BenefitsEngaged Workforce

Editor’s Note: Reflecting on HRO’s Maturity

In arriving at a new generation of deals, HRO is showing more signs of growing up.

by Andy Teng

On behalf of those of us who still remember when unleaded gasoline was a choice at the gas station, let me just say that growing old(er) sucks. For example: The other day my 10-year-old son poked fun at my gray hairs—which were probably caused by him constantly reminding me of how gray I’m getting.

I couldn’t help but recall how just a short time ago he was still grappling with basic syllables, much less forming whole sentences to irritate his parents. That seemed like a great time, but it was also a lot more work on Ol’ Dad’s part. He couldn’t clean his room, help out around the house, or even pour his own juice. Heck, these days he’s even out chopping firewood in the back yard. It’s remarkable to see him grow up.

Those of us who have watched HRO grow up during the past few years experience a similar wonderment. While none of us feel the same emotional attachment to outsourcing as we do to parenting—if you do, some serious counseling should be a part of your future—you still feel a sense of amazement at how quickly our little industry has matured.

Sure, there have been notable problems like service delivery failure and buyer dissatisfaction, but overall the market has made tremendous strides, stabilized services, and developed innovative solutions. Think about the suite of HR administration tools available in the marketplace. Dashboards, self-service portals, best-practice guidelines, and standardized processes all come with your contract. Just having robust time and attendance tools can free up your day for more important tasks…like chopping wood.

The first time my son rode his bike without training wheels was a memorable moment for me. When HRO buyers began to utter the “T” word for the first time—Transformation—that was a memorable moment for the industry. Until then, providers were still selling deals primarily on the promise of cost savings.

Today, the business case remains important, but it’s really the value-adds that draw buyers to the table—things like an integrated talent management suite, learning BPO, data analytics, and more. Getting payroll right was the equivalent of baby steps for the industry; supporting the client’s growth initiative through recruitment process alignment or global human capital support is evidence of the industry working up to a sprint.

This evolution in the market also means a different kind of dialogue between buyer and provider. As we move into the second generation of HRO, the
relationship is less adversarial. Consider this: many first-generation buyers got rock-bottom pricing (and service) in their initial contract; in the renewal process, both sides understand that financial survival of the provider is beneficial to all the parties, and buyers will be more willing to allow a fatter margin as long as they are rewarded with innovations and improvements in service levels.

Will the industry’s maturation lead to a happier HRO constituent? You have to believe so. HRO’s past immaturity and all of its accompanying shortcomings were the reason for buyer dissatisfaction. Unfulfilled promises, vague contract terms, and underdeveloped delivery capabilities contributed heavily to lots of
second-guessing after deals were rolled out.

But because both sides have “grown up” during the past several years, expectations are more realistic. Each side has a better grasp of limitations and desires for itself and the other party, so fewer surprises will come their way. And any time two parties see eye to eye, less tension and higher buyer satisfaction will result.

As my son heads into his teenage years, I anticipate more snide remarks; he won’t be able to help it, he’ll be a teenager. But I also know it’s the inevitable
precursor to adulthood, and I’ll look back one day and laugh about it.

And as the HRO industry barrels into its second generation, the market will have improved from the early days, but some bumpy roads can be expected along the way. These growing pains will simply be part of our maturation process, and we, too, will look back one day and laugh about it.

Tags: Benefits, Engaged Workforce

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