Full-scope HRO can only execute effectively if knowledge transfer, thorough documentation, and patience are included in the equation.
A potential misunderstanding associated with HRO is the notion that one is outsourcing to the experts. Naturally, in many process areas such as net pay calculation, this should be the case. However, when outsourcing includes the application of a collective agreement affecting boilermaker allowances that date from 1964, the only experts alive are the buyer’s incumbent payroll employees.
The providers should be expert in process design, efficient workflow, and appropriate technology, but today’s balance of long-standing HR practitioner expertise still probably resides in the buyers. Additionally, expertise specific to company policy, procedure, practice, and precedence always rests with the buyer. Most aspects of the HR work being outsourced in full-scope HRO deals involve a considerable amount of knowledge in which the buyer organization is extremely experienced. Allocation of job codes, identification of source data inconsistencies, and application of binding national sector agreements are a few examples. The planned capture, learning, and renewal of such knowledge and skills by the provider are critical for the success of outsourcing.
Equally important is the buyer’s acceptance that at the commencement of services, and for as long as two years afterwards, retained employees are often the more expert partners. Therefore, unless a standing HR practice is sold “as is,” complete with all employees to a provider, the first few years of operation are learning years for the provider.
One of the implications of such a situation is the degree of support expected of providers during the contract cycle. This will impact not only costs and business case but also planning for retained employees such as redeployment and retirement schedules. It may also impact contract negotiations with the provider, who might be expected to financially compensate unplanned support services from the buyer.
A predictable response of retained employees, on the very day a provider commences services, is to start the countdown to the first “calamity.” The mental observation, “So, you think you can do this job, eh?” is usually followed by thinly disguised glee when the newcomer doesn’t cope so well with one of those unpredictable events.
It can be beneficial if the retained organization understands from the beginning that no one expects the provider to reach the same levels of expertise after three months that the retained employee has achieved after 30 years of continuous service in the same department.
The provider should be expected to meet the service levels, however, and the measures can reflect exactly what the buyer and provider expect to happen. For example, the query-resolution cycle could be the same at the commencement of services as it is two years later, whereas the percentage of queries resolved on first contact—without referral—increases over the same period.
Further, the knowledge-transfer plan often benefits from accommodating job shadowing and including evaluations of progress by the buyer. It can also be helpful to identify where extended periods of job shadowing should apply rather than assume one size fits all. The buyer can also participate in training-course delivery and design, as well as validate knowledge documentation and help with user acceptance testing of systems.
Another factor to consider is the extent to which processes should change. Even when “transformational” HRO is not being considered, there can be scope for simplification and standardization. Taking such steps will assist the provider to break down knowledge into recorded process steps and decision hierarchies, which reduces the reliance on “expert” knowledge.
Key knowledge holders who transfer to the provider can be an asset to the buyer. Any such transfers can be hostage to wider issues such as legislation, provider redundancy plans, or the buyer’s need to retain expertise for managing the services. However a critical mass of buyer employees working for the provider is the best guarantee of effective knowledge transfer in the start-up period.
As full-scope HRO becomes a well-established norm, the balance of HR expertise between provider and buyer is likely to stabilize. In the meantime, ensure that more than 90 percent of knowledge associated with standard procedures is documented and transferred prior to commencement. Unfortunately, customers often specialize in surprises, and, in this regard, buyers should not rely on any HRO provider being able to offer the decades of accumulated experience to be found internally.