Many in the HR community view outsourcing as a threat. But some companies' strategic implementation of outsourcing has freed HR from transactional obligations and allowed for focus on more strategic and high-value activities. In this SHRM presentation, Mark Stelzner of Inflexion Advisors discusses the ever-changing state of HR outsourcing and the strong business case for outsourcing recruiting, payroll, benefits and more. He'll also describe steps organizations can take to launch an outsourcing initiative, assess their current outsourcing partners and create an effective request for proposal.
2. CAUTION – Mark may make this sound easy. It’s not. Electing to hand over the keys to a third-party is one of the most difficult decisions you can make. Don’t let his deep voice lull you into visions of simplicity. Agenda 2
3. What A Long Strange Trip It’s Been 3 “Sometimes the light’s all shining on me. Other times I can barely see. Lately it occurs to me ...” ~ The Grateful Dead
4. The Premise (and Promise) of HR Outsourcing “Given the surge in global mergers and acquisitions, the delayering of organisations around the globe and the increased speed of decision-making, HR is becoming more and more complex by the day. Many companies found their in-house resources and capabilities challenged in dealing with this complex situation.” ~ The Economic Times (Feb ‘02) Internal efficiency gains are insufficient Economies of scale will drive down costs Retained staff can focus on strategic activities Less customization and more standardization Innovation will continue post go-live Provider sustainability is a non-issue 4
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6. The Business Case For Change 7 “When we are no longer able to change a situation, we are challenged to change ourselves.” ~ Victor Frankl
7. Innovation Is Extremely Important… 8 “… going beyond transactional/operational work to achieve new productivity gains and/or new revenue streams … through unique, creative methods.” ~ Horses for Sources
11. 10 Steps To Successful HRO 12 “The difference between failure and success is doing a thing nearly right and doing a thing exactly right.” ~ Edward Simmons
12. Step One – Get Your House In Order Define Your Objectives Why are you pursuing this course of action? What is your desired outcome? How will success be defined? Is this proactive or reactive? Take Inventory Understand the nature of your current contracts and relationships Itemize all internal and external service providers Meet With Internal Stakeholders Assemble representatives from finance, IT, procurement and legal Assess the possible impact on your clients/business units Learn and benefit from outsourcing initiatives in other areas 13
13. Step Two – Seek Market Intelligence Benchmark Assess all aspects of service delivery Determine what market changes have occurred since last investigated Beware of oranges disguised as apples Leverage Advisory Firms Do not become codependent on your advisors/consultants Find those willing to stand next to (or behind) you Extract every ounce of knowledge you can Network, Network, Network Schedule calls/meetings with your peers Discuss lessons learned and what they’d do differently now Attain guidance on service providers that worked (and those who didn’t) 14
14. Step Three – Meet With Prospective Providers Culture Matters No two organizations are the same, so embrace your uniqueness Assess your comfort with a provider’s philosophical market approach Prescreen for the likelihood of a symbiotic relationship People Matter Did they do their homework? Do you like your sales person? What did you think of their overall team? Did they pitch, do discovery or both? Process Matters Invite procurement (and perhaps others) to the meeting Think about opportunity cost 15
15. Step Four – Regroup And Reassess Share Your Findings If your premise for HRO still valid? Is the market prepared to support your desired outcomes? Is there additional work to do prior to continuation? Were you unable to locate critical information? Do A SWOT Analysis Strengths and weaknesses Opportunities and threats Create An Accurate Project Plan Assess resource allocation Document time commitments Ensure travel and expenses are preapproved Notify all other stakeholders 16
16. Step Five – Issue The (Dreaded) RFP Share Your Work Be completely transparent about your goals and objectives Include relevant systems inventories, base case financials and all working assumptions Bigger is not better Embrace Market Maturity In highly evolved segments, don’t question table stake capabilities Emphasize quality of Q&A over quantity Get past “Yes” Allow For Controlled Collaboration Give providers ample time to respond Manage lines of communication yet share with all Turn around Q&A very quickly Admit mistakes early and often 17
17. Step Six – Down Select And Site Visits Honesty Wins The Day Explain your logic and reasoning to providers – they deserve candid feedback Choose no more than three (preferably two) for site visits Don’t automatically include the incumbent Embrace Subjectivity Allow team members to share their emotional responses Ask yourself if you want to work with the proposed team This reflects your legacy – proceed with caution Make Site Visits Meaningful Set a tight agenda Meet with those who own the outcome, not just the sale Don’t let a good lunch overshadow a bad performance 18
19. Step Seven – Speak With Real References Pay Attention To Details Is the provided reference on the same product/release? Are they in implementation or production? Are they at parity in terms of complexity and scope? What would they have done differently? Don’t Be Afraid To Ask For More Feel free to work your professional networks to get additional data Ask until you get the answers you want/need 20
20. Step Eight – Establish Governance And SLAs This Is A Partnership Avoid single points of failure Assign clear roles and responsibilities and allocate dedicated staff, as appropriate Emphasize collaboration over escalation Service Level Agreements Calculate the value of each SLA and assess what you’re measuring and why Measure monthly and avoid quarterly averages Openly discuss viable scenarios Realize that the last thing you want is a SLA penalty payment Benchmark And Validate 21
21. Step Nine – Negotiation And Contracting Buy On Best Value Model all variable inputs and anticipated changes Ensure the provider is engaging profitably Have only one person negotiate pricing Retain Outside Counsel Offers a real-time feel for marketable terms and conditions Compliments your general counsel staff Has a prior body of experience negotiating to successful outcomes Think Through The Business Implications Term and termination Scope and change order processes Key personnel 22
22. Step Ten – Innovate And Ideate That Sick Feeling Is Normal This is an arduous process Be prepared for mistakes and missteps Acknowledge your role in the process Welcome To The New Base Case Continuous improvement must be emphasized Take fat out by adding scope in Measure, study, improve… then repeat Participate Willingly Join the client advisory board Attend annual events Brief with executives You can’t outsource accountability 23
23. Questions And Answers 24 “The important thing is to not stop questioning. Curiosity has it’s own reason for existing.” ~ Albert Einstein
24. Thank you! Contact Information Mark Stelzner Principal, Inflexion Advisors 415-658-7460 mark.stelzner@inflexionadvisors.com http://www.inflexionadvisors.com http://www.twitter.com/stelzner http://www.linkedin.com/in/markstelzner 25