Roomba Redux
As if in response to my prior post, Convergys Corporation announced record earnings yesterday morning. However, upon further examination of the health of their HR Outsourcing business unit - Employee Care - we find a 20% increase in revenues with a correlated 20% increase in operating loss (-$12.0M in fiscal Q4). Citing a litany of challenges, Employee Care (my former employer) is not alone in the great HRO sweep toward profitability.
Convergys is not to be vilified for their financial results, as the market has devolved to a state whereby the victor in highly competitive HRO bidding processes is forced to subvert initial profitability in support of highly productive tailing revenues in outlying years. The premise of success is not on the back of any single client implementation, but instead rests with the hope that economies of scale across multiple HRO clients will render the cost of any particular HR service line significantly lower, thus benefiting all participants.
In large market HRO (15,000 employees and above), this has proven to be a daunting challenge. The majority of these clients are complex, global organizations and may demand that the outsourcers retain the unique nuances of their employee-facing solutions. This, at best, mitigates the net benefit of replicable solutions across multiple clientele and requires “one off” solutions to be supported in a highly volatile HR marketplace.
So will anyone “clean up” in this market? Are HRO clients provided with proper incentives to modify their HR offerings in support of economies of scale? Let’s keep the conversation going.