Contributors

Is HRO Successful?

Good or bad change management may bring out the hecklers or praisers of HRO.

by Paul Davies

One might think that the improvements in service quality that HRO can bring, plus reductions in HR costs, would make outsourcing a most welcome initiative on any business partner’s agenda. This is not necessarily the case, and this failure should be contemplated early on by anyone considering HR outsourcing.

In the first place, HRO might not bring the advertised benefits; and in the second place, even when the benefits do accrue, they might not be visible, the perceived cost of change might be too high, or the business partner may simply not like them.

HRO transformation requires a great deal of change management, and substantial cost savings can ease the change considerably. However, when cost reductions fail to materialize, the plain truth is that it doesn’t matter how good the service-level metrics look—the customer’s perception is key to success. This perception of success will drive a great deal of change management.

Typical HRO involving outsourcing, standardization, and centralization of services in an offshore facility is not always regarded by the customer as better HR service. Having to conduct transactions online is a source of Herculean struggle for some, while the idea that such minute tasks should be performed by HR professionals at all is a shock from which others never recover. The more senior professionals seek a way to excuse their astonishingly busy selves from such mundane troubles, while a sizeable proportion of the remainder decides that it is much better for the organization as a whole if each other’s administrative assistant takes care of these tasks.

Then there is that much maligned institution: the offshore call center. One would think from the intense criticism leveled at “foreign” call centers in the media that they were staffed by small circus animals not quite good enough to make it to the big tent. This is, of course, far from reality. Provider employees, like employees anywhere, want the satisfaction of doing a valued job well. However, just like everywhere else, there will be good and bad hiring, good and bad training, and ultimately, good and bad performances.

Nevertheless, such apparent common sense tends to desert managers, employees, and employee representatives the moment a provider employee fails to meet expectations. In many cases, the failure is due to mistakes made in the buyer organization, but mistakes are made by providers as well.

The difference, I have observed, is that a portion of those mistakes were made prior to outsourcing but were not measured or treated with tolerance because they were made by a colleague and could have been easily made by oneself. When the offending party is an outsider or a “foreigner,” the gloves come off, and a sense of proportion is lost. Retained HR staff who saw the jobs of colleagues or their own jobs outsourced are understandably inclined to “despair” at the “antics” of their provider counterparts and make such a topic a staple of lunchtime conversation.

The situation can be made worse when a particularly well-connected person experiences a less-than-satisfactory interchange with the provider. Here, irrespective of the merits or due process, the connected person will take his/her complaint directly to the most senior person with whom they are connected. The manager, in turn, will likely take a personal interest in informing the HR board member of the HRO “disaster.” By the time the provider has researched the particular incident, proven that the error was caused directly by faulty information provided by the buyer, and presented an analysis showing that 98 percent of transactions are error-free, the damage is done.

I don’t mean to suggest that the key to HRO success is PR management. Outsourcing individual parts of HR like benefits administration, payroll, or training delivery is already widely accepted as a successful business practice. However, multinational, full-scope HRO is still relatively new and often impacts the HR customers directly in every aspect of their HR interface within a short space of time.

Over a long contract, painstaking adherence to quality implementation will pay off in the end, especially when complemented by consistent, relevant service metrics reporting. In the short term (say the critical first three years), customer perception will be devilishly influential.

There are many parts to any successful HRO. However, one part lies in remembering that HR can’t outsource its customers. Another rests in addressing change management on the very first morning that the thought of HRO crosses one’s mind. So remember, HRO is not a short trek but a deliberative journey requiring cultivation to, collaboration, and patience.

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