Monday, May 30, 2005

How to make outsourcing work for you

An article written by a Dave Carlson from Mercer HR notes that “Teaming up with a compatible partner can make a tough job easier .“ (unfortunately you need $200 to get access to the actual article)

However, my rebuttal is that all the current HRO studies (the very current ones) are stating that satisfaction levels don’t fluctuate by vendor. Each vendor seems to have a broad selection of poor to excellent ratings. It also does not show that there are major differences between “compatibility.” What does matter is the client. Here are some components to look at:

  1. Governance. Who and how are decisions being made regarding the relationship and any processing issues that may arise. You should consider this a partnership and not simply a vendor relationship. Having a project manager or vendor manager is not sufficient. Executive sponsorship must be maintained throughout the relationship.
  2. Metrics. In order to have a decent relationship, a client organization must have HUGE amounts of data. Clients will generally state they expect similar performance at a lower cost. However, most clients don’t know how to measure that performance, and if they have not done so, cannot reasonably determine when things are going wrong. Thus, a client ideally wants to have metrics on all processes before and after outsourcing. This way, the partnership can establish reasonable service level agreements (SLA’s) and appropriate costing. Remember, it’s supposed to be a win-win.
  3. Dispute resolution. There will be blips in service. Clients really need to be reasonable. When the client was executing the processes, there were errors and blips. This should be expected with the outsourcer as well. The problem is that clients feel that it’s easier to blame an outsourcer rather than work with them. Oftentimes the fault is bilateral, but in a world where the “customer is always right” this can be a difficult environment.
  4. Scope of services. The reality is still that in most HRO engagements, most large agreements are only for payroll and benefits. There are a few that are growing to include comp, performance, etc. However, most of these HR oriented processes are focused on self service and technology deployment. The strategic planning is still retained by the client. There are a couple of problems with scope. First is that many clients want too much too soon. Second, clients have to manage their internal staff and managers after they go live. Once again, many will want to expect the outsourcer to perform jobs that are not in the agreement – this comes from education (or the lack of).

My message is that if you are in an outsourcing relationship or thinking about it, make sure you do adequate preparation. The relationship is bidirectional and should be treated as such. These people may become the main point of contact for your employees, so treat it as a partnership and be accountable when you as a client are accountable.