As the now billion-dollar Human Relations (HR) outsourcing industry matures, improvement in the quality of services offered, the way they’re delivered to the customer and how they are marketed and managed is creating new provider models that rely more on the virtual, and less on bricks and mortar.
These models are expected to at least triple this industry’s growth in the next couple of years according to David Hirschhorn, CEO of Dr. Benefits, an outsourcing HR firm that has been in business since 1999 and offers more of a boutique-type approach when assembling HR packages for its’ clients. “All the research data I’ve seen suggests exponential growth in this industry.”
In early October, Hirschhorn’s company entered into an affiliation agreement with Metiom that now allows Dr. Benefits to deliver its wide variety of HR services to the over six million users and affiliate vendors in Metiom’s network.
Hirschhorn says one primary reason for this affiliation is the ability to offer and manage benefits that are tailored to the customer.
Flexibility Of Choice
Most HR outsourcing companies are typically little more than new channels of distribution for traditional, less flexible benefits providers.† “It’s like what Henry Ford said about the Model T, ‘you can have it in any color you want so long as it’s black’. With us, it doesn’t have to be black,” says Hirschhorn. “Boutique HR outsourcers offer a Chinese menu of benefits and vendors who supply them, that can be tailored not only to the needs of a company, but the individual wishes of each company’s employees.”
Historically, HR services have remained somewhat constant. The tasks that involve HR and how they impact a company are no different than before.† “It’s still about recruitment, training and development, benefits administration and morale, so we’re not re-inventing the wheel.” says Hirschhorn.† † He has found that the preferred solution is evolving to deliver market-driven HR services and superior, more personal customer service to each individual client company.
Dr. Benefits’ process is host-application service provider (ASP) driven: a cost-effective mechanism for customers since it eliminates their dependence on internal, and sometimes limited HR software that might not suit their needs.† “Offering the ASP web model simply gives more choices to customers and makes them easier for them to manage on a daily basis,” says Hirschhorn. In addition, call center customer service is available to all of Dr. Benefits’ client companies.
He suggests that his and other boutique HR outsourcer’s ability to offer turnkey solutions for many types and sizes of companies with the least amount of intrusion into the client’s operational infrastructure offers a higher return on their HR investment.
Increased Value Leads To Stronger Employee Relations
He is also beginning to see how his firm’s assumption of a client’s HR responsibilities is producing a pleasant, if not originally envisioned, byproduct.
Internal HR can at times be intimidating to employees, sometimes creating controversial events through miscommunication. A supplemental advantage of improving employee relations through better communication with management has been observed in a growing number of Dr. Benefits’ client companies.
“Sometimes people are afraid of the traditional suggestion box,” says Hirschhorn.† “We’ve discovered that our network-based communication structure takes away some of that intimidation and offers a more positive approach since our method is seen as an objective third party by both sides. This has helped remove a lot of the concern to employees who must speak their mind. It in turn creates a more forthright communications avenue between employees and managers who use the channels we develop.
More evidence of this encouraging trend is growing client response to Dr. Benefits’ recently introduced variety of employee incentive programs.† Positive employee performance places them closer to receiving supplemental benefits like car or home payments, college tuition benefits and real-world bonuses that have worth.† “We won’t award Big Mac coupons to these outstanding people, but real value to those who achieve realistic, attainable goals,” says Hirschhorn.
“We’re pleased that this incentive program allows our employees themselves to set their own goals and work toward them,” says Chris Piedmonte, President of Eagle Creek Systems, who is pleased with the higher morale the program is leading to.
But a deeper answer for why a boutique HR outsourcer succeeds in the marketplace is found in several issues that are vital to a client company. In addition to providing real choice in employee benefits, easy data interface and automated workflow, superior customer service and a penchant for sometimes combining proprietary methods into a client’s private label solution also are key.
“That last point is largely responsible for our becoming the HR provider to Volt Technical Services,” says Hirschhorn. “It’s our method.† But Volt markets it as its’ own: sort of like national brand corn flakes being sold in a store brand box. The product’s the same, the only thing that’s different is the packaging.”
Before You Outsource HR, Do Your Homework
Although HR outsourcing appeals to a large segment of the market, Hirschhorn readily admits it’s not for everyone. “Traditionally, mom and pop companies with 10 or less employees probably don’t need these kinds of services since they’re informal environments to begin with.”
But for companies that see this as a viable, cost-effective alternative to their HR challenges, Hirschhorn cautions that diligence is prudent before any active discussions with HR outsourcers begin.† “First of all, it has to make sense. If growth is expected, then HR outsourcing probably does,” he says.
Another factor is the availability and size of an HR budget, which goes a long way in determining the sort of services a company can retain and the employee benefits that might be available to it. Typically, turnkey services seldom cost more than $10 per-employee per-month and many standard rates are well below that.
Who currently handles HR issues and how willing will that person be to work with an HR outsourcing company? Having an effective liaison for this kind of relationship is responsible for most HR outsourcing success.
Another point to consider is whether a company is prepared to absorb changes in its IS structure, especially if the outsourcer is going to be using proprietary software.† The percentage of employees that are currently wired must also be weighed.† ” We’ve discovered that at least one in four need to have online capability at work in order to be successful,” adds Hirschhorn.