In the evolution of outsourcing, it is clear that we are now firmly moving into the phase of transformation. The combination of several functions looked at holistically will have significant impact on the business rather than on the departments alone.
HR, still relatively new to the game in Europe, is in the enviable position of not having to follow the route that other corporate functions took: outsourcing small bits of service to test the waters to see if this approach works. What hasbeen recognized to work even better is integrated transformational outsourcing that delivers true business outcomes.
You could say in Europe we are fortunate because as well as being able to learn lessons from the functions that went before HR, we can also benefit from the experience of our United States colleagues, who are further down the path of outsourcing.
So are we now sitting here as smug Europeans, about to gather our HR professionals and launch into the use of transformational outsourcing, chuckling to ourselves about how we got it right at the first attempt?
Clearly not—given the scope of the recent deals signed across Europe!
The trend in Europe today is still overwhelmingly dominated by deals following the original routes of outsourcing taken 15 to 20 years ago. These are typically single-service deals in which payroll extends to a small number of employee records management or recruitment, or deals that are broader in scope but are being rolled out in only a few geographical locations.
Why is HR not learning the lessons that IT and other departments have by going straight into the transformational territory? Surely this is where the biggest gains come from. Yet, there are currently only a few organizations that have tried to address this.
Maybe there is a good reason why this transformational approach is not being taken up across Europe. On the client side, there is in many cases a lack of knowledge and experience. There is limited understanding as to the art of the possible, and without solid success stories, it’s a brave person who takes the
It is also true that in some cases, not enough is known about the existing HR function in terms of how various HR areas could be “joined up” to deliver greater benefits, an unclear comprehension of how the function aligns with the organizations’ business goals and, in some cases, no feel for the “real”
cost of HR. This does not apply to all but certainly to some. However, what is clear is that inexperience with this kind of contract fosters the continuing hesitancy that has plagued the European HRO market.
But many key service providers have experience in providing other outsourced services, so surely they can help potential clients understand these issues to build a transformational agreement? It appears not.
There are still too many service providers who show a lack of ambition in offering the client a real transformed service that integrates business units and
delivers comprehensive business outcomes. In their eagerness to sign new clients, many providers are too keen to deliver exactly what a client has asked for and what is easy and safe to deliver, rather than what they know will create the best impact for the client. So how do we turn this around?
Firstly, end clients need to have a vision of what HR can truly do for the business and what the transformed organization should look like. A thorough understanding of capability and cost in the internal organization is needed today before going forward to leverage previous lessons learned. Clients need to understand what is truly possible and the dramatic business benefits that can be achieved. To do so, it is essential to get to know the marketplace and understand the service provider community.
Next, identify providers capable of delivering what you need and what you are comfortable working with; then build a contractual relationship, which is sustainable and provides a win-win relationship. Aleast-cost, confrontational contract will not deliver the benefits and will cause future contractual renegotiation.
Finally, as an industry, we need to work together to push the boundaries and make sure that if HR is embarking on the outsourcing journey, it does so with its head held high, safe in the knowledge that it has created a solution that really helps transform the business. Surely, if you’re in for a penny, you’re in for a pound.