Every now and then I think I have a thought that is pure genius. This is not one of them. Instead, every now and then I have a thought that simply entertains me for longer than it should. This is definitely one of those.

I have not yet figured out the appropriate pronunciation for this. It might either be HR-ass, or harass. Either way, the thought popped up in my head while pondering the wonders of HR outsourcing. I mean, if we think about HRO, all we are really talking about is HR as a service, right? You subscribe to a service whether it is payroll or benefits outsourcing, or technology and call centers. You expect that the vendor will keep up with best practices, update their technologies as needed, have the right staffing ratios as your organization grows (or not), and maintain all the service levels you have negotiated. It really does sound like HR as a Service to me. It is unfortunate that HRO organizations have not adopted the acronym however.

We talk about it as HR service delivery after all, so why do we call the relationship HR outsourcing? Sure we have outsourced the delivery of parts of the service chain to someone else, but at the end of the day, it really does not matter if the service is internally or externally delivered. It’s simply a component of HR services that our employees and managers expect to get from us. What matters most to us is that the employees get the best experience possible in a scalable and cost effective solutions. (ok, so they really don’t care about the last 2). I mean, let’s think about the value proposition that HRO gives us. They can scale better, they can add technology with more agility, and and they are supposed to be rurally good at executing their core.

So next time you have a HR transformation project that includes HRO, I dare you. No, I double dare you. Brand your project HRaaS. (come on, I at least got a chuckle out of you, right? I really prefer not to laugh alone.)

Merge, Outsource, Re-merge

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?

Please Don’t Do It

I have to admit that I spend more time in airports than I would like to admit.  This means that I spend some time in airport bathrooms where a very disturbing event happens with unbelievable frequency.  I’d say that about every other trip to the bathroom, someone is in there talking on the phone.  I don’t mean listening to a conference call while on mute.  I mean ON THE PHONE TALKING!  I’ve heard people talking on the phone while in a stall!  (seriously guys, GROSS!!)  Perhaps it’s rather mean of me, but whenever I see this, my immediate reaction is to flush the closest toilet three times in immediate succession.  ((I’m also the guy who walks down the aisle on the plane and feels perfectly comfortable exclaiming, “whoever that is, you gotta stop farting!”))

Here’s my “please don’t” list based on preventable stuff I’ve seen in the past year:

  • Don’t outsource and think that everything will be handled.  Retain some key people.  You outsourced transactions, not strategy, so keep a retained strategic organization at the very least.
  • Don’t implement without doing some high level process design first.  If you feel like being a taker of any and all process flows your vendor is going to give you, then so be it.  But chances are you do have a legitimate business requirement that will drive better adoption if you implement it, and chances are also that your vendor can handle it.  If you wait to look at processes until implementation, it’s probably too late.
  • Don’t think that automation and self service is the same as usability.  They are not.  We are often so pleased with ourselves that we moved another transaction to the web that we have completely forgotten that the overall organizational impact is negative.  If we didn’t craft the transaction the right way, we may have decreased data quality, and we probably increased the overall organizational burden to complete the transaction.
  • Don’t think you’re special.  Every organization thinks they are unique.  Let me tell you, you really are not.  If all of you were unique, Software as a Service would not exist.  ERP would be king and every organization in the world would be driving major customization to make things work.
  • Don’t give up on the culture.  I remember an agricultural company that employed migrant farmworkers and needed to automate benefits enrollments to the web (about 8 years ago).  HR was determined that these workers could not possibly have computers let alone internet connections.  In the end, they got a 60% on-line enrollment rate, seriously modifying their expectations.  Remember, these are migrant farm workers.  When we think culture or politics is too much of an obstacle, realize that it is not.
  • Don’t forget that the technology is the smallest part of the implementation.  It takes all our time and costs a whole lot of money, but the end of the story is not about the technology, but the processes you built around it and how you deployed it.  The technology does not solve anything – it allows HR to solve whatever issues are out there with new tools.

I could probably go on and on, but this plane is about to land.  If I’m ever on the phone with you and I hear 3 flushes in quick succession, I’m hanging up on you.

HRO is not Dead

HRO has seemed dead for at least a couple of years now.  A couple years ago it was almost all I was writing about, and there were mega deals to be had every other month.  All consultants were talking about to their clients was deciding if they should outsource or not.  At the time, HRO was really the domain of the Fortune 100, maybe the Fortune 250, those who had the financial ability to spend that type of money on mega HRO.  Unfortunately for the HRO industry, outsourcing HR was not necessarily as easy as ITO or FAO.  The people factor sitting in the background was actually a factor that should have been sitting in the foreground, and large outsourcers who were used to technology or financial transactions were not as able to translate their business into HR.

We’ve lost track of HRO, but it’s really not that dead.  The fact is that while the mega HRO deals were going on, we figured out what works and what doesn’t.  What works are the things that always did.  Outsourcing technology, payroll and benefits.  But we’ve always outsourced that stuff.  I think the one new area that is starting to get outsourced is RPO.  We’re seeing more outsourcing in the sourcing area of recruiting.  As usual though, we’ve learned that it’s the transactional areas that are perhaps less strategic.   For payroll, wage and hour policy is still usually held internally, although the outsourcers are really the experts on compliance.  Benefits design is pretty much in-house, and the transactions are easily outsourced, and for recruiting, sourcing can be removed but the decision making is left for the hiring managers.

In the last wave of HRO, we started to see organizations start to outsource stuff like talent.  I’m not quite sure how this worked beyond technology, but apparently people were doing it.  As the economy comes back in 2010, I think I’m expecting transaction outsourcing to come back in a major way.  Organizations will be coming out of cost containment and looking to spend on implementations that allow them to capture more cost savings that they could not spend the money implementing in 2009.

For more on BPO and a couple comments reflecting my own here, see Phil Fersht’s blog here.