While 88 percent of respondents in a survey of large companies with HR outsourcing contracts reported short-term savings, and even more—92 percent—achieved longer-term savings, only 39 percent were satisfied with vendor services at the two-year mark.
"No outsourcer has yet figured out how to mint satisfaction," says a study of HRO effectiveness by Towers Perrin, a global professional services company. The vendor-client relationship is key in what the firm calls outsourcing’s seismic culture change.
Steve Bohannon isn’t surprised by the study’s findings. He’s CEO of ExcellerateHRO, jointly owned by Towers Perrin and EDS, a provider of technology services. "We saw a very large hole in the provider marketplace in vendor management," Bohannon says. "People think it’s simple to take a contract and make sure people do what they say they’re going to do. That’s a skill, and that’s part of the skill set we bring to the party."
ExcellerateHRO, based in Plano, Texas, exemplifies two emerging trends in outsourcing: It’s a third party providing sophisticated services. "An extension of the workforce will increasingly occur through the use of third parties—business process outsourcers, IT outsourcers and other suppliers," says Julie Giera, vice president of Forrester Research.
"People think it’s simple to take a contract and make sure people do what they say they’re going to do. That’s a skill, and that’s part of the skill set we bring to the party."
--Steve Bohannon, CEO, ExcellerateHRO
In addition, the rapidly growing number of outsourced services—her firm predicts that 3.3 million jobs will move offshore by 2015—won’t solely be low-end but will be highly intellectual, Giera says. "The role of HR is going to be crucial to ensure their organizations can mesh all of this talent seamlessly."
Outsourcing companies like ExcellerateHRO are designed to help HR deal with the complexity of managing multiple vendors with different time zones, languages, values and cultures. "Each new vendor relationship costs the average company between 4 and 7 percent of the outsourcing contract to manage," Giera says.
ExcellerateHRO, which has 200 employees and uses many of EDS’ 3,200 employees to deliver its services, has more than 400 EDS clients served by 40 offices worldwide. In its first year, the company has added 30 clients, including International Paper. It provides services—ranging from traditional administrative work such as payroll to recruitment and training—to 33 million active and retired workers.
"HR organizations are engaging us, saying, ‘I need your help beyond routine transaction support,’ " Bohannon says. "‘If you have a different and approved way of sourcing talent for my organization, of performing testing and interviewing and helping me winnow down talent to those who suit my company best, I need your help with that.’ Certain parts of that segment of HR have been delivered in a very fragmented way around the world."
A large organization like ExcellerateHRO has the opportunity to deliver greater efficiency and savings to clients, Bohannon says. That frees HR to concentrate on companywide strategy.
Ashok Bardhan—a researcher at the University of California, Berkeley’s, Haas School of Business—says that executives face many challenges. He recommends HR departments "take a fresh look at the entire demand for human resources to redefine and reorganize the workplace to come up with a more agile, competitive firm in today’s global economy."
Workforce Management, April 10, 2006, p. 32 -- Subscribe Now!