Mercer, best known here for pensions advice, is now moving into thehuman resource consulting business, and global president Dan McCaw is inDublin to promote the venture

There are some things in life that lend themselves to numerical analysis and some that do not.

Take pensions and people, for example. It would seem to be obvious that pensions are part of the numbers business whereas people, with all their idiosyncrasies, are the absolute opposite.

Wrong, at least in the eyes of Mercer Human Resource Consulting, the new entity born out of the Mercer Group, a global company best known in the Republic for advising on pensions provision.

In Dublin this week to mingle among his followers in the Republic, Mercer global president, Mr Dan McCaw, says that "quantitative analysis" can offer guidance on almost any issue that relates to the relationship between an employer and his staff. Pensions are only the half of it.

He cites the example of a hospital in the US, which approached Mercer for help in relation to turnover over problems within its workforce.

The hospital authorities had decided that they would hire more part-time than full-time staff, thus saving on ancillary expenses such as pensions or insurance benefits.

Initially, the plan worked and the hospital's cost base fell. Soon, however, the picture changed and productivity began to decline as staff turnover spiked up.

Mercer studied the hospital's profile and, through numerical analysis, identified a statistical threshold below which levels of full-time staff should not fall if the hospital wanted to continue to save and not lose on productivity. The solution was successful.

In another case, a manufacturing company found that customers were reporting an excessive number of faults every time a new product was launched. Management had no idea why and came to Mercer for an answer.

A quick quantitative analysis later and the consulting firm had worked out that the problem lay in the company's promotion structures.

Staff were encouraged to move around within the organisation, frequently changing department. This meant that almost all engineers working on a new product within a series had not worked on the previous version of the same instrument and could not draw on the benefit of experience.

"They needed to keep their staff in one area," says Mr McCaw, who believes an analysis of this type can be as useful to a tiny company as to a multinational organisation.

"If it's a small company, we would probably get in and do the analysis without running the company's data six ways to Sunday," he says.

In the broader context, Mercer sees this type of consulting as the activity likely to generate most growth for the company within the next couple of years, eventually growing to equal pensions in terms of revenue.

In the Republic, the "new" business is still very much that, with Mercer employing 35 people to look after the area, compared with 150 in retirement planning and 200 in pensions management.

For now at least, it looks like pensions are still big business, probably even more so than in recent years thanks to the massive upheaval seen in the investment markets over the last few quarters.

Mr McCaw acknowledges that market change, such as that experienced within the last year, can be good for consultants.

It means that their clients are going through a certain amount of upheaval and need advice on how to manage that. He says that this becomes particularly true when an organisation's multimillion pensions plan is at stake.

The main pensions queries that come out of market volatility relate to funding levels in defined-benefit plans, according to Mr McCaw.

Within this, he notes that two factors are at play: rising liabilities and lower potential for rates of return on investment in the future. "Both mean higher expenses," he says.

As far as defined-contribution schemes are concerned, Mr McCaw says that anxieties may be set to grow, as employees increasingly take over responsibility for their pension plan from employers.

"Rather than the company holding you harmless against fluctuations, you run the risk," says Mr McCaw, who believes that it might be more desirable for both parties to consider a combination of structures in their pension plan.

A defined-contribution scheme could operate until members are aged 40, for example, with the scheme then shifting to become defined-benefit. The possibilities are numerous, he says, recognising, however, that such innovation has, in general, yet to take hold in the pensions arena.

Back in the present, with the average pension fund in the Republic having fallen by 14 per cent this year so far, Mr McCaw acknowledges that there might be room for some worry.

He cautions against inappropriate reaction, however.

"Some people have seen their accounts come down 25 per cent. I'm sure that's been quite troubling, but unless you're very close to retirement, it's quite likely that you've got a lot further to go.

"By the time the turnaround comes, you'll have built up a decent sum. I think we all understand that it's human nature to take a knee-jerk reaction to the short-term economic environment, but a pension plan is a long-term vehicle."

Mr McCaw dismisses any notion that current market instability is something new, or the result of a stimulus that has never been seen before.

He laughs out loud at the idea of a "new paradigm" coming to bear on the global economy.

"Some of us are old enough to remember the fall of 1987," he says, recalling a 20 per cent drop in the Dow Jones Industrial Average in a single day and doubting that many care to remember that the Dow actually "went up a little bit" over the whole of that year.

Likewise, he says, the latest incarnation of an upset market will pass as "a little bit of a balloon" works its way out of the system.

In fact, Mr McCaw believes that the market has already "adjusted" to its latest cycle, but he warns that investors should not expect a quick bounceback.

"It will be slow steady growth as the markets go forward, not this 15 per cent per annum return."