ContributorsMulti-process HRSourcing

The Tyranny of the Contract

At the 2010 HRO Summit in Tampa, insights filled hallways and conference rooms alike. One panel, however, captured the delicate dance of the provider-practitioner relationship. Led by Accenture’s Barbara Coull Williams, three top thought leaders shared data, best practices, and a confession or two.
Barbara Coull Williams: What are the root causes of the gap between the service level agreements (SLAs) and performance perceptions? Where is the breakdown occurring?
Kevin McDonald: It is difficult to have an SLA for the ‘user experience.’ Unfortunately, the ‘perception’ of performance issues comes from end users and is difficult to manage. The challenge is to distinguish ‘noise’ from actual issues—more on that later.
Eric Muller: SLAs often are designed for contractual/legal/financial protection and as a result might not truly be in-line with actual end-user (employees and managers) satisfaction. SLAs are often supported by rigid processes, which are designed to ensure delivery of the SLA, and not delivery of a satisfied employee or manager.
LeAnne Andersen: My personal belief is that there are two reasons: 1) Often, SLAs are indicative of operational metrics—which is not satisfaction. As a result something can be performing well, but you are measuring the wrong thing. 2) Percentages can be misleading. For example, in my organization something can be done right for 99 percent of our employees, but that still means we got it wrong for 1,500 individuals who were counting on us. It is tough to, and wrong to, explain to them that it was okay.
Coull Williams: Are the SLAs wrong? Are they not enough? Are they not comprehensive enough?
McDonald: As I said, I’m not sure this is an issue of SLAs. This is more an issue of ‘noise’ and how to set the appropriate expectations with end users (and HR!). Moving from a culture of HR generalists being there for employees to work with directly to the world of ‘1-800-HR’ can be a tough transition for employees and managers. This can also be a tough transition for the HR generalists—they should not be forgotten in the change management efforts!

Muller: I believe SLAs are only part of the measurement of successful service delivery, and they need to be used sparingly to measure things that will not have an unintended consequence of impacting ‘quality’ or ‘warm touch’ by the associates. As Kevin referenced ‘perception,’ and it is often times reality, we need to tap into the ‘perception’ or pulse of the end users. For us, that is a monthly pulse survey that is sent to the employees/managers with closed cases. It is only a couple of questions and also asks if we may reach out to them directly if they have more feedback to share. The key is to actually use this data to make subtle adjustments along the way and not wait until there is a meltdown to address a problem that could have been solved earlier.
Andersen: You also need to remember that SLAs are often perceived to be the floor of what is acceptable. SLA measurement also misses the subtlety context of individual situations. More often than not these are the moments that matter. For example, a 24-hour SLA is fine to setup benefits most of the time, but if you have a grieving widow on the phone, then saying, ‘I’ll get back to you’ will not reinforce that you care—and your service brand will take a hit.
Coull Williams: How can clients and providers improve alignment between day-to-day metrics and the client’s strategic imperatives? How can communications, both formal and informal, manage expectations?
McDonald: The key to communications regarding these new services is no spin! Employees might not like the idea of outsourcing support and ‘taking away’ their HR generalist for transactional support, but they will eventually get over it. What can extend the acceptance curve is trying to convince employees that outsourcing is somehow better for them and trying to convince them that everything will be perfect from day one. I believe employees would rather you just tell them the truth—that this new model will take some time to get used to, and there will be bumps along the way. I believe employees value the transparency even if they don’t agree with what you are doing.

Muller: I agree with Kevin’s points. Also, if expectations of service level, service performance, and service scope are appropriately set with the employees, then hopefully there will be less ‘noise’ and fire drills to distract both parties from forging a stronger relationship and facilitating more strategic conversations and shared objectives.
Andersen: There are a lot of creative ways to tackle the alignment problem. Recently we leveraged Lean Six Sigma. We used the ‘customer value-add’ concept to determine which sub-processes are most important. As we did the analysis, we saw the feedback was often ground against our organization’s strategic objectives—either those voiced or implied. We also often learned we might have initially defined the problem wrong, highlighting that we might be measuring the wrong things.
Coull Williams: Is it simply a matter of better expectation-setting on what the provider should be held accountable for?
McDonald: Yes, to a large extent it is a change management exercise to set appropriate expectations; however, the change efforts must be focused on more than employees, managers, and executives. Too often, HR (specifically, HR generalists) is the forgotten ‘stakeholder group’ in the change management equation. We tend to use HR as vehicles for change and communication and do not focus on it enough as a stakeholder group.
HR has to be used as a ‘champion’ for the change efforts. A considerable amount of damage can be done by HR making random comments trying to empathize with employees. I have heard comments like, ‘They can’t get anything right’ or, ‘Those mistakes never happened when we just did it ourselves.’ These comments can set employees and managers back on the change acceptance curve in a big way. HR has to understand their role has changed, and they have to be trained to work in the new service delivery model.
Muller: I also feel that if the client places too heavy a focus on SLA, and rigid service/process plans, this will stand in the way of that supplier being compelled to bring new and strategic ideas to the table. It is an offense vs. defense relationship. Instead, I want to be on the same side of the playing field with my provider and know that the provider is engaged as if they are an extension of my team . . . not as an opponent where we ‘negotiate’ for position.
Andersen: Too often, as buyers, we can assume or accept that traditional SLAs are the right surrogate for what is important. An average speed to answer will help determine your call center staffing model. However, we have learned it doesn’t correlate to a caller feeling respected or valued in an interaction.
Coull Williams: Do you think inherent in an outsourcing arrangement there is a skepticism or ‘over-scrutinizing’ built into the organization around the provider’s performance no matter how good it is?
McDonald: Yes! Clients are often quick to point out everything that is wrong with their service provider. We are quick to forget that there were errors when processing was done internally. This is easy to do (and convenient) as most organizations did not (and still don’t) measure their own performance, and they tend to have very short memories when it comes to any historical internal issues.
Muller: Agreed. But, it can be overcome by two key ingredients: 1) Focus from both sides on building a solid ‘relationship.’ While it is cliché to say ‘partnership,’ if there is not a strong level of trust, then neither side can have confidence that the other party ‘has their back.’ 2) Client and provider need to develop ‘shared objectives.’ Both sides need to recognize that this relationship is much more like a business venture and not a car detailing service. They need to develop plans and performance objectives that will allow for both to succeed.
Andersen: Absolutely. It seems to be a natural behavior to be more forgiving when your own organization makes a mistake. Often, when we unwind critical incidents, we find our own organization was a significant contributor to the mistake. When highlighted, the original emotion attributed to the problem and the tone of conversation quickly changes. I don’t believe it is an intentional behavior but rather an unfortunate reality.
Coull Williams: Can you give an example when execution errors are dealt with well by the provider and client including communications with client, root cause analysis being performed, and improvements in the process being made on a go-forward basis?
McDonald: A specific example of this for Scripps was with our leaves administration practice around ‘keeping employees whole’ while their disability leave was being reviewed for approval. This ‘requirement’ meant every leave had to be handled manually until it was approved. This was the cause of much noise and many errors. We worked with our service provider who suggested that we simply ‘pay from pending,’ meaning, we would just start paying employees disability from the time they apply. Since only approximately 3 percent of leaves get denied, we went from touching 100 percent of leaves manually to only the 3 percent exception. This was a clear case of the service provider having to tell us one of our requirements was the root cause of the issue. This can sometimes be hard to hear for a client, but these conversations are critical to a successful partnership.
Andersen: Yes, I can actually think of several; we are fortunate. We have a fairly tight alignment on what is important and expectations on how to show up when issues arise. We have criteria around the definition of an issue (based on a rubric of number of employees’ involved, financial impact, and organizational visibility). Once triggered, we have a standard operating process of how to react to those situations, including how to communicate, research, and improve.
Coull Williams: Can you give an example when there was an over-reaction to a provider execution error and how you dealt with that?
McDonald: A recent situation occurred where our pre-employment background check vendor dropped the ball on the criminal record of a candidate. Local HR found out through other means about this candidate’s criminal record and escalated the issue all the way up to the head of HR and suggested that we alert all of HR across the organization that they could not trust any of the results from the provider. This is a situation where the only way to combat the ‘noise’ is with fact. We reviewed our stats and found this was the first time anything of this sort had occurred since this vendor took over—and they had processed over 11,000 background checks since our go-live. In a lot of cases, the overreaction is simply due to a lack of perspective. Although the one error was not good and needed to be addressed, the data shows this is an extreme rarity and the suggested course of action was not appropriate.
Muller: We have a difficult situation managing a situation with a subsidiary that is still using their heritage PeopleSoft platform. This requires Accenture to double key certain transactions for this group of employees. Additionally, there is workflow that is in place to help trigger action from both of the PeopleSoft systems. There were several errors that occurred, and while the impacted employee or HR partner was quick to ‘attack’ the service provider, I did not want to immediately carry that level of high emotion onto a call with the Accenture team when, largely, the risk of error is high because of our own requirements and workflows. Often times we, the client, insert roadblocks and hurdles that make it very difficult for any service provider to be successful. So, in turn, only ‘we’ can remove them and only ‘we’ can build toward a process that is more reliable for the service provider to deliver against.
Andersen: Our provider supports employee relations investigations. While the provider supports the process, the manager has the final decision. For a period of time, there was an organizational conversation that provider’s performance was sub-par. We asked a room of general managers how often they told an employee being fired that ‘provider x is making me do it.’ Everyone’s eyes shifted downward, and it led to a conversation about owning the local decision, rather than deferring it elsewhere.
Coull Williams: Let’s talk a bit about the role of governance. I’d like to get your perspective on what are critical elements within the governance structure. In my experience, a key area that is often undervalued within the governance structure is a sound change management approach, particularly for those employees who are retained but who will have a change in scope of responsibilities due to the outsourcing contact. Can you talk a bit about your experiences related to change management?

McDonald: I won’t expound again on HR as a key stakeholder in the change management efforts, as I have exhausted that. In summary, it takes more to make HR business partners than to simply take away the administrative work from HR generalists and change their titles to business partners.
Muller: I believe it is a very different skill set to go from being an HR ‘doer’ to an HR consultant/partner. Many HR professionals will thrive only on one side or the other. So, hard decisions need to be made in determining who the HR partners will be in the new outsourced model. If work is not relinquished once the outsourcer is in place, it can completely undermine and discredit the provider’s work or service levels. Those remaining HR teams must be held accountable to operate differently or find new roles.
Andersen: While a change management program is important, it is equally important that all executives, HR practitioners, and your outsourcing partner understand their day-to-day role in change management. It is a consistent skill required across the board, not a one-time project activity.
Coull Williams: How do we ensure the retained HR organization is aligned with the outsourcing strategy and expectations of performance by the outsourcer?
McDonald: I think the first step is to ensure you have properly designed your retained team. It is critical to define the necessary roles based on the SOW (i.e,. which work will be sourced and which work will be retained) and then hire according to the skills required to fulfil those obligations. Too often we stretch to have existing resources fill the new roles, even if they do not have the appropriate skill set.
Muller: We first need to recognize that it is going to take time. However, the HR team remaining must make continual progress toward full adoption by a hard date. Also, you must make it difficult for them to hang on to that old work by physically changing access, or tools available, etc.
Andersen: There are several important actions, but one we would recommend is finding a way to honor what is precious to your HR organization. Our initial impression was that several members of the HR team were reluctant to hand over responsibility to the outsource providers. The reality was that each of them had their own unique personalities in play. They had a major heart for service, and in response to that we needed to create new opportunities to continue to serve as a means for them to stay actively engaged in both their work and their relationships.
Coull Williams: How do you ensure that all the relevant parties are aligned, especially the retained HR organization and the client business partners?
McDonald: It is critical to define the measures of success going into the implementation and to overcommunicate. Transparency is the key. HR and retained team resources have to understand what success looks like, and that does not mean that there are no errors. I think this is one of the key drivers of dissatisfaction with outsourcing deals. Clients and their retained teams go in with unrealistic success measures, and the actual results will never match their expectations.
Coull Williams: Can providers and clients use a fact-based approach to take the emotionalism out of performance management? What kind of behavior changes are needed on both sides?
McDonald: There has to be a true spirit of partnership. That means a realization that for one party to be successful, both parties must be successful.
Andersen: There needs to be a natural curiosity and commitment to improvement, rather than justification of why or how something is done.
Coull Williams: Trusted and honest relationships are often key to the success of any outsourcing relationship, especially when it comes to performance management. What kind of characteristics and culture are you looking for in an outsourcing provider?
McDonald: Transparency! Service providers are not perfect and never will be. And, guess what, neither are clients! The key is to be honest with each other and have an open line of communication. If you have the same goals and agree to the principle of transparency and honesty (and check ‘feelings’ at the door), your chances of success are much higher.
Andersen: There is a leadership courage that is required to put the work ahead of self. You also need to maintain a broad commitment to continuous improvement and change management.
Coull Williams: How often do you revisit your objectives and discuss performance with your provider?
McDonald: Formally, on a monthly and quarterly basis. Informally, every chance I get. I want everyone in the service provider organization to understand what Scripps is trying to achieve with our outsourcing relationship.
Andersen: We review strategic alignment with most partners on a quarterly basis. Operational discussions happen at least monthly. Cross functional state-of-the-team conversations happen continuously.

Coull Williams: How does the commitment to continuous improvement play a part in the Green/Red phenomenon? Continuous improvement is something that everyone wants. But do you think there might be some different expectations around what that means and how it is executed in an outsourcing engagement?
McDonald: I believe this is a huge area of misalignment in many outsourcing engagements. Too often, continuous improvement is thought of as being on the latest technology. There are very few ‘silver bullets’ when it comes to HRO. Most wins are small wins, but a lot of small wins over time can drastically improve the overall perception of the quality of the services. Also, when it comes to technology, too often, clients are their own worst enemies. Clients often want to customize various parts of the systems, and then they complain when they cannot be upgraded to the latest versions or the newest technologies. Clients need to be more disciplined when it comes to customizing software and services, because this can have unintended negative consequences in the future.

Muller: Red/Green is such a ‘subjective’ measure in the first place that if there is fear that to improve or change or raise the bar means that the service will drop from Green to Red during the time of transition or changeover, then—in my opinion—the relationship was not solid enough in the first place. The Red/Green measure is a ‘heat map,’ and it should be a joint/agreed rating that is used to facilitate the conversation identify priorities, hot spots, and strategic plans.
Andersen: Sure, there are different expectations. Anytime you bring together groups of people, they are going to define language based on both their perceptions and their previous experience. Key phrases and terms—like continuous improvement—will require an intentional conversation to align on exactly what that really means. For example, is it improving quality, process improvement, or innovation? And you probably all just defined those words differently based on your own experiences. It has to be an intentional conversation that also cascades forward in order to ensure successful alignment.

Coull Williams: How could we do a better job of aligning expectations—on both the client’s and the provider’s parts—when it comes to the pursuit of continuous improvement? And what do you do currently?
McDonald: It can be tough to contract around continuous improvement, because it is such a broad term. I personally always try to think of improvements that Scripps needs—but that can be used across the service provider’s client base. The service provider is much more open to expending resources on improvements that can be applied to multiple clients than those that only impact one client.
Andersen: We have actually created performance expectations around continuous improvement. As the buyer, I provided the definitions of what below expectations, meeting expectations, outstanding performance look like. We tied the framework to our organization’s performance management structure. The third party works for my organization and we wouldn’t expect our own team to go without this communication.
LeAnne Andersen is Vice President of Global HR Services for Best Buy.
Kevin McDonald is Director, HR Operations at The E.W. Scripps Company.
Eric Muller is Head of HR Shared Services/Operations for BT.

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

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