord calls “a more sustainable phase” in which companies are looking to see if they can leverage economies-of-scale or innovative technologies in order to realize cost savings. “I think we’re now looking at outsourcing more from a perspective of providing technology and process economies rather than just labor reduction,” he affirms.

And with the nature of HRO changing, providers need to change with it. “In the early stages of the HRO movement, there were a lot of big deals out there to be won; providers really focused on delivering enterprise-level solutions to the largest, high-revenue customers,” says Secord. However, he suggests that over the past few months, the industry has increasingly been focusing its attention on the mid-market (those companies with fewer than 25,000 employees) – what Everest Research Institute recently called the fastest-growing segment for full-service HRO. “We asked ourselves a question,” says Secord. “How could we take what we were offering to enterprise-level customers in terms of HRO and deliver this to mid-market customers? How could we enable those companies with 5000 or 10,000 employees to fully benefit from the advantages of HRO?”

The answer lies in the use of HR best practices that build upon the successes ADP has experienced with its enterprise clients. “We’re very focused on delivering best-practice solutions and I think that in a big marketplace such as the mid-market, that’s really one of the key value drivers for companies who are looking to make a decision regarding how best to implement HRO,” said Secord. “In response to client demand in this area, we developed ADP Comprehensive Outsourcing Services (COS), which is a fully administered HRO solution that allows our clients to leverage economies of scale across multiple business processes.”

It is this idea of best-practice solutions (such as COS) that makes ADP stand out as a true pioneer in this field. Secord is keen to elaborate further. “Let’s look at configuration versus customization,” he says. “Up until now, there has been a lot of customization, with the big companies trying to use their scale and their mass with providers to have custom solutions implemented. With ADP COS, we now offer tools that allow companies to configure the way they perform a certain business process, based on proven, common solutions.”

Using industry-recognized options for performing these business processes, companies are able to realize greater productivity, better employee service levels and greater management utility. “Best-practice solutions allow us to deliver a higher quality of service to a broader number of clients,” explains Secord. Through analysis of previous experiences and client success stories, ADP is able to embed certain successful processes (i.e. best practices) in the technology that clients use as part of their HRO solution, while still allowing companies the option of making certain configurations to provide a best fit with their own business processes. “This really helps capture the ROI and the performance management capabilities that individual clients are looking for,” says Secord. “We have best-practice solutions developed and ready for implementation in pre-determined bundles within our COS solution so that clients don’t have to recreate the wheel.”

In terms of ADP National Account’s strategic focus over the next 12-18 months, Secord has a very clear idea of what they will be concentrating on next. “We will be looking at how to leverage technology – particularly in the employee/manager level versus the practitioner level – in our solutions, and expanding upon our self-service portal technology could be one route we take with regard to this,” he says. “One of the key differentiators that we are looking to capitalize on over the next 12-15 months is interoperability between applications – one of our strongest competitive advantages is the fact that many of the solutions companies are currently using for their HRO needs are actually ADP proprietary platforms. As a result, we’re building a one-stop-shop with a high degree of technology and service interoperability between applications, and we’re going to add more applications over the next 12-15 months to make the value proposition even more compelling for those companies in the mid-market.”