Guest Post: Phil Fersht - “Outsourcing: Holding HR Accountable”
Will HR people stop taking pot shots at HRO? Most HR chiefs have had the "O" decision made for them by their peer senior executives. Some realized their company was going to do it anyway, embraced the business benefits and quickly focused on driving some benefit for their company from the HR transformation process. They realized the change wasn't going to be a walk in the park and worked hard with their service provider to make the whole process an effective and positive one for their company. Sadly, most HR managers have resisted HRO vehemently and have used the media, events and even Wall Street to throw the whole process under the bus. The concept of slimming down over-bloated HR departments (largely in administrative areas), accessing more rigorous HR standards, applications and platforms, and their company attempting to have a more strategic view of managing their human capital, has been abhorrent. How could these CEOs, CFOs and sourcing advisors dare to point out that their HR function may be somewhat over-bloated and not quite giving them a level of workforce performance management that a professional third party could provide?
Net-net, do we hear CIOs constantly complain about their ITO provider and demand they do everything inhouse? Do CMOs complain that their customer care service provider is costing them business? Do we hear CFOs complain openly that their F&A provider us messing up the accounts?
Sales, IT, finance - and many other functions - are also crucial business functions, but their leaders realize the realities of operating in a cut-throat globalized economy.
So far, we have seen HR managers blame everyone but themselves for the "failures" of HRO. Firstly, we have only seen two companies out of 150 full-scope HRO buyers take their HR back inhouse - one because they downsized so considerably that HRO was not economically-viable, and the other for reasons other than poor service provider performance. Secondly, we hear some HR managers point the finger at the service providers and consultants for "over-selling HRO". What they are really saying is "we don't like being held accountable" because that is what their peers in sales/marketing/finance and IT have been doing for years.
The reason why multi-billion dollar HRO providers made a small (and let's face it relatively insignificant) early loss in this business is because they believe in the long-term value proposition of HRO - and who was it who said you need to spend some money to make money?
Companies with mature business functions, who go through a well-structured and well-thought-out outsourcing deal, rarely have any major problems beyond early transition and transformation issues. Very few of them say they would go back to the way they were. Many early HRO deals that have not proved very cost-effective in the early stages (and I stress most of these engagements are still in relatively early stages) have struggled because HR resisted the change and the buyers’ HR was not a particularly well-run and accountable department in the first place. The reason the market has slowed this year is because service providers have been more selective at taking on clients they know are going to embrace HRO in the right manner - and at the right price! As a result, the recent wave of HRO deals are not going to nearly as “exposed” and problematic as the earlier wave. Like any mature business function, the “O” word takes time to be accepted, and HR has taken a little longer than most to realize this is the reality or today’s economy and it is time to hold their hand-up and be held accountable like everyone else.
This post was provided by Phil
Fersht. Phil is a Vice President of Everest Research Institute
and is featured in FAO Today this month.
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