Contributors

Disaster Management Considerations

HRO providers must integrate client systems within its own to provide effective recovery efforts.

by William B. Bierce

A 100-year event such as Hurricane Katrina serves as a further lesson in managing the viability of business operations. Disasters strike, regardless if the enterprise outsources any functions. Sarbanes-Oxley audit and control compliance requirements and corporate legal fiduciary duties to shareholders and other stakeholders have given new legal impetus to emergency management procedures for disaster recovery and business continuity planning. 

For organizational survival, the HR department and its independent contractors need a plan for managing disasters across the HR supply chain. That supply chain includes all the people and resources necessary for the ongoing viability of the HR functions.

Following the 9/11 World Trade Center disaster, businesses’ continuity plans have started with geographical dispersal of personnel. Like a military command, dispersal implies a chain of command that springs into action upon the occurrence of catastrophic contingencies. To combat the loss of integration from dispersal, redundant and secure telecommunications are needed for “command and control” functions. Redundancy includes multiple resource providers at an additional cost if the capacity is hired but idle pending the occurrence of the contemplated disaster.

For HR personnel, redundancy might come in different colors, defined according to how indispensable the role is to organizational continuity. For example, a “red” category might cover personnel for functions such as payroll processing, travel, and expense reporting, time record management, and other high-volume transactions. A “yellow” category might cover those who perform less urgent, or spillover, processing. These include recruitment process outsourcing. In the “green” zone, service personnel might perform functions that could be delayed for a week. These includes workforce evaluation, skill-set planning, compensation design, pension and medical benefit plan redesign, and others.

Process refers to the manner of doing business. The enterprise customer needs to define its process so that it can be replicated by substitute resources. Service providers must have their own disaster recovery plans. But such plans might be useless unless integrated into the customer’s own disaster recovery plans and without periodic updating to adapt to new laws, process improvements, and changes in the customer’s markets.

Web-enabled technology allows remote access from anywhere. As a result, HR systems need to  support mobility. Technological tools can measure degradations in service and monitor performance by both humans and machines. Where continuity is critical, the measurement tools could catalyze other telecommunications and process changes to shift operations to another business processing center. Historically, outsourcing contracts have shifted virtually all risk of non-performance due to any ordinary disaster to the service provider. Non-performance is usually excused in cases of force majeure.

The normal excuse for non-performance is shifting. Increasingly, enterprise customers are asking why service providers should be excused when a “force majeure” event was foreseeable, or could have been mitigated by some reasonable level of planning and countermeasures.

As part of this new negotiation, service providers are asking for a clearer definition of roles and responsibilities and defined levels of process integration into the outsourced services. This discussion raises issues of “partnership” and sharing in risk management that would be logical and appropriate if the customer and supplier were under common ownership. To ensure business continuity, enterprise customers are negotiating for rights of termination and balanced force majeure provisions.

THE RESILLENT HR SUPPY CHAIN
In the long run, the enterprise customer should be concerned about its entire supply chain for all services, whether they are HR administration, payroll processing, pension investing and administration, healthcare claims management, employee life cycle management, training, or even employee recognition and rewards programs.

Outsourcing can help insulate from disasters. The service provider’s personnel, process, and technology can be harnessed to support business continuity. Appropriate business and legal structures require careful analysis, design, planning, and ongoing testing and updating.

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