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.
Types of Outsourcing1
Business Process Outsourcing Information Technology - 28% Human Resources – 16% Sales & Marketing – 15% Finance – 11% Administrative – 9% All Others – 22%
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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
0
10
20
30
40
50
60
70
80
90
100
companies thatoutsource some HR
function
companies with $1 billion+ annual revenuesconsidering HRO
HRO growth from secondhalf of 2004 to first half
of 2005
companies that outsource some HRfunctioncompanies with $1 billion + annualrevenues considering HROHRO growth from second half of 2004to first half of 2005
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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.
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?
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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
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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
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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
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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.
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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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.
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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
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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