Towers Watson: 2012 HR Service Delivery and Technology Survey Report

Emerging Choices, Enduring Changes Creating Service Delivery Success in an Era of New Opportunity

2012HR Service Delivery and Technology Survey Executive Summary Report

“The world of service delivery and technology is perhaps the most ever-changing in the industry of human resources. Our goals and timelines are most often measured in weeks and days; our margin for error is nonexistent.”

2012 HR Service Delivery and Technology Survey Executive Summary Report 1

Table of Contents

About the Survey 2

Key Finding #1: The Structure “Push and Pull” 3

Key Finding #2: Shared Services Is Here to Stay 5

Key Finding #3: Keeping Pace With the Talent Imperative 6

Key Finding #4: Spending the Same or More (on More of the Same) 8

Form Follows Function: HR Structure and Shared Services 10

HRMS: Changes and Choices 13

Talent Management: A Mission-Critical Element 17

Our Take 21

Conclusion 23

Featured Figures

Figure 2. Structure and process — Reasons for changing current HR structure 3

Figure 4. Structure and process — Use of HR shared services 5

Figure 5. Top HR service delivery issues — Top three frequency 7

Figure 6. HR technology spending in 2012 vs. 2011 8

Emerging Choices, Enduring ChangesCreating Service Delivery Success in an Era of New Opportunity

2 towerswatson.com

This dynamism bodes well for the HR service delivery function because it provides a wealth of opportunities to bring our organizations greater flexibility and agility, but it can also create rigorous process challenges. That’s why we’re heartened by this year’s survey results, which reveal that HR has big plans to make structural changes, continue investing in technology and align the function with business goals.

Change is carrying the HR service delivery profession into the future, and organizations are expressing optimism about the plans they’re undertaking. Challenges — from failing to establish

good processes, to pitfalls around implementation and governance — will arise along the way. The key to making the right choices is to discern what the most strategic needs are and match them with right service delivery solutions.

This is the most substantial and global version of our survey to date. We are pleased to highlight the HR service delivery and technology plans, goals and progress that more than 600 organizations around the world shared with us — along with Towers Watson’s perspectives and prescriptions for HR service delivery success.

Our 15th HR Service Delivery Survey explores the landscape of HR service delivery and technology trends, tools and tactics across North America, Europe and the Middle East, and Asia Pacific region. More than half (52%) of the 628 companies that participated were large and midsize organizations with more than 5,000 employees. Financial services is the most heavily represented industry, with just under one in five (18%) participants, followed by manufacturing (14%), high technology (13%), retail (12%) and a number of other diverse industries (Figure 1).

Figure 1. Industry and employee population

About the Survey

Employee population

18% Large — More than 20,000

34% Medium — 5,000 to 20,000

48% Small — Fewer than 5,000

18%

34%

48%

Industry0% 5% 10% 15% 20% 25%

Chemical, oil and gas

Health care

Utilities and energy

Professional and business services

Retail

High technology

Manufacturing

Financial services (including insurance)1818

1414

1313

1212

88

77

66

55

0% 5% 10% 15% 20% 25%

Other

Property and construction

Media and communications

Transportation services

Public sector and nonpro�t

Pharmaceuticals

Food and beverage33

33

33

22

22

22

22

Thanks to significant global and organizational change — and a continued emphasis on talent management — HR service delivery professionals’ daily work has tangible and immediate implications for the workforce and the organizations it serves.


Key Finding #1

After experiencing several years of relative stability in the HR function, change is coming. A growing number of all organizations (44%) — dramatically more than last year’s 26% — indicate they will change their HR structure in 2012 or 2013. Our experience suggests that this is due to both “push” and “pull” initiatives.

Technological advances are providing the push. To meet continuing pressures to be more efficient and effective, organizations are taking advantage of much that the constantly changing technology and delivery landscape has to offer. Advances such as software-as-a-service (SaaS) are simply impossible to ignore. Conversely, those maintaining the same HR structure as five or even three years ago risk missing various opportunities to realize new efficiencies.

Among organizations planning HR structure changes for the year ahead, improving operations is a major theme. A significant majority (64%) want to realize further efficiencies, while others are looking to capture synergies across processes and investments (54%), improve quality (51%) and reduce costs (46%) (Figure 2). As you will read in the pages that follow, many companies plan to achieve these goals by turning to shared services to develop more disciplined functions that deliver core expertise to the business.

As new options emerge for effectively and efficiently delivering HR services, organizations are including HR structure changes in the scope of possible adjustments.

0% 20% 40% 60% 80% 100%

Other

Business reorganization

Change of business strategy

Globalization initiative

Cost savings

Quality improvements

Realization of synergies

Realization of further ef�ciency potentials6464

5454

5151

4646

2828

2727

2626

88

Reasons for changing current HR structure

44% Yes

56% No changes anticipated

Figure 2. Structure and process — Reasons for changing current HR structureDo you anticipate changing your current HR structure in 2012 or 2013?

44%

56%

n = 612

The Structure “Push and Pull”

4 towerswatson.com

We believe that this represents an evolving organizational perspective on HR — one that we’ve seen moving toward a more disciplined function that develops and delivers core expertise in needed areas specific to the business.

HR is also growing into, and being led to, a more savvy approach. Business units are operating as more autonomous profit-and-loss centers — and demanding specialized and dedicated expertise in the form of centers of excellence (COEs) and business partners — to support their increasingly aggressive business initiatives.

Structural Changes

A single HR function for the entire organization remains the predominant model, especially in single-country organizations (72%), as opposed to global ones (23%) with HR functions covered by function and geography with corporate oversight (28%). And while it depends on the size and scope (global or domestic) of the organization, most companies making changes will move to (or back to) a shared services environment (39%) or bring additional services into an existing shared services organization (31%). Just over a quarter (26%) will outsource some or additional functions, particularly domains that are more siloed than the typical full HRO of days past (Figure 3).

0% 10% 20% 30% 40% 50%

Other

Move away from a shared services environment

Bring (some/more) outsourced functions back in-house

Combine our HR shared services with other corporate functions

Decentralize HR, allowing HR to be run by business unit or geography

Move to a single HR organization for the entire organization

Outsource (some/more) functions

Bring additional services into our shared services environment

Move to a shared services environment with HR COEs and HR business partners3939

3131

2626

1010

66

66

44

00

1717

Figure 3. Structure and process — Anticipated changes to HR structure in 2012 or 2013

Base: Those anticipating making a change (n = 271)

The most common responses in the Other category include changes within existing framework (14), new structure yet to be determined (11) and increased centralization or regionalization (seven).


Organizations have come to realize that developing capabilities and resources in-house for many core services is an accurate and effective HR service delivery solution. Shared services allows companies to maintain greater quality control, and create and adapt to new processes more quickly. The model also enables companies to allocate resources according to functional need and business cycle, but can be both a blessing and a curse, since the process often suffers at the hand of speed.

Rather than expecting generalists to cover the waterfront of business needs, organizations are again gravitating toward the shared services model, in which business partners draw support from skilled resources in COEs and service centers. Among large organizations, over two-thirds (70%) operate in-house service centers, while 54% of midsize organizations do so (Figure 4). A full 70% of organizations making changes to their HR structure are focused on shared services as a primary initiative — and not one organization indicated a move away from such an environment for 2012 or 2013.

A key part of this model working is an outstanding user experience where self-service is complete and easy to use; portals have easy-to-find, searchable answers to questions; and case management tools keep track of issues.

Outsourcing: In or Out?

Organizations adopting outsourcing spiked to 26% from 17% last year. We believe that this spike can be attributed to niche and single-function outsourcing, which can be highly effective for specific processes that require highly specialized, sustained expertise. Among the activities effectively outsourced can be pension, payroll, health and savings plan administration, relocation administration and other highly transactional activities. Our position is that these activities often can be best left to specialized outsourcers, leaving

the organization to focus on core processes, realize related organizational efficiencies and maintain a level of effective governance along the way — especially for functions that focus on their key talent management initiatives.

Figure 4. Structure and process — Use of HR shared servicesDoes your organization use an HR shared services (HRSS)/contact centerto deliver HR services?

0% 20% 40% 60% 80% 100%

No

Other

Yes, we use an external offshore provider(s)

Yes, we use an external onshore provider(s)

Yes, we have an internal offshore service center(s)

Yes, we have an internal onshore service center(s)

4040

6060

1717

4646

22

1010

33

88

44

1616

5555

00

1010

0011

33

44

0033

7575

2929

57574343

Large — More than 20,000 employees (n = 109)Medium — 5,000 to 20,000 employees (n = 232)Small — 2,500 to 4,999 employees (n = 83)Very small — Fewer than 2,500 employees (n = 200)

Key Finding #2 Shared Services Is Here to Stay Shared services is emerging as the most valued (and most prevalent) practice for delivering HR services to the business, though single-process outsourcing remains a stabilizing force.

6 towerswatson.com

In years past, we’ve been highly encouraged by the importance of talent management to survey respondents. For six years running, HR leaders and professionals have reported this as the key HR service delivery issue for the year ahead (Figure 5), a finding we’ve understood to reflect how critical the attraction, retention and engagement of talent is to the organization’s future success — clearly a positive finding. Better yet, it suggests a strong alignment of the HR function with business goals

Because of a confluence of issues — including demographic shifts around the world, a shortage of critical-skill employees and changing business priorities — savvy organizations will focus on talent management for some time. This includes an enduring emphasis on developing and implementing the strategies that create a meaningful career experience for employees.

This enduring emphasis on talent throughout the organization has led to a corresponding long-term focus on the strategies that companies can use

to create a meaningful career experience for their employees, and the supporting technology tools that help deliver this experience, from online performance management systems to portals that help manage employees’ careers.

This phenomenon has created something of a heyday for HR service delivery and technology, which has benefited from this focus in terms of technology advances and investments made. It has given HR service delivery professionals the long-term opportunity to contribute at a strategic level and offered the proverbial “seat at the table” in terms of helping to tackle the enduring talent management issues that the organization needs to solve.

As a discipline, talent management is here to stay for the foreseeable future. Demographic shifts around the world, the availability of critical-skill employees and changing business priorities have all converged to guarantee that savvy organizations will indeed focus on talent management for some time ahead.

Talent and performance management remains the primary HR service delivery issue — although the full story is more complex than in previous studies.

Key Finding #3 Keeping Pace With the Talent Imperative


However, only a few talent management technologies have become comprehensive, user-friendly and intuitive enough to unite the many pieces of talent management for employees and line managers. The result is that HR has a plethora of choices for talent management systems in a crowded marketplace of solutions, nearly all of which are still transactional and siloed in their focus and experience. It’s as if HR is still experiencing the “noise” in the system — in both the delivery and technological senses of the word — that will turn into music once the challenges are ironed out. (See Talent Management on page 17 to explore these and related concepts further.)

A triumvirate of priorities vie for second place behind talent management, including streamlining business processes, gaining more involvement in strategic business issues and recruiting (22% of respondents indicate it will be a priority for the year ahead). These issues hint that the pendulum may swing further in the business process direction next year, as change continues and HR organizations and technologies keep evolving.

First Second Third

Figure 5. Top HR service delivery issues — Top three frequency0% 10% 20% 30% 40% 50%

De�ne/Deploy human capital metrics and dashboards

Payroll/Time management services/systems

Upgrade HRMS to a new version/system

Cost reduction related to HR administration

Compensation services/systems

Improve line managers’ people management capabilities

Implement a new HRMS

Training

More involvement in strategic business-driven issues

Recruiting/Staf�ng services/systems

Streamline business processes

Talent/Performance systems

24 9 7 40% 24 9 7 40%

5 8 9 22% 5 8 9 22%

4 9 6 19% 4 9 6 19%

11 4 4 19% 11 4 4 19%

4 5 5 14% 4 5 5 14%

4 6 4 14% 4 6 4 14%

5 4 4 13% 5 4 4 13%

5 4 3 12% 5 4 3 12%

4 5 2 11% 4 5 2 11%

1 3 6 10% 1 3 6 10%

7 8 7 22% 7 8 7 22%

9 6 7 22% 9 6 7 22%

0% 10% 20% 30% 40% 50%

Other

Enable mobile access to HR self-service applications

Create a global data warehouse

Bene�t services/systems

Consolidate multiple HR systems globally

Deploy employee self-service functionality

Utilize additional HRMS modules

HR website/usability

Deploy manager self-service functionality

Accuracy of data

Systems integration

Introduce standard workforce planning process and tools

2 3 5 10% 2 3 5 10%

3 4 3 10% 3 4 3 10%

2 3 2 7% 2 3 2 7%

1 1 4 6% 1 1 4 6%

1 2 3 6% 1 2 3 6%

1 2 2 5% 1 2 2 5%

1 2 1 4% 1 2 1 4%

1 1% 1 1%

2 2 2 6% 2 2 2 6%

2 3 4 9% 2 3 4 9%

1 3 4 8% 1 3 4 8%

1 3 4 8% 1 3 4 8%

n = 606

HR has a plethora of choices for talent management sys-tems in a crowded marketplace of solutions, nearly all of which are still transactional and siloed in their focus and experience.

8 towerswatson.com

We’ve been heartened to see a consistent level of increased HR technology spending over the past several years (Figure 6), albeit with a reduced rise during the recession. Beyond the core costs of owning and operating technology, it seems that not only is technology still seen as “needed to play,” but also that organizations understand the investment required to remain current, expand capabilities and continue to improve operations. Over half of organizations (53%) report that their spending will stay the same as this year’s; another three in 10 (31%) will increase or significantly increase this investment, and only 16% expect a reduced HR technology budget for the year ahead.

Among organizations that expect to spend more in 2013 than in the previous year, over one-third (38%) plan to deploy additional functionality from existing vendors; another 36% are looking to upgrade or re-implement their existing HRMS, and 34% plan to expand their existing self-service offerings (Figure 7). These are healthy activities to undertake with increased funding and indicate an optimistic, growth-oriented outlook.

Figure 6. HR technology spending in 2012 vs. 2011

0%

10%

20%

30%

40%

50%

60%

Much higher(> 20%

increase)

Higher(< 20%

increase)

About thesame

Lower(< 20%

reduction)

Much lower(> 20%

reduction)

101066

5353

2121

1010

n = 599

Key Finding #4 Spending the Same or More (on More of the Same) HR technology spending remains steady and strong, and investments are directed mostly toward growth and new functionality.


0% 10% 20% 30% 40% 50%

Other

We will be moving to an IT outsourcing approach

We will be bringing services and/or technology formerly outsourced back in-house

We will be moving to an internally deployed cloud-based architecture

We will be implementing mobile access

We will be implementing new call center support technology

We will be deploying or redeploying a data warehouse

We will be deploying or redeploying an HR portal

We will be expanding existing functionality into new regions and/or business units

We will be deploying new HR analytics/workforce planning capabilities

We will be implementing new vendors to automate processes for the �rst time

We will be replacing older systems

We will be expanding our self-service offerings

We will be upgrading/re-implementing our existing HRMS

We will be deploying new modules/functionality from existing vendors3838

3636

3434

3333

2929

2525

2222

2121

1212

99

77

44

33

22

44

Figure 7. HR technology spending Factors accounting for increased spending in 2012

Base: Those expecting increased HR technology spending (n = 189)

10 towerswatson.com

The impetus for this change is, more often than not, driven by a broad desire for greater efficiencies (Figure 8) and a willingness to be expansive in finding them. Companies right now are more likely to be focused on realizing the synergies from already-implemented process changes or investments than they are on overtly saving money through cost reductions. Organizations have largely committed to a path and are comfortable exploring delivery models that help them gain greater returns from their decisions, and this puts HR structure next on the agenda.

Surprisingly, few global organizations cite globalization as an impetus for structural change.

Perhaps this is because the largest have already factored regional delivery into structural decisions. (Of course, how successfully they are delivering on change may be another story.) While regional differences can affect how organizations evaluate structure changes, a significant number in all regions cited efficiency. Additionally, more than half of U.S. and Canadian organizations — and only a third of Asia Pacific and European companies — named cost as a factor. As mentioned, shared services is reemerging as a solution after a decade in which many organizations experimented with large-scale outsourcing and focused their investments on other aspects of their delivery models.

Figure 8. Reasons for changing current HR structure

Location of headquartersAsia Pacific (n = 66)

Canada (n = 15)

Europe (n = 45)

Middle East/Africa (n = 9)

United States (n = 133)

Business reorganization 33% 13% 36% 44% 19%

Change of business strategy 44% 7% 18% 44% 23%

Cost savings 33% 53% 38% 33% 55%

Realization of synergies 53% 47% 51% 33% 58%

Realization of further efficiency potentials 53% 47% 56% 56% 75%

Quality improvements 36% 60% 44% 56% 59%

Globalization initiative 24% 27% 22% 33% 31%

Other 6% 20% 4% 11% 8%

Form Follows Function:

HR Structure and Shared Services

When companies show a desire to make shifts in HR structure, it usually indicates that significant, rapid change is occurring. But why is this motivation now 15% higher than in years past?


The most prevalent structure for HR globally is a single function for the entire organization (Figure 9), while relatively consistent alternate approaches are also used. In most regions, the second most common model is a matrixed, corporate-overseen HR function that varies considerably by the type of business unit and, especially, the company’s geographic footprint.

Moving to shared services, and adding functions to existing shared services functions, are the most

common structural change actions being taken across all regions (Figure 10). There are many reasons for these changes. Done well, shared services achieves the following:

• Improves the HR organization’s controls • Allows HR to manage the ebbs and flows of its business cycle more effectively

• Enables HR to improve quality by providing more standardized and consistent processes and resources

Figure 9. Current overall structure of entire HR function


Canada (n = 37)

Europe (n = 91)

Middle East/ Africa (n = 24)


Single HR function for entire organization 44% 78% 43% 79% 49%

Separate HR function by business unit with corporate oversight

14% 3% 16% 0% 16%

Separate HR function by geography with corporate oversight

15% 5% 18% 8% 12%

Separate HR function by a combination of geography and business unit with corporate oversight

20% 11% 18% 13% 20%

Individual HR functions (whether by business unit and/or geography) with no meaningful corporate oversight

4% 0% 4% 0% 2%

Other 3% 3% 1% 0% 1%

Figure 10. Changes to the HR structure in 2012 or 2013


Canada (n = 15)

Europe (n = 46)



Move to a single HR organization for the entire organization

15% 13% 15% 22% 5%

Decentralize HR, allowing HR to be run by business unit or geography

15% 0% 2% 11% 4%

Move to a shared services environment with HR COEs and HR business partners

49% 53% 30% 44% 35%

Bring additional services into our shared services environment

21% 20% 17% 11% 43%

Combine our HR shared services with other corporate functions (e.g., Finance)

6% 7% 4% 11% 6%

Move away from a shared services environment 0% 0% 0% 0% 0%

Outsource (some/more) functions 24% 20% 17% 22% 32%

Bring (some/more) outsourced functions back in-house

1% 0% 4% 0% 7%

Other 9% 27% 26% 22% 16%

Moving to shared services, and adding functions to existing shared services functions, are the most common structural-change actions being taken across all regions.

12 towerswatson.com

One caveat: The model carries some risks. Organizations need to design and implement shared services carefully and deliberately. It’s not a panacea for reducing head count or disguising failure to execute; rather, it requires transparency and good governance. Moreover, organizations that focus wholly on the structure — merely putting the “right” pieces in the “right” places — overlook a significant element of the shared service advantage: the process.

Process Is Paramount

Throughout our history of conducting this survey, we’ve observed that process (re)design can make or break the success of any HR service delivery or technology decision. A proper approach to process design involves creating a workflow that enables individuals and departments throughout the

organization to carry out the HR responsibilities for which they’re accountable, and maximize the value and usefulness of the technology that underpins them. This means empowering line managers to conduct HR activities directly — and without the constant need to be checked upon (of which HR is frequently guilty). It also includes holding individuals inside and outside HR responsible for upholding the same processes and standards.

Organizations approach governance and resources for shared services in various ways (Figure 11). Mixed ownership and double-hatting are common approaches used across different regions. Although virtual COEs and exporting HR operations are not prevalent in any region, they are more common in the U.S. and Canada, where two to three times more organizations include these features in their delivery model.

Figure 11. Features of current or soon-to-be-implemented delivery model

Asia Pacific (n = 155)

Canada (n = 26)

Europe (n = 66)



Mixed Ownership — Some HR resources sit in business cost centers (e.g., business partners), but all resources are centrally coordinated

50% 50% 55% 56% 56%

Double-Hatting — Some HR resources take on multiple roles (e.g., one person shares COE and business partner roles)

43% 50% 45% 44% 41%

Virtual COEs — Quasi-formal organization of HR resources exists outside the strictly formal organization units in which they reside

4% 12% 5% 6% 12%

Shared Resource Pool(s) — Rather than dedicating resources (e.g., specialists) to a specific center of expertise or HR department, they are assigned on a project-by-project basis

21% 23% 15% 19% 16%

Exporting HR Operations — HRIT operations and/or call center resources report to a function other than HR or in a matrix between another function and HR

6% 12% 5% 6% 13%

Communities of Interest — Cross-functional teams dedicated to specific areas of focus are created for the purpose of career building and also to leverage talent to deliver on various projects

19% 15% 14% 6% 23%

Throughout our his-tory of conducting this survey, we’ve observed that pro-cess (re)design can make or break the success of any HR service delivery or technology decision.


Adoption

More organizations (18%) intend to implement a new HR management system (HRMS) than we’ve seen in the past (10%), which could indicate a number of things.

Select economies are improving; more organizations want to enhance their HR administration and reporting capabilities, and many organizations have been waiting to determine which way the HRMS marketplace will settle out. We also see significant regional variation this year (Figure 12).

Regional Variation

Among the small number of Middle East survey participants, 42% plan to implement a new HRMS system. This suggests they are committed to establishing or enhancing HR administration and reporting capabilities. In other regions, a high ratio (1:5 to 1:3) of organizations intend to implement a new HRMS system.

Regional differences also extend to vendor choice. While a fair number of organizations in each region use Oracle/PeopleSoft and SAP, twice as many U.S.-based organizations use Oracle (Legacy PeopleSoft). As expected, SAP is deployed almost twice as often in EMEA, and ADP products are more prevalent in the U.S. and Canada, although they have some presence in Europe.

Workday’s prevalence is relatively low for existing HRMS implementations; however, it is represented in all regions except the Middle East. One-third (33%) of European companies and 40% of Asia Pacific companies indicated that they use other HRMS products, compared to only 10% of U.S. companies — but there is no single system that stood out for those organizations, as these appear to be regional solutions.

HRMS Application Highlights

The following are highlights for key HRMS applications, including Oracle, SAP, Workday and HR portals.

Oracle (PeopleSoft) and SAP: Legacy Versus New Generation PeopleSoftForty percent of organizations running PeopleSoft are using version 9.1 — with another 42% running version 9.0 or 8.9. While 87% of companies using PeopleSoft as their primary HRMS use a single instance of that application throughout their

organization, 9% run multiple instances of the same version in different locations and/or for different business units, with the remaining 4% using different versions throughout their organization.

Many legacy Oracle platform users are acting with abundant caution — something we’ve seen before. Despite its new Fusion offering, most existing Oracle customers (28%) are taking a “wait and see” approach, and slightly fewer (26%) plan to make no change, and continue to operate as they did before Oracle’s acquisition of PeopleSoft. One in five (20%) are proceeding cautiously until they more fully understand how the legacy products are being merged into Fusion (Figure 13).

HRMS: Changes and Choices

Figure 12. Is your organization currently implementing or planning to implement a new primary HRMS?

Asia Pacific (n = 193)

Canada (n = 37)

Europe (n = 91)

Middle East/ Africa (n = 24)


Yes 34% 32% 24% 42% 22%

No 66% 68% 76% 58% 78%

0% 10% 20% 30% 40% 50%

Not sure yet

Moving to Fusion within the year

Move to a third-party support provider (i.e., no further Oracle-developed upgrades)

Plan to be on the upgrade path to Fusion

Moving to Fusion now

Move to an outsourced HRMS

Move to another ERP system solution (e.g., SAP, Lawson)

Move aggressively to be as current as possible on PeopleSoft, but no plans for Fusionat this time

Proceed cautiously until we understand better how Oracle is merging the PeopleSoftproduct into Fusion

No change, same as before Oracle’s acquisition of PeopleSoft2626

2020

1616

55

22

11

11

11

11

2828

Figure 13. HRMS profile — Oracle (legacy PeopleSoft) Given the prospect of Fusion and Applications Unlimited, what are your plansfor the future?

n = 134

14 towerswatson.com

SAP*One-third (33%) of organizations running mySAP 2005 use enhancement pack 5 or later, while smaller numbers run past versions (28% on enhancement pack 4 and 16% on enhancement pack 3). While 73% of organizations using SAP as their primary HRMS use a single instance of it, 18% deploy multiple instances of the same version in different locations and/or different business units, and 9% use different versions of SAP throughout their organization.

SAP experiences a challenge similar to Oracle: A surprising percentage of organizations running SAP

have not fully developed upgrade plans, though for slightly different reasons:

• 40% of organizations running SAP’s enhancement pack 4 or earlier do not know what an enhancement pack is or don’t have plans for it.

• Well over half (62%) either have not heard of enhancement packs, or do not fully understand the strategy or how it impacts their organization.

We believe the work ahead for SAP will entail a greater education and communication effort directed to its existing base, as well as to organizations evaluating new technologies (Figure 14).

0% 10% 20% 30% 40% 50% 60%

4.7/Enterprise or earlier

mySAP ERP 2004 (ECC5)

mySAP ERP 2005 (ECC6) with enhancement pack 3 or earlier

mySAP ERP 2005 (ECC6) with enhancement pack 4

mySAP ERP 2005 (ECC6) with enhancement pack 5 or later

0% 10% 20% 30% 40% 50% 60%

Evaluate other vendor options

Upgrade plans not yet de�ned

Defer upgrade to mySAP ERP 2005 (ECC6) until 2013

Upgrade to mySAP ERP 2005 (ECC6) in 2012

Defer upgrade to mySAP ERP 2004 (ECC5) until 2013

Upgrade to mySAP ERP 2004 (ECC5) in 2012

7171

2828

3333

99

1616

1414

99

22

1717

55

5959

88

Figure 14. HRMS profile — SAP Release of SAP R/3 currently in production

Plans to upgrade (for those on mySAP ERP 2005 [ECC6]with enhancement pack 4 or earlier)

n = 97

n = 59

Almost three-quarters (73%) of organizations using SAP as their primary HRMS use a single instance of that application throughout their organization. In contrast, 18% have multiple instances of the same version of SAP in different locations and/or for different business units, while another 9% use different versions of SAP throughout their organization.

*The 2012 HR Service Delivery Survey was fielded prior to SAP’s acquisition of SuccessFactors.


Workday: A Next-Generation ModelMost organizations chose Workday because of its user interface (58%), lower ongoing costs (53%) and global capabilities (42%) (Figure 15).Among the modules that organizations have implemented most often — or plan to deploy by the end of 2013 — are compensation, benefits and performance management for succession planning (46% additional by the end of 2013 versus 7% implemented now), onboarding (44% additional versus 6% now) and performance management (40% additional versus 33% now).

In an ever-changing HRMS space, Workday clients have rapidly adjusted to its SaaS model:

• Two-thirds of Workday respondents say they deploy significantly more self-service with Workday than with their prior HRMS platform.

• Two-thirds find the obligatory update (upgrade) process easy or manageable.

• 58% say they are comfortable applying these updates on their own.

Workday’s success appears to reflect the continued rise of SaaS as a relatively user-friendly, cost-effective and efficient alternative to legacy systems.

0% 20% 40% 60% 80% 100%

Other

Easier to manage on an ongoing basis

Predictable ongoing costs

Lower up-front costs

Quicker to implement

Best �t our functional requirements

No need to upgrade; we are always on current version

Global capabilities

Lower ongoing costs (e.g., hardware, IT support, system maintenance, staff)

User interface (e.g., ease of use for HR, employees and managers)5858

5353

4242

3232

1616

2626

2626

1111

1111

55

Figure 15. HRMS profile — Workday What were your top three reasons for selecting Workday?

n = 19

16 towerswatson.com

The HR Portal: The “All in One”

HR has embraced the portal concept to deliver comprehensive employee and manager information in a customized manner — for virtually all employees — from one source. A substantial 60% of organizations offer an HR portal to both HR and employees. Moreover, 20% are working to develop one — and only a smaller number (fewer than one in five) have no portal plans at all.

The portal’s strong adoption level suggests that HR firmly believes portals can help retain and engage employees in many ways — ranging from sharing the value of their total rewards packages to providing real-time career management opportunities. Two portal technology approaches stand head and shoulders above the rest:

• 36% of organizations have developed their own custom portal.

• 31% use Microsoft’s SharePoint technology — which offers ease of use and customizability — a solution that will likely grow over the coming years (Figure 16).

HR and communication functions maintain responsibility for the portal’s content almost exclusively (84%), which most often consists of knowledge-based information, internal HR team sites, and new employee onboarding information and functionality.

0% 10% 20% 30% 40% 50%

Other

Custom-developed portal

IBM WebSphere

Infor (legacy Enwisen)

Oracle (legacy Oracle portal)

ADP

Oracle (legacy PeopleSoft portal)

SAP portal

Microsoft SharePoint3131

1313

1010

55

44

33

33

3636

1616

Where is your primary HR portal hosted?

80% Installed product, residing in our organization’s data centers

20% Hosted by a third-party vendor

Figure 16. HRMS profile — HR portalWhat HR portal technology are you currently using?

80%

20%

Does your HR portal provide a personalized experience?

60% Yes

40% No

60%

40%

n = 355

n = 358

n = 370

Approximately one-third of the other portals mentioned are provided through the company’s HRMS/HRO vendor.


This has held true in both boom years and during the past recession — regardless of the size or location of the organization. We believe this is due to continued demographic shifts that are changing the composition of the workforce and impacting employers’ ability to attract, retain and engage top employee talent and ultimately propel their businesses forward.

Talent and performance management systems have a pyramidal structure. The core talent management elements comprise the base, while the more advanced, cross-domain functions make up the middle and then narrow toward the pyramid’s peak. The challenge that HR service delivery professionals face is to integrate the sophisticated showplace functions many organizations desire with the elements already intertwined with their strategy and technology approach.

A best practice is to integrate strategies, programs and systems — with the ultimate goal of organizations seeking to achieve optimum effectiveness. That’s why new technology buyers often seek solutions that demand a truly comprehensive, fully aligned approach to design, online coaching and guidance that — supported by change management efforts — will “move the needle” of organizational transformation for employees and line managers. But there’s a catch: The objective of creating a smooth-running HR service delivery machine is not readily achievable through the technology vendors in today’s marketplace.

As Figure 17 shows, a majority of organizations use their HRMS or a custom solution for compensation, including base pay, variable/bonus pay and total rewards statements. Organizations also typically use these methods (albeit to a lesser extent) for onboarding, performance management, learning management, recruiting and job leveling. In nearly all cases, HRMS is the far more predominant (and effective) solution over custom-built approaches.

Talent Management: A Mission-Critical Element One of our most consistent research findings, for the past six years, has been that talent and performance management remains the top HR service delivery issue.

0% 20% 40% 60% 80% 100%

Compensation — Market analysis/Survey management (n = 515)

Succession planning (n = 493)

Compensation — Plan design and analysis (n = 517)

Career development/Planning (n = 494)

Recruiting/Staf�ng — External (n = 557)

Competency models (n = 438)

Workforce planning/analytics (n = 477)

Compensation — Global grading/Job leveling (n = 466)

Recruiting/Staf�ng — Internal (n = 574)

Learning management and training (n = 550)

Performance management (goal setting, assessment) (n = 570)

Onboarding/Joiner administration (n = 534)

Compensation — Sales/Incentive (n = 448)

Total rewards statements (n = 414)

Compensation — Variable pay/Bonus (n = 547)

Compensation — Base pay (n = 562)

44 18 2 8 28 44 18 2 8 28

35 22 2 9 32 35 22 2 9 32

28 17 3 18 34 28 17 3 18 34

26 23 4 8 39 26 23 4 8 39

26 12 3 12 47 26 12 3 12 47

25 22 4 18 31 25 22 4 18 31

25 19 9 21 26 25 19 9 21 26

21 14 6 27 32 21 14 6 27 32

21 14 3 14 48 21 14 3 14 48

19 17 4 5 55 19 17 4 5 55

16 19 3 11 51 16 19 3 11 51

16 11 6 36 31 16 11 6 36 31

15 17 3 13 52 15 17 3 13 52

12 17 4 9 58 12 17 4 9 58

9 17 3 12 59 9 17 3 12 59

7 14 6 27 46 7 14 6 27 46

CurrentHRMSsystem

Custom/In-house-developed tool

Best-of-breedtechnology (on-premise)

Best-of-breedtechnology (SaaS/Hosted by vendor)

Manual/Paper-based

Figure 17. Talent management — Current delivery systemPrimary delivery system currently used for talent management

18 towerswatson.com

An alarmingly high percentage of organizations still use manual or paper-based systems. This is to be expected in newer and more qualitative areas of emphasis like succession planning and career planning, but excellent technologies are available to aid in the aforementioned areas. Moreover, when it comes to areas like compensation that are highly transactional and require a high degree of accuracy and timeliness, such outdated approaches are a cause for concern.

Talent Management Technology Effectiveness: The Bottom Line

Organizations’ talent management strategies and their HR service delivery approaches — along with the tools they use to support employees and managers alike — are now even more personalized, executed in real time and easy to use. But whether these methods are effective is another matter. While 78% of organizations rate their base compensation management solutions as very or somewhat effective, more than one in five are neutral or dissatisfied with their delivery method. Performance management and external recruiting show effectiveness ratings of 77% and 75%, respectively, but the situation slides downhill from there. Effectiveness levels drop to unacceptably low ratings of just over half for more complex processes such as workforce analytics and planning, as well as career management and planning. Figure 18 reveals effectiveness percentages for various processes in more detail.

0% 20% 40% 60% 80% 100%

Workforce planning/analytics (n = 198)

Career development/planning (n = 224)

Competency models (n = 202)

Succession planning (n = 193)

Learning management and training (n = 384)

Compensation — Sales/Incentive (n = 251)

Compensation — Global grading/Job leveling (n = 221)

Compensation — Plan design and analysis (n = 197)

Compensation — Variable pay/Bonus (n = 346)

Recruiting/Staf�ng — Internal (n = 369)

Recruiting/Staf�ng — External (n = 368)

Compensation — Market analysis/Survey management (n = 253)

Onboarding/Joiner administration (n = 258)

Performance management (goal setting, assessment) (n = 374)

Total rewards statements (n = 258)

Compensation — Base pay (n = 381)

26 52 15 6 1 26 52 15 6 1

26 50 16 7 1 26 50 16 7 1

25 52 14 8 1 25 52 14 8 1

23 45 18 12 2 23 45 18 12 2

23 53 15 8 1 23 53 15 8 1

22 53 10 13 2 22 53 10 13 2

21 51 12 13 3 21 51 12 13 3

21 54 15 7 3 21 54 15 7 3

19 48 21 9 3 19 48 21 9 3

19 52 19 8 2 19 52 19 8 2

18 51 21 8 2 18 51 21 8 2

17 52 16 13 2 17 52 16 13 2

12 51 26 9 2 12 51 26 9 2

11 54 25 7 3 11 54 25 7 3

11 50 25 11 3 11 50 25 11 3

10 41 27 18 4 10 41 27 18 4

Veryeffective

Somewhateffective

Neithereffective norineffective

Somewhatineffective

Not at alleffective

Figure 18. Talent management — Effectiveness of technologyEffectiveness of technology in helping meet talent management objectives


Figure 19. Talent management — Average effectiveness of technology

Average effectiveness of talent management technology currently in place

Current HRMS

Custom/In-house-developed tool

Best-of-breed technology

Manual/ Paper-based

Recruiting/Staffing — External 3.46 3.43 3.99 2.80

Recruiting/Staffing — Internal 3.49 3.42 4.02 2.94

Onboarding/Joiner administration 3.56 3.63 4.16 2.52

Compensation — Market analysis/Survey management 3.55 3.62 4.08 2.88

Compensation — Plan design and analysis 3.46 3.60 4.08 2.98

Compensation — Global grading/Job leveling 3.69 3.65 4.04 2.70

Compensation — Base pay 4.01 3.74 4.10 2.97

Compensation — Variable pay/Bonus 3.80 3.74 4.05 2.87

Compensation — Sales/Incentive 3.70 3.71 3.96 2.66

Total rewards statements 3.97 3.66 4.10 2.67

Performance management (goal setting, assessment) 3.88 3.65 4.19 2.83

Learning management and training 3.58 3.53 3.85 2.87

Career development/planning 3.60 3.37 3.68 2.66

Succession planning 3.64 3.57 3.65 2.61

Workforce planning/analytics 3.35 3.19 3.64 2.51

Competency models 3.61 3.47 3.85 2.50

Note: Effectiveness is measured on a 1 to 5 scale, where 1 is not at all effective and 5 is very effective.Gray indicates effectiveness score for the technology is statistically higher than those for all other technologies.Teal indicates effectiveness score for the technology is statistically lower than those for all other technologies.

Further analysis reveals that, for a number of processes, best-of-breed applications deliver the highest effectiveness results. These systems are wholly designed and dedicated to administer specific processes, and are often bundled together as specific modules within a purpose-built software suite. Specifically, best-of-breed solutions are most highly effective for performance management, onboarding and compensation administration (Figure 19). Not surprisingly, manual and paper-based systems exhibited the least effective results for all processes.

20 towerswatson.com

Career Management: Whose Job Is It, Anyway?

When it comes to managing employees’ careers, a majority of organizations (61%) prefer that employees and managers take joint ownership of this activity, with half as many organizations (30%) believing that career management is the responsibility of the employee. Either goal has an inherent paradox in that the supporting tools and processes provided to both employees and managers enjoy less than 50% effectiveness in all cases (Figure 20). This ranges from a high of 49% for career mobility across geographies and functions, to a low of 24% in managing the effectiveness of career programs.

Regional differences exist in the area of career management. While joint ownership between the employee and manager is again most prevalent, the U.S. and Canada (headquartered organizations) are much more likely to indicate that the career management process requires employees to take ownership of their own careers — 38% for the U.S. and Canada, compared to 22% for EMEA and Asia Pacific (Figure 21). In contrast, 16% of Asia Pacific and EMEA respondents indicated that the manager is responsible for guiding an employee’s career, versus 3% of U.S. and Canada companies, reflecting perhaps a more paternalistic approach to career management in general for Asia Pacific and EMEA.

Measurement

Most regions’ talent management program effectiveness ratings are in line with aggregate results. However, we see significant variation regarding measurement of career management programs. Almost one-third (32%) of Asia Pacific and European organizations said they measured program effectiveness, but less than 20% of organizations in other regions said they did. This suggests a more rigorous process in Asia Pacific and EMEA.

0% 20% 40% 60% 80% 100%

Our career management programs support our attraction and retention goals (n = 565)

Employees understand how they can in�uence their careers (n = 569)

Our company has developed effective tools and resources for career management (n = 569)

Our organization measures the effectiveness of our career management programs (n = 560)

Employees at our organization are frequently able to move across organizational boundaries,geographies, functions and business units (n = 564)

8 41 30 18 3 8 41 30 18 3

3 21 32 37 7 3 21 32 37 7

3 32 35 27 3 3 32 35 27 3

2 38 37 21 2 2 38 37 21 2

3 34 38 22 3 3 34 38 22 3

Strongly agree Agree Neither agreenor disagree

Disagree Strongly disagree

Figure 20. Talent management — Career management process and program effectivenessAt our organization, we want:

Effectiveness of career management programs

30% Employees to take ownership

of their own careers

61% Employees and managers

to have joint ownership

9% Managers to guide employees’ careers

30%

61%

9%

n = 535

Figure 21. Regional differences in career management process

Organizations headquartered in the U.S. and Canada

United States/Canada (n = 271)

Asia Pacific/EMEA (n = 264)

Employees to take ownership of their own careers 38% 22%

Employees and managers to have joint ownership 59% 62%

Managers to guide employees’ careers 3% 16%


Our Take

The fact that organizations are continuing to emphasize talent and career management is quite encouraging to us. The question, however, is whether they will be successful at it in the long term. Companies that rely solely on technology to implement their programs will be far less effective than those that deploy it as simply one part of a more holistic plan. Leaders must provide strategic input, and managers need to steer programs using proper processes, governance and the necessary metrics. And correct alignment with the business strategy — and solid change management to make it happen right — will help ensure that programs are effectively delivered at all levels.

22 towerswatson.com

Figure 22. Employee self-service functionality in place now (employee location)

Asia Pacific Canada Europe

Middle East/ Africa

Latin America

United States

Change personal data 46% 58% 51% 47% 37% 78%

View pay stub/pay slip 44% 54% 40% 33% 22% 84%

View total compensation and/or benefit statement 31% 36% 33% 27% 19% 54%

View vacation/sick-time usage and balances 55% 51% 46% 40% 26% 73%

Update skills, competencies, education, certifications 36% 41% 39% 41% 34% 53%

Update performance goals and results 52% 55% 54% 52% 48% 64%

View career ladders/job-level definitions 21% 28% 24% 23% 21% 27%

Identify/Enroll in learning and development opportunities 41% 45% 43% 41% 38% 64%

Review career development possibilities and priorities 22% 27% 27% 23% 25% 31%

Begin onboarding or joiner administration before start date by updating personal data, taxes, benefits, orientation, etc. via the web 18% 17% 18% 18% 13% 32%

Offboard or leaver administration as employees exit the organization 23% 16% 18% 19% 12% 19%

Figure 23. Manager self-service functionality in place now (employee location)

Asia Pacific Canada Europe

Middle East/ Africa

Latin America

United States

Register/Approve training classes for employees 42% 42% 41% 40% 33% 58%

Change salary (e.g., off cycle) 25% 40% 32% 31% 31% 48%

Determine bonus/variable compensation 31% 48% 42% 38% 39% 48%

Make/Extend offers 22% 30% 27% 23% 26% 39%

Initiate/Approve job requisitions 39% 48% 43% 39% 37% 62%

Perform succession-planning activities 20% 28% 24% 25% 26% 28%

Promote employees 28% 39% 33% 31% 32% 46%

Review/Update employee performance 54% 57% 56% 55% 50% 65%

Search existing employee population for suitable candidates 21% 22% 18% 26% 16% 20%

Terminate employees (voluntary, retirement) 27% 38% 31% 30% 30% 48%

Terminate employees (involuntary) 23% 33% 27% 25% 24% 42%

Transfer employees 29% 36% 28% 30% 29% 44%

View scorecard of key human capital and business performance metrics 15% 13% 14% 13% 10% 15%

Workforce planning (project future workforce demand and supply) 12% 12% 10% 13% 9% 9%

We probed deeply. Our survey tracked the availability and prevalence of employee and manager self-service applications. We followed the movement of self-service — from a new and innovative development, to an established and ubiquitous way of completing many basic employee processes — and from a modest presence, to an established foothold in the more complex realms of HR service delivery for basic manager processes.

We explored globally. The survey’s worldwide reach reveals greater variability regionally than any other area (Figures 22 and 23) to illustrate how self-service success depends on many factors — from existing functionality, to effective implementation, to solid change management and communication practices that provide support.

Breakouts. Specific regional breakouts for self-service trends — including prevalence now and future implementation plans — provide further details in each region covered by this survey.

Employee and Manager Self-Service


This year was a watershed for this research — and our discoveries are encouraging. We think they should be heartening for your HR organization as well.

In 2012, we collected our largest sample size (628 participating organizations), and were able to achieve our broadest global reach, to reveal the growing importance and acceptance of best-in-class HR service delivery practices. Perhaps more significant, we think, is the level of enduring change, incremental success and future opportunity that the research illuminates.

Companies are equipping themselves to move forward using new structures, functionality and increased efficiencies that will improve and broaden both processes and execution. There’s a lot more work to be done — from discovering more user-friendly

portal options for employees and establishing better talent management technology for managers, to establishing effective shared services, to structuring HR organizations optimally across geographies.

Organizations around the world appear upbeat about their prospects for change. Even as the talent and HR service delivery sands keep shifting, HR continues to move forward with these strategic initiatives. The rest of 2012 and 2013 offer the potential to position HR organizations worldwide for success.

We look forward to sharing the results with you in future studies.

Reaping the benefits of continued change

Conclusion

Copyright © 2012 Towers Watson. All rights reserved.TW-NA-2012-24597

towerswatson.com

About Towers WatsonTowers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management.