Multi-process HRSourcing

HRO Boosts Unilever’s Brand-wagon

Accenture’s just-announced seven-year, $1 billion HRO contract with Unilever sets new standards for scope and scale. In an HRO Today exclusive, we meet the HR transformation leader behind the initiative and his secrets to HRO success in 100 countries simultaneously.

by Jay Whitehead

For those of you on the cocktail-party circuit, here is a business trivia answer for you: margarine launched Unilever.

Yes, the gooey yellow faux butter made its European debut in 1927 in Rotterdam, just south of Amsterdam, and began Unilever’s remarkable journey into 100 countries and to today’s employee headcount of 208,000. Many dozens of acquisitions later, the modern Unilever is anything but a one-product company.

Today, Unilever sports $60 billion in sales and an army of food and personal care brands—12 of which generate more than $1 billion each in revenues. The company’s most well-known marks include Knorr, Hellmans, Dove, Lux, Lipton, Ponds, Bertolli, Sunsilk, Persil, Vaseline, Wishbone, and Bird’s Eye. But vast markets and marquee retail names only set the stage for this story. The story is in how Unilever meets the operational challenges of being really, really big.

These days, Unilever is quite self-aware about its status as a global goliath. As a result, it has come face-to-face with many macro market forces that smaller firms never see. Among these is a new hyper-accountability to customers and shareholders that goes all the way up its supply chain (for an example, check out Unilever.com’s remarkable CSR, or corporate social responsibility pages). Another is the maturation of the firm’s traditionally core markets in Europe and North America, a hard fact that has driven it to the farthest reaches of the globe to find new product markets. (Here is a geography test for you: on the same Web site, visit the list of the countries Unilever now serves and see how many you can place on a map. I travel all over the world, and even I misplaced three.)

And here are two more mega-trends facing Unilever: managing the multinational workforces within acquired companies in emerging markets (consider the problem of recruiting salespeople in countries with sales-phobic cultures or training customer service folks where serving others carries the taint of a lower social status), and brutal brand competition (both battling global giants such as P&G as well as countless tens of thousands of local entrenched rivals in dozens of product categories). In this environment, survival has meant adjusting rapidly. As Sandy Ogg, Unilever’s Chief HR Officer puts it, “The company has become quite skilled at change management.”

In mid-2005, Unilever’s top management realized that staying competitive would mean cutting back-office and administrative costs drastically. As a result, the company set a gargantuan cost-cutting target: $900 million in near-term savings. In the end, only one tool can deliver results like this. Welcome to the world of big-time business process outsourcing.

ROLL THE FAO, ITO AND HRO BANDWAGONS

Last December, Unilever first jumped on the BPO bandwagon with a full-scale FAO contract with IBM, covering the firm’s global finance and accounting transaction and automation needs. Then in April, Accenture picked up Unilever’s European IT services contract. Next, on June 6, in the biggest of the three contracts, Accenture HR Services was awarded a seven-year HRO pact for Unilever’s entire enterprise. Analysts have pegged the value of the HRO contract at little more than $1 billion, making it the world’s largest HRO contract on an annual billing basis.

The deal includes all of Unilever’s HR transactions, administration, and HRIS requirements globally. Of the 3,300 HR executives in Unilever’s staff, the company estimates that less than half will be impacted by the move, with hundreds potentially moving from Unilever to Accenture.

To help put the record-setting HRO contract in perspective, I caught up with Reg Bull, Unilever’s senior vice president, HR transformation global in his Walton-on-Thames office southwest of London. Bull is the man-on-point for the company’s HRO initiative. After speaking with him over two days, I understood that while the Unilever executive knows that his deal is the biggest so far, Bull also knows that he is glad many previous global HRO decision makers went before him and took some of the arrows.

Bull reflects the classic profile of a senior manager of a massive corporate multinational project: a thirst for learning from those who went before him, a willingness to go anywhere anytime to sell his project to stakeholders, fluency in the language of details and finance, and a matching comprehension of the multicultural soup that is today’s Unilever. In fact, Bull’s team features people of eight nationalities who serve internal clients who speak more than 50 languages and live in more than 100 countries.

Bull is realistic, even reverential, about the effort needed to get the HRO accord executed.

“Contracts of this scale don’t come about when some guy in Cincinnati says, ‘I want to do a global deal, go get it done.’ Quite the contrary. It means a concerted effort of an organization that is focused on being competitive in every aspect,” he reflected. “It involves lots of sweat on lots of brows.”

When pressed, Bull counts the number of executive approvals involved in the decision at 50.

“First, I needed the board to generate funding,” he recalls. “Then, I needed the complete support of global business leaders and regional leaders in finance, supply chain, customer development, distribution, and several other units. Getting them all on-board was a major campaign.”

Bull’s internal selling effort was prodigious, but the main drivers behind the decision, as it turns out, were external. As he puts it, “The external market is the ultimate measure and the ultimate inspiration for everything we do.”

Bull builds the back-story behind the decision like this: “In 2001, we were keeping our eye on HR BPO. The BP deal was going, BT was rolling ahead, and IBM was outsourcing its HR to Fidelity. We took great note of the creeping professionalization of the HRO space. [Enterprise-level HRO] was the work of artisans for a while, but it got escape velocity quickly. Despite this growing momentum, combining HR transactions with HR services that required a human service component was still a big question for us.

“So we decided to run some tests. In the U.K. and Netherlands, we ran two insourcing projects and call centers that involved bits of several HR processes. In our Latin America region, we looked at a mini HR outsourcing deal with IBM, which still exists. Back then, four years ago, I remember asking a blue chip consultant about HR BPO at one point and I got five answers. Then nine months later, I got completely different answers. I came to the conclusion that the game was still very early but that soon it would be the right time for us to starting making a move into HR BPO.”

According to Bull, that time came in 2004 with the announcement of Procter & Gamble’s HRO deal with IBM. “When we saw our most direct competitor getting in, we knew we could not be too far behind,” the Unilever leader admits. To make the competitive picture even more vivid, being an Anglo-Dutch company, Unilever had links with Royal Dutch Shell, British Petroleum, and British Telecom, all of which were delivering strong results with their enterprise-level HRO programs. Bull recalls realizing Unilever was unique among its peers and competitors in having not jumped into HRO.

“And we had to ask ourselves the hard question, ‘they had gotten their deals done, why not us?’ ”

As a result of advances in enterprise-level HRO, Bull knew that by early 2005, the economics of in-house HR had changed forever. “I know it sounds trite, but there was a paradigm shift,” Bull says. “In 2005, our conclusion was that it was impossible to do a self-build that is endurable, singular, and aligned with our business. We could not keep HR top-of-mind by staying in-house. So in early 2005, we decided to move forthrightly into HRO.”

If there were any obstacle to the HRO effort, Bull knew it would be the complexity of the company’s existing HR infrastructure. He explained it like this: “Remember, Unilever is built from the ground-up. We buy companies and build around them. The acquired HR organizations reflect the company behind them. And in our HR teams, we had total heterogeneity. It was really good HR people, doing the work 100 different ways. We were too big as a function. We were not sharing our best stories. Our internal governance was not good enough. By bringing in an outsourcing component into our DNA, we could reshape ourselves internally, including adding some really important standards.”

But Reg Bull had also done his homework on the vendor community. He knew to take pains to tease the vendors’ sales pitches from their true delivery capabilities. And he understood there were actually only two or three providers who could execute his contract.

“When it comes to global capabilities,” he says, “this industry has an appetite larger than its ability to truly deliver. There were some (bidding providers) with ridiculous levels of ambition. Some made bids, saying this is a market-making deal, whatever that means. Some were saying this was the making of their organization, which meant that most of the expertise would come from Unilever. Some could not even identify some of the countries in which we do business.

“What we really needed is someone with an approximation of a global organization now. We needed someone who is already doing BPO in a global environment where there is no wage arbitrage, such as Cote d’Ivoire. Everyone knows how to do payroll in Germany, Belgium, or the U.S. and recruiting in the U.K. These practices are generic. It’s fair to say the HRO community knows how to do the easy things, not the hard things. There will be maturity in the market when there are five providers who can tell you how to do management recruiting in Bhutan.”

According to Bull, Unilever’s selection of Accenture HR Services hinged on meeting the operational people and knowing they had the depth to deliver, rather than just a wild set of aspirations. The fact that Unilever has had other dealings with Accenture also seemed to help, according to Bull.

“Their knowledge base on transformation is impressive, per their existing clients. And in the learning area, Accenture Learning Services is one of the strongest in the market. For Unilever, Accenture’s learning and recruitment offerings will be high profile and high value.”

Bull is also quick to note the fundamental role played by Unilever’s sourcing advisory firm EquaTerra. “These guys (sourcing advisors) exist for a reason,” Bull said with emphasis. “They are this market’s major repository of knowledge. We would not have been able to conclude this deal without their intervention.”

But the most telling moments in the selection process came during his calls to provider references.

“I had a very structured approach to the calls; 90 minutes each,” he explained. “I spent three complete days on reference clients near the end of the process. By then I had worked with the final two providers for six months. It was a very powerful experience. During the calls I also talked with other clients about how they handle health and safety issues in Africa. I even spoke with direct competitors. We share similar experiences and difficulties. They have the same trouble recruiting in Vietnam that we do. We have a sort of functional camaraderie, even though in the market we are ruthless with each other.”

THE NEXT PHASE
As Unilever’s HRO process morphs from one of decision-making to execution, Bull’s concerns change from vendor selection to vendor management. When interviewing his peers at BP and BT, for example, he found that those organizations had critical challenges managing their partnerships. One common problem in each of the previous deal’s early phases was that the client staff was unable to keep pace with their provider’s activities, which resulted in governance that was dominated by the vendor. Fortunately, said Bull, “We have a lot of experience managing partners here at Unilever. By declaring that the beast is contract management, that should help keep us focused. We know we have the abilities, and in typical fashion we will swarm over (the challenges of managing the partnership with Accenture HR Services) and execute well.”

Bull’s concern in the area of contract management is well-founded, as I soon discovered. When I ask him about the key metrics by which he will judge Accenture’s effectiveness, he replies, “I struggle to answer this question.

“While Accenture has counseled us that typically there are 12 to 15 service level agreement KPIs, we insist that across a range of geographies there are 70. We acknowledge that 70 is rather a lot. But the reason we have 70 is that measuring productivity in Germany is different than in Mozambique, and therefore you need different measures that reflect our extraordinary geographic diversity.”

Bull verified that his HRO contract shifts significant responsibility and accountability for certain functions back on the local managers and employees. He knows that this shift can mean healthy gains in productivity. But just how quickly employees and line managers will pick up on their opportunities and responsibilities is another question.

“The HRO contract can be a whipping boy or girl,” Bull conceded. “People management is put back on the plate of the line managers. What we will discover will be both a revelation and a revolution.”

As for HRO’s impact on the practice of HR in America and around the world, Bull seemed genuinely concerned for professionals whose resumes are increasingly out of touch with the HRO-flavored market.

“It’s amazing,” he said, “how many resumes I get that no longer apply. OE and OD people will be in more demand, especially those who have consulting background or who have helped manage another strategic HRO provider. The jack of all trades will not be as in demand in the modern organization.”

As we wrapped up our conversation, Reg Bull suddenly turned pensive, clearly concerned about the execution task ahead. I asked him about his mood shift. He said he failed to mention a critical factor on which he is relying for success.

“When you hire a McKinsey, it’s a three-month project, in and out. There is no need for a tight cultural fit.” But for this seven-year agreement, he pointed out, the need for cultural compatibility is much greater.

“It’s the 80-20 rule,” Bull continued. “Most providers can deliver the 80 percent, but what about the other 20 percent? So I asked all 20 on my team to fill out questionnaires with 300 questions on price, services, technology, which we update regularly. All of them ranked Accenture very high. With a process this long and a project this vast, it is so easy to get lazy, so we measure everything. With so much at stake, laziness is simply unacceptable.”

Reg Bull’s Six Success Secrets for Global HRO

1. Write Your RFP. Then Rewrite It Until It’s Right.
Realize that your RFP is the roadmap to your journey. When you write your RFP, write it, go away for the weekend, and then re-write it. Make sure it is as exacting and detailed as possible. Otherwise, you get bumped around during the process by providers whose capabilities vary and who will exert some pressure to go with their strengths and avoid their weaknesses.

2. Go Advisor Hunting.

Find yourself a sourcing advisor like EquaTerra, TPI or Everest, especially if you are a virgin to the HRO game. Reg Bull is certain that his advisor, EquaTerra, has added millions in value for the next seven years under the pact.

3. Make Money a Main Concern.
Just because HR people do not always have strong support from finance to make decisions is no reason not to demand finance help for a decision as critical as an HRO. Bull said he understood early on that his team had to follow the money closely. He put in a financial team that was completely dedicated to analyzing the financial details.

4. Meet the Provider’s Workers, Not Just the Sellers.
Make sure you see the operations people of all of the providers. Sometimes providers by design make it confusing as to who is a salesperson and who is the operations head. Who is the actual shift manager in Bangalore? Find him and have a cup of tea and understand how he will get the work done. Then see the bench strength behind. Find the person who will perspire the same amount as you over the service delivery levels.

5. Understand Your Own Level of Flexibility.
Know what you are going to be flexible on, and that does not mean just in negotiation. Be clear about the trade-offs in all areas. Are you set on that brand of performance management system? Will you compromise? From a process mapping perspective, are you willing to go with the provider’s process? Have conscious discussion about it with your team. Don’t dig trenches around a process that you want to maintain simply out of historical prejudice.

6. Know Your Money Sources Before You Sign.
If yours is a global deal, don’t put yourself in the position of having to tin cup around the globe to get your money after you have signed the contract. Get the money centrally and have it allocated to the local businesses. But first, talk to the local stakeholders because they are being charged by the global organization. During the discovery process, Unilever talked with many other organizations that forgot to have their funding sources buttoned down, which led to a lot of energy loss after the signature.

 

Tags: Multi-process HR, Sourcing

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