New Research Shows Workforce Productivity Gains Exaggerated

CINCINNATI, OH – Large corporations are not effectively using their workforces, and they are losing revenue and market share potential as a result. That’s according to the results of a new study announced today by Convergys Corporation (NYSE: CVG) and conducted by Saratoga/ PricewaterhouseCoopers LLP, in conjunction with the University of Michigan. Even though the U.S. Labor Department reports that the productivity of American workers rose at an annual rate of 2.9 percent last spring, 84 percent of executives surveyed admitted they were unable to take advantage of their workforce’s full potential, and half of all HR executives acknowledged they did not have enough information about their workforce to remain competitive in their industry.

For the 2004 Convergys survey, over 300 senior executives in HR, finance, and operations at U.S. and European companies with revenues of greater than $1 billion were interviewed both in person and via telephone. The in-person interviews were all conducted with Fortune Most Admired companies.

65 percent of corporate executives surveyed said they face an increased demand for a flexible workforce to remain competitive in today’s global market. Despite this awareness, the Convergys research showed that companies have trouble retaining key talent, don’t have systems in place to identify skilled employees, and aren’t providing more training and development for their most strategic employees — all factors which contribute to low productivity.

The Convergys 2004 “Workforce Agility” study outlines the major obstacles companies face in maximizing their return on human investment (ROHI). For example, the corporate executives surveyed admit that gaps between workforce strategy and business strategy are common.

Moreover, the ability to mobilize their workforce to meet business demands with speed, precision, and agility remains an elusive goal. When asked to describe their company’s ability to reallocate people to projects across lines of business or teams, over 45 percent of respondents rated their company as rigid, while only 16 percent rated their company as flexible.

Even companies known for employing best practices estimate that they are overspending by at least 10 percent on their workforce, yet their employees are under performing by 10 percent. As a result, companies could be leaving a significant percentage of their revenue on the table. Example: For a $10 billion company, a 10 percent decrease in workforce costs and a 10 percent improvement in productivity would represent nearly $1.25 billion in annual savings. While these results point to the need for financial discipline in overseeing HR, only 27 percent of companies in the U.S. say they have a human resources controller.

Most significant, the Convergys 2004 Workforce Agility study highlights a real gap between human resource needs and business goals. 55 percent of respondents claim that work structured around jobs versus skills and competencies is a major barrier to optimizing their key talent. In addition, 80 percent of senior executives emphasized the need to focus on retention and development of their strategic employees and most skilled talent. Paradoxically, less than 20 percent of HR executives rate their company as highly proficient at either of these.

“Companies are beginning to recognize the need to put a stronger emphasis on more strategic HR processes to manage and retain key talent,” said Philip Fersht, Senior Analyst at Yankee Group. “The tough business climate is driving many medium-sized and large organizations to scrutinize how they measure, monitor, and manage their human capital.”

Workforce Agility: The New Competitive Advantage
In the search for competitive advantage, a well-trained and flexible workforce can adapt quickly and easily to new opportunities. Working within a structure that is clearly aligned with corporate strategy, companies can drive revenues up, keep costs down, and clearly differentiate themselves in the marketplace.

Karen Bowman, president of Employee Care at Convergys said, “Aligning the workforce to business objectives is clearly top of mind among executives today. Convergys provides globally integrated HR solutions that help clients gain visibility into the trends and profiles of their workforce. This critical HR intelligence helps them accurately plan business initiatives and maximize their return on human capital investments.”

For more than 20 years, Convergys’ Employee Care business has provided HR outsourcing solutions to the world’s leading organizations. Institutions such as Fifth Third Bank, Office Depot, and RR Donnelley rely on Convergys to improve their HR management processes, operations, and service delivery models. Convergys is rated one of “America’s Most Admired” companies in the diversified outsourcing industry by Fortune magazine. Supporting clients and their associates in nearly 60 countries and 30 languages, Convergys has the infrastructure and resources required to deliver flexible outsourcing solutions for a global workforce.

Survey Methodology
Conducted between March and August 2004, Convergys’ Workforce Agility Study consisted of two parts:

• In-person interviews with C-level and top human resources executives at U.S. and European companies in a wide range of industries. Each of these industry leaders is a Fortune Most Admired Company and was selected based on its reputation for using human capital and its overall financial performance. The survey, conducted by Saratoga /PricewaterhouseCoopers and the University of Michigan School of Business and Education Professor Richard W. Beatty, sought to determine best practices in workforce agility and alignment.

• Telephone interviews of HR, operations, and finance executives at some 300 companies in the US and Europe. Each of the companies reports more than $1 billion in annual revenue and most have more than 13,000 employees worldwide. Respondents have responsibility for setting or executing workforce strategy; roughly 40% were HR executives; 30% were operations executives; 30% were finance executives. The survey sought to determine the degree to which these companies had adopted the best practices identified in the first part of the study.

About Convergys
Convergys Corporation, a member of the S&P 500 and a Fortune Most Admired Company, is a global leader in integrated billing, employee care, and customer care services provided through outsourcing or licensing. We serve top companies in telecommunications, Internet, cable and broadband services, technology, financial services, and other industries in nearly 60 countries. We also provide integrated, outsourced, human resource services to leading companies across a broad range of industries.

We bring together world-class resources, software, and expertise to help create valuable relationships between our clients and their customers and their employees. This commitment is validated by the more than 1.5 million individual bills our software produces each day to support more than 100 million subscribers, and by the more than 1.7 million separate customer and employee contacts we manage each day, both live and via electronic interaction.

Convergys® employs more than 60,000 people in 60 customer contact centers and in our data centers and other offices in the United States, Canada, Latin America, Europe, the Middle East, and Asia. Convergys is on the net at www.convergys.com and has world headquarters in Cincinnati.

About Saratoga
Saratoga, a PricewaterhouseCoopers LLP (PwC) offering, is the global leader in Human Capital measurement, benchmarking, and strategic application of Human Capital information.

About University of Michigan Business School
The Michigan Business School is a premier educational institution within one of the finest research universities worldwide. Its mission is to develop leaders in thought and action, who are ready to tackle the challenging, multidisciplinary problems facing society. Dr. Richard Beatty is a Core Faculty Member, University of Michigan Executive Education Center.