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When Firehouses Catch on Fire

Ironies aside, will service quality ever cease to be a point of contention between HRO buyers and their providers?

by Andy Teng

Life is full of ironies. When I was a cub reporter at a daily newspaper, I once covered a fire that had broken out at a local firehouse. Then there was the time when I wrote an obituary for a local man who had committed suicide. It turned out he was the morale officer for his Coast Guard unit. Years later, a local county prosecutor known for his tough stance on crime went on the lam for cheating his business partners. He ended up taking his life in a seedy motel room after cops had him surrounded. Strange and sometimes tragic how life works.

So it was no surprise that these episodes came back to haunt me when I recently could not reach our service rep at a large, national PEO. (I’m withholding the company’s identity because my aim is not to embarrass the firm.) So the irony was not lost on me as someone who regularly writes about the benefits—and the pitfalls—of outsourcing HR.

As the editor of HRO Today, I’m often bombarded by service providers who sing the praise of outsourcing HR. Some of what I hear is indeed compelling reason for outsourcing; a lot of it I can add to my garden. And this is what buyers contemplating HRO face in this market: an always rosy picture of HRO painted by providers.

I can envision the angry letters now: PEOs are not HRO enterprise providers, just like editors are not brain surgeons. That’s a valid point…if the same complaint weren’t voiced by some of the biggest buyers of HRO.

The interesting aspect about being a journalist is you hear both sides of a story, and countless times I have been told by large global HRO buyers that outsourcing has been both a savior and a headache for them. In most cases, the good outweighs the bad; in a few, it’s the other way around.

Not to condemn the entire industry, but HRO is a classic example of an immature market. Early pioneers make headlines with big signings, accelerating market momentum. Hungry sales and marketing VPs in related fields try to cash in by incorporating trendy acronyms into their corporate names and promising the moon. Sales associates push service offerings before they are ready to come out of the oven. First wave of buyers are left with a bitter after taste following their first bite.

It’s a lesson that many in the buying community have learned the hard way. The problems aren’t as severe as, say, missing payroll or failing to report taxes, but to those who thought HRO was the pain-free road to transformation, they are finding out that there is no shortcuts to a more strategic HR. While HRO might be the block and tackle, HR must still supply the pull.

As it turns out, one of the industry bottlenecks right now is not enough pulleys. Many enterprise HRO providers continue to be hobbled by capacity constraints. That’s why many of them have quietly stayed on the sidelines during the past year. Sure there were a few headline deals in 2006, but by many accounts, the pace of deal-making has reduced from a full boil to a simmer. Big providers such as Hewitt and Convergys seem to be taking a breather since racing through 2005, working the kinks out of a bunch of large contracts they’ve executed.

That brings us back to quality of service delivery. Even as providers figure out how best to service their clients, the occasional stumble—small or large—is expected. That’s acceptable by most standards. What’s surely not acceptable to buyers is provider reluctance to accept responsibility and address these issues. Even more maddening is refusal to acknowledge there is even a problem. For the intrepid buyers who have risked their HR careers to embrace outsourcing, they deserve better.

So as I continue to wonder how many more weeks before my call to the service rep is even acknowledged—fortunately a colleague clued me in to my original inquiry—several new questions have come to top of mind: when will the industry reach a state of maturity in which service quality is no longer an issue, and will HRO buyers have to pay through the teeth for such white-glove treatment. I suspect we have a few more years to go before we get to the answer.

Tags: Engaged Workforce, Multi-process HR, Payroll, Sourcing

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