HR leaders talk

Like anything else, outsourcing has its pros and cons. Canadian HR Reporter talked with five senior HR leaders across the country to find out what their firms are outsourcing, what they won’t outsource, the impact it has had on the business and what they’ve learned along the way.

Debbie Lane
Executive vice-president of market solutions
SaskCentral

SaskCentral is a co-operative that supports credit unions in Saskatchewan. It is based in Regina and has 95 employees.

After a restructuring that saw the elimination of 15 positions at SaskCentral in Regina, the co-operative that provides services to credit unions in the province decided to fully outsource its payroll function except for one part-time payroll administrator.

The decision allowed the remaining HR personnel to focus more on strategic functions, such as benefit programs and performance management, says Debbie Lane, executive vice-president of market solutions at SaskCentral.

“They’re focused more on the relationship with employees and ensuring employees have answers to their questions,” says Lane.

Being able to redirect internal resources to focus on higher-level functions ensures the organization is using everyone’s skills to their greatest advantage, she says.

Before choosing ADP as its payroll provider, SaskCentral conducted a mini request for proposal process to find the provider that could best meet its needs and expectations.

“We really took a look at our cost and determined what we needed in the future,” says Lane.

SaskCentral laid out its specific needs for ADP, including accuracy and ensuring legislative changes were embedded in the process. The level of expertise ADP provides is probably greater than what SaskCentral would have been able to afford to hire internally for such a small payroll, says Lane.

“There’s probably a financial savings there,” she says, adding SaskCentral has yet to do an audit to determine the actual cost savings of outsourcing.

However, one of the drawbacks of outsourcing is losing internal control over the process.

“If there was an issue on the payroll, previously you could go to the internal person and say, ‘What happened and please fix it.’ Now you’re having to go through an extra step to try and get a resolution,” she says.

That’s why it was so important for SaskCentral to get a guarantee from ADP it would be responsive when issues arise.

If an employee has an issue with payroll, she will bring the issue to the HR department, which will then take it up with ADP, says Lane.

“We certainly understand the importance of people being paid accurately, timely and having confidence in our payroll system,” she says. “If there are issues or challenges, we address them right away.”

SaskCentral’s payroll administrator used to run the payroll when it was done internally. Her new role allows her more work-life balance, says Lane, and her experience with the company makes her the ideal liaison between SaskCentral and ADP.

“She has knowledge of the values and the culture in which we operate, which is very beneficial,” she says.

The administrator is responsible for enrolling new employees and recording when people leave and their vacation time. She forwards the pay information to ADP, which then does the mathematical calculations.

There is discussion among Saskatchewan, Alberta and Manitoba to form a co-operative called PrairieCentral, to service the prairie credit unions. The amalgamated co-operative would then look to see if it makes sense to bring the payroll function back in-house or to potentially outsource other functions, says Lane.

“We will need to take a look at (whether) we created that critical mass that would warrant having that function internally completed or does it still have the strongest value proposition to remain outsourced.”

But for now, outsourcing payroll is the best for SaskCentral, especially when there are staffing changes, says Lane.

“When you have internal resource changes, it creates some disruption because you have to find someone else who has the talent, who can become accustomed with the organization’s process. When it’s outsourced, it becomes routine because, at the end of the day, it becomes your service supplier’s role and responsibility to ensure that service is continuously delivered with great excellence.”

When considering outsourcing, organizations need to think about the marketplace and the work environment going forward, says Lane. Then, when it comes to choosing a provider, an organization needs to understand the service standards, pricing, benefits and potential drawbacks.

“You don’t want to just make that leap of faith and say, ‘It would be better to outsource it.’ You really need to do that investigative work to ensure that the arrangement is appropriate for you as an organization.”

Jim Turner
Director of human resources
Family Services of Peel

Family Services of Peel is a community-based agency that provides a range of counselling services. The agency is headquartered in Mississauga, Ont., and has 60 employees.

Over the past four years, the expertise and knowledge an external information technology provider has provided to Family Services of Peel has been invaluable, says Jim Turner, director of human resources at the agency which provides counselling services in Ontario’s Peel region.

“The ability to identify problems and be able to rectify them before they became major issues was the biggest benefit of outsourcing,” says Turner.

Four years ago, Family Services of Peel outsourced its networking and repairs function while maintaining an in-house employee to handle minor IT issues as they arise, such as problems with individual computers or printers, he says.

To find the right provider, the agency put out a request for proposals. Because outsourcing is expensive, HR and finance wanted to ensure they found a provider that could meet all their needs.

“We were looking at specific functions,” says Turner.

As part of the vetting process, the agency brought the providers in-house to look at the computer servers to ensure they could handle them. Flexibility, such as being able to come in on a Sunday, was also a very important requirement for the agency, says Turner.

“The goal for us was to minimize the downtime as much as we could,” he says. “If we’re down and need to get up right away, the individual has the ability to help us.”

When the provider first started working for the agency, it was using Microsoft Office 2003 but the provider felt the 2007 version would be a better fit for the agency’s needs.

“He was right. We’re not stalled and we have less problems,” says Turner. This led to increased productivity among employees because their computers weren’t always stalling or freezing up.

The provider also recommended a new printer to replace a photocopier rental that was costing the agency $1,000 a month.

“He saved us a lot of money in that aspect,” says Turner.

The provider has also been able to solve many of the problems the agency has encountered while being off-site.

“He doesn’t have to be here to solve the problems, he can do it remotely,” says Turner. “Having a full-time IT (person) with that type of knowledge would be extremely expensive.”

While outsourcing has saved the agency money, Turner doesn’t see Family Services outsourcing any other functions in the future. The finance department handles the payroll and the other HR functions are best handled internally, he says.

Organizations looking to outsource certain functions, be they IT or HR, should do a thorough vetting process to ensure they choose the right provider, says Turner.

And then the organization needs to draw up a good contract to ensure it’s covered in any circumstance, he says.

Andrea Garson
Vice-president of human resources
Workopolis

The job resource website Workopolis is headquartered in Toronto and has 165 employees.

While Workopolis outsources its payroll processing, it is very unlikely the job resource website will ever outsource any other functions, says Andrea Garson, vice-president of human resources at Workopolis.

Part of the reason for that is Workopolis’ corporate culture, which drives all of the company’s business decisions.

“We’re still a pretty small and nimble organization in many ways and we want to try and keep that feeling of personal commitment to our employees,” she says. “We just feel we’re better able to do that and maintain more control over our processes by keeping things in-house.”

If the company were to ever outsource other functions, the service and the provider would have to fit Workopolis’ culture, says Garson.

Called the “Workopolis Promise,” the culture is based on five core values: integrity, customer focus, results, personal development and relationships.

All employees are screened on these values before being hired and are evaluated on how they exhibit them as part of the annual performance review process.

The company’s reward and recognition program is also based on these values. For example, two people on the HR team recently received the Certified Human Resources Professional (CHRP) designation and were recognized for that personal development accomplishment, says Garson.

This year, Workopolis’ culture was recognized by Waterstone Human Capital’s Most Admired Corporate Cultures, so it makes sense Workopolis would also choose outsourcing partners based on whether or not they demonstrate the same values ingrained in the company’s culture, says Garson.

“If you can find the right partners to match the culture and they give you the control you need, that’s something to consider.”

Even with payroll, the company handles as much as possible internally — such as creating the compensation structures and recording any changes — and then sends the information to the provider so the payroll can be calculated and distributed.

“We maintain control over everything until such time as it needs to be entered and processed. Those are the times it makes sense to outsource, when there’s no value-add to keeping an administrative or routine task internally if you don’t have to,” says Garson.

And an external provider has much more expertise around payroll than an internal person would, unless the company is looking to solely hire a payroll expert, she says.

When figuring out the cost benefit of outsourcing, there’s a cost to losing control that is hard to quantify, says Garson. The organization also needs to ensure there are processes and mechanisms in place to catch errors and rectify them before they become a big problem.

“You have to weigh that against what is the cost of having in-house talent continuously upgrade their skills to be able to grow with the technology or new requirements,” she says. “But when it comes to anything that can greatly affect the employees and the culture and the daily flow for people, the more control you have, I’d say probably the better you are.”

Jean-François Boulet
Vice-president of human resources
Industrial Alliance

The insurance and financial services company Industrial Alliance is headquartered in Quebec City and has 3,000 employees across Canada.

About 10 years ago, the HR department at Industrial Alliance, a national insurance and financial services company based in Quebec City, examined its systems and services to determine which ones were integral to the company’s core business.

“We said, ‘Let’s put our money on the systems that are required for the insurance business,’ which is the core business here, and let’s focus the HR people not on systems but on supporting our management and employees,” says Jean-François Boulet, vice-president of human resources at Industrial Alliance.

Over time, the HR strategy became more focused and aligned more closely with the business strategy, he says. The department wanted to focus on developing the skills HR people need to add value to the organization and then eliminate all the non-value-add activities.

“We decided to focus on the main challenge HR departments are facing at this time, which is attracting and engaging people,” says Boulet.

Eventually, the department outsourced 14 different systems and services, including a job-posting system, resumé management, payroll, reference checks, exit interviews, disability management and temporary employee management.

“Instead of gathering data, now (HR employees) have time to analyze the data and make recommendations and provide better support to managers and employees.”

In outsourcing so many services and systems, finding the right providers was critical.

“In some cases you don’t have a choice, there is only one service provider,” says Boulet.

But when there was a choice, Boulet considered whether a provider was national and if it offered services in both English and French to meet the needs of the company’s 3,000 employees across the country. Boulet also examined the quality of service available at each location and looked into the track record and reputation of the providers.

It was also important the providers offer service after hours and online, says Boulet.

“If there’s a pandemic or any crisis, you can run your business anywhere.”

To keep costs down, Boulet looked for providers with multiple services, such as Shepell-fgi, which provides Industrial Alliance’s employee assistance program and disability management services.

“It gave us more volume so we could get a better rate,” says Boulet.

He was able to do this a couple of times and ended up with seven providers for the 14 systems and services.

Boulet also ensured the service ­contracts were about three to five years long so if things don’t work out, it is easy to renegotiate the contract or move on to a better provider.

With new providers constantly entering the marketplace, if one doesn’t work out, there’s always another waiting to take its customers. As such, Boulet doesn’t foresee any circumstance under which he would bring the outsourced functions back in-house.

The company also doesn’t have the volume to justify hiring a full-time person to just do payroll or disability management, and give the employee a satisfying career path, says Boulet.

“There’s a lot of administrative work. I wouldn’t ask my people to go back to do these things.”

When deciding to outsource, HR needs to define exactly what it wants to outsource and the parameters of service it’s looking for, says Boulet. It also needs to investigate the providers, including referrals from long-time customers.

Once a provider has been selected, it’s important to develop a partnership with the service provider, says Boulet.

“If you establish a partnership, it will be a win-win situation. You will be able to sit together on a regular basis to discuss issues that were not foreseeable in the contract.”

When a service provider is trying to win an organization’s business, the organization is the provider’s most important customer. But over time, an organization can become just one of many customers and get lost in the shuffle if it doesn’t work to maintain that important relationship, he says.

“You have to establish meetings on a regular basis to get feedback and input. They need to know what’s going on here and we need to know what’s going on at their place,” says Boulet. “That’s a relationship you need to develop and keep going. That’s discipline.”

Marianne Pelletier
Director of human resources
Investment Planning Counsel

The wealth management organization in Mississauga, Ont., is owned by IGM Financial, which also owns Investors Group and Mackenzie Investments. It has 180 employees and 600 independent financial planners.

With 180 employees and just four HR staff, it didn’t make sense for Investment Planning Counsel (IPC) to keep its payroll in-house, especially when it could be outsourced to a larger sister company, says Marianne Pelletier, director of human resources at IPC.

“It was a synergy for the group of companies to have all their payroll to come out from one entity as opposed to each one of us doing it separately. They’ve got the resources to do it,” says Pelletier.

IPC initially outsourced payroll to Mackenzie Investments in 2003, then both companies outsourced to Investors Group in Winnipeg in 2008. All three companies are owned by IGM Financial.

Outsourcing has meant IPC can take full advantage of the payroll specialists at Investors Group instead of relying on its own HR generalists, says Pelletier.

“It’s a time-saver,” she says. “There’s much improved quality in accuracy.”

However, outsourcing payroll does have its drawbacks.

“You lose control. If you need answers right away, need to issue a cheque, you can’t do that right away. There’s a bit more of a process involved,” says Pelletier. “We also don’t have the relationships that you would with your in-house team.”

To overcome these challenges, Pelletier’s team has worked hard to network and build relationships with the payroll team at Investors Group.

“That’s made a huge difference for us,” she says.

When payroll people come to Toronto, Pelletier ensures her team gets the chance to spend time with them. They’ve also created a very open relationship so if anyone at IPC has a question, they can call the appropriate person at Investors Group to get answers.

“If we’ve got questions or we’re researching something, we go to them for their opinions,” she says. “Even if we’re looking at bringing in a new benefit we might ask our Investor Group people — they’ve got a huge benefits department — what their experience is and what their opinion is. So there’s a lot of networking.”

While the company has talked about the possibility of bringing payroll back in-house, it’s not a priority, says Pelletier.

One of the main goals of outsourcing is to control costs and increase efficiency, so the company wouldn’t want to bring payroll back in-house and have it as an expense, she says.

“If the rates went high, if we got to the point where it would be more cost-effective to keep it in-house or if the process became inefficient and ineffective, we would bring it back in-house.”

When it comes to outsourcing other HR functions, IPC uses hiring agencies when recruiting people in niche markets but tends to keep as much of the hiring in-house as possible.

The company also considered outsourcing benefits but decided against it, says Pelletier.

“I’m big on outsourcing the transactional pieces, but you don’t want to outsource everything because then you lose the whole relationship and engagement with the employees. Benefits is a good example. That’s a lot of confidential questions and concerns. It’s nice to keep that in-house.”

Pelletier’s number one piece of advice for other companies looking to outsource is to check providers’ references. After that, a company needs to examine the vendor’s philosophy and culture to determine if it’s a good fit for the company’s needs, she says.