the decision to outsource HR is the first hurdle a company faces. Keith Rogers
examines how to steer clear of outsourcing pitfalls
organisations approach HR outsourcing with some trepidation – and rightly so.
While the theory makes a lot of sense – why should you devote resources to
tasks that specialists can do more efficiently and effectively? – in practice
there are a number of hurdles to cross. Key challenges include:
Cultural disparity. This is top of the list for many clients – the
feeling that the service provider doesn’t understand the nuances of the
organisation’s business and its strategic aims.
Managing the service provider. The framework comes from a
well-constructed service level agreement (SLA) – one that is flexible enough to
cope with change during or after the initial transition period, but that also
pins the provider down to key performance metrics.
Building a relationship. Above and beyond the SLA, success depends on
the two organisations’ ability to build a mutually beneficial relationship –
one where the service provider acts as a partner rather than a vendor, and the
user understands the commercial and practical constraints that guide the
outsourcer’s business. The personal relationships between the various managers
that interface with the service provider are also critical.
The true business case. Users need to have a firm grip on where and when
the benefits will emerge – consultants warn that cost-savings may not kick in
as early as expected
The enterprise-wide implications. The decision to outsource HR will have
ramifications across the enterprise as the service is unrolled to different
user departments. This can prompt cultural resistance elsewhere in the
a Big Five consulting firm, partners with Convergys to provide HR outsourcing
services. Karen Bowman, president of employee care at Convergys, and Brett
Walsh, partner and head of human capital at Andersen UK, outline some of the
ways users can overcome these kinds of outsourcing issues.
What are the three biggest steps users can take to avoid failure?
Bowman: There needs to be clarity of scope – oftentimes a client thinks
they are outsourcing one thing, and the outsourcer has outsourced something
else. There also needs to be clarity of roles at the outset, so you do not
create shadow organisations at the client – some clients keep stay-behind teams
that are too large. The level of empowerment given to the outsourcer is also
important – let the outsourcer do their job. If you have good communications
and a good level of empowerment, you can allow the outsourcer to manage it like
Outsourcers talk of the relationship being more important than the Service
Level Agreement — but it is the SLA that gives the client legal comfort. How
do you reconcile the two?
The way we look at the SLA is that it is the minimum level of quality we want
to provide. The real value is that we have tremendous access to data about the
client. We can look at an issue and say ‘here’s something we thought about
doing better or smarter – or not doing at all any more.’ That is not a
performance metric – it is hard to pre-script into a contract, but it is very
critical to being successful.
are tools to do that – we have dual report cards. The client gives us monthly
feedback on the quality of our service. We give feedback on the things we could
do better ourselves, what we could do better in conjunction with them, or the
things on their side that could be done more efficiently. Those tools are more
important to us than passing out metrics on a monthly basis.
How should organisations go about managing the service provider relationship?
Walsh: The relationships should first and foremost be predicated on a
partnering relationship. Personal relationships are key to this but also a
clear understanding early on by both parties on what the client will retain and
the outsourcer will manage is critical to the working relationship. Joint
management structures are important to ensure interests are meshed,
transparency and trust are established at the outset.
Cultural issues, loss of control and poor management of the service provider
are often cited as reasons for failure in outsourcing. But what other issues
should HR managers consider?
It is important to recognise the concerns of employees as organisations pursue
HR outsourcing. HR managers need to have convinced staff before implementation
that employee self-service and a more strategic HR function is not a diminution
of their current HR support, but rather a major enhancement. All too often cost
savings are cited as the main benefits – while cost is a major driver, the HR
service and channel expansion is often understated. A communication and
training plan is therefore a critical success factor all too often overlooked.
The outsourcer has to bring some type of scale and buying power to the table.
But we also bring a whole data network and telephony network infrastructure and
a secured internet access structure – and we bring the systems and keep them up
If much of the outsourcer’s business case rests on economies of scale,
presumably you have to standardise much of the services you offer. How much can
they be tailored to individual needs?
Our view is that larger organisations still need to differentiate themselves in
the marketplace. We are very keen to give people something tailored to their
needs. But often organisations will claim they need to be more differentiated
than they actually do. You need to resist the temptation to be ultra-tailored,
but you do need to customise.
How much is this an HR issue, and how much board level?
With the increasing difficulty of attracting, retaining and motivating top
talent – HR management is becoming a major business issue. The possibility of HR becoming a strategic
player by outsourcing less value-added activities is highly attractive to
enlightened organisations and boards striving for advantage in ever tougher
market conditions. With the cost and service benefits now available through
these transactions, HR and boards are generally considering these issues
together against a detailed business case.
How do outsourcers’ approaches to the transition period vary?
Our approach is somewhat different – before anything is actually transferred
over to Convergy, we are keen to fix it. Most providers take on the service,
then fix it piecemeal – they sell you something that lets them take some
benefit for fixing it, but that is not necessarily transparent to you as the client.
We find it is more expedient to do it this way, versus taking the service
delivery model over and then transforming it. You spend a large amount of time
in the latter model moving people, some of whom will not be part of the model going
forward. In the new organisation, the skillsets you need – both at the
outsourcer and in the stay-behind team – are typically quite different.