It’s only a week after we were gripped by a great sporting comeback in the Ryder Cup in Medinah, Illinois and once again our focus is back in Chicago, this time for the HR Technology Conference and Expo, which starts on Monday 8thOctober.

There is talk of “disruption” in the way we manage the people in our organisations led by new tools and technologies. Plus there are exciting developments with HR in the cloud, Social in the Enterprise, Analytics (including Big Data) and of course, Mobile Technology.

The HR Technology industry is in ebullient mood after some big trophies have changed hands in the Wall Street clubhouses. These include :-

SAP purchasing Success Factors
Oracle buying Taleo
IBM procuring Kenexa
Plus of course, Workday launching its IPO

But back on the fairway, away from the conferences, the analysts, and the business press – implementing HR Technology successfully does have its challenges. Selecting the right technology platform with the right functionality is hard enough. Guessing where your business and your workforce will be in the next 5 years and then persuading your sceptical Line Managers that this will help them in their job is even harder. If in doubt, see how well you get on with this useful list of HR Technology Questions from Naomi Bloom.

But, for every perfect delivery there is a bogey.

It is all too easy to get bedazzled by exciting innovations and disruptions taking place, whether in the clouds or by ‘belly putters’. The fact that 68% of technology projects fail, because companies forget their ‘basic swing’ hitting a few unexpected Bogeys along the way! The good news is that HR have crucial skills to bring on the people side of the project that are so critical to success.  HR can lead projects with confidence, avoid the bunkers, and ultimately become Technology Champions.

Although I can’t make the HR Technology Conference Expo this year, we here at Glass Bead Consulting, have played a few tough rounds over the years in the HR Transformation Cup. Here are some reflections from the HR Clubhouse we have come up with to help with your handicap and ensure project success.

1  Agree how decisions will be made during the technology implementation

So the first big decision went OK.  At the beauty parade, the software company wheeled in their best salesperson and your Finance Director and Technology Director were impressed enough with the pitch to go with your recommendation for Fusion/SAP/Workday/other. You didn’t really have to revert to your evaluation criteria and weightings, but they still gave the right answer. First job done – now comes the hard bit…

As you get into delivery, you will have to make a number of decisions along the classic project management triangle of ‘Time vs Scope vs Cost’. Often there will be competing demands on your budget, resistance in unplanned areas and resourcing conflicts. At this point the last thing you need is any delay, with 10 expensive Fusion/SAP/Workday consultants on the project, you’ve calculated their burn rate on the train to work (but didn’t tell anyone).

It is critical to spend time up front working through how decisions will be made on the project, who will make them and what the escalation path will be. Governance is key in any substantial project. Make sure a clear governance structure has been agreed up from the onset, and ensure there is a business sponsor to help iron out issues.  Decide who will be on your Governance Board and what their role will be.

When you get going, on occasions you will hit the ball into the rough, and will need to have some difficult conversations on scope, timings, budgets. You will want to remind everyone the terms they agreed at the beginning of the project.

2  It’s the People, Stupid

Start thinking about the change strategy right at the beginning. The Technology Account Manager will make the deployment sound so easy, if mentioned at all. However, think carefully about all your stakeholders, what they need from this change, what their concerns will be, start rehearsing your messages and arguments because you will need to start them soon.

In our experience, to develop an effective change strategy is a canny mix between the high-level, for example, ensuring the change is couched in your organisational goals, and the low-level, getting out a monthly project update, keeping the intranet portal up to date and so on.

Ensure that when you construct your budget and programme team, you have allocated enough resources to communications, change and training expertise – but you work in HR, so you know this right?

3  Agree the goals of the project

Then ‘tattoo’ them somewhere strategic, well at least get them printed on some nice mouse mats or put some posters up. There are many reasons to put in a new HR System and different stakeholders will have diverse drivers and see the benefits in different places. Irrespective if this is to deliver a transformational change in people management, consolidating different systems of records, or to enable employee self-service. Get consensus up front on the goals of the project, show how these goals links to your overall organisational strategy and your HR Strategy.

The new system is ultimately there to delivery HR goals and ultimately make the organisation more successful.

When you get into the project, a few shots will inevitably be hit in the bunker, and there will be crunchy decisions to make, but make sure you can revert to a compelling vision and goals for the project. Also ensure your sponsors agree with these and communicate them widely.

And finally, make sure that ‘the tattoo’ is temporary.

4  It’s still the People, Stupid  – Identify what skills you will require

The skills needed to run HR are not the same as those needed to transform HR. Review how you will get the skills and experience required in programme management, process design, technical skills, support knowledge, change management. Then work out when these will be needed and for how long those skills are needed. Do a skills audit and work out the gaps – but this should be easy as you run HR.

You will need to fill the gaps, identify all the team members, considered the progression of roles, procured any external contractors or consultants and developed training courses.

Remember, your project team capability has the biggest impact on success not necessarily the software.

5  Define your HR Operating Model and HR Processes

It is important to know what flavour of operating model your new technology will be supporting in the future. Will there be changes to what you expect Line Managers, your workforce, your HR Business Partners to do? What is the scope of the HR shared service centre and how much might be delivered by 3rd parties in the future? It is vital that your new system will support this.

At Glass Bead Consulting, we have developed a HR Process Inventory which details every HR service, and who should be doing what in the new operating model. We found this tool really helps our clients stick to what it really needed in terms of requirements. A HR Process Inventory helps flush out ownership and interface issues at a process level, before it becomes a problem for the System Design.

It is easy to forget that typically a new technology system might not deliver real benefits for many months or years, once you have completed an eye-watering amount of data cleansing and trained the Line Managers to use the technology correctly. Unfortunately, for large global projects, by the time the system is fully operational the HR Strategy, and HR Operating required to support it might have changed anyway.

By clearly articulating your HR Operating Model and HR Process Model you can reduce the risk that they system is not fit for the future.

Finally – don’t let the Tail wag the Dog. The biggest mistake of technology projects is to let the system lead the process you will be delivering to your customers!  Our firm belief is HR has valuable skills in Change Management, Training, Communications, sourcing the right people and resources to drive any projects, including IT system implementation. Increasingly, HR also need to be Technology Champions to avoid those expensive bogeys.

It would be great to let us know what you think, or share lessons learned, on the blog or #HRTechConf

Your loyal HR Transformation caddy,
@AndySpence

1. In Search Of HR Tech Best Practices, by Naomi Bloom

2. The Future of Human Resources and Social Media, by Sharlyn Lauby, aka HR Bartender, on Mashable

3. HR Costs Rebounding?   from Michael O'Brien in HRE Online  

4.  Performance management: looking in the wrong place from Glyn Lumley, aka HR Maverick 

5. Service Levels for HR Services Delivery – An Evolution, from Jim Koenig – Equaterra

6. A systems thinking guide to outsourcing for the sceptical public sector leader, from the Systems Thinking Review

7. Is HR too big to innovate?, from J.Keith Dunbar, from DNA of Human Capital blog

8. Mobile Apps are Ringing up HRO, Linda Merritt from HRO Insights Blog

9. What Next for HR, Connecting HR at HRO Europe, from HR Transformer Blog

10.  Shared HR services the way forward for local authorities

April has been a bumper month for a good selection of HR Transformation related articles, from using 6 Sigma in recruitment, optimising your HR Shared Services, to how the iPad can help HR.
Here is a a leading question, 'Are Performance Management appraisals the Great Evil?'  Election fever is gripping the UK and the main political parties are locking horns in a final show down.  The last three articles here deal with UK Government policies including a comparison of the main parties manifestos on skills and training.

1.  6 Sigma Recruiting – from Jason Buss, The Talent Buzz

6-Sigma can work in HR when used in the right context, with the right skills. It works really well with higher volume for repeatable processes like recruitment. In the right hands, the results are dramatic and can pay for your Black Belt many times over.  This article also includes a useful slide deck.

2.  HR Shared Services Optimisation: Attaining the full potential of HR Shared Services – from Outsourcing World

This is a good post about how to get the most out of HR Shared Services. You have gone through the blood, sweat and tears of getting the model working, so what do you do next? Here are 10 excellent ideas and suggested initiatives. Find out more about “leaner, not meaner HR” and “HR orphans”.

3.  5 ways to torpedo your next HR sale – from Mark Stelzner, Inflexion Advisors
We often facilitate vendor evaluations for HR Services and we've seen lots of pitches over the years ranging from the incredible to the incredulous, to the downright dreadful. This is a candid post which outlines the ways HR vendors can “fail spectacularly”.   Do you recognise any of these “torpedos” ? We do too.

4.  Workday and the unspoken benefits of SaaS – from Phil Wainewright, ZDNet
This is a good article about Software as a Service (SaaS).

“Our estimate is Workday is at least 25%, perhaps 50% cheaper than on-premise competitors Oracle or SAP, mainly due to the simpler implementation and process configuration of the Workday solution.” according to Aviva.

Cost is one of many issues when considering future HR Tech options, but the above statement is a powerful claim.  What does your IT Director think about SaaS ?

5.  How the iPad Can Change HR – from Jason Corsello, KI OnDemand
Is an iPad a big iPod or a laptop with a big screen? I am not sure because I am still waiting for my evaluation copy. (subtle hint to Apple)

Large proportions of the workforce in retail & manufacturing industries have limited access to PCs.  In the design of HR Operating models a big challenge is how to get these employees to access HR service channels, including self-service HR applications and tools to manage vacancies, book courses and update personal info. 

We need to use all the ‘pull factors’ we can to get employees to use HR services and providing a few iPads could be worth considering for certain groups of.  Jason outlines examples from streamlining mundane and repetitive forms, interactive training, performance management and perhaps the area with most potential ‘mobilising HR’.

6.  Performance Evaluations: "The Great Evil"? – from Mike Haberman, HR Observations Blog
Is Performance Management The Great Evil? Systems Thinkers think so and it would seem that many employees think so too. Does the effort pay off and should HR focus their efforts on other initiatives to improve employee performance?

"This corporate sham is one of the most insidious, most damaging, and yet most ubiquitous of corporate activities. Everybody does it, and almost everyone who's evaluated hates it. It's a pretentious, bogus practice that produces absolutely nothing that any thinking executive should call a corporate plus." Quoted in the article from authors Samual A. Culbert and Lawerence Rout.

Strong words indeed, but a thought provoking article and interesting discussion which represents different views on the subject.

7.  If eLearning is still not seen as effective – how will social learning take off?- from Martin Couzins, XpertHR
eLearning has proven to be a cost-effective way to deliver training in  certain areas and the potential for Social Learning is great given the tools, connectivity and knowledge we now have at our fingertips.

However a recent survey by CIPD, on UK Training methods, found that eLearning was floundering at the bottom of the pile on 12% (it was 7% in 2009).  Martin asks a really good question, if eLearning is still not seen as effective – how will social learning take off?
Another question for us is :- if eLearning is a cost-effective way to deliver training, why isn't it used more by organisations?

8.  Election 2010 Briefing – skills and training – from CIPD
The UK election is on May 6th, but when choosing which party to vote for, how important are their policies on Skills and Training?

To grow the economy, enabling the workforce with the right skills and training is absolutely key.   This is a useful three page summary of the main parties manifestos on skills and training. It includes apprenticeships, youth unemployment and internships.

9.  Don’t bank on efficiency savings – from Flip Chart Fairy Tales
The Conservatives say they can get £12 billion more efficiency savings out of the UK public sector than the government has claimed.    “Back-office efficiencies” are proposed by all politicians to reduce the deficit to a more manageable level.  Rick points out the problem with efficiency savings is that they are "probably unachievable".  Developing a realistic business case is difficult work but Rick suggsts the politicians need a reality check.  For more on HR efficiencies in the public sector, see our article about Government Benchmarks – a Government Health Warning.

10.  HR Transformation in Local Government - from Nicola Grimshaw, director at Digby Morgan writing in Changeboard
This is a good article about HR Transformation trends in UK Local Government.  It picks up on trends in collaborative working, headcount freezes and outsourcing.  Nicola reckons that 75% of all local authorities are in the process of adopting an Ulrich style HR Operating Model.

We hope you enjoyed our latest and greatest HR Transformation Articles for April.

Many thanks for the feedback for our Top 10 HR Transformation Articles from March, as always we would welcome any suggested articles, or follow us on Twitter @AndySpence.

We are officially in Spring and in this part of the Northern Hemisphere we have heard the sound of bleating lambs and seen the yellow blaze of cheery daffodils.  It is also a traditional time to blow out the cobwebs, air the mattress and perhaps get round to doing an organisational spring-clean.

Over time every department picks up activities that were meant to be ‘temporary’, done as a ‘workaround’ or done as part of an agreement between people who left years ago. These tasks still get done but we overlook the original purpose and value to the organisation. This stops us from doing tasks that are more productive or useful.

An exercise we find useful is a Stop, Start & Continue review.

- Simply list all the activities you do in a particular area, department or role.

- Decide which activities you will now STOP as they are no longer useful or add little value

- Determine which activities you just have to CONTINUE, as they keep the show on the road

- And then having created some spare capacity, ADD those activities that have been on the To Do list for much too long that you plan to START.

We have found this spring clean useful at an individual level, for a role e.g. HR Business Partner or for a function, e.g. Human Resources. In the context of HR Transformation, we often use this technique as a preliminary step before allocating HR activities to a part of the new organisation structure or in designing new roles. This exercise works well as a facilitated session with small groups. It sounds obvious but it is important to eliminate redundant activities before designing a new organisation.

Download our Stop, Start, Continue Worksheet below:

Here are some examples of Stop, Start, Continue activities that have come out of similar sessions with HR :-

Stop
 

Doing line managers work with employee performance issues

Organising the Christmas Party

Creating manual reports every month without automating

Renewing contracts without assessing the market

Manually entering data into a system because of that temporary system workaround from the upgrade in 2004

Continue

Delivering excellent employment advice

To work with business leaders to plan future scenarios

To coach teams on improving performance

Start

Investigate how social media tools can reduce the cost of recruitment

Determine and measure HR cost drivers

Find out what Managers really think about HR service

Develop a HR Monthly Dashboard

Reviewing contracts with HR suppliers

Let us know, what will you Stop, Start and Continue in 2010?

Spring is in the air and the forces of nature are unstoppable, perhaps inspired, some of our favourite bloggers, analysts and writers are in great form.  With talk of revolutions in HR, some systems thinking, the economics of Software as a Service (SaaS) and the use of artificial intelligence in HR.  In March there was also some big news in the HR Outsourcing industry, with Northgate Arinso acquiring Convergys HRO business. It’s always useful to have a peek over our shoulder at what the Finance community are up to. And while we are thinking of numbers (sort of), we get an economists ‘dismal’ view of management.

1 – The Evolution Debate and HR, from Andy Gebavi – Infusion Nation

Any transformation of an organization takes time, but which is better, a revolution in HR practices or a more evolutionary approach? It depends on the context, but Andy outlines the pros and cons of each approach. Our take is that systems and processes can be changed relatively quickly, but genuine transformation involves changing behaviours which generally evolves in step-changes over time.

2 – Some Days are Better than Others, from Glyn Lumley – The HR Maverick

Why are some days better than others? Glyn observes that when things go wrong “Most of the blame seems to be laid at the door of individual employees”.  But organisations are a complex interaction between people, processes, technology and the environment. Could it be something in the system?

3 – CFO = Value Integrator…CHCO = ?,  from J.Keith Dunbar – The DNA of Human Capital

Ulrich and colleagues have often explained that the change imperative in HR is also happening to different degrees in Finance and other functions.  Keith looks over the fence at the finance community with reference to an IBM Global Chief Financial Officer CFO study. The report refers to the CFO as a Value Integrator, so what does this make our Chief Human Capital Officer CHCO (not a title we like) or HR Director?

4 – Building the Perfect HR Team, from Trish McFarlane – HR Ringleader

Do you need a HR background to be in HR? We had a similar debate last year, with Do You Need a HR Background To Be a Successful HR Director. Trish, who during the day works as a HR Business Partner, asks the question, but goes further.  If you were a ‘fantasy HR Manager’, who would you have in your team? A view on HR skills that will be in demand in the future.

5 – The Management Con, from Chris Dillow – Stumbling and Mumbling

What are we doing highlighting articles from the ‘dismal science’ on the HR Transformer Blog. Well, everyone is interested in economics now aren’t they? Stumbling and Mumbling is a good read and Chris Dillow is a financial writer with attitude, who asks the question, What do Bosses Do? A good question, we may not agree with his answer, but always enjoy some NHS number crunching which he uses to illustrate his view.

6 – Top Reasons for ERP Project Delays –from ERPKO

Unclear critical paths, indecisive decision making and unrealistic expectations – sound familiar?   Most HR Transformation programmes involve getting the most out of HR Technology, including ERP systems such as Oracle or SAP. Delays in the roll-out of new systems are a big problem for HR. Loss of credibility, budget over-run, service delivery issues – the list goes on.  By now, we have seen them all, but do we know what causes them and how to prevent them happening? Sufficient planning, right skills at the right time and a robust governance model all help in our experience. (Thanks to @DougLubin and @rfsilva123 on Twitter for this article.)

7 – How SaaS makes a good free option, from Dennis Howlett, AccMan

Fed up with ERP delays? It might be worth reading more about SaaS. More and more  HR organizations are buying Software as a Service solutions such as SuccessFactors and Workday. Dennis considers the economic model and psychological appeal.  You need to understand the different commercial models as well as the fit with your business requirements. Some conversational topics to bring up with the IT Director when you meet her in the lift!  This article was spotted in our HR-Transformers-Techies Twitter Group.

8 – Employee self-service – Can HR keep up with the pace of self-service technology?, from David Woods at HR Magazine.      

All the evidence points to self-service saving time and money yet take-up remains low and the technology is becoming ever more advanced. David Woods looks at why HR is dragging its feet. There is also evidence that self-service does not always save time and money but what caught our eye, was that Self-service is moving into artificial intelligence. Early adopter Aviva took the decision to launch an automated Ask HR response service for its 23,500 employees back in 2006.  Aviva employees type in a question and with the help of the language search engine, suitable answers are brought up instantly from the web-based knowledge base. Since installing Ask HR, 69% of all HR enquiries are now handled through the system, reducing telephone calls and allowing HR staff to focus on more complex queries.

9 – Northgate Arinso Buys its way to top spot in enterprise HRO and it only cost them 100m, from Horses for Sources

This was big news for the industry in March. By acquiring Convergys HRO business, Northgate Arinso have acquired US HR Service Centre Capability and ready made clients for its HRIS team. The news shakes up the HR Outsourcing industry and creates a Global Leader in an expanding industry with Headquarters in the UK. This was also covered on the day by the HR Transformer Blog – in HR Outsourcing – The Challenge of Picking Winners.   On the subject of industry news, you might already be familiar with the Horses for Sources blog, this has now spawned a new analyst firm, Horses for Sources. We are looking forward to reading the same quality of thinking on outsourcing trends in HR.

10 – Does HR Outsourcing Really Work? From Deloitte

Before we get too excited about HR Outsourcing, does HRO really work? Our friends at Deloitte say HR Outsourcing works when you do it right. The same answer would also apply if you replaced ‘HRO’ with any complex change programme such as a new IT system or move to HR Shared Services. However HRO has had some mixed results for a variety of reasons. The good news is that in 2010 we have over 10 years of lessons learned, case studies and battle scars to learn from….worth reading if you are considering outsourcing HR functions.
We hope you enjoyed our HR Transformation Articles for March.
 
Please suggest articles and HR Transformers worth following on Twitter @AndySpence.
 
And finally, Happy Easter!

The biggest barrier to transforming Human Resources is the lack of appropriate skills in HR, according to the 2008 Global HR Transformation Report (conducted by HROA in association with ADP).  This is the 5th annual survey with 129 executives around the globe in varying stages of HR Transformation.    DOWNLOAD 2008 GLOBAL HR TRANSFORMATION REPORT HERE

The survey defines HR Transformation as – “any concerted effort to change and improve HR operations, whether through outsourcing, shared services, internal reengineering, or a combination of these strategies”.

We use a broader definition. Successful HR Transformation needs to align all the components in the HR operating model including Business Partners, Service Centres, Centres of Excellence, HR Strategy, Managers and Employees.  Sometimes there is too much emphasis on implementing Shared Services or HR Outsourcing at the expense of actually delivering the HR Strategy. (see comments by Jason Geller “HRO does not equal HR Transformation”)

The survey points to some interesting trends in HR Transformation :-

“The biggest ‘chronic hurdle’ that impedes transformation is the skills of existing HR staff.”
This is cited by over 60% of respondents.  The skills needed to manage HR are very different to the skills needed to transform HR.  The survey doesn’t mention which skills, but experience is required in Change Management, Process Design, Organisation Design, Project Management, Business Case Management, and HR Technology.   So what can you do? Consider these steps before starting your HR Transformation project, utilise transformation experience in other areas of your organisation and use HR professionals as ‘content’ owners.

“Most organisations are meeting or exceeding their cost savings targets.”
Sounds impressive, but of course this depends on what the cost savings targets are.  Some projects aim to break even, but allocate a larger proportion of their cost to strategic objectives rather than administration.

“Past HR Transformation lessons don’t appear to filtering out.”
Each organisation will have different goals, a different workforce and different starting points. But there are themes and lessons learned – so why aren’t they being shared in this digital age of collaboration?  Joining networks such as the HROA help.   Conferences are dominated by vendor/sponsors rather than providing HR transformers with real ‘independent’ lessons learned.  With more sharing and online networking things should improve, see for example initiatives such as our own  HR Transformer Blog and DiscussHR.

“Only 48% engage consultants or sourcing advisors.”
Some organisations are getting external support which is an obvious solution to the skills gap. On business cases which involve large IT transformation and cost savings, a review from an experienced, independent consultant can be money well spent.  There are still objections to using consultants who are perceived to push ‘pyramids’ of junior consultants and lack independence.  Do advisors need to up their game or do they need to market their benefits more effectively?

“66% plan to outsource some HR processes.”
Payroll is outsourced in nearly 90% of cases. End-to-end HR Outsouricng contracts are being signed (see recent IBM Unilever deal) , and buyers do see the benefits of HR Outsourcing, however buyers are even more careful in this environment. With major economic change there is less appetite for 10 year contracts and more examples of tactical sourcing.

“Price is most significant in provider selection.”
It is interesting that Financial stability has risen up from 12th most important factor in 2006, to 6th in 2008.  This will be Top 5 next year with much more detailed financial checking of potential vendors.

The ADP/HROA survey has provided a useful barometer of HR Transformation, it will be interesting to see whether more progress has been made on the barriers next year.

HR Project failure usually means increased cost to implement, reduced quality of final outcome, time delays and often leaves a huge dent in morale. The list below are reasons why HR projects fail based on the number of sleepless nights they have caused HR Execs, and the more scientific approach of research and surveys. The good news is that they are all preventable – by following tried and tested methodologies such as Prince 2, brushing up on your Change Management skills and mixing all of this with a huge dose of common sense. Typical HR projects can include change programmes, implementation of shared services, HR transformation projects, outsourcing and IT projects. Top five reasons why HR projects fail include:

1. Lack of clear executive leadership. Any HR project needs a sponsor to help ensure that it is set up to succeed with the right resources. Having executive leadership comes into its own when the project has to traverse choppy waters. HR projects that have business (non-HR) sponsorship tend do well. Lack of leadership can lead to a lack of vision and people quickly forget why they are working so hard in the first place.

2. Skills of staff. It sounds obvious, but the key skill that is usually lacking is project management. There are simply not enough skilled project managers in HR with experience in successfully delivering complex projects. Many project management problems stem from inexperience, a common example is not breaking up the project into manageable pieces. Another key skill that is required for HR Project Managers is Change Management and unfortunately Project Management methodologies and courses do not emphasise this enough.

3. Governance not set-up properly. If the governance hasn’t been agreed formally at the beginning, it is amazing how initial enthusiasm can disappear when the going gets tough. This comes from not agreeing up-front how decisions will be made during the project. It is well worth investing time early on to establishing project governance. This helps ensure that issues are resolved quickly when they arise.

4. Not managing stakeholders effectively. For most projects, you will need to persuade human beings to change how they do things. This is very difficult and will require diplomatic and sometimes innovative methods to succeed. Not managing stakeholders can lead directly to other classic PM problems like not gaining employee buy-in, dealing with resource cuts, other projects getting priority and not dealing with genuine cultural differences. The key is to identify your stakeholders up front, work out how the project impacts them and what they will need to make the project work. Then ensure that you prioritise your time so you can work through any issues they may have.

5. Project complexity across multiple businesses and geographies. Complexity can be caused by working across different business units and geographies, each with potentially different drivers and cultures. To overcome potential problems, set up the project to gather all requirements, take time to understand your stakeholders and design your Governance to help resolve those tricky issues. Finally, use your sponsor to provide you with guidance where appropriate and watch out for barriers that are perceived rather than real.

The HR Outsourcing market has its problems like every other market right now. On the supply side, there are too many providers, with some running ‘loss-making’ HRO contracts over 7-10 years. On the demand side, a larger range of organisations urgently require HR solutions that allow them to provide better and more cost effective HR solutions. The HRO market is still maturing, 2009 will be interesting with large contracts signed and further HR provider consolidation. Why is there increasing demand from organisations to outsource their non-strategic, transactional HR processes? The benefits of HR Outsourcing include:-

1. To reduce the cost of HR, and to better manage the cost of HR. Many organisations have achieved savings greater than 20% by standardising HR processes, utilising self-service tools and outsourcing. The extent of savings depends on willingness to standardise and transformation of the “retained” HR function. When the HR cost base is more tightly controlled and better managed then decisions can be made about the relative allocation of resources. In sectors with mergers, acquisitions and rapid changes in employee numbers a goal is to provide more variable costs linked to employee numbers which can push clients towards using more specialist 3rd parties.

2. To avoid major investments required in HR technology. That multi-million dollar SAP/Oracle upgrade is much harder to justify in this economic environment. Some HRO providers can provide their own HR platform and offer the latest upgrades and services that your organisation probably can’t.

3. To realign HR to focus on delivering HR Strategy and support its core business. A typical goal of HR Transformation is to increase the proportion of HR cost allocated to strategic HR and reduce the proportion allocated to HR Administration. With non-strategic HR processes outsourced, HR is better able to respond more quickly and more effectively to organisational changes.

4. To improve the quality of HR Services delivered to employees and managers – using service management techniques, self-service tools or best-of-breed suppliers. To achieve this requires excellent change management skills with policy harmonisation, standardisation and changing HR customer interactions. This is difficult work, however the advantage of a legally binding contract and go-live date really can focus the mind.

5. Controlling the legal risks and improving compliance will be more rigorous when there are external contracts with providers – this will become increasingly important in an era of increased regulation. See also HR Outsourcing – The Challenge of Picking Winners and Will HR Outsourcing Ride the Third Wave?