Public-Sector Organizations as HRO Providers

A look at the newest players in the HRO provider marketplace

by Glenn Davidson

Of all the big industry news made at HRO World 2005 this past April, the most startling came not from a corporate, government, or academic leader; it came from a union president. Andy Stern of the Service Employees International Union rocked the conference with his controversial prediction that unions may soon become HRO providers in their own right fully embracing outsourcing as a means to expand their membership base, grow their expertise, provide better benefits to their members, and demonstrate their relevance in the 21st century economy.

A mere year ago, unions picketed outside of HRO World, protesting the concept of outsourcing. Now, the vanguard of American organized labor is eager to take advantage of what the HRO industry offers and how it can revolutionize the workplace. Whether unions will become partners or competitors is unknownand who knows if these plans will ever take flightbut credit must be given to Stern and others in organized labor for seeing outsourcing as an opportunity, not a threat.

Sterns bold concept got me thinking: If a union can be an HRO provider, who else could join them? In a way, every worker is capable of being an outsourcerand in the free agent workplace of today, perhaps we all are. But on a large scale, what institutions could potentially join the HRO universe?

One of the assumptions of the HRO industry is that the number of providers has topped outall the corporations that built out advanced HR infrastructures with commercial potential have already made the leap. With the maturation and rapid consolidation of the HRO industry, this could be the case.

But consolidation is only one possible outcome for HRO. Its also quite possible that the HRO industry will organize itself based on other industriesspecialized providers will gain a foothold by providing unique, trusted services to a particular vertical industry. Another possible outcome is that while the HRO universe is dominated by big, global providers, regional or even local providers could very well find a foothold serving communities that are being passed over by the big providers.

And who is going to get the ball rolling if either of these outcomes is going to be brought to fruition? We need to keep our eyes on public institutions. Governments, school systems, libraries, museums, foundations, and non-profits are all ripe to take advantage of the new sourcing revolution. But no HRO provider has yet gained a foothold amongst them.

Furthermore, in some cases, it may now make more sense for some governments to build out a shared services solution. I know thats heresy in the pages of HRO Today magazine, but given political realities, some governments simply may not be ready for an HRO engagement right now. But if they build out and create an HR infrastructure with commercial potential, the opportunity then arises for them to eventually join the universe of HRO providers.

A state or local government, for instance, could sell its HR outsourcing services to other levels or departments of government. On an even more visionary scale, they could form a non-profit and sell these services not only to public institutions, but also to private sector firms that have been underserved by the HR outsourcing industry and are deemed worthy of special government support such as companies that are based in enterprise zones or other distressed communities.

By getting into the outsourcing business, governments can help build a critical mass for the migration of service centers to their communitiesafter all, the most valuable commodity in our industry is skilled outsourcing personnel. They will help cut costs up front and over the long term, improve workforce skills, hold down benefit cost increases, lower the risks of scandal and corruption, and give taxpayers the best services for their money.

Ill have more to say on this and other potential futures for HR outsourcing in the public sector in coming columns. Perhaps none of this will come to pass. Perhaps the old political trench warfare on outsourcing will be revived, and perhaps government inertia will prevent the most visionary approaches from leaving the drawing board.

But I believe that it only takes oneone leader willing to see the vision and commit to bringing it to lifefor an idea to take wings. And I have a feeling that this first leap of faith is coming sooner than you might think.

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