Human Resources Outsourcing SHRM by SupremeLord

VIEWS: 23 PAGES: 68

									HR Outsourcing (HRO): Its Impact on Your Company,
Your Career, and the HR Profession

Presented by Tom Darrow
2006/2007 SHRM-Atlanta President
Principal, Talent Connections




                                   Copyright 2005 Talent Connections. All Rights Reserved.
              Agenda

: HR Outsourcing Overview
: Impact on Companies
: Impact on HR Profession
: Impact on Your Career
: Selecting, Managing, and Measuring
 Outsourcing Providers
: Helpful Resources




                         Copyright 2005 Talent Connections. All Rights Reserved.
            What is Outsourcing?


The performance
by outside parties,
on a recurring basis,
of tasks that would
otherwise be
performed in-house.




                        Copyright 2005 Talent Connections. All Rights Reserved.
           Other Definitions


:   In-sourcing
:   Off-shoring
:   Co-sourcing
:   Geo-sourcing
:   Outplacement




                      Copyright 2005 Talent Connections. All Rights Reserved.
                Types of Outsourcing1

:   Business Process Outsourcing
:   Information Technology - 28%
:   Human Resources – 16%
:   Sales & Marketing – 15%
:   Finance – 11%
:   Administrative – 9%
:   All Others – 22%




                           Copyright 2005 Talent Connections. All Rights Reserved.
              How Common is HRO?

: 58% of companies outsource some HR
 function2
: 91% of companies with $1 billion+ annual
 revenues are now considering HRO3
: HRO grew 28% from second half of 2004 to
 first half of 20054 100


                     90


                     80


                     70


                     60                                                                               companies that outsource some HR
                                                                                                      function
                                                                                                      companies with $1 billion + annual
                     50
                                                                                                      revenues considering HRO
                                                                                                      HRO growth from second half of 2004
                     40                                                                               to first half of 2005


                     30


                     20


                     10


                      0
                             companies that                            HRO growth from second
                                               companies with $1 billion
                           outsource some HR     + annual revenues       half of 2004 to first half
                                function          considering HRO                of 2005




                                    Copyright 2005 Talent Connections. All Rights Reserved.
               The HRO Market

: In next 5 years, global spending on HRO will
 double – from $40 billion to $80 billion5

: From 2002 to 2004, 14% increase in large
 firms that would consider HRO6




                          Copyright 2005 Talent Connections. All Rights Reserved.
                  5 Most Commonly Outsourced
                  HR Services7

1.   Background Checks – 73%
2.   Employee Assistance/Counseling – 66%
3.   FSA Administration – 67%
4.   COBRA – 55%
5.   Healthcare Benefits Administration – 60%

                 Background C hecks



               Employee Assistance /
                   C ounseling



                 FSA Administration                                               Series1




                            C OBRA



                 Healthcare Benefits
                   Administration


                                     0   10   20   30   40   50    60   70   80




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                Other Types of HR Outsourcing7

:   Pension Benefits Administration – 55%
:   Temporary Staffing – 54%
:   Retirement Benefits Administration – 47%
:   Payroll & Software Services – 48%
:   Recruiting, Staffing & Search
    – Non-executives - 30%
    – Executives - 29%




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               Other Types of HR Outsourcing7

:   Employee Relocation – 29%
:   Training and Development – 21%
:   Incentives – 19%
:   HRIS & Web-based Services – 15%
:   Reference Checks
:   PEOs and ASOs
:   Sourcing Consultants & Legal Services
:   Screening & Workplace Security
:   Process, Project, and Systems Management


                          Copyright 2005 Talent Connections. All Rights Reserved.
                          Least Commonly Outsourced
                          Functions7
:   Performance Management 3%
:   Strategic Business Planning – 4%
:   Policy Development/Implementation – 4%
:   Employee Communication Plans – 10%


               Performance Management




             Strategic Business Planning


                                                                     Series1

                     Policy
            Development/Implementation



               Employee C ommunication
                       Plans


                                       0   2   4   6     8     10




                                                   Copyright 2005 Talent Connections. All Rights Reserved.
              Audience Survey

: How many of you outsource part of your HR
 function?
  – Payroll
  – Benefits
  – Recruiting, Staffing, & Search
  – Training
  – HRIS & Web-based services
: How many of you outsource all of your HR
 function?
: What led to the decision to consider
 outsourcing?


                         Copyright 2005 Talent Connections. All Rights Reserved.
               Why Outsource?

: Allow HR to focus on core competencies
: Creates strategic opportunities for HR
 professionals
: Improve quality, efficiency, and effectiveness
: Relief from administrative burdens
: Reduce operating costs




                          Copyright 2005 Talent Connections. All Rights Reserved.
                Other Benefits to HRO

: Access to outside HR expertise
: Greater diversity of HR services
: Leverage vendor investments in technology
 rarely available to HR organization
: Limit fiduciary, audit, and litigation risks and
 liabilities
: Upgrade level of customer service
: Ease time pressure demands
:“Better, faster, cheaper”


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               Risks

: Over promise and under deliver
: Nonperformance of key function
: Cost
: Loss of institutional knowledge
: Difficulty managing vendor relationship
: Change in provider’s business or financial
 stability
: Lack of fit with company culture
: Organizational resistance or unreadiness


                          Copyright 2005 Talent Connections. All Rights Reserved.
              When to Outsource

: High HR service delivery costs
: No further investment in technology
: End administration of transactions and
 focus on strategic work
: Improve quality of HR services
: Strong business case
: Other business reasons




                         Copyright 2005 Talent Connections. All Rights Reserved.
               Considerations

: Core Competency?
: Best in Class?

1. What is your vision for your HRM business?
2. What metrics will measure progress toward
   vision?
3. What business outcomes are needed from
   the HRM aspects of the business?




                          Copyright 2005 Talent Connections. All Rights Reserved.
               Poor Reasons to Outsource

: Do not outsource just because you are
 frustrated
: Do not outsource as a last resort, just
 because you have tried everything else




                          Copyright 2005 Talent Connections. All Rights Reserved.
               Outsourcing Myths

: Outsourcing is just a fad
: Outsourcing can be kept secret from
 employees
: Outsourcing is only for the largest companies
: Messes must be fixed before outsourcing
: Outsourcing is for everyone




                          Copyright 2005 Talent Connections. All Rights Reserved.
              Trends in HR Outsourcing Market


: Specialization       : Consortia Buying
: Globalization        : Mid-market Mania
: Standardization      : Utility Model
: Regionalization        Evolution
                       : Consolidation and
                         Partnering




                        Copyright 2005 Talent Connections. All Rights Reserved.
                The Future of HRO

1.   Growth-Maturation of HRO market
2.   Increasing weight of non-cost drivers
3.   “Commodization” of HR functions
4.   New roles for internal HR departments
5.   New career opportunities for HR
     professionals




                           Copyright 2005 Talent Connections. All Rights Reserved.
               The Future of HRO (cont’d)


6. Expansion of small/mid-sized HRO markets
7. Demographic changes
8. Improved HRO metrics
9. Reshaping of industry




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              Impact on Companies

: Employee reactions
: HR executives taking part in operational
 and strategic decisions
: Elimination of bureaucracy
: Customer service improvements




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                 Impact on Companies (cont’d)

:   Growth of self-service platform
:   Slimming down staff
:   Cost savings
:   Model will serve to guide other
    organizational functions (IT, accounting)




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              Impact on HR Profession


: Internal HR at significant disadvantage in
 cost per transaction
: Loss of control of key processes
: Enhanced credibility
: Strategic focus
: Decentralized structure
: Internal politics – HR as business partner
: Move to customer service culture



                          Copyright 2005 Talent Connections. All Rights Reserved.
               Impact on HR Profession (cont’d)

: Management and Organizational
 Development – big picture view
: New roles – consultant and HR strategist
: Develop competencies to remain valuable
: HR is exposed and more visible as
 organizational function
: HR is far more measurable
: Align HR strategy with corporate goals




                         Copyright 2005 Talent Connections. All Rights Reserved.
                Impact on Your Career

: Transformation – from transactional administrator
  to business partner that sets strategy
: Develop competencies to negotiate and manage
  vendor relationships
: Demonstrate ability to provide business solutions
  for employee and customer problems
: Change bureaucratic culture
: Develop strategic expertise necessary to manage
  human capital




                             Copyright 2005 Talent Connections. All Rights Reserved.
                 Impact on Your Career

:    Deliver exceptional customer service
:    Sharpen your skills
:    Build/Develop your network
:    Stay on top of trends and their implications
:    Utilize vendors now so that they can help
    you later




                             Copyright 2005 Talent Connections. All Rights Reserved.
             Online Resources

: Better Management.com –
 www.bettermanagement.com
: EquaTerra – www.equaterra.com
: Everest Group - www.everestgrp.com
: HRO Today – www.hrotoday.com/org
: HR Executive – www.hrexecutive.com
: Human Capital Magazine –
 www.humancapitalmag.com
:“HR Outsourcing Gaining Traction Fast” –
 www.rwbaird.com/docs/YourReports/HRO2
 003.pdf

                       Copyright 2005 Talent Connections. All Rights Reserved.
              Online Resources (cont’d)

: Nelson Hall – www.nelson-hall.com
: Outsourcing Center –
  www.outsourcing-research.com
: Outsourcing Institute – www.outsourcing.com
: Outsourcing Suppliers –
 www.outsourcing-suppliers.com
: The Outsourcing Management Zone –
 www.theoutsourcerzone.com/law.htm



                         Copyright 2005 Talent Connections. All Rights Reserved.
              Books

: The HR Scorecard: Linking People, Strategy,
 and Performance by Becker, Huselid, and
 Ulrich (2001)
: Strategic Outsourcing: A Structured
 Approach to Outsourcing Decisions and
 Initiatives by Greaver (1999)
: Out of Site: An Inside Look at HR
 Outsourcing by Beaman (2004 )




                         Copyright 2005 Talent Connections. All Rights Reserved.
              Books (cont’d)

: Outsourcing: A Guide to Selecting the
 Correct Business Unit…Negotiating the
 Contract…Maintaining Control of the Process
 by Bragg (1998)
: The Challenge of Outsourcing Human
 Resources by Vanson (2004)
: Outsourcing Human Resource Functions:
 Strategies for Providing Enhanced HR Services
 at Lower Costs by Cook (1999)



                         Copyright 2005 Talent Connections. All Rights Reserved.
                Professional Organizations

: Human Resources Outsourcing
 Association – www.hroassociation.org
: HR.com – www.hr.com
: International Association of HR Information –
 www.ihrim.org
: Shared Services & BPO Association –
 www.sharedxpertise.org
: SHRM National – www.shrm.org
  – Outsourcing Forum –
    www.shrm.org/outsourcing/

                            Copyright 2005 Talent Connections. All Rights Reserved.
QUESTIONS?


     Copyright 2005 Talent Connections. All Rights Reserved.
THANK YOU!
         Tom Darrow
TomDarrow@talentconnections.net
   www.talentconnections.net




                 Copyright 2005 Talent Connections. All Rights Reserved.
                 Selection Process

:   RFI – request for information
:   RFP – request for proposal
:   Site visit
:   Create and use scoring tools
:   Top 3 potential providers deliver
    presentation




                            Copyright 2005 Talent Connections. All Rights Reserved.
              Selecting a Provider

: Identify must have’s and nice to have’s
: Discuss provider with consultant,
 competitors, former customers/employees
: Perform reference checks
: Determine current state of provider’s
 market share
: Consider local vs. remote




                         Copyright 2005 Talent Connections. All Rights Reserved.
               Selecting a Provider (cont’d)

: Identify provider’s recent disappointments
: Determine provider’s current weaknesses
: Beware of off-the-shelf solutions
 from vendors
: Determine provider’s current workload
 and capacity




                          Copyright 2005 Talent Connections. All Rights Reserved.
               Selection Criteria

:   Proven track record
:   Cost of vendor services
:   Service level guarantees
:   Flexible contract options
:   Cost savings guarantees
:   Recommendations from other companies
:   Compatible corporate culture
:   HR process expertise
:   Leading technology


                          Copyright 2005 Talent Connections. All Rights Reserved.
               Transitioning Resources

: Launch period between selection and
 implementation
: Approximately 90 days
: Time of learning in order to gain mutual
 understanding of company and processes
: Communication and project management
 are key
: Slowly turn over control as you transition
 resources
: Cannot measure results until end of
 this period

                          Copyright 2005 Talent Connections. All Rights Reserved.
              Managing the Provider

Who should manage the provider?
: CFO
: Head of HR
: Other HR individuals




                        Copyright 2005 Talent Connections. All Rights Reserved.
               Managing the Provider

: Establish performance targets and set
 expectations up front
: Determine priorities and communicate them
 to vendor
: Establish reporting relationships up front
: Provide forum and timing for discussion of
 issues
: Anticipate and plan for conflict resolution –
 arbitrate when it occurs
: Ongoing ownership, involvement, supervision




                          Copyright 2005 Talent Connections. All Rights Reserved.
               Managing the Provider (cont’d)

: Where continuity is critical, establish long-
 term relationships with vendors
: Review annual operating plans and major
 initiatives
: Guidance for provider and buyer’s managers’
 oversight
: Require competitive bidding for outsourced
 service at regular intervals
: Review contract terms and suggest changes
 as needed




                          Copyright 2005 Talent Connections. All Rights Reserved.
               Managing the Process

: Look beyond initial cost savings and track
 affect on employee satisfaction and
 organizational performance
: Ensure senior management buy-in and
 involvement
: Reinforce/reward through incentives
: Focus on quality first, cost second
: Test outsourcing with specific function
 before expanding



                          Copyright 2005 Talent Connections. All Rights Reserved.
              Managing the Process (cont’d)

: Facilitate feedback from internal HR team
: Manage resistance from internal HR team and
 company at large (communication is key)
: Anticipate and manage culture change
: Develop staff members to effectively manage
 vendor relationships




                         Copyright 2005 Talent Connections. All Rights Reserved.
               Measuring Performance

: Insist on accurate and frequent status
 reporting by vendors
: Demand immediate notification when
 problems arise
: Metrics are key
  – Quantitative terms
  – Incorporate multiple time periods




                          Copyright 2005 Talent Connections. All Rights Reserved.
               Measuring Success


: Internal metrics: effectiveness, efficiency,
 quality, productivity

: External metrics: revenues, expenses,
 market share, customer relations, quality
 productivity




                           Copyright 2005 Talent Connections. All Rights Reserved.
              Typical Problems

: Lack of measurement
  – 88% of large business require metrics8
  – Only 41% of mid-sized companies
    stipulate metrics in contracts8
: Rush into autonomy too soon
: Unrealistic expectations and goals
: Outsourcing for the wrong reasons
: Overly focused on cost savings
: Lack of communication
: Difficulties managing vendor
: Employee resistance


                         Copyright 2005 Talent Connections. All Rights Reserved.
              Success Factors

: Preparation is paramount
: Be a knowledgeable buyer
: Realistic goals and expectations
: Strategic vision
: Consider permanence of outsourcing - costs
 involved in switching outsourcing vendors or
 ending HRO
: Find the right vendor




                          Copyright 2005 Talent Connections. All Rights Reserved.
                   Satisfaction

Recent survey of 129 large companies
  representing 2 million employees9:
: 89% satisfied with outsourcing arrangement
: 85% achieved hoped-for benefits
: Additional 20% achieved unexpected benefits

                       satisfied




              achieved hoped-for                                    Series1
                   benefits




             achieved unexpected
                   benefits




                                   0   20   40   60     80    100




                                                      Copyright 2005 Talent Connections. All Rights Reserved.
              Best Practices

: Selective path toward HRO
: Multiple vendor relationships
: Combination of internal and external
 strategies




                         Copyright 2005 Talent Connections. All Rights Reserved.
               Overview of Process

Outsourcing Model – Greaver, 1999
1. Planning
2. Exploring strategic initiatives
3. Analyzing costs/performance
4. Selecting providers
5. Negotiating terms
6. Transitioning resources
7. Managing relationships



                          Copyright 2005 Talent Connections. All Rights Reserved.
              Planning

: Prepare HR
  – Develop and communicate new HR
    strategy
  – Define new roles and responsibilities
  – Restructure HR
  – Hire new employees to fill skill gaps
  – Provide training for employees in new
    roles



                         Copyright 2005 Talent Connections. All Rights Reserved.
               Planning (cont’d)

: Prepare Organization
  – Develop HR strategy within overall
    organizational strategy
  – Communication plan
: Resolve issue of whose payroll individuals
 are now on
  – Are HR employees actually employees
    of provider?
  – Does head of HR work for company or
    provider?



                          Copyright 2005 Talent Connections. All Rights Reserved.
                Exploring Strategic Initiatives

: Assessment
   – Self examination
   – SWOT of department
   – Organizational scan
: Define opportunities and benefits
: Build the business case – consider all costs and
  impacts on organization
: All functions that are not core competencies
  should be considered for HRO – nothing is sacred
: Consider the driver behind HRO decision




                             Copyright 2005 Talent Connections. All Rights Reserved.
              Analyzing Cost/Performance

: Understand market trends and competitive
 position
: Identify goals and objectives
: Determine added value
: Gather baseline HR costs and metrics
: Compare current HR operations to
 benchmarks
: Determine which processes have highest
 strategic importance and add most value


                        Copyright 2005 Talent Connections. All Rights Reserved.
               Identifying a Provider

:   Referrals/Networking
:   Newspapers and Magazines (HRO Today)
:   Internet
:   Mailings
:   Professional Association Lists




                          Copyright 2005 Talent Connections. All Rights Reserved.
              Negotiating Terms

:“Good contracts make good partners”
: Maintain heat of competition during
 negotiation
: Reasonable, but clearly established,
 expectations
: Well-documented deliverables regarding
 every aspect of deal
: Attorney involvement




                         Copyright 2005 Talent Connections. All Rights Reserved.
               Specifications of Contract

: Contract Duration
  – Exact beginning and ending dates
  – Financial penalties for early termination
: Parties to the Contract
  – Allow for additions or deletions (in case
    of acquisitions or divestitures)
  – Require vendor to name all
    subcontractors and give you right of
    approval for those introduced later


                          Copyright 2005 Talent Connections. All Rights Reserved.
             Specifications (cont’d)

: Services Performed
  – Specify all functions to be provided
  – Outline all support services
  – Ensure escalation process and dispute
    governance included
: Performance Standards
  – Tweak standard performance
    guarantees
  – Reinforce performance guarantees
    through at-risk fees

                        Copyright 2005 Talent Connections. All Rights Reserved.
               Specifications (cont’d)

:   Hold-Harmless Statement
:   Fees
:   Data Security
:   Communication Review
:   Contingency Plans
:   Audits
:   Final Contract Review




                          Copyright 2005 Talent Connections. All Rights Reserved.
              Articles

: Adler, Paul S. 2003. “The HR Outsourcing
 Decision.” MIT/Sloan Management Review.
 Fall 2003
: Gelman, Lisa & David Dell. 2002. “HR
 Outsourcing Trends Study.” New York: The
 Conference Board.
: Goldsmith, Neal M. 2003. “Outsourcing
 Trends.” The Conference Board, July 2003.
: Holincheck, James. 2003. “Deciding to
 Insource or Outsource Human Resources.”
 Gartner Research, 28 February 2003.

                         Copyright 2005 Talent Connections. All Rights Reserved.
                   Footnotes

1. Offshore IT Outsourcing –
   www.offshoreitsourcing.com/Pages/outousrcing_statistics.asp
2. 2004 SHRM Human Resource Outsourcing
   Survey
3. Human Resource Outsourcing Association –
   citing the Yankee Group
4. Fidelity Investments – “Fidelity Building Its
   Share in HR Outsourcing Market” by Matt
   Ackermann; American Banker; July 19, 2005
5. Human Resources Outsourcing Association –
   citing the Yankee Group

                                  Copyright 2005 Talent Connections. All Rights Reserved.
              Footnotes – (cont’d)

6. Human Resources Outsourcing Association -
   Conference Board Report
7. According to the 2004 SHRM Human
   Resource Outsourcing Survey
8. “Outsourcing Comes to the Middle Market”
   by Bob Violino – SHRM HR Outsourcing Forum
9. Survey from Hewitt Associates Press Release
   April 18, 2005 “HR Outsourcing Continues to
   Boom as Organizations Gain Experience and
   Reap Benefits”

                         Copyright 2005 Talent Connections. All Rights Reserved.
               Sources

: Anonymous. “HR Outsourcing: Success Steps
 to Observe for Your Company.” HR Focus,
 September 2003.
: Anonymous. “Planning to Outsource.”
 HR Focus, May 2004.
: Ackermann, Matt. “Fidelity Building Its Share
 in HR Outsourcing Market.” American Banker,
 July 19, 2005.
: Greer, C., Youngblood, S., & Gray, D.
 “Human Resource Management Outsourcing:
 The Make or Buy Decision.” Strategic Human
 Resource Management. Southwestern, 2002.

                          Copyright 2005 Talent Connections. All Rights Reserved.
              Sources (cont’d)

: Grensing-Pophal, Lin. “Outsourcing
 Performance Management: Is It Right for
 You?” SHRM HR Outsourcing Forum,
 August 2005
: Hewitt News and Information – April 18, 2005
 Press Release - “HR Outsourcing Continues to
 Boom as Organizations Gain Experience and
 Reap Benefits”
: Henneman, Todd. “Measuring the True
 Benefit of Human Resources Outsourcing”
 Workforce Management. July 2005

                         Copyright 2005 Talent Connections. All Rights Reserved.
                 Sources (cont’d)

: HRO Today Magazine – July 2005/August 2005,
  May 2005, January/February 2005, December 2004,
  October 2004
: Human Resources Outsourcing Association
  Certification Course - “Outsourcing as an HR
  Strategy”
: Landberg, Steven. “Effectively Utilizing Recruitment
  Outsourcing: Lessons Learned From Early Users.”
  SHRM White Paper, August 2005
: Miller, Stephen. “SHRM 2005 Conference &
  Exposition: HR Outsourcing: All the Way?”
  June 2005


                              Copyright 2005 Talent Connections. All Rights Reserved.
              Sources (cont’d)
: SHRM Special Expertise Panels 2005 Trends
 Report – HR Consulting/Outsourcing
: Violino, Bob. “Outsourcing Comes to the
 Middle Market.” SHRM HR Outsourcing
 Forum, August 2005
: Watson Wyatt “HR Outsourcing: Finding the
 Optimal Mix – 2005 HR Technology Trends
 Survey.”
: Weatherly, Leslie A. “HR Outsourcing:
 Reaping Strategic Value for Your
 Organization.” 2005 SHRM Research
 Quarterly.
                         Copyright 2005 Talent Connections. All Rights Reserved.

								
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