Copyright 2005 Talent Connections. All Rights Reserved. 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.
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Copyright 2005 Talent Connections. All Rights Reserved.
HR Outsourcing (HRO): Its Impact on Your Company, Your Career, and the HR Profession
Presented by Tom Darrow2006/2007 SHRM-Atlanta PresidentPrincipal, Talent Connections
Copyright 2005 Talent Connections. All Rights Reserved.
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.
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
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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
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Satisfaction
Recent survey of 129 large companies representing 2 million employees9:
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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
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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?
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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
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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
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Identifying a Provider
Referrals/Networking Newspapers and Magazines (HRO
Today) Internet Mailings Professional Association Lists
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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
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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
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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
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Specifications (cont’d)
Hold-Harmless Statement Fees Data Security Communication Review Contingency Plans Audits Final Contract Review
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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
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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”
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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
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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