Three key steps to think about when determining what to outsource.
It’s that time again: to look into the crystal ball and envision what 2008 will hold for HRO. If I had to explain my predictions in only one sentence, it would be: In 2008, more HR leaders will begin to look at talent from a global perspective and even look at outsourced roles as part of the overall talent mix—and value—to their organizations.
In the past few years, HR departments have struggled to decide how much and what to globalize. And they’ve struggled more than other business process organizations; I’ve seen more resistance to globalization among HR personnel than others.
More recently, HR departments have shown a willingness to outsource, but only on one end of the extreme or the other—either outsourcing very small pieces of a process to onshore or nearshore locations or outsourcing entire end-to-end processes to large onshore providers such as Hewitt.
That approach certainly leaves room for improvement. Sourcing to onshore locations, for one, will limit an organization’s ability to scale up its outsourcing. And shying away from outsourcing single processes leaves a huge opportunity for gains unrealized.
But company executives—CEOs, CFOs, and COOs—are beginning to challenge HR leaders to clearly identify the ROI for each process. If an HR department head wants to implement an Oracle or PeopleSoft system, for example, she’ll have to explain the value it will add—how it will improve accuracy or efficiency or reduce the department’s head count, for example.
Increasingly, HR leaders are being questioned about their departments’ role as cost centers within their organizations and are being asked to justify their headcount. To make that justification, HR leaders are reviewing the way their departments are structured. They’re questioning which processes are value-added and which can be outsourced.
In 2008, HR leaders will continue to face these tough questions. They’ll have to categorize each process into one of three groups: transactional processes, collaborative processes, and strategic processes, and decide which are non-value-added and can be outsourced.
In HR, that’s more difficult to do than in some other business process areas, because the cross-linkages between the three categories are stronger than in other areas.
To overcome the unique challenges that they face in determining which processes to globalize, HR leaders will be tasked in 2008 to take three steps:
• Change their Mindset. The answer to where and how an organization needs to operate is evolving. But wherever HR processes are performed, the department head is still accountable for the end-to-end result. For example, in an environment in which 60 out of 100 process steps may be performed in India or China, the next 20 may be performed in-house, and the final 20 may be performed in Canada or Mexico, it can be difficult to manage the details so that the end result is as good as or better than if all 100 steps were performed internally. To manage those details and deal with a truly globalized process chain, HR leaders will have to change how they think about how processes are performed and their role in overseeing those processes.
• Identify Process Metrics. Too many in-house HR functions don’t have the measurements in place to ask questions about accuracy, compliance, turnaround time, or other important performance-related issues. With a process chain that combines offshore, in-house, and nearshore delivery, clearly defined process metrics are key.
• Develop a Discipline of Reviews. How often does a function head review processes to drive accountability? With a globalized process chain, reviews will have to be conducted often and used to evaluate performance on a set of clearly defined metrics. In 2008 and beyond, this discipline for conducting reviews will have to become imprinted in HR managers’ DNA.
For companies that haven’t started to review the way their HR is structured and have to ask which processes are value-added and which are not, 2008 will be a year for major change. These companies will have to start by developing a clear understanding of their own in-house processes before they move on to handle more complex operating relationships. For firms that have started to globalize, 2008 will be a year to tackle the steps I outlined above. If they do, they’ll begin to realize the gains associated with keeping value-added processes in-house and shipping out the rest.