Cardinal Health HR to Take More Strategic Role

By Staff Report

Apr. 28, 2006

Corporate leaders at Cardinal Health have decided that the company’s competitive advantage lies in its people. As a result, it’s concentrating human resources efforts on finding and developing talent while outsourcing administrative functions.

Cardinal announced this month that it has signed an end-to-end contract with ExcellerateHRO, which is jointly owned by EDS and Towers Perrin. This is ExcellerateHRO’s first end-to-end deal. A provider of health care products, services and technologies, Cardinal ranks 19th on the Fortune 500. It has 55,000 employees, 42 percent of whom live outside the United States.

Don Moseley, vice president for HR transformation at Cardinal, introduced the partnership in a presentation at a Conference Board meeting in New York. The company is based in Dublin, Ohio.

Cardinal and ExcellerateHRO have declined to reveal the size of the deal, and Cardinal will only say that it is a multiyear contract. But if it is a true end-to-end outsourcing contract, involving several human resources processes, analysts who asked not to be named estimate its value at $300 million to $400 million. Cardinal also declined to say which specific functions will be outsourced or how many Cardinal HR staffers will lose their jobs.

Moseley emphasized that the 250 human resources professionals who will remain at Cardinal will work in areas intended to influence business strategy and the bottom line—talent management, organizational effectiveness and total rewards.

“We weren’t having to find ways to get to the table,” Moseley says. “The business was demanding it. We’ve invested a lot of money in our remaining organization so that they have the ability to function in that atmosphere.”

Cardinal will place human resources “business partners” across the company who will focus on strategic activities while establishing new HR field operations. It also will create transactional centers supported by ExcellerateHRO.

The changes will enable Cardinal to redesign the HR function in one fell swoop, make human resources a more strategic player and increase global HR capabilities, he says.

Cardinal’s new perspective on HR comes in the aftermath of very rapid growth. During the past 10 years, the company’s revenue zoomed from $7.8 billion to $74.91 billion as it took over a collection of health care companies.

Last week, Cardinal announced that the man who oversaw that growth, founder Robert D. Walter, was stepping down as CEO. He will remain board chairman. R. Kerry Clark, most recently vice chairman of the board at Procter & Gamble, is the new president and CEO.

Meanwhile, Cardinal is integrating its disparate pieces and is turning to ExcellerateHRO to consolidate what it has under its HR roof.

“They can help us bring it all together,” Moseley says. “We had no metrics for the HR function.” With ExcellerateHRO, Cardinal will have the analytical tools to make better business decisions, he says.

The thoughtfulness shown those HR workers who are leaving is directed at a wider audience. “What we do to that group will have a residual effect on those who remain,” says Kathryn Kelly, vice president of strategy and growth at ExcellerateHRO.

Whether the strategic focus will increase shareholder value may be an open question for a while. “We haven’t been able to quantify it yet,” Moseley says. “It’s a little bit of faith on the part of senior management.”

Mark Schoeff Jr.

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