BenefitsEngaged Workforce

Admiring the Business Model

If political leaders were as fiscally responsible as the buyers of HRO, we might be able to avoid bankrupting future generations of Americans.

by Andy Teng

The other day I was having a moment with my 10-year-old son. As he took inventory of his piggy bank, he was ecstatic about how much he had saved. In truth, he is very frugal and rarely spends the money he is given, and I laud him for his fiscal conservatism.

I didn’t have the heart to tell him that our national debt is now more than $9 trillion and, consequently, his share is more than $30,000. His pig isn’t all that big, and what’s the point in spoiling the moment?

Our spendthrift leaders in Washington are bent on bankrupting my son and everyone else in his generation. Can you blame them? As a nation, we now have a negative savings rate, so their irresponsible behavior is simply reflective of our society. If there is one good thing the credit crisis has brought us, it’s the realization that we can’t continue our gluttonous ways. “Pay as you go” should be tattooed on the foreheads of every political leader in this country.
That’s why I’m a big fan of the HRO business model. Buyers face no big upfront capital investments, you pay as you go, and services expand and contract with your business needs. What’s not to like?

I’ve written about the frugality of outsourcing and shared services in the past, but difficult economic times ahead are reason enough to reconsider the value of outsourcing. As companies begin to feel the pinch of this recession—to all intents and purposes, we’re experiencing many of the symptoms of one, even if the data haven’t confirmed this yet—back-office expenses will be one of the first areas subjected to belt-tightening. That means looking for ways to become more efficient, cutting costs, and asking staffers to take on more responsibilities are in the works.

One of the best tools for improving efficiency is self-service, and it’s something that HRO providers have perfected. They invested heavily in technology and processes and have battle-tested their systems on numerous clients.

The invention of self-service is one of the great evolutionary moments in HR services, even if it took a while to perfect it. Self-service is akin to preventative healthcare. Eating less fatty foods, getting regular exercise, and looking after yourself can do wonders for how you feel and look. Similarly, self-service empowers employees to accurately maintain their own information, managers to make better decisions based on data, and HR to minimize headcount and costs on administrative chores.

Employers, of course, can invest in internal self-service capabilities, and many have done so over the years, with varying results. In my opinion, those who outsource are more likely to succeed. Why? Outsourcing clearly defines the process for employees and managers to manage their own data, whereas companies with internal delivery capabilities tend to lack the same discipline. HR professionals got into this line of business for the people interaction, so when an employee in need of help is standing at the door, it’s awfully difficult to turn him away to get the answers on the web. Inevitably, HR tends to get mired in administrative burdens, regardless of whether self-service is available or not.

More importantly, outsourcing enables buyers to purchase only the services they need and add them as the business grows. For the fiscal conservatives in all of us, it’s a nice consideration. And with the cost-cutting axe more ready than ever to fall, there are a lot more of us fiscal conservatives today than a year ago.

Will we see more companies explore HRO in this latest economic downturn? I think so. The overall market penetration rate remains in the single digits, so many more buyers have yet to embrace outsourcing in a meaningful way. Now that operational and administrative efficiency are coming under greater scrutiny, expect a renewed interest in the marketplace and the benefits HRO can bring. We can only hope that this growing awareness among business leaders will rub off on our political leaders.

Andy Teng,
Editor-in-Chief

Tags: Benefits, Engaged Workforce

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