Will HR Outsourcing ride the Third Wave?

There’s a common belief that the third in a series of ocean waves is the biggest. If it’s true for waves of change in HRO too, this latest wave of transformation in the industry will have a considerable impact. According to Anthony Hesketh in HRO Today transformation is back on the Outsourcing agenda, if indeed it ever went away.

We all understood the logic of the first wave of HR Outsourcing in 1999 – freeing up HR to focus on strategic aspects of the job, introducing standardization, self-service technology and Global Service Centers. It was this desire for HR Transformation that created ground-breaking Global HR Outsourcing deals with Exult-BP and ePeopleserve.

Back then HR consultants from the Big Four, heading for the exit, process-map and SLA template in hand, myself included, could be heard muttering under their breaths ‘every last large organization will want an HR portal and centralized HR service’, (while they hungrily signed-up to their dot.com share-options). Of course they didn’t.Innovation is a tricky business. Potentially great ideas get ignored because markets are too small, or the change doesn’t fit other people’s business models or match existing values. Sounds familiar?

The second big wave of change in HRO contracts came around 2006, including Unilever-Accenture, Johnson & Johnson – Convergys. These didn’t quite deliver our dream of pre-configured, hosted and e-Enabled services either. Instead, the services they offered were bespoke, tailored to clients’ demands and the particular nuances of their HR Operating Models. Still they had some success, given the industry grew to be worth billions of dollars.

In response to the economic meltdown of the last few years, organizations began thinking again, developing new business strategies, and new operating models. The HRO industry consolidated. Outsourcing contracts lasting a decade were thin on the ground when organizations couldn’t see where they might be themselves. Out of this has come the third and potentially most significant wave of transformation for HRO.

The focus for HR has shifted to employee productivity and engagement, deploying the right skills at the right time, mergers and acquisitions, and developing staff. HR needs to transform itself and the way it operates in order to deliver, enabled by organizational structures and processes better aligned to the businesses it serves. A greater share of the HR responsibility needs to be carried by line managers too.

The question for HRO vendors and HR Executives is what role will HRO play in the move to new HR operating models?

One way will be through more standardized HR services. HR needs to demonstrate value for money. Can a business justify providing employees with a personalized HR service when competitors get good results for less money using self-service processes. If HRO vendors can provide standardized services with user-friendly tools then there will be a sea-change in HR Operating Models.

HRO providers can also offer web-based tools to enable improvements in collaboration, productivity and managing the workforce. Delivering these tools, allowing buyers to avoid large upfront costs and access to the best solutions is an attractive proposition. Those HRO vendors who provide tools and services that help address organizations’ key talent management issues will thrive. Watch out for innovative market entrants building rapid market share with a credible HRO/SaaS model.

Transforming HR is about changing how people work and behave, not merely changing systems and processes. Having worked on both sides of the HRO vendor/buyer fence, I have seen opportunities where skills gaps in managing change, managing vendors and transformation programmes could have been bridged. HRO vendors have been reluctant to share (or sell) their change management skills and can play a significant role in the move to new HR operating models by sharing their experience, knowledge and skills with organizations.

HRO will enable a leaner corporate function, by reducing central transactional HR work, pushing out more ‘people management’ to managers enabled with much better skills and tools. The onus is on HRO providers to be innovative and enable more self-service, for example by utilizing mobile devices for time-recording, checking schedules, benefits, vacancies.

HR Transformation is not back. It never went away. For HR executives to benefit from cost savings and to achieve their strategies, they will need to accept increasing standardization. Industry consolidation, technological innovation, economic pressures will all help to make this happen, and we could see HRO take off. All change is disruptive, outsourcing in the HR industry included. The early innovators of HRO had the right ideas at the wrong time. Now the conditions are right for it too.

This article was originally published in the Spring 2011 edition of HRO Today, by Andrew Spence.

See also HR Outsourcing – The Challenge of Picking Winners

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This entry was posted on Monday, September 12th, 2011 at 8:58 pm and is filed under HR Blogs, HR News, HR Operating Models, HR Outsourcing, HR Strategy, HR Technology, HR Transformation, Leadership. You can follow any responses to this entry through the RSS 2.0 feed. You can trackback from your own site.

HR Transformer Blog – Most Popular Posts of 2010

Here are the most popular HR Transformer Blog articles from 2010. Many thanks to all those who stopped by and provided ideas, links and comments.

1. Stop, Start & Continue – A Guide for HR Transformers

What will you Stop, Start & Continue in 2011? Includes a useful PDF worksheet.

2. HR Transformation Articles of the Month

Add this link to your Bookmarks and browse over 90 different articles. We trawl through the web to bring you a selection of the most interesting HR Transformation articles of the month.

3. Future Trends in HR Operating Models

If you enjoyed reading this, check out our longer articles on What the future holds for HR , on Evaluation Centre (free, easy registration required). Downloadable PDF article about the trends shaping future HR Operating Models.

4. HR Benchmarks – A Government Health Warning

Very topical subject, we did some analysis on UK Government HR benchmarks and attached the data in this article. The original statistics have disappeared from the Government website, so we have had quite a few hits from Whitehall. Also featured in the first online edition of HR Magazine.

5. HR Transformers on Twitter

11 Lists of great people to follow on Twitter, including consultants, HR practitioners, leaders, writers, analysts, techies and teachers.

6. Are you a HR Twitter Virgin?

Do you still know people in HR who have not used Twitter, surely not! Here is a useful guide to get them started….

7. Top 5 Reasons HR Projects Fail

A golden oldie, but are we still making the same mistakes ?

8. HR Outsourcing – The Challenge of Picking Winners

In choosing a HRO vendor, a key question is How do you know they will last the course?

9. Why England Lose – Talent Management Insights from Football

Inspired by the World Cup, what can we learn from studying the management of football?

10. HR Survey Highlights Skills Gaps in HR

Very useful annual survey from ADP/HROA, see also this years findings in HR Transformation Delivers solid Savings of 25%

You can subscribe below to every new HR Transformer Blog article which will be delivered direct to your inbox.

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This entry was posted on Saturday, February 5th, 2011 at 3:34 pm and is filed under Change Management, HR Blogs, HR Careers, HR News, HR Operating Models, HR Outsourcing, HR Strategy, HR Technology, HR Transformation, Leadership. You can follow any responses to this entry through the RSS 2.0 feed. You can trackback from your own site.

Why England Lose – Talent Management Insights from Football

For England fans the World Cup is sadly over, our ears have recovered from the din of Vuvuzelas, and once again the England team has fallen from its precipice of unrealistic expectations.

The question of the day is “Why do England lose?”

To answer this, rather than ask the usual football pundits, we look to our ‘dismal’ friends the economists. Usually found researching and thinking about stagflation, economic stimulus and other boring stuff, when they turn their inquisitive minds to football, we discovered some interesting insights. From their findings we have identified some broader talent management lessons.

“Why England Lose: And other curious phenomena explained” is a book by Simon Kuper who writes a weekly sports column in the Financial Times and Stefan Szymanski, a Professor of Economics and MBA Dean at Cass Business School in London. The book draws on geography, economics, statistics and psychology.

The answer to the question of why England lose at football, is of course – they don’t. The authors did some number crunching on historical data of football games and using regression analysis determined how much of a given outcome (winning football games) can be related to a other factors (wealth, population size, footballing experience, home advantage). The authors suggest that England are in fact over-performing.

The authors came up with some interesting findings about football, which we think poses some interesting lessons for management and in particular talent management. Sport played at the highest level really hones management techniques as every win and loss is played out in public. Getting the most out of your people is crucial, with small differences in individual performance making or breaking a season (and of course a towns’ collective heart).

The authors also looked to case studies of teams that have had great success, they looked for structural reasons rather than individual greatness or prowess.

Some lessons come from Olympique Lyon, who have progressed from a relatively obscure provincial club to rule French football, winners of Ligue 1 from 2001/2 until 2007/8. In England in 1979/1980, this occured with Nottingham Forest (before then even less known in football terms than Lyon) who won consecutive European Cups with the footballing management duo Bryan Clough and Peter Taylor. More recently there are lessons from another modern French thinker of football, Arsene Wenger, the Arsenal Manager.

The authors highlighted 12 main secrets of the football transfer market, and from these we have pulled out 8 broader talent management lessons for you :-

1 – A new manager wastes money. Typically the new manager wants to make their mark by buying and selling players. This is usually disruptive to the team, with the manager unlikely to stay around long enough for this tactic to pay dividends. Would you let your new Executive ‘hire and fire’ and bring in their own team in the first few weeks? Or get them to utilise the existing resources, understand their strengths and weaknesses before filling capability gaps to match your strategy?

2 – Stars of recent World Cups are overvalued. You can pick the player who dazzles for their country in the big tournament, playing for their national pride, but will they deliver on a cold, wet evening in Blackburn in November? A new recruit is “only as good as their last project” this cliché is simply not true. Don’t be dazzled by the last project – look for a consistent pattern of performance.

3 – Centre-Forwards are overvalued – goalkeepers are undervalued. Do you have to pay more for some roles because you are told you have to pay more for that particular ‘in demand’ new skill? Isn’t it more important to get the best people who delivery the core elements and pay them appropriately? Don’t be blinded by the flashy or those who ‘talk a good game’ – you might find it’s the goalkeeper who really keeps the company moving forward (and stops those painful own goals!)

4 – Use the wisdom of crowds. When Olympique Lyon think about signing a player, a broad group debate the transfer. In England it’s usually the manager. The more collaborative system has proved to be successful and tends to avoid the typical mistakes in the transfer market. How can you benefit from the wisdom of crowds in recruitment, and implement a process where different views are taken into account?

5 – Gentleman prefer blondes. At least one big British football club noticed that their scouts recommended more blonde players – apparently in a field of 22 similar looking players, the blondes tend to stand out. The club in question began to take this distortion into account when judging scouting reports. Sport is all about improving performance – there is no point in excluding a section of the population if they give your team advantages. An example quoted by the authors is a decline in racism against black footballers since the 1970s. So you may have a diversity policy and track demographic data religiously – but are you missing out on the breadth of talent that can help your organisation really shine? Identify and abandon your organisation ‘sight-based prejudices’ and look for systematic failures – rather than individual mistakes.

6 – Replace your best players even before you sell them. Do you wait for your trusty Finance Director to decide that it’s now time to spend more time in the garden or with the grand children? Have a succession management plan in place, so when the big day comes (and retirement is the nicest option here), you have someone who can fill the boots of the star players.

7 – Buy players with personal problems, and then help them deal with their problems. Brian Clough and Peter Taylor were great football thinkers, they had their vices and this possibly gave them particular empathy with troubled players. Once they identified a ‘more challenging’ player’s issue, they helped that player manage it. Their motivation might have been altruistic, but the outcome was they got much better value out of the transfer market and better results. In football the attitude has been “we pay you a lot of money now get on with it” – as if mental illness, addictions, or homesickness should not exist above a certain level of income. The modern attitude of Arsene Wenger also helped Tony Adams through his own recover from alcoholism, see Adam's charity, Sporting Chance. We are not suggesting you make “personal problems” one of your recruitment selection criteria, but this is a real issue in maintaining a healthy workplace. According to the 2001 World Health Organisation, one person in four will suffer from a mental health problem at some point in their life. There is an ethical and strong business case for helping employees who are having a hard time. See the CIPD Factsheet – Mental Health at Work.

8 – Help your players relocate. Why spend £24 million on a new member of staff and then let them fend for themselves in a Hotel in a new country. Clough and Taylor found that many transfers failed because of problems off the pitch. Use relocation consultants or find some way of integrating new joiners into their new role in your organisation. Didier Drogba spent months in a hotel looking for somewhere to live after training with Chelsea, how much faster would he have assumed his current form if his move, six years ago, had been better managed?

Before we blow the final whistle, here is our final thought – if we can learn something from football management, what can football management learn from talent management practices in other businesses?

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This entry was posted on Sunday, July 4th, 2010 at 5:57 pm and is filed under HR Blogs, HR Business Partner, HR Careers, HR News, HR Strategy, Leadership, Talent Management. You can follow any responses to this entry through the RSS 2.0 feed. You can trackback from your own site.

How to Lead Change by Example – 5 Tips for HR Professionals

This is a summary of an original article published by Strategic HR Review.

In an economic downturn and subsequent recovery, change is inevitable for every organization. Effective Change Management is often a mix of the strategic and the practical. It can encompass everything from ensuring strategies are aligned, to making sure your weekly bulletin goes out on time, on message and to the right people. From a HR perspective, it is important to provide leadership and guidance by example and the following actions can help HR executives to lead the way during the change process.

1. Define and deliver your HR strategy

Make sure that HR strategy is consistent with the overall business strategy, and where necessary provide input and ideas into the overall business strategy. Make sure you achieve buy-in from key stakeholders. This can be achieved by clearly outlining your proposed improvements and delivering on project ideas early on. Part of aligning HR strategy with the overall business strategy will be achieved by sharpening your HR operating model and asking how each HR role will support your organization in the next 12 months. You will be better able to respond quickly to organizational changes with better HR systems, more effective processes and better aligned capabilities in place. This allows HR to deal with the next new change more effectively.

2. Understand HR cost drivers

It is vital to know what drives HR costs. If you know your key performance metrics and what has an effect on them, you can quickly demonstrate that you understand the cost, service and risk implications of any proposed organizational changes on your own department. A good grasp of the cost implications of strategic decisions and the analysis to back it up – really helps when it comes to making changes. By conducting an assessment of the HR department, you get a better understanding of your internal benchmarks. A key metric for HR to understand is the HR “Cost to Serve”of each employee, including staff, systems and third parties. This can vary widely between businesses and geographies and it is important to know why.

3. Take a lead on sourcing options

Take the outsourcing decision to your board – do not let the board take it to you. Be proactive and do the research into how outsourcing could benefit your department (see article Top 5 Benefits of HR Outsourcing)and bring about positive change, as well as cost-savings. Show that you have been actively looking at alternative ways to provide better and more cost-effective HR services in payroll, IT, recruitment, training, HR administration and benefits. Develop your own “build or buy” criteria to help gradually improve HR services. Demonstrate that your business case takes into account the benefits of moving from fixed cost to a more variable cost (that will help in the downturn and the subsequent upturn).

4. Lead by example

There is a balancing act that good HR directors need to master. Often, HR directors are so outwardly focused on supporting the organization that they can neglect the day-to-day workings of their own department. When aligning HR strategy to the wider business strategy, HR directors need to focus on the internal working of the HR department, and most importantly, the people within the HR department. Show leadership through developing your talented team members, and use this as your core team to lead change. Retention strategies start at home, so show the board what you are doing to keep and develop your most talented team members. Be innovative. The organization will look to the HR department to lead on this – secondments, project roles and recognizing excellent service are all initiatives that can inspire people within the organization.

5. Implement change decisively and calmly

All executives in the organization must demonstrate leadership by managing change in a calm and decisive way. HR can stop the organization making “knee-jerk” reactions – more than ever, this is the time to make the right decisions for your organization. Implement changes calmly, effectively and consistently.

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This entry was posted on Monday, September 21st, 2009 at 10:37 am and is filed under Change Management, HR Outsourcing, HR Strategy, HR Transformation, Leadership. You can follow any responses to this entry through the RSS 2.0 feed. You can trackback from your own site.