Mar 30, 2011
Imagine this. You’re fixing your house, and you take down a few walls to reconfigure how the place looks – it’s a bit more open, you can see more, put more people in it when you entertain. While you’re at it, you decide to put new walls up – perhaps a new powder room where there wasn’t one before, or a new bar area. But the bar area never got used, and you didn’t install water to go to in so you could have a sink and forgot the wine rack, so you take it back out since it wasn’t what you really needed. At the end of the day, you’ve spent a whole lot of money trying to get what you wanted, and then didn’t get what you wanted.
The trend has been going on in business for decades now. Organizations acquire or merge, and then merge common business units and functions. What follows is counter intuitive: after the merge comes the re-piece mealing of the business unit or function. Basically we merge things together and then break them apart again.
We’ve really done the same thing in HR. Over the last decade and more, we’ve tried to figure out what can go into HR shared services. We’ve dropped payroll and benefits in there, then we added HRIS and call centers. The first steps were easy, we gave payroll to the ADP’s and Ceridian’s of the world, and benefits to the Mercer’s and Hewitt’s of the world. Then we went a step further and gave away our call centers to HRO, going ultimately to a state of letting someone else do the transaction processing for us.
We thought this was smart, and in many of the cases, it was. We reduced our costs, created scalability through our providers, and theoretically instilled better quality. But a couple of years ago, we had one of those “uh-oh” moments – we realized that we did it wrong, perhaps went too far, or just didn’t prepare the right way. It’s not to say that outsourcing was bad, or even that we outsourced too much. But it did make us realize that simply outsourcing doesn’t get you to the end state without a lot of work.
What we’ve done in the last couple of years is pull back some of the outsourcing and reintegrate the processes back into our shared service centers. We realized that there is lots of stuff in HR that can’t be simple handed over to an outsourcer and scripted. After all, we’re not talking about accounts payable and cutting checks – much of what we do is nuanced and no matter how many process flows or scripts you write, there is always another unique problem heading towards you just over the horizon.
The problem with HR outsourcing is not that they can’t do what they do effectively. It’s that we haven’t figured out where to draw the lines. We give away the core employee indicative transactions like personal data or job changes. Yep – those are pretty easy. But along with that, we group the complex international movements in with the job changes. Often these are high potential or succession candidates that are getting moved around because we’re actively investing in their development. Rather than simple job changes, we’ve moved people between countries and business units, and both they and their managers are senior people in the organization that expect a high quality transaction. Outsourcers seldom bungle the regular transactions, but given the complexities of other types of movement, dissatisfaction rates can be pretty high. So we bring the transactions back in, but it was not the outsourcers fault – they were probably good at the basic stuff, and we were supposed to be smart enough not to give away the complex processes that were important to us.
I’m pretty sure we’re going to go through another round of this pretty soon. Everyone seems to be thinking about service delivery models, but we’re still thinking about efficiency and cost rather than effectiveness and services. Sure, we can save $100M on paper, but in most cases it didn’t work the first time around. Are we going to make the same mistake again?