Beyond appearances, the underlying technology of outsourcing will determine the effectiveness of the effort.
A recent imagination-inspiring retail success in The Netherlands is the company Suit Supply. Starting in 2000 with one suit shop in the middle of nowhere along the ever-busy A4 motorway between Amsterdam and Rotterdam, it is now a successful business with 16 shops along the motorways and in several cities. Its concept is simple: remain open after working hours, align with the business commuters, and provide cut-to-the-bone suits at low costs.
Relevance to HRO? While lower costs are important, the value delivered in tailor-made suits and shirts, including a tailor who comes to your office for a quick measurement, is the key element that has fostered this success. Suit Supply effectively eliminated the dichotomy between cheap and simple (confection clothes) and expensive and personal (designer wear) and created the perfect hybrid model.
In HRO, economic considerations often gravitate to the cost aspect while underestimating the impact the value of your HR operation can bring to your organization. The quality of your HR processes and deployment model is critical to the success and sustainability of your project. It can be the tailor-made HR suit of your organization or a worn, battled sports jacket.
When Procter and Gamble embarked upon its HR transformation journey, its two key objectives were to increase the organization’s total productivity through an effective HR employee service and to create an innovative HR department.
Globalization and standardization of processes allowed the company to not only attain cost reduction goals but also helped increase business performance. As P&G’s Luigi Pierleoni, who headed up the transformation project, stated in April 2005: “For Procter & Gamble, outsourcing parts of our HR organization was a strategic move to further deploy state-of-the-art processes and related technology in order to better serve our internal customers.”
Key to achieving that value is indeed the underlying technology platform. I have said earlier on that it is important to think “inside the box.” What’s inside largely determines the value of the box—the fabric of the suit, if you will. Access to state-of-the-art HCM processes and related technology deployment is an essential contributor to the value HR delivers, whether outsourced or in-house, in a shared-service center, or otherwise.
Pressure from employees, managers, and business stakeholders for more value-added services is increasing. Employees want to manage their own career path, check on their benefits, and be part of their own retirement planning. Managers want up-to-date employee information at their fingertips. Business stakeholders want HR supporting and aligned with their business strategy.
This is in line with the view of one HR guru, Dave Ulrich. He has stated in the book “The HR Value Proposition:”
“As the pressure to do more with less increases, and as the human or organization factors become ever more important, human resources must be transformed.
For the stakeholders (line managers, employees, customers, and investors), the transformation revolves around a simple idea: VALUE.”
Outsourcing done in the right way delivers distinct benefits to other stakeholders as well—from increased flexibility to lower capital expenditure to better employee satisfaction and, possibly, customer satisfaction. However, for the BPO provider to deliver value, it needs to use superior scale, process reengineering expertise, and access to cheaper labor.
As with the Suit Supply folks, as a customer you have to allow them to use their strength. At the same time, in HRO, the client should keep a close eye on how technology is used to underpin process scale, reengineering, and labor access. Why?
Because while you can perhaps live with a suit’s fabric that deteriorates a little too fast or an occasional rip, an outsourced process is neither “what you see is what you get” nor a minor consideration. Technology deployment by the provider affects the way the retained organization operates, the options available to the client at contract end, and the amount of innovation the client can expect.
Likewise, a client team forcing undue customization and fragmentation in the provider’s service delivery undermines the business fundamentals of the provider’s service delivery, which may have disastrous consequences later on, even if the negotiating teams on both sides think they’ve cleared the path from a commercial perspective.
So, when considering HR outsourcing, look further to fully understand what value the underlying technology deployment can bring you. After all, while appearances can be deceiving, quality and value are undeniable.