How to tell if you and your prospective HRO service providers are mid-market ready.
By Celeste Campos
HRO’s mid-market has traditionally been underserved as service providers have focused on large-market clients. But increasing awareness and demand for services by mid-market clients—along with recognition by service providers of the potential of this market segment—is helping to slowly drive a larger selection of services and customization options.
One HR executive recently went to the marketplace seeking a solution for its legacy HRIS and payroll system, which had become difficult to update and could no longer meet the needs of the business. A number of HRO service providers were happy to propose solutions, but the HR executive thought the options were too limited.
From this client’s perspective, an even bigger challenge was the lack of range and domain expertise among the providers. Most seeking mid-market clientele focus on payroll and workforce administration (employee data management, HRIS, and reporting) and do not typically offer broader talent management solutions such as recruitment process outsourcing (RPO), compensation, performance management, or learning.
Fully customized solutions are not efficient or cost effective for the mid-market client or the service provider. Thus, most providers typically offer a standardized solution that allows for minimal, if any, customization. However, we are seeing an emerging trend in which some vendors offer templates that allow a limited range of customization (based on business needs and/or other regulatory and compliance requirements). These slightly expanded options attempt to balance the client-specific needs with the economics of providing HR services.
When it comes to integrating today’s solutions with clients’ ERP platforms, many service providers still require their mid-market clients to utilize the providers’ proprietary solutions (generally based on SAP, Oracle, or an internally developed solution), while others are willing to implement a client’s preferred ERP platform, usually at a heftier price.
Global HR service delivery is an emerging area that offers multiple solutions. Several service providers are offering mid-market clients greater access to shared services models for contact centers and process areas such as garnishments and taxes.
While custom solutions for mid-market clients are difficult to come by no matter the geography, clients with relatively small global populations—typically less than 500 employees per country—have even fewer options. For example, access to contact centers may be cost prohibitive regardless of the location of the service providers due to language requirements.
Globally dispersed mid-market clients can improve the economics and options for their HRO engagements by standardizing their internal processes where it’s not prohibited by country-specific regulations and by adopting industry best practices that may be pre-configured into the service provider’s base solution.
To gauge whether an HRO service provider is prepared to offer appropriate solutions for your mid-market-size organization, consider asking them:
- Do you offer a proprietary system solution for HR and payroll, or will you implement our preferred ERP solution?
- Which HR process areas are included in your current solution? What is planned for delivery in the next two to three years? What do you recommend to your clients for areas you do not plan to service?
- Do you offer a standard global template? How configurable is your solution, and/or what level of customization do you allow your clients?
- What is your standard service delivery solution for your mid-market clients? Is it a shared-services model?
- How many clients do you currently have who are comparable to our organization in size, scope, and complexity?
- What guarantees can you provide that our company will receive the most cost-effective solution?
While it is valuable to possess a clear understanding of your options and the direction of the HRO industry, assessing your organization’s readiness to transform to a new operational model is equally important. We recommend using these questions to gauge the readiness of your company to move forward with an HRO solution:
- How standardized is our workforce administration and payroll processes? If they are not standardized, is our organization willing to align to a single standard process?
- How “global” do we need our solution to be?
- How much of our organization uses English as the business language? What other languages will be required?
- How attached to our current ERP is the IT organization, and how willing are they to adopt a new system and/or have a service provider host and maintain the system?
- Do we have CEO-level buy-in, or will we need to build and “sell” the business case?
As HRO service providers serving the mid-market gain traction by growing in numbers and capabilities, many buyers are active in outsourcing relationships. Though most engagements serve domestic workforces, an emerging class of global HRO providers promises to expand the range of available service delivery options.
Celeste Campos, Senior Advisor with TPI’s CHRO Services group, is a subject matter expert on the mid-market. She can be reached at 908-580-0048 or celeste.campos @tpi.net.