by Peter Allen

Finding the right people and tools for managing HRO.

During the outsourcing transaction process, it is imperative to make plans for the department or organization that will be managing the outsourcing relationship. In order to do this, it is helpful to review some of the basic tenets of organizational design.

Organizational design is the integration of people and their competencies with the available tools (administrative systems, technology, and information) to maximize results. Organizational design is a recognized discipline underlying change management and one of the core competencies of a strategic HR function. It is used to match the structure of the organization to the purposes and goals of the organization. Through the organizational-design process, organizations improve the probability that their cooperative efforts will be successful.

We’re frequently asked by clients what should my new department, function, or the organization look like as a result of this initiative, and how do I design the structure of my new organization? While there is no one-size-fits-all structure when designing your organization and processes, you need to consider the following. The design process is composed of five steps: 1) developing a statement of purpose, vision, and strategy; 2) determining what positions and competencies are needed for the new organization; 3) ensuring administrative systems are in place; 4) ensuring the right technology exists; and 5) providing access to the right information.

Step 1: Statement of Purpose. Organizational development starts with the development of statements of purpose, vision and a strategy. The strategy is derived from clear and concise statements of purpose and a vision from the overall organization. Strategy combines the intent of the organization and focuses members toward actions designed to accomplish desired results.

Step 2: Positions and Competencies. The right people with the right competencies must be positioned within the organization to increase the possibility of meeting or exceeding business goals and objectives. Before outsourcing, your organization required certain skills to complete job duties and responsibilities. Now an entirely new set of competencies is needed. You’ll want the people with the necessary competencies to interact successfully with the administrative systems, technology, and information that your service provider will put in place. Remember, being responsible for a service-provider relationship is different than being responsible for the actual work processes. An individual who enjoys and is good at managing a production operation may not be the best or happiest managing a service provider.

Step 3: Administrative Systems. Administrative systems consist of policies, decision rights, procedures, and guidelines that enable the organization to operate. Sometimes these systems impede an organization from running efficiently. With an organizational redesign, it will be important to reexamine and modify these systems to ensure they facilitate change. You’ll need to review and reconsider issues as basic as employee-only system access policies, for example, since service-provider representatives, who are not corporate employees, are still likely to require the same access as employees.

Step 4: Technology. Technology provides the means for people to gather information in an efficient and timely manner, allowing time to concentrate on more strategic and less transactional tasks. The management team or organization will need access to performance tracking systems but may no longer need access to the systems that house core transaction details.

Step 5: Access to Information. It’s essential for information to reach its intended users and be available to those who are making decisions. This is a key area on which you will need to focus when building a new management team—access to the right data at the right time is essential to effectively manage the relationship and ensure that overall performance targets are being met.

This organizational design process, which is part of a comprehensive sourcing management process, is one that we follow to help an organization shift from a transactional process focus to the “hows” of service provider and performance management. The end result is a crisp definition of the new organization’s purpose, a definition of the new team and their skills, a revised set of procedures that the entire organization and the service provider can effectively operate under, and new systems and reporting processes to aid the entire relationship.