Multi-process HRSourcing

So What Has HRO Done for Us?

The outsourcing industry isn’t quite the Romans, but HR certainly receives benefits it often forgets to think about. The impetus lies with providers to help clients rebuild the retained organization.

by Neil McEwen

Readers who remember the Monty Python films will recall the famous line: “So what have the Romans done for us? Apart from paved roads, running water, central heating, common laws and peace.” In an outsourcing context, the senior vice president of HR could ask a similar question: “So what has HRO done for us?”

In an ideal situation, the response would be, “HRO has given us lower costs that are consistent and predictable, increased service quality and customer satisfaction, continuous process improvement, updated software and tools, accurate and common people data for decision support, and allowed us to focus on what is really important—delivering organizational and people capability so that we have the right people doing the right things with the right skills in the right organization in order to deliver our current and future business goals.”

However, the reality thus far is somewhat less positive. Yes, costs have been lowered, often significantly, but the early focus on cost reduction has been a double-edged sword in that the “narrowing” of the service has contributed to a customer view that service is poorer than it was previously. Attempts to deliver consistent service quality have been mixed, and all providers have underestimated the complexity, difficulty, and the length of time required to extract and re-engineer HR processes from disparate and often decentralized organizations into their service centers and drive the adoption of self-service tools and access.

As a consequence, service improvements—real and perceived—take longer to appear and result in unmet customer expectations. For the provider, the business case is “strained,” revenue flows appear later than anticipated, and initial costs spiral.

On the other hand, people data have improved significantly, especially where organizations have been able to utilize HR ERP systems and common data fields as well as standardize and simplify reports to focus on what is really required to run the organization. However, many organizations have not been focused in their transformation of the retained organization. This latter issue is fundamental. Unless the retained organization is transformed—that is, the majority of HR generalists are replaced by commercially astute and people-centric HR business managers—HR expertise is confined to a small number of strategy and policy gurus. And unless HR sets up a tight service management organization with clear accountability to manage both the internal customers and third-party relationships, the outsourced HR service will be sub-optimized.

So, if the reality of HRO has not met the weight of expectation from a provider perspective, what are the improvements they need to make to close the gap and deliver the ideal set out above? Specifically, providers need to address the following:

• Making the Deal. Be honest in what can and can’t be done, and be realistic about how the transition will work, especially in multi-process, multi-country deals. Insist that the client build a new retained HR organization—throwing HR processes over the wall and expecting the provider to deliver increased quality and reduced cost is not an option. Make clients totally aware of the resource, time, and effort necessary to push through what is a very significant organizational change. And be willing to say “No.”

• Making the Deal Work. Agree on realistic timeframes and manage client expectations around transition and improvement. Build increased capability in transition and operational management of outsourced processes. Work with the client (and third-party evaluators) to establish an effective governance process to manage day-to-day business, escalations, and change controls. Look for continuous improvement to be built in the service—delivering to the initial SLAs is not enough.

Clients, too, need to think differently. They need to understand that there are no shortcuts—you get what you pay for, and HRO is not a commodity activity.

However, as the seller, HRO providers must shape the market through consistent and effective delivery so that clients can be certain of the benefits that outsourcing will deliver; make sure that providers are consistent, capable deliverers of process quality and improvement; and ensure that the partnership with a provider can help them achieve the strategic transformation they desire. In doing so, they help the SVP of HR to answer the question, “So what has HR outsourcing done for us?”

Tags: Multi-process HR, Sourcing

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