HR’s technological revolution meets the outsourcing phenomenon, and the profession may never be the same
Human resources outsourcing (HRO) is among the fastest growing of all business operational and functional areas. It’s also one of the most complex because it involves selected processes and comprehensive across-the-board administration, as well as employee and managerial services.
A significant new book, published by the International Association for Human Resource Information Management (IHRIM), Out of Site: An inside look at HR Outsourcing, aims to “demystify the situation and alleviate the fears, laying the groundwork for a successful HR outsourcing initiative in your company.”
Technology is the major component of, and a reason for, outsourcing. The management of HR technology and of HR itself comes together in outsourcing, hence this IHRIM publication becomes a comprehensive look at what HR technology and HR outsourcing do to the department and profession. Technology is really where outsourcing will start.
It’s difficult to imagine a more comprehensive set of views, approaches and advice on this challenging topic in a single volume.
By way of introduction, the book offers this view of the landscape: “HRO has been clad in a shroud of secrecy — to outsource was seen as not being able to solve your problems yourself and as dumping them onto someone else: ‘outta-sight, outta-mind.’ The good news is HR outsourcing is now emerging as a viable, effective, well-respected — even sought after — strategy for managing the human resources infrastructure and processes in the organization.”
Experts from HR, business, IT, academia and consulting wrote the 29 chapters examining outsourcing and offshoring, HRO vision and rationale, deployment, transition and roles for HR leaders and practitioners before, during and after. Shared services and application service provider models are also outlined. The intended audience includes HR and HRIS professionals, HR and IT executives, vendors, consultants and general management decision-makers.
The book is organized around a five-point outsourcing strategy backed by solid change management:
•develop the strategy;
•structure the organization;
•manage the people;
•redesign the business processes; and
•deploy the solution.
An early chapter presents key steps for moving into HRO:
•develop an overall strategic outsourcing plan;
•establish a sound governance model;
•identify ongoing methods for measurement and assessment;
•implement a comprehensive vendor management program; and
•deploy a company-wide change management program.
Readers will find numerous perspectives on many of the topics — evidence there is no single right answer or approach for all organizations.
To outsource or not?
The trends toward HR outsourcing are well-documented but each organization needs to come up with its own answer to the “outsource or not” question and, more realistically, the what, why, how and when of outsourcing.
One chapter is entitled, “Is outsourcing right for you? The answer depends on the question.” The writer argues that “to outsource or not to outsource” is the wrong way to frame it. Instead start with: “Going forward, what do we want HR’s core competency to be?’’ Then work out the path in light of key variables:
•the status of your technical infrastructure;
•areas of pain in your current service offerings;
•the company’s position in the organizational life cycle;
•industry type; and
•management decision profile.
A later chapter explores what to outsource (expert resources, HRIT, HR business processes or comprehensive HR), the many reasons for considering HRO and the challenging question: “Why not outsource all of HR?”
The book covers strategic motivations for outsourcing: cost benefits, access to expertise and excellence in operational, administrative and technical HR practices. There’s also an overview of business case development considering lower costs, improved efficiency and mitigation of legal and regulatory risk through process consolidation and standardization.
Ultimately many HRO decisions are based, at least in part, on the desire to reposition HR management in a more strategic role.
“Many managers report that shifting the burden of administrative processes to an outsourcing partner enables them to better manage their responsibilities and to have a more meaningful impact on the company’s strategic direction.”
It doesn’t automatically happen this way. A deliberate and comprehensive plan is essential.
Outsourcing requires HR measurement
But outsourcing is not for the faint of heart, especially if HR doesn’t have its act together with benchmarking and measurement.
Numerous chapters deal with the steps required to actually move into an HRO mode of operation.
Careful attention is paid to process design and selection for outsourcing and the building of the HRO operating model.
Measurement of the savings, gains, quality and efficiency improvements is a vital dimension of the whole outsourcing decision. Anticipated benefits and the related metrics should be developed before beginning the selection of vendors. There are six important areas to cover:
•service level metrics (scope, hours and costs of service and number of calls);
•service quality (user satisfaction, response time, accuracy and meeting legal requirements);
•vendor management issues (responsiveness and ethical practices);
•total cost reduction (taking into account the baseline costs, vendor contract payments, vendor management costs and HR staff reduction);
•unintended consequences (such as erosion of trust or of attraction and retention of staff); and
•better use of HR resources (focus on more strategic goals, impact and how the savings from HRO deployment were directed to support business objectives).
People and change
A move to outsourcing is like any other big change in the life of the organization and its people. Several chapters address the change thinking necessary to execute the transition effectively, the need for a clear and complete communication strategy and the change management preparation and action required to identify and address the direct and indirect impacts on various stakeholder groups.
Ten critical success factors are listed that include issues like: work process flow and boundaries, orderly transition and implementation, change management and communication, relationship management and investing in the retained organization.
Some readers may feel the scope and challenge of HR outsourcing is overwhelming. A powerful message of the book is to use caution, proceed with eyes wide open, study and learn before making decisions and invest in a comprehensive, customized and well-planned strategy.
“Twelve steps to HRO success — lessons learned from real life” summarizes a systematic approach with positive examples, albeit mostly from large organizations including: CIBC, BMO, Sony, BASF, the United States government, AT&T, the City of Copenhagen and Prudential Financial.
Global trends and issues
Trends, practices, cultural differences and specific country issues are described in detail in chapters surveying HR outsourcing in Europe, Asia and Latin America.
There’s also a chapter on outsourcing strategies for the transnational organization, and advice for HR executives on the growing, irreversible and often sensitive issue of offshoring business activities, processes and HR functions.
“HR executives owe it to their companies and their employees to ‘step up’ and manage how/when their corporation embraces offshoring. Rationally and emotionally they are most optimally positioned to help companies plan, source and execute a systematic and well-communicated offshoring program … HR must proactively lead.”
Looking ahead at the HR profession in the outsourcing era
Out of Site outlines approaches for transitioning the HR function and the HR team through and beyond the outsourcing deployment. New skills will be needed in vendor management, HR business partnering and process ownership in a centre of excellence model.
Of course many HR specialists and practitioners may prefer (or may have no other option but) to make the transition to working for an outsourcing provider, where they can focus on their areas of expertise and deepen their experience.
Out of Site includes a chapter on “HR leadership and outsourcing” which enumerates the qualities HR leaders need in the age of outsourcing:
•statesmanship;
•emotional intelligence;
•credible eloquence;
•focus on permanent business;
•partnership with the business;
•grace under pressure; and
•knowledge, endurance and confidence.
Two of the writers envisage HR emerging as a new profession, and outsourcing heralding the end of HR as we know it:
“For the mid-career professional in human resources, outsourcing may be the greatest opportunity for career growth the HR profession has ever seen. But it may also be a threat to those who lack the necessary skills and direction to thrive in the new workplace environment. Much of what HR professionals have done and learned in their careers has now changed and will continue to change. What were once the most important services they could provide — reliable HR transactions and one-to-one employee service — may now be of declining value to the employing organization. But at the same time, for HR professionals who think outside the box, who think of HR in business terms and not service terms, the opportunities are now limitless.”
Reasons not to outsource
Presenting all points of view Out of Site also gives readers the strategic case against HR outsourcing, listing four reasons to minimize outsourcing:
•outsourcing will not provide a firm with a competitive advantage;
•outsourcing limits the growth, the image and the capabilities of the HR function;
•no “actual” cost savings are realized and there is no data to prove “it works”; and
•maintaining company secrets and data security.
It goes on to list many more problems with HRO and concludes, “why would HR abdicate its core responsibility and outsource a key competency? … If HR is to become a true business leader, the answer would be to accept its responsibility for both strategic and tactical people problems,” states John Sullivan, professor of management at San Francisco State University. “I have found no evidence that an HR department becomes more ‘strategic’ after outsourcing major parts of the HR function. In fact I found the exact opposite.”
One writer challenges the myths that HRO is very similar to an internal shared services organization or to an IT outsourcing model, and the belief that scaling an HRO solution from one company to another is easy.
Whether as substantive input into an HRO strategy, or a valuable devil’s advocate perspective, these arguments round out the book’s complete treatment of the subject.
Ray Brillinger is a certified management consultant who works with clients on organizational change, HR strategy and performance improvement. He can be reached at (905) 547-8193 or [email protected].
A significant new book, published by the International Association for Human Resource Information Management (IHRIM), Out of Site: An inside look at HR Outsourcing, aims to “demystify the situation and alleviate the fears, laying the groundwork for a successful HR outsourcing initiative in your company.”
Technology is the major component of, and a reason for, outsourcing. The management of HR technology and of HR itself comes together in outsourcing, hence this IHRIM publication becomes a comprehensive look at what HR technology and HR outsourcing do to the department and profession. Technology is really where outsourcing will start.
It’s difficult to imagine a more comprehensive set of views, approaches and advice on this challenging topic in a single volume.
By way of introduction, the book offers this view of the landscape: “HRO has been clad in a shroud of secrecy — to outsource was seen as not being able to solve your problems yourself and as dumping them onto someone else: ‘outta-sight, outta-mind.’ The good news is HR outsourcing is now emerging as a viable, effective, well-respected — even sought after — strategy for managing the human resources infrastructure and processes in the organization.”
Experts from HR, business, IT, academia and consulting wrote the 29 chapters examining outsourcing and offshoring, HRO vision and rationale, deployment, transition and roles for HR leaders and practitioners before, during and after. Shared services and application service provider models are also outlined. The intended audience includes HR and HRIS professionals, HR and IT executives, vendors, consultants and general management decision-makers.
The book is organized around a five-point outsourcing strategy backed by solid change management:
•develop the strategy;
•structure the organization;
•manage the people;
•redesign the business processes; and
•deploy the solution.
An early chapter presents key steps for moving into HRO:
•develop an overall strategic outsourcing plan;
•establish a sound governance model;
•identify ongoing methods for measurement and assessment;
•implement a comprehensive vendor management program; and
•deploy a company-wide change management program.
Readers will find numerous perspectives on many of the topics — evidence there is no single right answer or approach for all organizations.
To outsource or not?
The trends toward HR outsourcing are well-documented but each organization needs to come up with its own answer to the “outsource or not” question and, more realistically, the what, why, how and when of outsourcing.
One chapter is entitled, “Is outsourcing right for you? The answer depends on the question.” The writer argues that “to outsource or not to outsource” is the wrong way to frame it. Instead start with: “Going forward, what do we want HR’s core competency to be?’’ Then work out the path in light of key variables:
•the status of your technical infrastructure;
•areas of pain in your current service offerings;
•the company’s position in the organizational life cycle;
•industry type; and
•management decision profile.
A later chapter explores what to outsource (expert resources, HRIT, HR business processes or comprehensive HR), the many reasons for considering HRO and the challenging question: “Why not outsource all of HR?”
The book covers strategic motivations for outsourcing: cost benefits, access to expertise and excellence in operational, administrative and technical HR practices. There’s also an overview of business case development considering lower costs, improved efficiency and mitigation of legal and regulatory risk through process consolidation and standardization.
Ultimately many HRO decisions are based, at least in part, on the desire to reposition HR management in a more strategic role.
“Many managers report that shifting the burden of administrative processes to an outsourcing partner enables them to better manage their responsibilities and to have a more meaningful impact on the company’s strategic direction.”
It doesn’t automatically happen this way. A deliberate and comprehensive plan is essential.
Outsourcing requires HR measurement
But outsourcing is not for the faint of heart, especially if HR doesn’t have its act together with benchmarking and measurement.
Numerous chapters deal with the steps required to actually move into an HRO mode of operation.
Careful attention is paid to process design and selection for outsourcing and the building of the HRO operating model.
Measurement of the savings, gains, quality and efficiency improvements is a vital dimension of the whole outsourcing decision. Anticipated benefits and the related metrics should be developed before beginning the selection of vendors. There are six important areas to cover:
•service level metrics (scope, hours and costs of service and number of calls);
•service quality (user satisfaction, response time, accuracy and meeting legal requirements);
•vendor management issues (responsiveness and ethical practices);
•total cost reduction (taking into account the baseline costs, vendor contract payments, vendor management costs and HR staff reduction);
•unintended consequences (such as erosion of trust or of attraction and retention of staff); and
•better use of HR resources (focus on more strategic goals, impact and how the savings from HRO deployment were directed to support business objectives).
People and change
A move to outsourcing is like any other big change in the life of the organization and its people. Several chapters address the change thinking necessary to execute the transition effectively, the need for a clear and complete communication strategy and the change management preparation and action required to identify and address the direct and indirect impacts on various stakeholder groups.
Ten critical success factors are listed that include issues like: work process flow and boundaries, orderly transition and implementation, change management and communication, relationship management and investing in the retained organization.
Some readers may feel the scope and challenge of HR outsourcing is overwhelming. A powerful message of the book is to use caution, proceed with eyes wide open, study and learn before making decisions and invest in a comprehensive, customized and well-planned strategy.
“Twelve steps to HRO success — lessons learned from real life” summarizes a systematic approach with positive examples, albeit mostly from large organizations including: CIBC, BMO, Sony, BASF, the United States government, AT&T, the City of Copenhagen and Prudential Financial.
Global trends and issues
Trends, practices, cultural differences and specific country issues are described in detail in chapters surveying HR outsourcing in Europe, Asia and Latin America.
There’s also a chapter on outsourcing strategies for the transnational organization, and advice for HR executives on the growing, irreversible and often sensitive issue of offshoring business activities, processes and HR functions.
“HR executives owe it to their companies and their employees to ‘step up’ and manage how/when their corporation embraces offshoring. Rationally and emotionally they are most optimally positioned to help companies plan, source and execute a systematic and well-communicated offshoring program … HR must proactively lead.”
Looking ahead at the HR profession in the outsourcing era
Out of Site outlines approaches for transitioning the HR function and the HR team through and beyond the outsourcing deployment. New skills will be needed in vendor management, HR business partnering and process ownership in a centre of excellence model.
Of course many HR specialists and practitioners may prefer (or may have no other option but) to make the transition to working for an outsourcing provider, where they can focus on their areas of expertise and deepen their experience.
Out of Site includes a chapter on “HR leadership and outsourcing” which enumerates the qualities HR leaders need in the age of outsourcing:
•statesmanship;
•emotional intelligence;
•credible eloquence;
•focus on permanent business;
•partnership with the business;
•grace under pressure; and
•knowledge, endurance and confidence.
Two of the writers envisage HR emerging as a new profession, and outsourcing heralding the end of HR as we know it:
“For the mid-career professional in human resources, outsourcing may be the greatest opportunity for career growth the HR profession has ever seen. But it may also be a threat to those who lack the necessary skills and direction to thrive in the new workplace environment. Much of what HR professionals have done and learned in their careers has now changed and will continue to change. What were once the most important services they could provide — reliable HR transactions and one-to-one employee service — may now be of declining value to the employing organization. But at the same time, for HR professionals who think outside the box, who think of HR in business terms and not service terms, the opportunities are now limitless.”
Reasons not to outsource
Presenting all points of view Out of Site also gives readers the strategic case against HR outsourcing, listing four reasons to minimize outsourcing:
•outsourcing will not provide a firm with a competitive advantage;
•outsourcing limits the growth, the image and the capabilities of the HR function;
•no “actual” cost savings are realized and there is no data to prove “it works”; and
•maintaining company secrets and data security.
It goes on to list many more problems with HRO and concludes, “why would HR abdicate its core responsibility and outsource a key competency? … If HR is to become a true business leader, the answer would be to accept its responsibility for both strategic and tactical people problems,” states John Sullivan, professor of management at San Francisco State University. “I have found no evidence that an HR department becomes more ‘strategic’ after outsourcing major parts of the HR function. In fact I found the exact opposite.”
One writer challenges the myths that HRO is very similar to an internal shared services organization or to an IT outsourcing model, and the belief that scaling an HRO solution from one company to another is easy.
Whether as substantive input into an HRO strategy, or a valuable devil’s advocate perspective, these arguments round out the book’s complete treatment of the subject.
Ray Brillinger is a certified management consultant who works with clients on organizational change, HR strategy and performance improvement. He can be reached at (905) 547-8193 or [email protected].
| Out of Site: an inside look at HR Outsourcing Edited by Karen Beaman 379 pages IHRIM (2004) ISBN 0-9679239-5-6 Available from IHRIM (800) 946-6363 www.ihrim.org |
