The days of big transformational HRO have gone (but may return later). However, now is the time to garner quick savings.
By now, it’s pretty clear that in these lean economic times, big implementation of multi-process HRO is a nonstarter for enterprises that have not already made such a commitment at least a year ago. That’s because these types of outsourcing deals are protracted, costly, and distracting to organizations—many of which are now squarely engaged in a fight for survival as revenues take a tremendous hit.
If your company is like the typical Global 1000 corporation, you know that budgets are under lock-down, discretionary spending has just about gone away, and pink slips are flying fast and furiously throughout the organization. So you can imagine the pin-drop silence of senior executives when the idea of embracing comprehensive HRO is brought up now. It’s not that outsourcing isn’t sound as a business concept (it remains fundamentally beneficial to practitioners), but now is not the time to take on projects with a relatively long return on investment.
So where does that leave the industry? Actually, it’s the best time for small-scope HRO focused on discrete processes but which produces instant gratification. The industry should be knocking on the doors of every business, touting the ability of service providers to cut costs in small but measurable ways. There is no shame in promising savings of 10 percent when buyers themselves are under pressure to drop their price by a similar amount.
For instance, you don’t need to transform HR to reduce, say, healthcare costs; all it takes is outsourcing something like absence management. Or if you’re worried about employee engagement in these tough times, how about adopting an outsourced incentives program in lieu of pay raises? You can garner incremental savings while maintaining worker morale. Of course eliminating your recruitment department and replacing it with a scalable RPO solution will also make a difference.
The point is that any one of these solutions can be rolled out quickly and painlessly, with minimal commitments to governance or change management. As long as you keep an eye on scope creep and prevent these small projects from ballooning into bigger ones, discrete HRO can give you a quick hit and results with which to impress colleagues, family, and friends.
Is there any appetite among organizations to take on big-box, transformational HRO? Of course there is, but only under unique circumstances. For instance, companies at a crossroad with their HRMS will probably look to HRO instead of traditional licensing, which calls for a pretty sizable investment. Who wants to implement or upgrade their ERP at a time like this? In addition, expect some fire sales in Corporate America during the next 18 months as distressed organizations spin off units to generate cash. That may result in a number of new entities not looking to reinvent the HR wheel; instead, they’ll want to outsource a wide range of HR services.
But for most organizations, enterprise HRO is not particularly palatable today. However, if the industry can deliver quick savings through discrete outsourcing, you can be sure that more than a few interested parties will want to dine on HRO.
HR leaders have spent quite a bit of time and energy during the past five years studying comprehensive HRO. For organizations that have not yet undertaken the transformational effort, now is not a good time to jump in head first; trust me, you might crack a skull. However, by identifying discrete processes that may be ripe for savings, you can quickly garner some savings and possibly get invited to the table.
