HR OUTSOURCING: Servicing the Boardroom

For global corporations, outsourcing of non-core functions has become not

just a smart business move, but a critical strategy for maintaining a

competitive edge and increasing market share and shareholder value. Corporate

leaders know they need to understand what outsourcing means and stay current

with leading-edge practices.

While HR outsourcing in its earliest applications, such as payroll, has been

among accepted best business practices for decades, it is only in the last few

years that the business necessity to shed entire non-core functions–such as

human resources, finance and accounting, or procurement–has moved to the

forefront of C-level and boardroom strategy deliberations.

As

HR outsourcing began to include more functions, leading providers moved to the

next level, called ‘process integration,’ by linking more and more of the

many discreet HR sub-processes in ways that provide better control and cost

effectiveness.

The increasing capacity to integrate processes is now giving rise to an even

more strategic, ‘third level’ of sophistication, where leading outsourcing

systems not only integrate the mechanical, data-heavy parts of HR functions, but

also become service integrators–where the outsourcer joins together the over

20 sub-processes found in large company HR departments and links them both with

the work done internally and with work done by third parties.

Service integration thus enables the linking of processes and the underlying

data from those processes, resulting in a more dynamic command of comprehensive

HR information. This new capability can greatly enhance strategic decision

making, especially in the area of workforce planning.

The Present State: More Effective Integration



Current HR offerings by outsourcing companies are becoming standardized and

increasingly effective, and are characterized by:

n An increasingly integrated,

single-entry network of information for the client’s use in managing HR

functions and programs.

n A transparent process that

allows both HR system managers and employee-users facile access to required

information, usually e-enabled.

n Processes that are linked

across the HR program spectrum, creating the ability to use an ‘event-based’

approach, where all relevant HR responses are provided to the employee in a

comprehensive and user-friendly manner.

n An integrated method of service

delivery for HR programs so that employees will see all HR-related responses to

a work/life event occur within appropriate times.

n A ‘single platform’ concept

of integrated technologies, resulting in end-to-end administration and

processing of data from a variety of sources.

n Thorough integration of the

suppliers of goods and services into the company’s delivery system, including

the ability to substitute vendors in and out of the system without compromising

it.

The results of such integrative actions increase the standardization of HR

sub-processes throughout a corporation, and aid managers in identifying areas

needing improvement.

The Next Level: Service Integration



To move to the next level, that of ‘service integrator,’ HR outsourcing

providers working with global companies will need to evolve to the point of

taking responsibility for all third-party providers in such a way as to deliver

better service to client firms and their employees. This will often involve

outsourcing firms working with a small number of allied partners under their

direction. As process integration evolves, client firms will enjoy increased

benefits of scale, see further cost reduction, and be moving towards global best

practice.

At the same time, employees will have access to increasingly high-quality HR

services that allow them the greatest freedom to manage their own particular

needs and requirements.

Thus, as a corporate HR system grows towards true service integration levels,

the determining factors of future value in outsourcing will be significant

changes in infrastructure, e-enablement and scale.

If the present state of the HR outsourcing experience in major companies is

examined closely, what emerges is a plethora of disparate, though functional,

activities that require amalgamation and integration to achieve the next levels

of efficiency and savings.

As an example, most large companies use hundreds of vendors and suppliers who

provide goods and services to the companies and their employees via the HR

department. To be able to rationalize and reduce that number is a prime goal of

leading HR outsourcing firms, and is a task requiring determined and intricate

effort. This effort is often not something even the largest corporations are

prepared to do.

The key benefit, however, in reducing vendor numbers is to acquire additional

purchasing leverage and efficiency via larger scale; to improve and streamline

service to the client firm and its employees; and to have greater control over

the quality of services provided to employees.

The Future: HR Operates at the Strategy Level



Several firms in the HR outsourcing industry are now able to provide service

offerings that manage increasingly larger numbers of processes and sub-processes

within global corporations with increasing speed, accuracy, and cost reduction.

However, new vistas of need are emerging. Corporations are looking beyond the

now-traditional ‘process management’ service offerings and are seeking

answers to larger, strategic-level questions–in particular, how to manage

human capital in light of the need for flexibility, accuracy, and

predictability.

With the ever-increasing speed of business activity and market changes

throughout the world, a company’s ability to adjust continually its staff

functions in the light of business exigencies is a primary focus, and, not

incidentally, is redefining the human resources function.

Thus, larger companies are looking for HR outsourcing offerings that combine

proven expertise in process and systems with the ability to serve as service

integrators, linking process management with strategic human capital decision

making needs.

In doing so, global corporations are discovering both the desire and the need

to outsource their entire HR function. The companies they turn to in order to do

so will be those that are creating the service-integrating strategies of the

future, and who also understand the role of human resources as it is changing

and taking a new place at the center of corporate management.

Extracted from an Exult white paper www.exult.net