Multi-process HRSourcing

Standards-setting Body Helps Accelerate Market Development

Even after years of development, the HRO market still lacks standards for some basic issues. An industry committee is hoping to change that.

by Andy Teng

When Linda Merritt, one of the architects of AT&T’s outsourcing engagement with Aon Consulting, began putting together the early HRO deal, she started from scratch. With few predecessors to look to for guidance in 2002, her team painstakingly had to establish a foundation that included fundamental agreements such as pricing. It was pioneering work in the rawest form.

“By focusing so much time on terms, we spent a lot of energy on basics, which should be a given. That could have been time spent on discussing what if circumstances changed, how would you deal with that,” Merritt recalled. She added that as a result, AT&T couldn’t give as much focus to issues that had a more strategic impact on the outsourcing effort and missed opportunities to address HR needs with “higher value.”

But that was in 2002, when the HRO industry was pre-nascent, barely a twinkle in the eyes of HR buyers, sourcing consultants, and a handful of then-bumbling providers. Much has changed since, as the industry has grown up significantly. Providers are more capable, buyers are savvier, and sourcing consultants have a better perspective of the landscape. Yet many of the deals being cut today are still not benefiting from the lessons learned in 2002, and Merritt said it’s time to accelerate that part of the industry’s development.

She is heading up an industry group to establish standards aimed at helping new HRO buyers reach deals more quickly, implement them more effectively, and raise their overall success level. Formed at the beginning of this year, the Research and Standards Committee of the HRO Association is hoping that by establishing industry standards, buyers can spend less time on basic questions and focus on the “higher value” of HRO.

“Right now, to pursue these large-market deals is a long, stressful, and expensive proposition for everyone, whether you are a buyer or provider. For doing multi-tower deals, there isn’t much information out there available to give you a base to start from,” said Merritt, who recently joined as acting chair of the committee. “That takes a lot of advisory help and legal assistance. Months can be spent to develop terms and pricing. We would like to see that information basic and transparent.”

The goal of the committee, according to the HROA, is to solicit industry input on best practices that are eventually considered for standards. By helping new buyers to quickly understand various aspects of HRO engagement, the buyers are able to reach agreements with providers more quickly, reduce costs and energy spent in areas such as requests for proposals (RFPs), and get a clearer understanding of implementation, governance, and change management. Also, because deal scope often changes after a contract has been implemented, buyers can better spend their time preparing for “scope creep” than on terms or pricing.

Already, the committee has put out several documents for review. One is on unit pricing for services—which is being reviewed by a number of industry leaders including sourcing advisors, who often help negotiate pricing for buyers. Another is on service level agreements, which can vary widely depending on the engagement. According to Richard Crespin, who heads up the HROA, the documents were under a 30-day review, and following that period, the committee will reconcile the comments and put out a final ruling on the proposed standards.

As a buyer, Merritt said the effort will have far-reaching effects on the industry. “When I buy a house or a car, a lot of those terms are the same, no matter which house or car I’m buying,” she said. Standards “would allow us to focus on the relationship and the value we are trying to come together on. If you’re going into a deal and you are looking at a blank slate when there have been practices already established, you don’t want to start from fresh.”

For more information, visit the web site standardspractices.html.

Tags: Multi-Processed HR, Sourcing

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