The old saying “Payroll is Payroll” has finally gone by the wayside and its associated legacy thinking that has inhibited us in the past.” said Meier. “This slow growth economy, the associated anemic labor markets and the increasing government burdens, coupled with the increasing workforce management complexities will continue to challenge us for quite some time.”
The question is what can we do?
Ephor Group Founder Garry E. Meier shares some of his findings, thoughts and conclusions to solving the many challenges facing us as service side executives, including growth & growth capital strategies, based on an eight month tour of operational, business process outsourcing (BPO) and support facilities in 13 countries in across
North, Central & Latin America.
Here’s the recap.
- The LATAM region has become a receptacle of some 120 new BPO facilities comprising approximately $350M in foreign investment in the past 2 years alone. Even with these impressive growth statistics in that region, Ephor Group has determined the total capacity utilization of BPOs in LATAM is in the lower 25% quartile, while the English speaking capacity utilization is even less. Of particular note, there exist a particular opportunity for the Healthcare Business Services BPO’s to expand and prosper in LATAM.
- Payroll Services experienced less than 5% growth in sector demand in 2013 driven by an anemic job market & slow GDP growth; while Workforce Management (WFM) experienced greater than 25% Growth in sector demand driven by increased reporting, compliance & employment lifecycle requirements. This trend will continue for the near-term.
Key Metric: COGS and Gross Profit Margin as a Percentage of Labor Costs, needs to be a real focus area. Don’t hire resumes first… create a more efficient and productive process… then the resumes.
Key Performance Indicators: Ephor and its management teams measure the company’s business metrics at times daily, often weekly, and consistently on a monthly and quarterly bases. Our businesses are “Perform Businesses”. Meier said. “Find the top 8 to 12 key metrics that drive your business then focus the entire company on them. Get down to a unit-based economic systems — such as gross profit per person per hour."
The Future: Meier said he expects margin pressure to get increasing more difficult especially in the North America labor markets due to “the administration’s” increase in compliance, reporting and cost burdens. Therefore consolidation of especially “sub-scale” assets to formulate scaled assets will be mandatory for survival and wealth creation. Ephor suggest that specialized and focused BPO’s, SaaS, and cloud computing services will be areas of opportunity in the near-term.
Meier concludes: “In my 38 year career I have never seen an economic cycle or time where well managed and resourced service organizations have not been successful”
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