Multi-process HRSourcing

What Qualities Do You Look for in an Outsourced HR Provider?

Consider these five critical competencies to differentiate the providers in the marketplace. Beware of sales rhetoric that can lead you to the wrong vendor.

by Neil McEwen

So you have decided that you want to outsource parts of your HR function, and you have hired a third-party evaluator and are scanning the market for qualified providers. Who is the right one for you, and what should you look for as you go through the selection and deal-negotiation process?

Naturally, there are myriad factors that need to be assessed—track record, multi-process or single-process capability, geographic reach, network of service centers, cultural compatibility, etc., but a focus on the following five areas will help to denote the real differentiators.

• How strong are their solutions? Providers will offer a choice of solutions based on their approach to transformation, their technology-hosting capability, their supporting software tools, the location of service centers and, importantly, their ability to integrate a number of best-of-breed providers to deliver a seamless service with clear and agreed-upon accountability. Each factor needs to be assessed and reviewed. Know whether they have got a clear and tested transformation methodology, whether they have the requisite technology bandwidth, whether their preferred tools are the best on the market, whether their service center operations are integrated and effective, and whether IT partnerships tried and tested?

• What is their track record in integration and transition? There are essentially two approaches to integration and transition: lift, shift, and transform to the provider solution, and transform first and move. Each has advantages and disadvantages.

In the former, the provider takes the risk but is dependent on the retention of client knowledge. In the latter, if the transformation takes longer then expected (and many do), then the client can incur operational costs. While there will be penalties, they will not fully offset the costs incurred. Questions to ask include: How experienced and capable are their transition teams? What is their transition track record? How quickly can they standardize processes and delivery mechanisms? What is their methodology for knowledge transfer? How effective have they been in retaining client knowledge and capability?

•How capable are they at managing technology issues? Not all providers have equal capability across the key HR ERP systems. Some have better knowledge of PeopleSoft, and others are stronger with SAP. It is important to dig behind the sales rhetoric to see the real capability. Some of the critical questions to focus on are: How many people do they have? Who are acknowledged experts on a particular ERP system? How good are they at integrating and managing “tools on top?” Do those tools on top supplement or duplicate ERP functionality? What is their record on systems maintenance, application development, technology change, and disaster recovery? What third parties do they use? How strong are they both technically and from a relationship standpoint?

• What is their operational capability? Effective operators who have real in-depth understanding of process delivery, supporting technologies, and sustained operational excellence and who can manage and run service centers to their full, operational capability are like gold dust. In the provider selection process, it is critical to understand the depth of operational capability that each provider can bring to the table. Further, it is important to go beyond the CV to see the individuals in operational mode and to bring them together with the clients’ operational teams to assess capability.

• What is their record on customer service? All providers will emphasize their commitment to customer service but they are, without exception, constrained by the need to balance service focus against cost of delivery. As a potential client you should understand that you get the service you pay for, and beware of customer segmentation and service levels that cannot realistically be delivered against the price being quoted. Critically you need to know whether they can deliver on their promises, whether they are trying to “buy” the contract. You should also project into the future to analyze the consequences of the pricing decision.

Clearly the full gamut of selection criteria cannot be set out in a one-page column, and all the third-party evaluators have comprehensive lists of selection criteria, drawn from experience, which they use with their clients. However, a focus on these five key questions will allow a potential HR outsourcing client to see through the sales rhetoric and find the real differentiators among many competing provider propositions that will be presented to them.

Tags: Multi-process HR, Sourcing

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