In a first, the industry’s biggest HRO buyers come together with providers and advisors in meeting of the minds to discuss how to improve outsourcing.
Successful HRO contracts are hinged on the idea that employers and service providers forge partnerships that transcend traditional buyer-vendor relationships. So when the industry gathered for the inaugural HRO Summit conference recently in Wesley Chapel, FL, the event marked the first time that the market’s biggest practitioners came together with its leading providers to hold frank and open discussions about improving outsourcing practices.
The three-day event, which included an exclusive meeting of the HRO Large-market Buyers Group as well as awards recognizing key contributors to the industry, was the first time that vendors have been included in what had been a buyer-only event in the past. Although the opening day featured buyer-only sessions, the rest of the conference promoted an open exchange of ideas between employers and the vendors on whom they depend for payroll, benefits administration, and a host of other HR-related services. Key sessions at the conference also focused on oft-mentioned issues such as governance, the retained organization, talent management, and benchmarks.
By many accounts, the Summit broke new ground for the industry, especially considering that in the past the Buyers Group prohibited vendors at their meetings. However, this inaugural event signaled a shift brought on by new leadership in the organization, comprised of about 50 enterprises with at least 10,000 employees each. By holding its 10th meeting in conjunction with the Summit, buyers indicated that they wanted greater input from the vendor and consulting community.
Moreover, the meeting also brought attention to the burgeoning middle market, which is expected to be the next boom area for the HRO industry. Considering that the HRO Association is organizing a new mid-market interest group, the Summit also gave companies in the segment an opportunity to raise awareness around the unique needs and limitations of organizations with 3,000 to 15,000 employees.
“It’s a great opportunity for us to get together and talk about the challenges of the middle market,” noted Kevin McDonald of E.W. Scripps, a founding buyer company in the mid-market interest group.
In all, the Summit attracted 152 attendees representing buyers, providers, sourcing advisors, and others within the industry. Offering more than a dozen presentations, the event featured working sessions, case studies, and research focused on outsourcing successes and failures. It joined various stakeholders within one forum to allow them to share gripes, communicate innovations, and generally speak about how to make outsourcing more effective.
One key attraction for attendees was to hear about successful case studies. In Kimberly-Clark’s case, outsourcing helped the company achieve some notable changes in HR, even though some old-time employees at various manufacturing sites were not quite ready for HR transformation, according to Liz Gottung, the company’s chief HR officer, who spoke at the Summit. She recounted how in 2005 the consumer goods company (a maker of popular diapers and other nonwovens products) wanted to reduce headcount and shift $80 million to $100 million from internal costs to invest in brands and product innovations. As part of that strategy, Kimberly-Clark decided to outsource a number of HR services to Accenture as well as benefits administration to Hewitt. She recalled the initial resistance internally, especially from those supporting HR at various sites.
“Nobody wanted to mess with HR. It was fine the way it was,” she said, recalling that after outsourcing and implementing self-service, even the CFO griped about using the system. “Our CFO told me a while ago, ‘I signed up for self-service, but I didn’t mean it.’”
But the truth was HR at Kimberly-Clark had been highly inefficient and offered little in terms of automation and self-service. Moreover, many processes were not documented, which meant a lot of tribal knowledge had to be passed on from person to person. Gottung said HR had to become leaner so it could support Kimberly-Clark’s goal to cut headcount by 10 percent.
Gottung said since signing its outsourcing contract in 2007, the company has experienced its share of difficulties as well as achievements. Having gone live in North America so far, the organization has overcome most of the initial problems and is now focused on the thornier area of talent acquisition. Still, as evidence of HR’s growing importance to the business, it is now brought into discussions around mergers and acquisitions.
In Kimberly-Clark’s case, adopting HRO was one way to transform an existing HR organization. For a new organization such as Veyance Technologies, a spin-off from Goodyear that was purchased by The Carlysle Group in 2007, building HR from scratch was also an opportunity to leverage all that outsourcing could offer. Laura Domchick, director of global HRO for the firm, recounted her company’s experience with implementing services from provider Ceridian.
Even by spin-off standards, Veyance required a global and comprehensive HR solution. As it came off its parent company’s services, the organization needed to establish its own HR system. Because it operates in 22 countries, the business hosted a disparate network of HR systems at the time it was being spun off. Moreover, its policies and processes were largely decentralized. Further complicateing the move was that since the spin-off, it has made five acquisitions.
Like many corporate orphans, Veyance had little time to establish its own HR services. Domchick recalled that when it became clear the spin-off would occur, the new entity needed to act quickly. “The things that we needed to do, we needed to do with speed, simplicity, synchronicity, and with success,” she told Summit attendees.
Of key importance was the mandate to establish global visibility and alignment. Additionally, it wanted a scalable delivery model so that as the business grew in some areas and retracted in others, it could adopt accordingly. Outsourcing seemed to be the right solution, but as Hank Johnson, an advisor with sourcing firm EquaTerra, which worked with Veyance, explained, the company needed to be clear about how it would adopt outsourcing; in particular, it needed clarity on its statement of work (SOW).
“If you screw up the statement of work, the whole deal will fall apart,” said Johnson.
So the company immediately focused on the SOW as well as governance, and by spring this year, it started implementing a contract it signed with Ceridian, with phase one recently completed in October. Under the accord, Ceridian is providing payroll, HRIS, self-service tools, call-center support, and time and attendance in the U.S. and Canada as well health and welfare in the U.S. Furthermore, the provider is also managing leave administration and giving Veyance integrated recruiting tools.
Domchick said although the organization is examining ways to make more improvements in HR processes, she described the initial implementation as successful because it was on time and under budget. She credits this to the company setting clear goals and winning executive buy-in from the start. She also advised prospective buyers to involve key stakeholders from all corners of the world to standardize as much of the HR process as possible.
Veyance Technologies and Kimberly-Clark were just two of the successful HRO case studies presented at the Summit. David DiSalvo, the DMS People First director with the State of Florida, also reviewed his organization’s HRO contract with Convergys in one of the largest and most comprehensive deals engaged by state government. Since signing the contract in 2002, Florida now has 232,000 users of the People First system and service centers established through the contract, with the majority from state agencies (139,000) followed by retirees (48,000), and Florida university employees (45,000).
Although DiSalvo conceded that the state has at time struggled with the outsourced services, he said the benefits have been clear, including improved business controls, system security, and audit tracking. Employee and managers now largely use self-service, some processes have been standardized, and seven legacy systems have been replaced by an ERP.
Like his counterparts on the commercial side, DiSalvo advised all buyers to pay extra attention to planning. “Possibly the most important element in the success of a project is proper planning,” he urged.
In addition to case studies, the Summit also featured a number of speakers on topics as varied as talent management trends, HRO metrics, learning outsourcing, the recruitment market, and more. Buyers also recognized the contributions made by sourcing advisory and consulting firms TPI, Towers Perrin, and former AT&T HR executive Linda Merritt.