Keeping buyers happy in the long run requires a significant amount of work. Understand there are ups and downs on this ride, so be prepared for the bumps in the road.
The rollercoaster ride to a successful HR outsourcing partnership between buyer and supplier starts out on the crest of the hill with high optimism, hopes, and expectations. Then the HRO relationship rollercoaster really takes off—downhill. Fast.
There is a common pattern in outsourcing relationships that is part of the HRO start-up life cycle as revealed by several years of Towers Perrin’s HR Outsourcing Effectiveness surveys of large company HRO clients. This is further confirmed by the real-world experience shared at the HRO Buyers’ Group summit meetings.
Deal satisfaction is highest at deal signing but then drops sharply and bottoms out after year one, climbing back and stabilizing in years two and three. The speed of the drop has changed—it is happening earlier as buyers are less tolerant of slow starts and demand a quick drive to issue resolution. Prior studies had shown a “honeymoon period” where satisfaction remained high during implementation and transition and then dipped.
What causes the drop? The answer is the simple gravity of reality. The fuel of the sales pitch, deal pursuit, and consummation is heady. It gets you to the top of the first rise but does not last long. The deal team has stepped aside, and the implementation team remains on the rollercoaster—revealing actual vendor capabilities around turn one, uncovering unaddressed process and technology issues over the next hill, and uncovering misaligned client expectations in the loop. Then on the straightaway, the HRO buyer has a full view of the hard work needed to create a sustainable foundation for a long-term business partnership.
What can help? Buyers are looking for providers that will meet the financial terms of deal, quickly and consistently meet service level expectations, and have the staff quality and subject matter expertise to deliver the promised improvements. Study results and participant observations from the HRO Buyers Group indicate that the more upfront investment (in both staff and funding) an organization makes in governance, the more likely it is to be satisfied with its outsourcing arrangement.
While the HRO roller coaster’s early path through a traditional change management style dip has not changed in the first few years of HRO growth, other buyer expectations are changing. Cost is still king in vendor selection criteria, according to this year’s survey data. In addition, buyers are looking for a partner able to deliver on technology capabilities and process transformation with the flexibility to meet changing HR and business needs.
What’s next? Fifty-five percent of the 38 survey participants, representing billions of dollars in total contract value, are more than 18 months into managing a large HRO relationship, and some are at or near contract renewal. Once the basics of meeting service levels, customer satisfaction, and delivering on the financials are met, buyers place great emphasis on the vendor quality capabilities needed to ensure long-term success, continuous improvement in service quality (cited by 100 percent of buyers surveyed) and the ability to change and grow to meet emerging needs (also cited by 100 percent).
Part of the intent of the HR BPO Advisory Board (aka the HRO Buyers Group), is to share what buyers can really expect and to help vendors understand what buyers really want. We each made the choice to serve our companies and further the journey of HR by making outsourcing a major part of our delivery models. More than one member has already bought a tickets to ride again.
All the benefits of the HRO value proposition are out there. When thoughtfully and deliberately planned and applied, these benefits increasingly extend beyond cost and convenience into value-added process and technology improvements. Outsourcing can also provide access to advanced subject matter expertise that aid in the internal HR organization’s transformation into strategic business partners that deliver business-impacting results. So climb in, hold on, and with your eyes wide open, enjoy the HRO rollercoaster ride!
