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Longer Term HRO Viability as Change Management

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I’ve always been fascinated by HRO and it’s been a constant topic here on systematicHR since the beginning.  While it certainly would seem to make sense that sharing resources across a variety of organizations would save some money, there’s always been a lingering question in the back of my head as to whether it made sense to spend $250M+ on getting there.

Let’s take your average HRIT organization as an example.  Most might have some sort of ERP HR in PeopleSoft or SAP and all of those would have some semblance of employee and manager self service.  It’s possible that they have a goodly number of transactions going through the self service sites, and they probably have good reporting capacity.  Many of these organizations will have solid call center and data center support that may even be in a shared services environment, thereby already leveraging available cost savings.  Especially for organizations who share the ERP among multiple functions (finance, SCM, CRM…) there is significant resource sharing there as well.

So when I take a step back and look at outsourcing, the gains to be had from the relationship don’t’ look so good.  HRO vendors are often just as far behind on new technologies as everyone else.  For example, if you’re using a separate talent management system, really nobody out there can give your employees an integrated portal experience where they can change their address and look at training classes and performance reviews at the same time.  Bring along timekeeping and really nobody is there.  You look at reporting and if you want everything in a data warehouse, you’ll be paying as much for it to be outsourced as you would for it to be in-house.

So why do it?  Phil Fersht brought up perhaps one of the most interesting points of all:

And what’s more, HR outsourcing drives business change with the investment footed by labor arbitrage, process automation and self-service technology (contrary to the mega ERP implementations of the ‘90s where the cost was borne by the shareholders).  For many global organizations, they simply cannot drive the scale of change necessary through organic process re-engineering – it’s often far too expensive, far too slow, and often far too political.  ((Phil Fersht, June 02, 2007.  The HR Outsourcing Industry Crystallizes around J&J.  Retrived from The Outsourcing Blog…”Horses for Sources.”))

For some organizations, in order to change, they have to change the whole thing.  It’s the only way they can see to get out of the current rut, and sometimes staying in the current rut is unacceptable.  The question would then be if the HRO organizations have actually fulfilled their promise of transforming the HR organization and taking it to the next level.  I don’t know the answer to that, but truly understanding what the goals of your HRO contract are will be critical to measuring your success.

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4 responses to “Longer Term HRO Viability as Change Management”

  1. Longer Term HRO Viability as Change Management Most might have some sort of ERP HR in PeopleSoft or SAP and all of those would have some semblance of employee and manager self service. It’s possible that they have a goodly number of transactions going through the self service sites, … [

  2. systematicHR – Human Resources Strategy and Technology » Longer Term HRO Viability as Change Management

  3. change management model…

    A good change management model is always useful in situations like these. Nice article….