Addressing process clarity, managing change, and unraveling technological difficulties will go a long way toward a successful HRO implementation. Be ready for the unanticipated bumps in the road.
In a previous issue of HRO Today I wrote about getting to a successful deal, but arriving at the point where the ink is drying on the contract is, as Churchill said, only “the end of the beginning, not the beginning of the end.” It is now that the real hard work starts.
Designing and managing the transition of HR activities to the outsource provider is key to long-term success and overall customer/user satisfaction. It is where the fine sentiments expressed in the contract negotiations become reality.
Regardless of the quality of the due diligence in the contractual phase, HRO providers only really get to understand what they are talking about when they have to work with the client to plan and manage the transition of activities into providers’ service centers. However, it is essential to get the transition right because the errors and omissions made in these initial stages will result in negative perceptions of the service and provide ammunition for the doubters. Experience shows that early problems color the future relationship and can ultimately unravel the contract. So what has to happen for transition to be successful?
KEY SUCCESS FACTORS
There are seven key success factors that must be tackled for clients and providers to manage a successful transition. They include:
• Service Level Design and Implementation. Service levels will be defined in the contractual stage, but it is vital in the transition phase to go behind the service levels and define/agree on the operating level agreements (OLAs) that the client has to deliver to facilitate the achievement of agreed service levels. Additionally, service levels in transition will be different from service levels to be achieved during the steady state, and this factor needs to be reflected in the transition process.
• Process Clarity. Clients and providers usually underestimate the time it takes to “corral” and transfer knowledge, manage intellectual property, simplify processes, and write new process standards manuals. Accuracy and effective translation into common, simple forms are critical both to the implementation of common process standards and to facilitate employee and manager self-service.
• Technology Management. In any transition risk plan, technology issues will form at least 60 percent of the risks that are logged. Technology risks usually occur in the detail of transition. They are more than just the transfer of legacy systems into a common HRIT platform and the introduction of common tools.
• Managing People Issues. For the HR function, the transfer of activities to an outsource provider and the loss of jobs is always traumatic. Best practice is always to communicate, to ensure that key personnel are protected, and to ensure the provider acts as a good employers. This is particularly so in the U.K. and Europe, where the outsourcing practice is governed by EU regulations and where significant fines exist for non-compliance. However, transition activity must not ignore the customer’s need to be informed about what is happening and the benefits of change.
• Effective Governance. From experience, most organizations underestimate the importance of governance in building and sustaining an effective outsourcing relationship. Good governance needs to be conducted at a high level through a service management organization (SMO), which acts as the interface between the customer and the provider. The amount of management attention needed during the transition phase is extremely high.
• Asset Transfer. As the HRO market matures and providers have established a network of global centers, asset transfer is less an issue than in the early days of the market. However the legal and fiscal impact of the transfer of physical assets can be a significant impediment to an effective transition.
• Implementation. In the end, success depends on the ability of the client and provider to manage implementation. The key to that success is the ability to balance the speed and scale of change, and the requirement to deliver a business case, with the need to safeguard business as usual and manage changes. Clients and providers must ensure that the transition process is led by highly capable senior managers with real program management expertise.
There is no such thing as a smooth and uneventful HR outsourcing transition process. The unpredictable will always occur, and crises will crop up at regular intervals. However, the ability to plan for issues, to take into account the seven success factors, and to drive forward with excellent program management will help clients and providers to even out the bumps and reach a mutually beneficial steady state.