BenefitsEngaged Workforce

Gauging Your HRO Deal’s Health

By carefully examining these four critical areas of your outsourcing initiative, you can help ensure greater success in achieving your project goals.
by Marc Solow
Now more than ever, HR is a critical function for every company, and making it cost efficient and business focused makes sound economic sense. Our research has shown that HRO is one tactic that can help build competitive advantage by enabling companies to fundamentally switch their cost structure from fixed to variable.

HRO can also help deliver improvements to service offerings, deploy new technology platforms, and provide access to support teams with needed skills and competencies. Sounds like a great proposition, doesn’t it? However, assessing whether it is indeed the right solution, determining how and where it can add the most value, and successfully transitioning to the right supplier is a very complex set of activities. Wrong decisions at any phase of an outsourcing project can dramatically impact the success and return on investment of the outsourcing effort.

As HRO has grown and evolved during the past 10 years, some deals have not delivered the expected results for companies. We have all heard “horror stories” from colleagues in the industry on both the company and the service provider side of the equation. Typically, the issues cited by unhappy adopters of HRO revolve around solutions that don’t meet expectations and transformation objectives like cost reduction, service expansion, quality, and strategic repositioning of HR not fully achieved. These issues are risks that need to be managed in any large project.

While much has been written and discussed in the marketplace on the failure of some deals, HRO does work and is an integral part of the service delivery model in many companies. We have seen it work, played major roles in supporting implementation teams, and helped HR organizations in their efforts to transform through outsourcing. For organizations considering outsourcing or those managing ongoing deals, it is imperative to understand, manage, and periodically assess the health of the arrangement.

As a result, Deloitte has developed a comprehensive HRO health check that enables organizations to assess the maturity and identify gaps associated with their HRO models. This revolves around four critical dimensions fundamental to achieving success. Each is comprised of a set of criteria designed to help measure the maturity of an organization’s design, implementation, and operation of HRO. Whether you’re in the midst of evaluating your strategy, mid-stream into your implementation, in operate mode, or preparing for contract renewal discussions, we believe making sure that you understand where you are and where you want to be along the continuum of an HRO maturity model is a prudent management activity.

HRO strategy is the first dimension. In this area, you gauge the extent by which your HRO strategy and vision are aligned to take advantage of market offerings and add value to a business.
Contract and deal performance, the second dimension, has been designed to measure technical aspects of the deal and the processes and tools to manage it throughout the lifecycle of the arrangement. Our experience suggests that with a well-designed contract, master services agreement, and accompanying schedules, the right governance structures, performance management processes, and tools, organizations and their providers should be well-positioned for long-term success.

Organization structure and people management are often under-resourced by both organizations and their service providers. Here we help you evaluate the effective management and organization of your people (including the supplier organization and the retained organization) to foster a culture of customer service and high performance.

HRO operations and technology is the final area that comprises the HRO health check. It focuses on the implementation, operation, and improvement of key processes, technologies, infrastructure, and enablers associated with processing and managing customer transactions and interactions.

HRO is at an important juncture. Along with the many successful relationships that exist in the market today, there has been a wave of supplier consolidations during the past five years, with new entrants to the market accompanied by major suppliers retreating or exiting from the market. Whether your organization is considering HRO, managing an ongoing relationship, or preparing for a contract renewal, follow a logical path. Utilizing an objective, comprehensive, and data-driven approach to select, measure, and manage expectations and the performance of your outsourcing relationship should better position you to achieve your objectives.

Marc Solow is director of Deloitte Consulting LLP’s Atlanta office. He can be reached at 404-631-3739 or at msolow@deloitte.com.
 

Tags: Benefits, Engaged Workforce

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