HRO scalability, scope, technology, and expertise add up to a recipe for HR success.
The TPI Index from 2005 Q1 asserts that HRO will be increasingly procured on a global basis. Since 2001, half of TPIs HRO contracts worth $25 million or more have been global. Notably, we see U.S.-based companies signing globally-scoped deals covering not only their domestic employees, but also their employees in Europe and Asia-Pacific. Overwhelmingly, more than any other BPO process, HRO is gaining global scope.
This is not surprising because HR is increasingly going global with leading U.S.-based firms with global operations integrating their HR functions around the world. The top seven HR service providers are gaining a bigger global footprint to meet this growing demand, with key service providers winning recent HR contracts.
Based on TPIs market activity and client engagements, virtually all leading HR executives of global corporations are considering an HR sourcing strategy. The prospect of significant cost savings, avoidance of future capital expenditures, access to standardized processes, and the potential to transform the HR function is compelling these executives to consider broader sourcing strategies for HR.
HRO providers have traditionally been more accessible to U.S. clients than to European clients, but this is changing fast. Accenture has been most active in Europe, but Convergys, Hewitt, and ACS also appear to be stepping up their presence across the Atlantic.
WHY THE APPETITE TO GLOBALIZE?
Most companies face tighter competitive pressures and an overriding focus toward greater cost efficiencies as a means to improve value for their customers and impact the bottom line. Global HRO offers access to state-of-the-art technologies and systems that are scalable to the size and international scope of their employee bases, as well as the deep domain expertise of a provider whose core competency provides what companies need.
Another incentive is the chance to stitch together disparate HR systems residing in different countries, with different processes and solutions, into a single, overarching system with consolidated reporting monitoring the corporations global talent pool. Many large global enterprises have customized their applications to various cultural and national settings, making the single framework model a very attractive, cost-effective solution. This requires outside experts to help manage the daunting task thus, the call to the HR outsourcers.
WHAT IS THE SECRET SAUCE?
The variation of languages, cultures, currencies, regulatory practices, and HR policies across different countries is a major challenge to developing a global outsourcing strategy. In North America, for example, benefit programs are typically provided by the corporation. But, throughout much of Europe and Asia, benefits are largely provided by the governments in each individual country.
HR has been described as a multi-local activity, as it tends to take on its own characteristics depending on locale, and its own unique requirements in each incarnation around the world. There are also more fundamental differences in common work practices that make a one-size-fits-all approach to HRO not only impractical but also impossible. Consider the tradition in Spain, for example, of taking a two- or three-hour siesta in midday and not returning to work until late in the evening, and then eating dinner at home after 9 or 10 p.m. In the Netherlands, bicycles and mopeds play a major role in the transportation mix, with dedicated bike paths in the cities driving the need for a bicycle policy in HR practices there. Work rules; formal relationships between employee and employer; variations in health care, compensation, taxation; and many other factors all weigh in to complicate the process of globalizing HRO.
While the strategy of global HRO can certainly be applied to any region of the world, tactically speaking, it is absolutely crucial to take local factors into account on an individual country basis. Like serving a gourmet dish, getting it right is not always easy, but getting it on the table is vital to the occasion.