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1 | P a g e New wheels of HR Outsourcing
New Wheels of HR: Outsourcing
2 | P a g e New wheels of HR Outsourcing
Abstract
World over, outsourcing is the key trend shaping the future of Human Resource function
and the role of HR. Commonly referred to as Human Resource Business Process
Outsourcing (HR BPO) or simply Human Resource Outsourcing(HRO), the outsourcing
model is the wheel of HR in the new age organizations. With superior technology and
advanced process, HRO can bring in measurable benefits for an organization at lesser cost
and defined service levels.
3 | P a g e New wheels of HR Outsourcing
New wheels of HR Outsourcing
Human resource management is a process of bringing people and organizations together
so that the goals of each other are met. The role of Human Resource (HR) manager is
shifting from that of an administrator and screener to the role of a planner and change
agent.
Indian organizations are also witnessing a change in systems, management cultures and
philosophy due to the global alignment of Indian organizations. There is a need for multi
skill development. Charles Handy also advocated future organizational models. Such
organizational models focus on people centric issues and call for redefining the future role
of HR professionals. And at the same time, Businesses are demanding high performance
from all the Key Stakeholders in Business. On this demanding playing field, it requires non-
stop innovation and a consistent drive to become more efficient. Technology and cost
savings are not enough – increasingly, the competitive edge for any global player is people.
And increasingly people and the HR direction and philosophy have become the
cornerstone for delivering superlative performance for any Business.
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CEO’s envision that HR function should be focused entirely on strategic activities, and not
performing the regular transactional activities. CEO’s mandate is no way compromising the
employee related transactions that sustains the satisfaction for the employees but is based
on well proven premise that contribution and real value for HR lies elsewhere. The structure
which emerges for HR is a team consisting of a of high- level contributors, perhaps internal
consultants, HR process designers and Change Champions— leaving all the transactional
and administrative activities to vendors for which those processes are core.
More than a decade after large U.S. companies began to adopt shared services in HR, this
delivery model has proven its worth by cutting administrative costs, reducing transaction
errors and generating greater employee satisfaction with basic HR processes. In India as
well companies form their human resources vision and charter to give them a competitive
edge in Talent Acquisition, retention and Management, and developing/ aligning
employees to meet business goals, HR shared services has entered an era of increased
relevance and value.
World over, Outsourcing is the key trend shaping the future of HR. Traditionally HR has
been a support function to support the Business critical processes. As the organizations
are striving to be best in both growing and maturing markets, the focus on performance
and efficiency has grown manifold.
In such relationships, a company contracts with a vendor that rents its skills, knowledge,
technology, service and manpower for an agreed-upon price and period to perform
functions the client no longer wants to do. Much attention has focused recently on the
outsourcing of staffing, including temporary and contract workers, and IT professionals.
A much less noticed, though growing, business has been that for human resources
business process outsourcing, either HR BPO or more commonly referred to as HRO
(Human Resource Outsourcing)-Starting with payroll processing, outsourcers now offer to
take over virtually any HR activity — or even the entire function.
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With increasing focus on HRO, there are business benefits to specific standards for HRO,
further enabling movement up the value chain by leveraging an equally shared partnership
between supplier and buyer. As HRO evolves, organizations have new choices for delivery
options that reflect the strengths of their prospective business partners. Some of these
investments will produce real benefits for the HR industry in general. It is up to you to
make critical decisions about how they will impact your organization.
HRO varies based on company- specific circumstances. However, certain common elements
are usually present when you are thinking to outsource the function:
Companywide consistent policies and processes, from which standardized,
automated transaction processing can be achieved
A central knowledgebase
Some use (often extensive)of employee and manager self-service applications from
a Web portal
Most often, but not always, a single HRIS (Human Resource Information System)
platform
A contact center, internal or outsourced, for fielding queries and handling other
tasks by phone, e-mail and chat
For decades, administrative matters related to compensation, benefits and personnel
policies have consumed HR’s time. Now, most, if not all of these processes can be
standardized, centralized and automated through a HRO. This frees HR to apply its energy
to talent management, organizational development and other strategic endeavors that
contribute directly to meeting business goals. In time, adopters will reap the double-
barreled benefit of cutting costs and boosting HR’s strategic impact.
What can’t be Measured can’t be Achieved
Most people would agree that, in the past, HR has lacked the sophistication level of measurements
that most other corporate functions are accustomed to today. However, during the past few years,
HR has increasingly focused to deliver value with making the HR output completely objective for the
Business. These improved metrics and analytics are the result of not only increased sophistication
from the mathematical perspective but also specific research on real-life HR problems.
It started with Technology solutions - ERP systems have also been a help to some buyers seeking
to improve their analytics, but the hard management disciplines for creating a measurement culture
in HR are often still lacking.
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However with the surge of HRO, organizations have real options to generate change within their
organizations. We have looked at metrics in recruitment like – Cost per hire, Time to fill etc. But
HRO has thrown a completely new paradigm to measure HR.
HR typically would have common needs when it comes to various areas within HR but a lot would
get differentiated on what vision and final objective an organization needs to have.
However, there are fundamental aspects of performance one would need to track to bring in more
objectivity. HRO organizations have already invested in producing the best practice around operating
standards and the associated analytical tools to go with those standards
Outsourcing Creates a Focus
One of the pluses of going through the outsourcing procurement process is that you will learn much
about your organization.
The outsourcing process forces you to understand how your processes are being handled currently
and how they compare to others in the industry. A detailed “As is understanding” of the process
through scientific diagnostic tools helps to evaluate where you currently stand.
This end result won’t be some fancy consulting report but a set of expectations that will chart out
deliverables for Business. These decisions will really focus thoughts about what you need or don’t
need, since you will be immediately translating them into real money.
Let’s take the example of Recruitment process – One has traditionally looked at “cost per hire” and
“time to fill”. However, measurements through HRO throw some startling metrics to watch out for.
One could calculate the cost of every resume that is put in the process. With outsourcing this
process, one will have a saving of 30% and processing cost of each resume is 0.7x; you have put
some money on the table to think about.
To illustrate this further, let’s say on an average your HR junior management team spends 40% of
their time on employee query management and your middle management tier is spending 20% of
their average time on escalation related to employee queries. With an HR team of 20 people with 3
managers, your organization spend is 8.6 FTE (Full time equivalent) on just employee query
management.
And on top of this there is no definitive service level measurement. However, with HRO relationship,
HR decision maker is empowered with that information and can demand about service level
measurements: not whether they should be 99.5 percent versus 99.9 percent but whether these are
the measurements that really impact the mission of the organization
With an HR team
of 20 people with
3 managers, your
organization
spend is 8.6 FTE
on just employee
query
management.
7 | P a g e New wheels of HR Outsourcing
HRO Leads to an Overall Impact
HRO empowers leaders to have real- time views of their organizations for their vision and charter.
At the end of the day, the success or failure of HR will not be based upon how long it takes to
answer a call in the contact center but rather around a much broader set of business metrics.
Already, areas of HR that lend themselves to better standards via HRO include the obvious services
surrounding employee recruiting commonly known as RPO, payroll and other Retirals administration
activities, as well as identification and administration of benefits plans.
In addition, HROs are developing capabilities that will help organizations produce better results
when it comes to managing workforce productivity, reducing liability exposure for employee relations
issues, or being able to model global workforce changes to mirror changes in the business
requirements.
You may call HRO as a ‘Business process outsourcing’ ‘Business Improvement’ or may be ‘Business
Re-engineering’ for that matter and maybe an ‘HR transformation’, or something else entirely?
Whatever you choose to call it, the name signifies a lot about mindset, objectives, and approach to
implementing HRO.
None of the above is accomplished without some pain. Standardizing and then centralizing processes
are the first two steps toward creating an HRO model, whether internal or outsourced. In highly
decentralized companies, this can take several months. Some adopters choose to begin with only
certainaspects and do the rest over time.
The journey of HRO process would evolve in three stages to reap the actual benefits:
In a leading Insurance company, Business leaders initially resisted HR Outsourcing
because they wanted their HR people to work on their problems. The top
management, however, wanted HR team at the business units to focus on human
capital issues not on administrative tasks and that mandate had to be driven with
both HR teams and the Business Line Managers.
HR had to lead the way saying “HR will solve the problems, it’s just going to be in
a different fashion – a more predictable and dedicated channel”.
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A company can launch HR shared services with more than one platform, but it isn’t easy. It is far
better to standardize on a single platform for payroll and Human Resource Management (HRM)
databases. A company needs to budget time and money if the move to HRO will require a new
implementation of standard software.
The biggest challenge is Change management. Employees must learn to use self-service and the
Helpdesk center, not the HR representative which is available in person at their location, to solve
problems. Line managers must be convinced their dedicated HR specialists will provide more valuable
service once they offload administration. HR team must adapt and retrain for new roles.
Some of the Tangible benefits of HRO are going to be:
Streaming (and optimization, if applicable) process work flow
Improved data and content accuracy
Automate redundant tasks and eliminate errors and rework to 0%.
Reducing/eliminating print, distribution (forms, manuals, newsletters, etc.)
Identify Non Value Added for HR Operational activities.
And the most important is the cost benefit for the savings from centralization. It could range anything
in range of 10% to 40% depending on the stage of the organization. One metric is the HR FTE to
employee ratio which could use to measure the obvious ROI (Return on Investment) from an HRO
model.
9 | P a g e New wheels of HR Outsourcing
The figure illustrates one of the most widely researched ROI for
effectiveness of HRO in terms of direct cost savings.
The savings most often come from reduced staffing in HR. In
the Hackett study, “world-class” HR organizations—defined as
the top quartile of 125 companies benchmarked— spent on
average 13 percent less on HR per employee (see chart 1, “Total
HR Cost Per Employee,” above) and they had 15 percent fewer
full-time HR staff per 1,000 employees than the others in the
study.
CaseStudy
PeopleStrong’s client, a Telecommunications company with approximately 8,000 employees in offices
across India, had moved structure with Centers of Excellence, and had also outsourced benefits
administration to multiple vendors.
The result: change in HR and new processes and organization. As the company looked to the future,
however, it recognized that these improvements were not enough. Its core business was very
profitable and also was growing very fast. HR’s internal customers felt their basic service needs were
well met, but they wanted HR to be more proactive in providing assistance in various areas such as
single channel for all the employee needs, workforce planning, change, and talent development.
The business wanted to further increase cost savings and did not want to have any capital
investments in HR technology. HR leaders, therefore, set out to engage in further HR outsourcing,
which ultimately led to a choice of HR Service Centre (HRSC). The choice of this is significant for at
least three reasons:
This was not just outsourcing, it was a redesign of the service delivery model.
Internal HR team had new responsibilities.
HRSC was to build on and improve HR experience in leading change efforts.
Positioning HRO Internally
The HRO solution included a new HR service centre, several new technology applications
such as an applicant tracking system, increased manager and employee self- service, a
new benefits management tool, a new time and attendance system, and the transfer of
contact center responsibilities and technology maintenance to PeopleStrong.
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HRSC required that the joint client/PeopleStrong team implement many new processes,
tools, and responsibilities.
A Steering Committee comprising senior client and PeopleStrong executives oversaw the
project. A business case, showing the investments and returns expected, was approved.
There was also a significant redesign of the retained HR generalist organization. Previously,
these generalists had supported all types of HR activities, including administration, delivery,
employee relations, staffing, training delivery, and, when possible, strategic consulting to
the business. Now, however, the new technology and self-service capabilities from HRSC
allowed for fewer generalists focused on higher value activities for the business.
In addition, a new staffing organization was created that focused solely on the recruiting-
related activities for which the generalists were no longer responsible.
Because of the significant changes involved, HRSC also required upfront and ongoing
stakeholder communication and change management. There were many stakeholders
affected by HRSC, including senior executives, HR employees, line managers, employees,
other external vendors, and a host of people involved in the project itself. HRSC employed
a change and communication plan, with dedicated resources, to help ensure the
stakeholders’ understanding and readiness.
Implementation and Readiness
HRSC was implemented by a large project team comprising of client and PeopleStrong
stakeholders led by a Project Steering team (PST). The PST was responsible for the overall
project plan and for project coordination and execution. Under the PST was a set of teams
responsible for areas such as HR Transactions team, Contact Centre, Payroll & Benefits.
Each team was tasked with implementing the methodology: Discover Design, Develop,
Test, Deploy, and Evaluate.
A separate, but related, effort was needed to implement the new HR generalist
organization. This included redesign of the future roles and competencies, as well as
evaluation of the current team on capability and assessment in line with new structure.
Some team members were reassigned within HR or outside HR. Rigorous communication
and training helped prepare team for their new roles, processes, tools, and relationships.
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Integrating change management and communication activities into the overall project plan
helped to make stakeholders aware of, and involved in, the implementation.
Examples of these activities include:
Regular broad communications from the senior Head of HR, to different
stakeholders in the process – very key to address the Business leadership team;
Monthly “awareness sessions” with HR leaders and their customers (i.e., business
managers)focusing on the changes affecting them;
An email box to solicit ongoing feedback and questions from key stakeholders,
used to compile FAQs; Involvement of end-users during design validation sessions
(e.g., different stakeholders validating the process workflows);
Focus groups/interviews with each process regarding stakeholder impact.
Throughout, in the process it was made sure that stakeholders’ needs were met
and that teams were coordinated toward the broader business goals.
Key Learnings
For this organization, the lessons are ongoing as HRO is implemented and adjustments
are made. Its past experience with HR change has raised awareness and helped them to
improve the approach for design, coordination, and change.
Some of the key lessons learned may seem obvious but, unfortunately, they are violated
in many HRO implementations. For that reason, we reiterate them here.
HRO is an overall strategic goal business first and then for HR.
Design and implementation activities needs to be built around three key
ingredients - Process, Technology, and People — not as a separate initiative.
Make implementation a true partnership between the client and outsourcing
vendor.
Internal HR organization needs to complement the new outsourced processes and
technology — with aligned roles and training.
Communication is the game changer from the beginning and needs to be focused
around consistent set of key messages.
Build partnership around various teams for a smooth rollout.
12 | P a g e New wheels of HR Outsourcing
The change process is stressful, so be proactive in helping people maintain
performance and build their readiness — don’t wait for reactions.
Ensure ongoing coordination among various teams towards an integrated service delivery
model and consistent experience
Author Bio
Shelly Singh - Chief Business Officer
13 | P a g e New wheels of HR Outsourcing
Shelly Singh is the Co-Founder and Chief Business Officer at PeopleStrong and is responsible for Process Solution
development, Special Initiatives, Service Line Expansion & Delivery Excellence. An HR process specialist with rich
experience in setting up HR processes, policies, as well as rolling out end-to-end implementation plans, she has
worked with companies like Sony, Flextronics Software, Hewitt & high-end technology start-ups.
Shelly is the first woman board member on PeopleStrong’s’ Board since inception and is also the National
Treasurer, for NHRDN.She was also awarded the Young HR Professional Award from the NHRDN recently.
Shelly has a Masters Degree in HR & International Business from NMIMS and a Bachelor’s degree in Physics from
Punjab University.
Shelly can be reached at [email protected]
About PeopleStrong
PeopleStrong is a leading platform based mpHRO (Multi-process HR Outsourcing) and Technology company,
headquartered out of Gurgaon in India. We enable Business Leaders and CEO's in transforming their people
agenda. Our proposition value is further enhanced by the fact that customers see us as trustees of HR
Transformation, partnering in their prime objective of creating Happy Organizations. We have implemented some
of the largest HR Service Centers in Asia Pacific. We deliver employee services across regions and time zones for
more than 300,000 employees and have hired more than 40,000 employees through a unique technology
interface coupled with high end decision making Tools for people data. We are the first company in the space
to be successfully assessed on SSAE16.For details more details, visit www.peoplestrong.com
Corporate Office
PeopleStrong HR Services Pvt. Ltd.
A-10, Infocity, Sector 34, Gurgaon-122001, Haryana, India.
Ph no: 91 124 4782400
Email: [email protected]
