The difference between managing a global enterprise versus a collection of country-specific entities begins with the choices made around process, technology, and service partnerships.
by Yvette Cameron
The HRO industry is maturing. Service providers are ingraining more standardized approaches to ensure scalability and repeatability. Buyers are stepping back from tenaciously held beliefs that competitive advantage depends on unique HR processes. And both sides are focusing on engagements involving mature processes such as payroll and workforce administration.
For organizations looking to achieve global payroll and/or HR harmonization, the above trends would seem to bode well. From the earliest planning stages, however, organizations should ensure they are selecting the right processes and engaging with providers enabled by the right technologies to create a strong outsourcing foundation.
Making the Right Scope Choices. The challenges to successfully outsourcing HR and payroll on a global basis are many. Priorities and process applicability can vary by region and country. As I have pointed out before, individual processes themselves vary in suitability for standardization and global harmonization. Processes with high potential for standardization may benefit significantly from economies of scale in outsourcing, whereas those already optimized will not. The benefits of harmonizing processes globally may not be sufficient to offset the business disruption of changing those processes, or the gain may be too minimal to justify the investment.
Owing to its high volume, high cost, high potential for standardization and low impact resulting from process change, global payroll is a good starting point for establishing a global outsourcing platform. A bulk of the activity around payroll outsourcing revolves around the actual gross-to-net calculations, where it is the number and types of deduction calculations that provide the greatest variance. Reporting and compliance can vary significantly by region. The key here, as with other local variations to global approaches, is to differentiate true “legislative requirements” from “comfortable practices” that would cause resistance to the use of global practices.
Once global payroll is established, time and attendance and workforce administration are natural progressions along the global harmonization path. Other strategic HCM processes (recruiting, learning, and others) may also be candidates.
Ensuring the Right Technology. Getting to outsourced global HR and payroll processes demands technology that supports repeatability on a “glocal” level (that is, global requirements with scalable local variations). Beyond support for multiple languages, currencies, and time zones, underpinning technologies must also support “multi-tenancy”—multiple customers enabled on a single instance of the software. This drives the transaction volumes necessary for affordable outsourcing. Consider, for example, contracts involving pan-European payroll, where there are often small numbers of employees across a large number of countries. Without the aggregation multi-tenancy enables, buyers are often driven to discrete outsourcing contracts in lieu of the desired global approach.
Look under the hood of your service provider’s delivery engine to understand how their technology specifically supports scalability in low-volume areas as well as other critical factors such as deployment of global best practices.
Understanding Provider Approaches to Global Platforms. In times of economic contraction, there will naturally be a renewed focus on strong market players who have garnered the trust of the market and have proven sustainability. The big will get bigger, due in part to their ability to recoup fixed costs on a large scale. Providers with a common platform approach, enabled in a one-to-many model, will be better positioned to not only survive but thrive in these challenging times.
The approaches of global HRO providers, and those seeking to serve the global market, are varied. Some have developed their platform based on the proven global capabilities of an ERP, such as NorthgateArinso and ADP, who each serve their multinational customers on a SAP-based platform. Other providers mix core HR and payroll technology with numerous talent management solutions to deliver a standardized, if not fully unified, global platform. In at least one case, there is an aggregator of more than 100 different local providers who delivers its version of global payroll and HR services. The choices are broad, and a critical question to be answered is, “Will the provider help me manage a global enterprise or merely a collection of country-specific entities?”
Consider these factors as you look to your global outsourcing provider. Consider also the impact of their underlying technologies on the success of your carefully chosen outsourcing initiatives. While the best solution will be situational for each organization, understanding the choices and trade-offs can make the important decision of global outsourcing a bit more manageable