Lea Soupata, SVP of HR for UPS, shares her secrets to selective sourcing success.
When Lea Soupata, SVP of HR for UPS, started her keynote speech at this years HRO World conference, she was the first to admit that had she been asked to speak on the topic of outsourcing 20 years ago, she, like many other HR executives, wouldn’t have had much to say. Fast forward to today, and UPS is outsourcing no less than six HR processes to eight different HRO providers. As she faced the audience at the conference, Soupata challenged HR executives to ask themselves the question she thinks is critical to the future of HR, “What can selective sourcing do for you?”
For a company with a culture like UPS, a selective sourcing and global outsourcing strategy may seem like an odd fit, and Soupata is the first to admit that it took a while for UPS to make the decision to go that route. Founded in 1907, UPS is a company steeped in tradition with a large number of union employees and low turnover. The nations third-largest employer, UPS currently counts 384,000 people in more than 200 countries, and has a turnover rate of less than 7 percent. Soupata, herself, is one of those long-standing employees, having been with the company for 36 years.
“There was an early reluctance in the corporate culture to consider outsourcing or selective sourcing,” says Soupata. “There were two reasons that made us hesitant: one, our corporate culture; and two, the effect that outsourcing might have on our employees.”
UPS has long prided itself on a culture that stresses self-sufficiency and innovation from within. Its earliest successes were based on inventions and solutions of the companys founding memberssuch as the creation of package-sorting machines. “We often figured we could do it better if we did it ourselves,” says Soupata. “The company was also worried about how outsourcing would affect the companys reputation of providing for employees. One of the most important questions we asked ourselves when considering outsourcing was How will this affect our employee base?”
However, Soupata and other executives at UPS knew the topic was something that couldnt be avoidedespecially when considering the very nature of UPSs business. “We felt that outsourcing was something we had to at least consider,” said Soupata in her speech at HRO World. “After all, UPS is telling its customers ‘Turn over parts of your business so that we can do it better’–that’s our business model. So we had to ask ourselves, Why aren’t we doing the same thing?” The answer, after talking to a number of HR service providers, was that perhaps they should be.
The Whole HR Package
In the late 1980s, UPS began looking at selective sourcing and global outsourcing as a long-term strategy to improve its HR services while at the same time controlling costs. “We knew the prospects for HR spend were not going to be going up in the years moving forward,” says Soupata, “so we had to be smart about the financial implications. Outsourcing gave us the opportunity to bring to the table new and improved solutions so that employees dont miss out on what HR has committed to do for them.”
UPS looked at the sourcing route as an opportunity to build upon its HR services, not reduce its HR headcount. “We viewed outsourcing not simply as a cost-reduction tool, but as a way to streamline, to become more productive, to become more competitive, to provide better service, and to become stronger as a company,” says Soupata. “This form of outsourcing isn’t only about saving money or sending jobs overseas. Done right, this form of outsourcing will actually create more jobs for everyone. UPS has a very positive and nurturing environment for its employees and that is something we know we are not going to change. However, how you deliver those support services to employees may.”
UPS decided to focus on those elements it did best and those it thought it could improve. “The HR leader really has to think about what HR is bringing to HR and the organization,” say Soupata. “Ask yourself what are your core competencies? Make a list of two or three, then think seriously about if you would ever outsource them. Anything that is not on the A list as your core competency, you should consider moving to a provider that specializes in it.”
The first HR function UPS looked at outsourcing was their benefits. In the late 1980s, UPS outsourced their 401(k) administration. A few years later, they turned to service provider Hewitt for help with healthcare benefits administration, enrollment, help desk, and online technology. Based on the success of that pilot sourcing, UPS began to expand into other areas. Currently, UPS is working with no less than eight different HRO providers (see sidebar): Citistreet handles 401(k) administration; TALX and Spherion are partners in the hiring and staffing process; Choicepoint handles background checks; Cendant manages relocation; PricewaterhouseCoopers provides employees with financial education and planning; Mellon manages stock transfer obligations; and Towers Perrin provides systems administration support.
Who’s Going to Deliver?
Identifying, implementing, and managing that number of providers has been no small task for the UPS HR team. “We have come a long way in the last 15 years and have done a lot learning along the way,” says Soupata. The most important lesson learned was identifying and developing the right relationship with their service providers. Says Mike Smith, VP of marketing for TALX, and one of UPSs sourcing partners, “UPS’s approach to outsourcing is very unique. For them, this strategy is definitely about partnerships, and from what we have seen, this is true of all their vendor relationships. UPS doesnt treat us like vendorsin fact they dont even like to use that term. They treat us like business partners and foster collaborative efforts that bring out the best in both companies.”
In looking for the right partner, Soupata stresses the importance of networking with other HR professionalsthrough associations and conferences, such as HRO Worldin order to gain first-hand knowledge of what has gone right, and what has gone wrong, with other sourcing relationships. “The most important thing when selecting a provider,” says Soupata, “is to look at their track record. Talk to other companies they have worked with. Then look at your own company’s scope versus the scope of the providers services. You need a provider with scope and scaleand not only for your current needs, but also for ways in which your company may grow in the future. And last, but not least,” she adds, “ask yourself if their culture is going to match or complement your company’s culture.”
Moving HR Processes
When taking that first step in outsourcing, you never get a second chance to make a first impression, Soupata emphasizes. So communication with employees and HR is key. UPS set up group meetings, a portal for employees to stay up-to-date and address their concerns, established daily communications, and instituted follow-up surveys asking employees about their experiences with HRO providers the results of which they shared with employees both to let them know that UPS was serious about monitoring provider services.
UPS also began their outsourcing strategy by focusing on both specific HR functions and addressing one HR function at a time. This selective sourcing approach was stress-tested with pilot programs in each outsourced function. For example, before establishing a company-wide standard for background screening, they tested their current provider, Choicepoint, in several different UPS locations. When they recently moved to a new HR portal for employees to check on benefits and status, they tested the program in one geographic region and surveyed employees on their experiences before rolling out the program globally.
“This step-by-step approach to outsourcing has not only improved employee adoption and acceptance of the process, it has also had a positive impact on HR staff by preparing them for the transition and allowing UPS to avoid lay offs. We know a few years out when were going to be looking at changes in HR,” says Soupata, “at which point we decide: No more replacements until we get through this. That way, we don’t have HR people being displaced. UPS works with temporary staffing company Spherion to fill gaps until the transition is complete.”
“Whether you are outsourcing HR, call centers, or billing,” says Soupata, “if you decide to outsource a function, there will be an interim period. And that’s your opportunity to protect your people through training, development, and reorganization. Outsourcing doesn’t have to automatically mean layoffs. In UPS’s own experience over the last 20 years, they have reduced HR headcount by only 10 percentall of which have been administrative positions that werent refilled.”
The Future of Selective Sourcing
To date, UPS has had a positive experience with their selective sourcing strategy, but this is progress that they still consistently track. “We’re UPS,” says Soupata “we measure everything. It’s in our DNA. And that has been helpful to our successful sourcing strategy. There has to be accountability to maintain the quality of the services. You have to look at more than one element. You also have to look for qualitative feedback, not just What was the turnaround time? but How was your experience working with the sourcing provider?”
The measurements have added up to better services at better costs for UPS. A recent switch to an online portal for benefits enrollment recently saved the company more than $500,000 a year just in paperwork. “We’re also seeing how technology advances have improved our processes and are constantly learning from our relationships with vendors,” adds Soupata. “We have both made suggestions on how to expand services, streamline processes, and offer more to employees.”
Now that a lot of the administrative processes have already moved out of the in-house HR system, Soupata thinks the next direction for HRO is going to be learning systems. Learning systems are going to be a big area of growth because organizations have a lot of different levels of learning. Something that brings together online learning systems with companies specific needswhile addressing both cost and consistencywill be important to HR, which needs to take the role in developing employees.
Soupata also feels strongly that the HR profession and professionals have to move into stronger decision-making roles. They need to get involved earlier in the evolution of the company and plan more thoroughly for that process.
“You can’t shrink to greatness,” says Soupata. “Companies must grow to be great, and outsourcing helps you focus on your core competencies and create a climate for innovation, which is essential for that growth.”
TALX SPEAKS TO UPSS SELECTIVE SOURCING STRATEGY
TALX, ONE OF THE QUIET GIANTS IN THE HRO INDUSTRY WITH MORE THAN 6,000 CLIENTS INCLUDING TWO-THIRDS OF THE FORTUNE500, IS ALSO ONE OF UPS SOURCING PARTNERS. IN A CONVERSATION WITH TALXS VP OF MARKETING, MIKE SMITH SHOWS US WHAT IT MEANS TO SWIM IN THE SELECTIVE SOURCING POOL.
WHAT SERVICES IS TALX PROVIDING TO UPS?
We provide three major areas of support. The oldest service is unemployment cost management; UPS does a lot of seasonal hiring and has to process 25,000 unemployment claims annually. The second service is employment verification. UPS has almost 200,000 requests for routine employment and income verifications each year that we now handle. The most recent service is streamlining their hiring process. Each year, UPS receives more than two million job inquiries that need to be screened and makes 100,000 hires. We handle candidate screening via telephone and the Web, automatic scheduling of interviews, and new-hire processing, such as I-9 and hiring tax credits, via Web-based services (once an employee has been hired), and have made this process entirely paperless.
WHAT ADVICE DO YOU HAVE FOR OTHER COMPANIES THAT ARE CONSIDERING SELECTIVE SOURCING?
An organization should consider selective outsourcing when: the process they are looking at outsourcing takes place over a short timeframeyou find it hard to staff for; special technology is required and you dont want to support it internally; the process can be easily isolated as an end-to-end process; the current process is highly inefficient; the desired total solution is not otherwise available; and last, but not least, handling that process is outside your strike zoneask yourself Would I hire me to do this? Would I outsource this function to me? If the answer is no, you should be outsourcing the process.
HOW DO YOU MAKE A SUCCESSFUL TRANSITION TO OUTSOURCING?
Do only one thing at a timedont do it wholesale. Test a service first and make sure you are wildly successful before adding on other services. You need top management buy in and you need to communicate about changes. This is especially important in HRO, where you are outsourcing services that touch employees. Companies most successful with outsourcing are those that highlight the real benefit to the employees (not the benefit just to the company). For example, if you are moving to electronic pay stubs (a step that can save the company a lot of money on administrative fees), you may want to point out to employees how they now have the ability to see their next pay one to two days before its available. This gives employees a chance to review their paycheck ahead of time and also alert the company of any errors or changes.
BASED ON YOUR EXPERIENCE AS ONE OF THE UPS STABLE OF PREFERRED PROVIDERS, ANY ADVICE FOR OTHER COMPANIES ON HOW TO BEST WORK WITH MULTIPLE VENDORS?
UPS has done two things that have worked very well in managing providers. 1) They have created a level of consistency in expectations. SLAs [service level agreements] and expectations are very similar across the providers, so UPSs HR operations are not run ragged. 2) They have also insisted on good, and regular, metrics from all vendors. They set expectations for regular reporting so that UPS can meet their own companys SLAs.