Human resources BPO may have delivered on cost savings, but it still has much room for improvement in terms of delivering strategic benefits and process improvements, according to a keynote presentation at the HROWorld conference in New York.
In past years this event has had a gung-ho atmosphere, fuelled by the expectation that the rapid growth in contract signings up to 2005 would continue. It is a measure of the change in the fortunes of the industry that this year’s event should kick off with a keynote presentation entitled, HRO: Where do we go from here?. Last year was not exactly a dot-com-style meltdown, but it was a major reality check. Some of the biggest vendors admitted to signing too many deals too fast, and only during their implementations did they realize that some would never be profitable.
Sharon Taylor, who heads up the HR function at Prudential Financial, and is chairwoman of the Human Resources Outsourcing Association, delivered the presentation in which she provided a scorecard for how the HRO industry had performed in the last eight years.
On cost savings, Taylor gave the industry four out of five. Here at least, she said, vendors had delivered, often beyond expectations, though she said that there are still opportunities to drive costs down further. Providers still haven’t quite cracked the code to leverage the possibilities for future economies of scale in a way that is attractive to buyers and certainly offshoring makes some sense and is an opportunity for all of us, she said.
On process improvement, Taylor gave vendors a three – vendors, she said, had met expectations, but there were areas they needed to improve on, not in transactional processes but in the high-touch areas such as learning and recruitment services. Some processes were, she said, possibly unsuited to outsourcing. Frankly the jury is still out on whether there are some areas that will ever be viable candidates for outsourcing, given how deeply ingrained they are into a person’s culture. As an example, I would argue that in self-service, there is continued work that needs to be done. Many employers and managers on the buyers side do not completely embrace the do-it-yourself mindset, they are still wedded to the phone and to paper. In part it may be that some self-service tools are not as intuitive or as high-end as they need to be.
Buyers are also to blame at times though, she admitted. As the market moves to a more standardized model, buyers needed to be realistic about the need for exception and exception processing and need to build these into their expectations and metrics, she said.
One of the main selling points of HR BPO is that once the buyer has moved the low-level transactional processes out to an outsourcer, the remaining HR staff are free to work on the high-level strategic areas of HR. Taylor said that this often hadn’t happened, scoring the industry a two out of five on pushing forward the strategic role of HR. Retained HR people needed to be provided with the right tools and training to take on strategic roles, she said.
Taylor, whose company outsources HR to Hewitt Associates and uses ExcellerateHRO for benefits administration, said that knowing what she does now, she would have taken the whole process more slowly, and would not have let go of people in the HR department as quickly. She also said she would have spent more time on due diligence as she underestimated how long it would take for some outsourced processes to stabilize.
Still, overall Taylor scored the industry a solid three out of five for this, its first phase. When we consider the benefits and challenges associated with HR outsourcing, when we look back with reasonable expectations, I would say that the model has met but is not yet exceeding all of our expectations, she said.