Arguably, a company’s most important assets are its people, and leading companies around the world are taking more strategic approaches to managing their human resources. They are focusing on the big picture: globalization, organizational development, executive succession, workforce planning, compensation policies, and other important issues that impact corporate performance, profitability, and shareholder value.
To be able to focus on these strategic issues, HR executives are turning to outsourcing partners that can effectively manage their companies’ day-to-day human resources functions, says Alan Little, the London-based partner who leads Human Resources Outsourcing in Europe for PricewaterhouseCoopers. This frees up valuable management time and energy that can be better spent on strategic planning initiatives that add more value to the company, rather than program administration with all of its many complexities and details.
Of course, program administration is also very important, because properly managed, human resource programs can greatly increase employee productivity and everyone’s sense of well being, Little adds. Employees have come to expect efficient, responsive services that meet their individual needs. They want ease of access to address life event changes such as marriage, children, college, career moves, savings plans, retirement funds, health plans, and other benefits.
“What typically happens when employees are trying to resolve these issues is they have to go through a chain of communications with the HR department,” Little says. “It becomes quite a time-consuming process, and I think employees are looking for easier ways of making their benefits decisions and adjustments. Typically, HR departments don’t have the infrastructureor specialization to make everything happen in a smooth and efficient way.” And this is where business process outsourcing can provide more cost-effective solutions.
Increasingly, companies are turning to business process outsourcing for help in managing their HR functions. One immediate way outsourcers can improve employee services is through today’s new self-service technology. This allows employees to update their benefits elections, retirement contributions, and payroll deductions with interactive voice response technology and the Internet. Not only is this technology more efficient for employees, who get timely and accurate information, but it reduces the company’s costs as well. Also, it allows management to focus more time and attention on building its core business, rather than be tied down with back-office administration.
Strategic Advantages of Outsourcing
Among companies that are already outsourcing human resource functions, 90% of the executives say they are satisfied with the results of their initiatives, and 60% say the cost reductions meet or exceed their expectations. These findings come from the Global Top Decision-Makers Study on BPO, sponsored by PricewaterhouseCoopers and conducted in 1998 by Yankelovich Partners, which interviewed top executives at 304 of the world’s largest companies in 14 countries.
These senior executives talked about the strategic advantages that they are realizing from their outsourcing programs: 91% reported greater administrative efficiency; 86% said they can focus more on their company’s core business; 85% mentioned increased shareholder value; 81% cited improvements in service quality; 76% said outsourcing helps maintain a competitive edge in their industry; and 64% said it helps them meet changing customer demands.
Currently, the HR functions outsourced most frequently include compensation planning, benefits administration, recruiting and outplacement services, 401(k) savings plans and retirement plans, management development, and training programs. But what is rapidly gaining ground among larger companies is something that might be called Total Human Resources Outsourcing, where the many different functions are bundled together into a total package of outsourcing services that provide for more integrated and coordinated solutions at reduced cost levels.
Total HR Outsourcing Model
PricewaterhouseCoopers has developed a Total Human Resources Outsourcing model which offers companies end-to-end HR services, says Diane Shelgren, Managing Director of Human Resources Outsourcing for North America. Under this model, human resource functions throughout a company are supported by the latest technologies, including self-service, an HR information systems platform, and data warehousing for management information. HR processes are reengineered in a fully integrated manner so that the company gets maximum value out of the technology investment along with higher quality service.
Indeed, to achieve breakthrough improvements, HR executives need to develop integrated business solutions in terms of both the human resource processes and the supporting systems, Shelgren says. Since outsourcing to multiple service providers precludes this, it is important to choose a single firm that has the resources, experience, and technology to fully integrate the processes and systems, along with skills in project management and technical disciplines.
In addition, the firm should have the infrastructure and global reach to handle a company’s HR requirements in different countries and cultures, Shelgren says. Companies are trying to figure out how they can manage their HR programs and interface information around the globe. This is where PricewaterhouseCoopers provides the global solutions companies are looking for, through its worldwide network of 850 offices in 152 countries, where local nationals have hands-on experience with each country’s HR practices, labor laws, and benefits programs.
Single Delivery Capability
Shelgren points out that Total Human Resources Outsourcing provides companies with a single delivery capability, first by managing a number of HR functions with the firm’s own resources, and second, by integrating other best-in-class service providers to provide a total outsourcing solution. Bundling these firms’ resources together provides a company with greater value by having all the costs under one roof, she says, and provides employees with better services through a single point of contact for the range of services being offered.
From a client’s perspective, the firms are working together to provide a total solution, although certain vendors may provide specific services on their own where they have core competencies and specialized expertise, Shelgren says. What’s most important is to manage the outsourcing program so that each firm’s services are properly planned and integrated into a comprehensive service package – with good coordination among the firms’ teams and the delivery of seamless services to the company’s HR administrators and employees.
Lessons from the Outsourcing Primer:
- Multinationals should take a more strategic and global approach to planning and managing their human resources programs to better support the business and build shareholder value.
- Human Resources Outsourcing allows management to focus more of their time and energy on strategic planning initiatives without the distraction of back-office administration.
- Companies are moving toward one-stop shopping where a single service provider manages all HR outsourcing firms for greater investment returns and cost control.
- As with any outsourcing engagement, insist on a service level agreement with built-in performance measures to reflect your company’s HR objectives and goals.