Tag Archives: 上海品茶网QMV

Taking it outside

first_imgRelated posts:No related photos. Taking it outsideOn 1 Jul 2001 in Personnel Today Like it or not, there is a growing trend to outsource the HR function.Margaret Harvey, who oversaw the BP/Amoco contract, reviews the background tothe current growth in the HR outsourcing market and examines the key issues HRdirectors should consider before embarking on an outsourcing strategyHR outsourcing is a hot topic in many boardrooms. Last year revenuesgenerated by HR outsourcing projects exceeded growth predictions, while thesize and nature of the deals demonstrated that the HR outsourcing market iscoming of age. Traditionally customers have parcelled up discrete areas such asrecruitment, benefits administration or training, and outsourced these toservice providers with reputations as specialists in the niche service areas. The next generation of HR outsourcing will be characterised by customerstaking a more strategic, integrated approach and the advent of new providers offering”life cycle” services, which handle all employee issues, fromrecruitment to retirement and beyond. Technology will also play a large part inshaping HR outsourcing. Landmark HR deals A number of the landmark HR outsourcing contracts that were signed in 2000reflect a move towards an integrated approach. Some include HR as one ofseveral outsourced business processes, for example, Pricewaterhouse Cooper’sglobal contract with Nortel Networks, which includes Nortel’s human resources,training and finance functions. Other contracts relate exclusively to HRfunctions, but on a grand scale, such as Exult’s $600m (£430m) contract tooutsource British Petroleum’s entire global human resources function. Catalysts for change Achieving cost savings is often cited as a reason for embarking on anoutsourcing programme. However, in the HR environment, cost reduction alone canrarely justify the fundamental change that HR outsourcing involves. Anticipatedsavings as a result of HR outsourcing are typically in the 10 per cent to 20per cent range over the life of a multi-year contract, but this rarelyrepresents a major percentage of a company’s overall cost base. For some companies a major structural event, such as a merger oracquisition, may bring about wholesale changes. In these circumstancesoutsourcing may be seen as an effective means of harmonising a number ofdifferent legacy HR systems. Other organisations consider outsourcing as an alternative to making acapital investment in the new technology required to support the HR function.Investment drivers of this kind often play a part in decisions by public sectorbodies to outsource. Some companies have progressively outsourced more and more non-coreactivities, and as the HR outsourcing market matures, outsourcing willincreasingly be seen by these organisations as a viable option for the HRfunction. BP is a good example of a company which has, since the late 1980s,championed outsourcing as a business model and progressively outsourced variousactivities, including IT, telecommunications, finance, accounting, procurementand, in 2000, HR. Another reason for outsourcing may be when a customer forms a joint venturewith a service provider to develop a HR share service centre. The joint venturecan deliver services back to the customer as well as offer services to thewider market on a commercial basis. An example of such an HR-based jointventure approach is BT’s alliance with Andersen Consulting/Accenture. The impact of technology Many companies have historically under-invested in the technology used tosupport their internal processes and HR is no exception. This has led toreliance on labour intensive manual systems for generating, processing andstoring the significant volumes of paperwork involved in many HR processes. Indecentralised organisations there are often many different systems used by HRprofessionals in various business divisions or geographic sites, leadinginevitably to the duplication of effort and inefficiency. The advent of modular software applications, such as SAP and PeopleSoft,which are specifically designed to integrate a range of HR processes, has had amajor impact on the role of the HR function. It has liberated HR staff from theroutine of low value tasks and has allowed resources to be focused on morestrategic matters, such as the development of policy. It has also allowedcompanies to standardise their HR processes, sometimes into shared servicecentres, and gain economies of scale as a result. The development of the Internet has also had a major influence on the changein the HR outsourcing marketplace. It has encouraged people to thinkimaginatively about radically re-engineering the HR function. In companieswhere employees have computer facilities, such re-engineering results in a”self-service” approach which allows employees to have direct accessvia an employee portal to information on employee benefits, training, internaljob vacancies and so on, as well the ability to update personal records on-lineand carry out other routine transactions. The role of the contract An outsourcing contract, whether for HR or any other business process is thepermanent record of the commercial deal between the parties. It must thereforebe a clear and unambiguous reflection of that deal. The contract mustaccurately record each party’s rights and responsibilities at any given timeduring its term. It must also anticipate and cater for the many events thatwill occur during the life of the contract, including changes in the customer’sbusiness needs. The contract must be a living document and the tool used by theparties to monitor performance. It must provide a framework for resolvingdisputes and ultimately legislate for how the relationship can be”unwound” on the termination or expiry of the contract. The contracts needed to support a joint venture approach will differ fromthose supporting a traditional customer/supplier relationship. Equally acontract for the outsourcing of a company’s global HR requirements will have a differentorder of complexity to a contract for a limited number of HR processes in asingle jurisdiction. However, the following issues should be considered inrelation to every HR outsourcing contract. Selecting a service provider It is vital that an effective long-term partnership can be established andmaintained between a customer and a service provider. Selecting a provider thatis financially stable and has a proven track record will obviously be key. Cultural compatibility between a customer and supplier organisations is alsolikely to be a core reason for selection. Although this is difficult tolegislate for in the contract, it is possible to focus attention on culturalissues by aligning the personal objectives/ reward plan of the provider’s keyemployees with the desired culture. Scope – strategy v process Establishing a clear idea of the service levels is fundamental to thesuccess of any outsourcing arrangement, which in relation to processes such asHR, is not easy. Many organisations do not document their HR processes ormeasure internal performance against pre-defined service levels. You need tofactor sufficient time into your procurement process to develop the scope ofthe service levels, which will then form the backbone of the ultimateoutsourcing contract. Service levels and service credits A contract should include terms that relate to monitoring the delivery ofservices. The parties should also agree on key measures or service levels towhich financial service credits are attached. If the provider fails to meet theagreed service levels it should be liable to pay (or credit) you with servicecredits. Service levels must be set against measurable, objective criteria, byfocusing on aspects of the services that could have a material impact. Benchmarking and audit rights The contract should allow you to review the provider’s performance and thecosts associated with the services on a periodic basis against an appropriateexternal benchmark. The precise terms of any benchmarking clause willinevitably be the subject of negotiation. If the benchmarking exercise revealsover charging or underperformance, the benchmarking provisions should forcechanges in the service levels, charges and any other key aspects of thecontract. People issues Staff transfer is a major issue in most outsourcings. In the UK and other EUmember states the Acquired Rights Directive (Council Directive 77/187/EC) andits local implementing legislation will dictate whether the customer’s existingHR team will transfer to the service provider. Managing the issues associatedwith personnel transfers will be a key issue, particularly given the HRexpertise of the employees involved! Protecting data The protection of sensitive employee related data is naturally of majorconcern when outsourcing HR services. You must ensure that your organisation isin a position to comply with its obligations under the relevant data protectionlegislation. The outsourcing contract will therefore need to contain detailedprovisions relating to the supplier’s handling of data, including your rightsto monitor the supplier’s compliance with these obligations. Planning for change A customer’s HR needs will change over the life of the outsourcing contractand there will be improvements in the processes and technology used to deliverthe HR services. You must ensure that the contract is flexible to manage thischange and reap its benefits. The contract must also provide the way in whichthe services can be transferred from the original service provider to asuccessor provider or back to the customer on its termination. Does outsourcing deliver? In December 2000, IDS analysed nine examples of HR outsourcing projects inboth the commercial and public sectors. In the resulting publication,Outsourcing HR Administration, IDS concluded that while a number of highprofile contracts have recently been signed, it is not yet known whether thecustomers’ objectives have, or will, been achieved over the longer term. Some organisations, such as BP and BT are keen to be at the forefront ofdevelopments in the HR outsourcing area. Others are adopting a more cautiousapproach, preferring to gain the benefit of others potentially hard wonexperience. Margaret Harvey is a partner and outsourcing specialist at AddleshawBooth Growth forecasts2000 may well have been a breakthrough year, but it does not represent ablip, it is indicative of a significant trend. In a report produced last yearby Morgan Stanley Dean Witter, the market for HR outsourcing was forecast togrow from $1bn (£712m) in 1999 to $12bn (£8bn) by 2003. This mirrors a generalgrowth in the overall business process outsourcing market, which GartnerDataquest estimates will generate revenues in excess of $500bn (£356bn) by2004. Customers’ strategy Key planks in a successfuloutsourcing strategy are:– a thorough business case which has senior managementsponsorship– a clear and rigorous procurement and evaluation process– an effective negotiating team and strategy– an appropriate contract which embodies the commercial deal  – an on-going contract management process – a “win/win” relationship with the service provider.Drawing up the contractual servicedefinitionWhen drawing up the contractualservice definition, you should focus primarily on the “what” and notthe “how”. Specify the outputs you need from the services and do notbe over prescriptive about “how” the provider actually structures itsinternal processes. Outsourcing by its very nature means relinquishing asignificant degree of control over the day-to-day operation of the processes.If you seek to be actively involved with ever step of the process theprovider’s ability to be creative and achieve efficiencies or even cost savingswill be stifled. And if the contract legislates for precisely how every taskwill be carried out, then any changes, however immaterial, will become thesubject of contract change control. This will impose a significantadministrative burden on both parties. You will, in almost all cases retain responsibility fordeveloping strategy and establishing policy. The provider’s role is to providethe services and administer the processes in line with the strategy and policyset by you, the customer. The contract should clearly delineate between eachparty’s roles and responsibilities. Comments are closed. Previous Article Next Articlelast_img read more