Our suggestions to other mid-market organizations considering HR BPO.
To understand Travel Traders’ decision to outsource to an HR BPO, I first need to explain a little bit about the history of our company. In many ways, it all started with a date very familiar to everyone: September 11, 2001. Prior to this day, WHSmith, one of the U.K.’s leading retail groups, employed many individuals—who were later hired by Travel Traders, which hadn’t come into existence yet.
For years, the WHSmith brand name was well known to U.S. travelers. Until recently, WHSmith’s U.S.-based businesses managed the operations of 485 news, gift, and specialty retail stores located in airports, hotels, and resorts across North America, reaching more than 400 million travelers annually.
After 9/11, WHSmith suffered major financial losses as a result of the slowdown in travel across the country. In September of 2003, WHSmith announced the sale of its two U.S. divisions—its airport and hotel retail businesses, the latter of which was sold to then newly created Travel Traders, LLC.
Immediately, Travel Traders’ owners recognized a big challenge that would require prompt attention to ensure the business’ success. How could the new company establish an infrastructure which included HR and payroll while cutting operating costs and continuing to ensure its people performed well in the organization? To complicate matters, WHSmith wanted to close its U.S. support operations—which included HR—by the end of March 2004. Travel Traders had to move fast and needed to partner with organizations that could keep pace.
The selection of our HR outsourcing provider was no exception. Within two months, we had evaluated and selected PlatformOne to provide our BPO solution. Beginning in December 2003, PlatformOne was charged with the task of establishing our HR back office, assuming the responsibility for processing every HR transaction, and doing so with minimal impact on our day-to-day operations. The implementation, which included a transition away from a national payroll service bureau, started in early January of last year. The goal was to go live by April 1, 2004 with PlatformOne completely responsible for processing payroll. While we did hit a few early bumps in the road, we worked together to come up with solutions.
Now 18 months into a five-year relationship, we are provided with a comprehensive HR BPO solution, including an integrated HR information system. PlatformOne administers all payroll, tax, HR, benefits, and HR call center-related functions that are transactional in nature. Travel Traders maintains two regional HR managers who address strategic HR issues core to our hospitality industry—business-employee relations, manager guidance, internal communications, recruiting and retention, performance management, employment and labor compliance, and training and development.
Together, this partnership supports more than 1,300 employees everyday and enables us to achieve the goals of Travel Traders’ management: focus on our core business. The following are 10 lessons we have learned since our HR transformation began after 9/11:
Lesson 1: Get early “buy-in” of all affected parties within your organization. HR BPO affects more than just the HR department—it reaches into the IT, finance, accounting, and tax areas of the company. Get early executive sponsorship of the HRO project, and bring all affected parties into the decision-making process. Resolve the struggles of internal politics and personal agendas first.
Lesson 2: Know the details of each existing HR program. Start by documenting the numerous detailed tasks required to deliver each HR program and who performs what today. Then understand and document your internal cost. That way you are prepared to determine the real value an outsourcing provider has to offer—what tasks (in detail) they are going to deliver and at what price. This process prepares your organization to better communicate your requirements to the vendor and evaluate the solutions. It also better prepares you to document the scope of services provided by the selected vendor.
Lesson 3: Focus your attention (and the attention of your HR staff) on the HR functions that add significant value to the company, as defined by executive management objectives. Invest the maximum time possible on the strategies, policies, and management of these programs. Identify the low—value (administrative) tasks that are consuming your energy and outsource them. Reach an agreement up front about what the provider will handle versus what will be handled in-house.
Document, in detail, the HR tasks to remain in-house, and review these with your staff. With the selected provider also document, in detail, the complete scope of the services provided by the HRO organization. Attach the scope of services as an addendum to the contract to hold the provider responsible and accountable for the services you expect.
Lesson 4: Only consider potential providers willing to tailor a service program to fit your specific needs. Insist on flexibility from your provider, i.e. the capability to customize a specific scope of HR services to your needs, with adaptable business processes, people, and systems. Then return the favor. Remember, it’s just as important for you, the client, to be flexible. Seriously consider recommendations from the provider.
For example, during the early steps of the implementation, a good provider will encourage the client to streamline complicated processes for good reason. They have been where you have not, and they know the system’s capabilities. Take the time to understand the vendor’s viewpoint, but don’t be afraid to speak up and let the vendor know your organization’s needs. Only by working together can you come up with solutions that are acceptable to both of you.
Lesson 5: Insist on a team dedicated to your account. Insist on meeting the individuals who will service your account. Review their credentials. Get agreements from the provider that only qualified individuals you accept will be assigned to your account. This is the first step in determining if you will receive “next in queue” call-center support, or personalized support from individuals you already know and trust. That way you can start building the needed personal relationships that keep the communication lines open. At Travel Traders, we’ve had the same core team handle our account since its inception. Having a dedicated team that knows and understands our company has been a big benefit.
Lesson 6: Regular communications between your company and the BPO provider is essential for a successful relationship. Initially, set up regular meetings and conference calls to review open issues with management. Later, expand the agenda to be collaborative and strategy-driven. This communication process will strengthen personal relationships and build a services team. Only when both sides speak up can you ensure an effective working relationship.
Lesson 7: Service-level agreements produce quality service. To measure the quality of the provider’s services, your program must include specific, measurable performance metrics. Here are some common metrics we recommend for your next HR BPO contract: payroll accuracy, payroll timeliness, payroll correction responsiveness, call-center availability, call-center responsiveness, call center follow-up, service issue resolution, HRIS system uptime, HRIS system responsiveness, HR regulations compliance, tax regulation compliance, and internal control certification.
Lesson 8: Negotiate a “no surprises” fixed-price contract. Never allow what the national firms prefer—à la carte pricing at the transaction level. This just encourages the service bureaus to deliver less and less service at higher and higher margins at your expense. Some providers are beginning to use value-based pricing models that give clients assurance that the value of the services provided at the quoted price is high. This approach works to the advantage of the customer, assuming you know the details of the HR tasks involved and their internal cost. You define the details of the scope of services desired, and the provider delivers all services requested for an all-inclusive rate per-employee per-month.
These value-based pricing models protect the provider as well, making it fair for both parties. For example, service fees under this approach take into account fluctuations in the client’s employment and assure predictable cost to the client as the employee base grows or shrinks. For the provider, fees increase or decrease based on the number of employees serviced each month.
Lesson 9: Improved and integrated HR business processes don’t just happen—they require good decision making on your part and good capabilities on the part of the vendor. Don’t outsource a mess. Outsourcing pieces of the HR function to different providers with different systems can prove very problematic. You cannot expect the resulting systems, processes, and people to work in an integrated manner. Outsourcing to a single partner with a dedicated service team can streamline your business processes and potentially drive down your total cost of HR delivery.
Lesson 10: Weigh the experience of the provider. Experience must span three key areas: seasoned HR professionals, leveraging fully capable HR information systems, and defined, proven HR business processes. Once you determine that the new provider has the experience you can trust, make the decision to benefit from their experience. When the provider suggests changes to business processes to support best practices, seriously
consider the recommendations.
Most importantly, work diligently toward a win-win relationship with your HR BPO provider. Then periodically, test the relationship. Ask yourself a few basic questions:
—Do you consider your provider an extension of your own HR team and an extension of your staff’s experience and capabilities?
—Do you trust the provider to get the job done in critical moments?
—When critical issues arise, does your relationship remain positive or turn confrontational?
—Does your provider attempt to profit every time you need its service?
—Do you feel comfortable letting your BPO provider know what your organization’s needs are and speaking up if you are ever dissatisfied with the service provided? Is your provider responsive to your input and requests?
The best HR BPO providers understand that their service teams are dedicated to and work for you, the client. If you have not arrived at a win-win relationship, keep looking. The right one can provide a great deal of value to your organization by streamlining HR processes and providing services that you do not have the resources to handle in-house. At Travel Traders, we view our BPO as an extension of our HR department. By selecting the right provider for your organization, you should be able to feel the same way.