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The Secret (and Tragic) Driver Behind HRO’s Early Growth

On September 11, 2001, we all felt the horror. No matter where we were, we can remember the day. But little did we know that 9/11 was also the day that the HRO market was born.

by Jay Whitehead

On the morning of 9/11, I was on a plane from Dallas to Columbus, Ohio. It departed around 7:30. Sometime close to 9 a.m., we were forced from the sky and landed at Cincinnati airport, which is technically in Kentucky. In her trusty Volvo V70, my wife sped to retrieve me, driving south from Columbus at 95 mph. It is usually a 2-hour, 30-minute drive. She did it in 90 minutes. Obviously, all the cops were diverted from traffic duty that day.

My HRO company had at least 10 staffers traveling on 9/11. Our first priority was to make sure they were safe. I had all their cell phone numbers. I called five. My colleagues called the rest. Within 30 minutes of my landing, we located them all and determined they were safe.

The next priority was our HRO clients. We went into our emergency alert mode, and within three hours we had contacted all of them and determined that they were unharmed. The next priority was our vendor network. Most were secure, including our bankers, our landlord, and our software suppliers. Unfortunately, our insurance broker was headquartered in the WTC. Several of our friends were lost.

The terrorist attacks on that day unleashed horror beyond the terror sites. Regardless of PR denials to the contrary, the attacks also launched a financial collapse. Starting with the travel and tourism industry, sector after sector felt the pain, an ache that failed to stop for years.

Corporations, because they are made up of people, react like people. And people, when attacked, often turn on their neighbors, their friends, their family, their co-workers. Such was the case in the months and quarters following 9/11.

In times of high stress, laggards are no longer tolerated. No slack is cut. And that is what happened to HR in the post-9/11 period. HR was unable to prove its value. No HR metrics were believable. Robust staff-to-service ratios did not matter. Steadily improvements in HR response times were useless. What really mattered is that HR had acquired a rep as a perennial laggard, a bucket behind the corporate boat. HR had no street cred. HR was a restaurant with food poisoning. HR was a hotel with bedbugs. HR was a cruise ship crawling with Legionnaire’s Disease.

And HRO caught the wave. In fact, it’s still riding the curl.

CFOs and CEOs from coast to coast lowered the boom. Sourcing advisors were summoned. HR leaders were called to the carpet. Private equity players from General Atlantic to Warburg to Fidelity Capital to First Analysis to Disney to BankAmerica Ventures opened their wallets and made big bets. HRO Today magazine was launched. The HR hate parade made strange bedfellows.

Funny thing is, the parade keeps rolling. We at HRO Today had our best year ever in 2006. And 2007 is already shaping up to be even better than 2006. HRO, as reviled as it was in 2003 and 2004, is proving far more popular than HR.

But let’s be clear. HRO is not anti-HR. It is pro-human-capital. HRO is about great employee services for everybody, for less than any company can achieve on its own.

My point is that it is important to be honest about HRO’s origins and the real driver behind the HRO boom. The real driver is not cost savings (they are half of FAO’s 35- to 50-percent guaranteed savings). It is not employee productivity improvements (HRO’s metrics are important but tough for the average CEO to relate to).

The real engine behind HRO was created on 9/11. The industry has fed on the HR industry’s singular inability to prove its own value as an in-house function. Keith Hammond, Fast Company magazine editor, said it best in his September 2005 cover story “Why We Hate HR.” HR has created its own challenge by associating itself with administrative functions rather than higher value services. Once faced with the 9/11 nightmare, HR’s expensive and time-sucking paperwork was easy to hate, and proved easy (and, for smart providers, profitable) to automate and outsource.

That is why you are reading this magazine today. And it is also why you will be reading it next year and the years after that.

Tags: Consultants & Advisors, HRO Today Global, Multi-Processed HR, Professional Contribution, Sourcing

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