HRO Strategy Guide

HR Strategy HRO

Sometimes a firm actually publishes a study that is neither ‘salesy’ or full of common sensical information that we already knew. Deloitte put out a “Making HR Business Process Outsourcing Work”Deloitte Consulting, November 9, 2005. “Making HR Business Process Outsourcing Work,” retrieved from on January 3, 2006. study/paper here.

I’m not going to comment on it extensively as there is simply too much good content. This paper is thorough, full of thoughtful content and for an organization about to go into an HRO search, it’s simply a great guide. Instead, I’m just going to hi-light a couple of important items from the text:

    The Deloitte Consulting study uncovered several additional insights:


  • Outsourcing delivers strategic value to organizations that choose outsourcing for well-considered strategic reasons (as opposed to organizations that pursue it simply because they see others doing it).
  • 

  • Developing a fact-based analysis of the organization’s need for, and compatibility with, outsourcing before the decision to outsource is made will enable a greater likelihood of achieving the desired results and minimize the chance of unwelcome surprises.
  • 

  • Understanding and articulating the objectives of an outsourcing initiative up front help facilitates subsequent decisions during vendor evaluation, selection, implementation, and operations.ibid, page 1.

I’d like to add a couple of insights of my own:

  1. Determine the governance structure for making decisions early – preferably before you search for a vendor or define scope. It should the first thing on the list.
  2. Understand HRO and what the retained organization will look like. Also understand what the retained tasks look like. Be realistic regarding what resources and processes will/might go away and what you will need to keep.

Up next, Deloitte listed the top reasons organizations outsource. My comments here are not a criticism of Deloitte, they are simply reporting on their research. However, being an opinionated guy, the italicized below are bad reasons to outsource. The bolded below are good reasons. Hopefully you’ll agree.

Figure 1: Why Do Companies Outsource HR?

  • Gain control over HR spend by contracting for a defined set of services at an agreed upon service level for a fixed price
  • Desire for a more flexible and scalable HR organization that can support acquisitions and divestitures
  • Achieve rapid and sustainable cost savings
  • Elimination or reduction in the need for capital investments and ongoing investment in technology and infrastructure maintenance/upgrades
  • Access to supplier-provided “best practice” processes, technologies, and decision support tools
  • Serves as a lever or catalyst to support HR transformation initiatives
  • Reduce need to manage multiple vendors and technologies by contracting with a single provider responsible for end-to-end administration
  • Improve customer satisfaction and user experience with accessing HR servicesibid, page 1Formatting added.

It’s not that cost savings are a bad thing, but 50% of the reasons people outsource HR should not be around cost. If you are going to give your HR department (or part of it) away for 7 years, please give it away knowing you get more back than a few dollars!!!

Last up is a quote that I completely agree with:

Based on Deloitte Consulting’s experience, the organization is likely to achieve better results if it develops a holistic HR service delivery model before it identifies the specific services in scope for outsourcing. While attributes of the service delivery model may differ from company to company, the key is to define clear, distinct roles and responsibilities for each component of the organization. The HR service delivery model can enable the organization to look at alternative models and run associated scenarios, instead of simply assuming HR BPO is the only alternative.ibid, page 2.

Don’t allow the HRO model define your HR service delivery strategy. If you are going to spend that much money (ok – if you have that much money) you should be sophisticated enough to determine your service delivery strategy and make the HRO fit into it. If you don’t have a service delivery strategy, you are not ready for HRO. HRO is all about service delivery and process. Most people are more than ready to give up the process. But how many give up the service delivery along with it? Surely you can’t be willing to allow a vendor to determine the strategy for your employee interactions?

Read the rest of this paper. It’s everything I wish I could say in 15 pages. Except it would have taken me 100 pages and I still wouldn’t have sounded good. (no, I don’t work for Deloitte).

7 thoughts on “HRO Strategy Guide

  1. Pingback: H.R. eSources
  2. Pingback: scale|free
  3. In today’s competitive market, only the smart leader sees profit margins climbing. He/she realizes that one of the largest expenditures (which must be constantly addressed) is balanced and cost-effective staffing. The successful leader realizes that employee leasing provides a competitive edge.

    Employee Leasing is not a totally new concept. It has been tried and proven by some of today’s leaders and most profitable companies. It can help to stabilize your costs and insulate you from unexpected increases, which can send your profit margins tumbling.

  4. Pingback: Planet KM
  5. Interesting thoughts here on ways to make sure the HR Outsourcing is the right thing for a company. However many small and medium sized businesses can gain a competitive advantage as well from engaging at PEO or Professional Employer Organization. For a complete list (by state) of PEOs in the USA see

Comments are closed.