Buyers Seek Metrics on Service Quality

April 12, 2007
Since Lockheed Martin signed an outsourcing agreement in 2000 with PricewaterhouseCoopers’ Unifi division, the entire landscape of the HRO market has transformed. The outsourcer, for example, is now known as Affiliated Computer Services. Six years ago only a handful of providers offered a full suite of HR processes, but today there are close to 100. And in 2000, there weren’t many buyers to compare notes with—let alone companies in one’s own industry, says Warren Pfister, Lockheed’s director of HR customer services.

    "We were one of the first defense contractors to do HRO in the scope that we did," he says.

    So in 2005, when Lockheed’s contract with ACS was getting close to renewal time, Pfister knew that he was going to need expert help to navigate a market that had radically changed. The company chose Watson Wyatt Worldwide to help with the process. Pfister was looking specifically for information on what kinds of metrics other buyers were including in their service agreements.

    "And we said, ‘Oh, by the way, we want to see how those answers line up for other defense companies,’ " he says. "That was a perspective we couldn’t get in 2000."

    As the early adopters of HRO contracts approach renewal time, many of them, like Lockheed, are expanding how they measure the performance of their providers. Many of these companies have attained the cost savings they were promised from these agreements, but not the quality of service, experts say.

    "I’m seeing buyers being more careful about how they measure certain HR processes," says Lowell Williams, vice president, HR practice lead at EquaTerra, a Houston-based sourcing advisor.

    Lockheed renewed its contract with ACS last year, but added more qualitative metrics to its service agreement, Pfister says. Previously, the company might have judged contract adherence by measuring how long an employee might wait on hold during a call-center session. Now it is doing more to gather feedback from employees and retirees, he says.

    "Getting the numbers is really important and gives you a picture of what’s going on, but it doesn’t tell you what to do to make a change," he says. "We established listening posts and other mechanisms to get customer-recommended changes."

    For example, when employees retire from Lockheed now, they receive a package that includes an insert asking them to evaluate how well the outsourcer did in getting them their pension information and other forms, Pfister says.

    Having more qualitative metrics rather than the traditional ones has become so important that some new HRO contracts have quality teams as part of the agreement, says Mark Azzarello, chair of the HR BPO Buyers Board, a group of seasoned HRO buyers that meets periodically to discuss issues affecting the market. These teams, which are often made up of HR managers as well as employees from the provider, oversee how the transactions are being accomplished. For example, the team might look at employee feedback instead of just how quickly calls to the employee service line are answered, he says.

    "The real key to success is moving to value metrics—not just metrics around quality, execution and satisfaction, but ultimately metrics that get you to be able to talk about how outsourcing has contributed to the overall profitability of the corporation," he says.

Workforce Management, March 26, 2007, p. 36 -- Subscribe Now!

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