Outsourcing is a hot topic on many HR Director's 'To Do' lists, but it has been slower to take off than Finance or IT Outsourcing. So what are the key differentiators that drive outsourcing as a preferred option for HR and warrant extra attention during the outsourcing process?
Firstly HR processes tend to have fuzzy boundaries. Ask 10 HR Directors to define what tasks fall into payroll and which into the HR admin department and you will get 10 different answers.
There is a tendency for customised offerings, designed to meet a client's specific policies, procedures and priorities for HR. There is no 'one size fits all' where HR is concerned.
Thirdly HR has multiple inputs and outputs. Data passes between HR and authorities, employees, managers, the finance department, the production department, trade unions, debtors, former employers and many other parties.
Finally HR is subject to frequent and stringent legal changes. Non-compliance can result in considerable fines and can also lead to onerous audits elsewhere in the company.
So HR outsourcing is not so straightforward.but these simple tips can help to ensure success when outsourcing HR services.
1. Clarify the unspoken truths
Some HRO providers have a strong 'can-do' attitude, but given the fragmented nature of HR, their experience may be lacking in substance. A supplier may deliver vaguely similar services to those you wish to transition. They may deliver the same services but on a much smaller scale. You don't want to become their guinea pig. They may offer 'comprehensive services', but this may not mean that everything is included.
Be sure to understand the supplier's background and experience. Is their experience mostly in systems implementation, process improvement or actual service delivery? Ask whether the supplier has actually transitioned certain services or simply 'bought them in'. Visit the service which will actually deliver your services. In reality these may consist of 20 people who have never transitioned or delivered HR services like yours, and may be different from the 'showcase centre'.
Finally understand the supplier's approach to automation. A sad fact of HR processes is that not all can be automated, but suppliers may charge extra for manual processes. Build a detailed list of scenarios and ask how each would be handled, and most importantly charged for.
2. Don't change all of your processes and systems at once
It is very tempting to implement a single system for your entire HR department and outsource everything at once. Because HR systems are extremely interdependent, project slippage in one system can lead to manual work, additional programming and training in interim systems. Outsourcing brings disruption and risk in the early days, adding multiple processes and projects increases this risk considerably.
Consider instead outsourcing some processes as-is, or having a staggered implementation. This will require additional work to establish new interfaces and hand-offs, but this investigation is valuable in ensuring the systems and processes are fully understood, and will increase the quality of your outsourcing in the long term.
3. HR people don't like project plans - build a diverse project team
Stereotypical? Yes. Realistic? Indeed! It is no secret that HR people are less comfortable with rules, structure and excel sheets than their Finance and IT counterparts. An outsourcing project involves multiple workstreams covering technical, process and change management areas. It needs a lot of structure and rigour, as well as strong empathy and a sense of humour.
Choosing team members for there preference for order and structure, or their interpersonal skills, as well as their experience, can help the whole team to function better, consider a broader range of issues and progress at the right pace. A strong project kick-off programme will help team members to understand, respect and leverage each other's views, skills and preferences.
4. A little outsourcing experience is a dangerous thing - build a diverse project team
A team member with a little outsourcing experience may use this as a reference point for a much bigger European deal. This 'blinkered' view risks the team missing key points specific to European outsourcing such as the extent of diversity in HR law and practice between countries, the complexity of legal changes and statutory reporting in certain countries and the role of Works Councils.
The answer is to build a team including people with broad experience of outsourcing, and also those with no experience, but with the skill to question the decisions the team is making.
5. Be aligned on what 'partnership' means
HR Outsourcing deals tend to last for at least 5 years, so it is critical to have a strong relationship with your outsourcing provider. 'Partnership' is a commonly used term, but should not mean 'best friends with'. A strong, long term relationship should be built around a strong contract which meets the needs of both parties. It can be very tempting to always defer to the wishes of the supplier in the desire to build a 'partnership', but this is detrimental in the long term.
Be sure the project team are clear on the rules of engagement with the supplier. Explain that partnership means building a mutually beneficial business relationship. That it is ok to give in on some things but be sure not to give in on others. Build a list of what you are prepared to give way on and what not. And be sure to track your starting position - what you ask for when first selecting a supplier and any negotiated points throughout selection and contracting. This will help you to have an unbiased view of how balanced your partnership is.
6. Negotiation - give your team strength
Negotiating is tough at the best of times and HRO contracts are complex and specific. Your team may have been brought together for its HR experience, not its negotiating skills. This makes for a stressful time. One HR manager recently agreed many things in the supplier's interest, simply because they lacked basic negotiating skills and had formed a 'kinship' with the supplier.
Ensure all members of the negotiating team have negotiating training. Ensure that the team has strong roles and responsibilities - who can make agreements and concessions, who can take detailed notes, who can call time-out on a discussion. Set clear ground rules - no side discussions or offline discussions, a democratic process for making decisions, a defined process for changing an agreement once made.
7. Knowledge transfer - HRO takes time!
HR processes are typically dependent on a number of different inputs and factors. Processes and procedures vary considerably from one company to the next. It is much harder to write 'rules' and build a knowledge base for HR transactions than for other functions. HRO providers with a systems background may underestimate the importance of detailed knowledge capture, stating 'we'll do the processes our way; we don't need to understand how you do them'. This increases the risk that important steps are missed, which can impact not only the success of the outsourcing, but also employee morale and even the reputation of your company.
Be sure to allow sufficient time for Knowledge Transfer and ask your supplier detailed questions about their Knowledge Transfer process. Your contract terms should ensure that failure to adequately capture and transfer knowledge will have financial implications for the supplier. Most importantly, work together, so that your employees understand and support the knowledge transfer process.
8. Implementation - establish clear ownership of the local organisation
Each country should be responsible and accountable for the successful implementation of the outsourcing project. Local HR organisations understand better the intricacies of their countries, and can better mitigate the specific local risks. If local leadership do not feel ownership for the project there will be much more resistance at grass roots level.
This means involving key country leaders in the project in the early stages, including the supplier selection. Establish clear lines of responsibility between the central and local teams. The central team may own the contract negotiations, while the local team may own the success of the knowledge transfer process.
HR Outsourcing is a key enabler for HR departments to fulfil their vision and meet their commitments to the broader company. Ask lots of questions of your potential suppliers around their experience, skills, and knowledge transfer methodologies. Beware of crossing the line between successful partnership and 'best friends'. Be realistic about the scope to be outsourced, and place high importance on a strong knowledge transfer process. Finally, build a diverse and balanced project team, with clear operating principles and be sure to involve the local organisation early on in the project. It isn't simple, but with good planning and a strong implementation team HR Outsourcing can bring enormous benefits.
About the author
Rachel Anderson is a Senior Consultant with Alsbridge Europe, the award winning advisory firm on outsourcing, shared services and offshoring. Rachel can be contacted at Rachel.anderson@alsbridge.eu |
