For a truly rewarding HRO engagement, know your goals, be realistic in expectations, and adjust to changes.
Recently, my company, Prudential Financial, celebrated the fifth anniversary of our large-scale HR outsourcing deal. Because we were one of the first companies to move in this direction, I am often asked what it was like to be an outsourcing “pioneer.” To that end, I’d like to share with you five of my most meaningful pioneering lessons.
• Lesson 1: Be sure of your direction. There are a number of things you can’t anticipate or prepare for when you make the decision to outsource. But one thing that’s essential is clear consensus about what you want to get out of the deal. In our case, we knew we needed a variable cost model for HR services, and we had specific targets associated with that goal.
Managing HR like a business and delivering new projects on time and within the negotiated prices gave us enormous leverage and credibility with our company’s internal business divisions. Nailing those expense targets and working hard to guard against expense creep bought us a lot of forgiveness when the road got bumpy.
• Lesson 2: Be prepared for the bumps in the road. As much as you believe you have planned for the smooth transition and migration of work, there will be unexpected surprises. Some of these are the things you should have been able to anticipate, based on what you know about your organization’s culture. For example, if your company is accustomed to a lot of “high-touch” customer service, the move to self-service is going to be a challenge.
In addition, the regulatory climate has changed rapidly over the past few years, adding a layer of complexity to the buyer/provider relationship. Vendor governance has become a much bigger challenge than any of us had anticipated at the beginning of outsourcing, and buyers and providers have had to build infrastructure within negotiated expense guidelines to support it.
• Lesson 3: Be ready to build trust with those on the journey with you. A strong commitment to partnership is paramount because at the end of the day, you are your partner’s keeper.
Buyers need to be realistic and transparent about the pre-outsourcing state of our processes and cost structure and have realistic expectations around improvement. Providers must be honest about their strengths and soft spots so your clients can assist before things deteriorate. Problem-escalation processes must be robust and effective. This is a new way of working, and it has created entirely new expectations in terms of the professional skills needed that we couldn’t have envisioned even just a few years ago.
• Lesson 4: Be advised, a new frontier requires new skills. Outsourcing has radically impacted our traditional assumptions about what makes a strong and effective HR professional, relationship manager, or consultant. While people skills will always be important for those who work in the human resources function, business savvy, influence skills, and an entrepreneurial mindset have become increasingly important for those who work for companies with an outsourced service delivery model.
On the provider side, staff must have not only deep process knowledge but also the ability to adapt to their client’s unique internal culture, management, and decision-making style. They need to deliver superior customer service to their clients and maximum profitability for their company, recognizing that it is often a delicate balance between the two.
Those who have these skills are in high demand, and talent management and career pathing for both buyers and providers are emerging as a hot issue.
• Final Lesson: Be prepared to conquer the next new frontier. Those of us who were early adopters have proven that outsourcing can be done successfully—that the model works. But having achieved some level of stability doesn’t mean we can just rest on our laurels. We need to press forward, to push to the next frontiers of emerging practices. Next-generation self-service, global solutions, the mid-sized market, and the capability of niche providers are all ripe for exploration. This clearly continues to be an exciting, dynamic, shifting space with wide-open opportunities for those who can see the need and have the vision to come up with the right solutions.
