Transforming HR

THOROGOOD PROFESSIONAL INSIGHTS

A SPECIALLY COMMISSIONED REPORT

TRANSFORMING HR How to get shared services, outsourcing and business partnering to deliver what you want

Ian Hunter and Jane Saunders

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THOROGOOD PROFESSIONAL INSIGHTS

A SPECIALLY COMMISSIONED REPORT

TRANSFORMING HR How to get shared services, outsourcing and business partnering to deliver what you want

Ian Hunter and Jane Saunders

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Acknowledgements Ian Hunter and Jane Saunders would like to thank the following people for their help in the production of this report: •

Simon Constance for his invaluable research and reviewing skills.

•

Allan Boroughs and Peter Upton for their help in providing comments and proof reading the report.

•

Angela Spall and Neill Ross of Thorogood for their advice and editorial support.

And, finally, our heartfelt thanks to the numerous clients and colleagues who gave their time and input during the interviews and research discussions that formed the basis of our thinking.

THOROGOOD PROFESSIONAL INSIGHTS

The authors

Ian Hunter Ian Hunter is a highly experienced hands-on HR professional and business consultant, with acknowledged expertise in the areas of transition and programme management, outsourcing and shared service operations and design. He has held senior positions in leading international consultancies, including PWC, Accenture and AT Kearney, as well as executive HR management roles with organizations such as British Petroleum and PepsiCo. With BP he held operational HR Management positions both at Group Headquarters, London, and at Grangemouth’s Refining and Petrochemical complex. He has worked in Europe, the Middle East, Asia, Africa and North America. His experience spans the FMCG, manufacturing, telecommunications, retail, oil and gas, transport and distribution and financial services sectors. He has managed large consultant and client teams, implementing business solutions in: •

Organization design and process re-engineering

•

Post merger integration

•

HR strategy and capability review

•

Change management and culture transformation

•

HR outsourcing and shared services implementations

•

Strategic HR and management team audits

Ian is a graduate in History and Economics (Bristol), with postgraduate masters degrees in Human Resource Management and Organizational Psychology. He also has an MBA. He is a Fellow of the Chartered Institute of Personnel and Development and is a qualified user of a number of psychometric assessment and development instruments.

THOROGOOD PROFESSIONAL INSIGHTS

Jane Saunders Jane Saunders is an experienced international consultant, with significant experience in the area of HR strategy and transformation. She combines a practical expertise of operational HR delivery, with the consulting experience of shaping and delivering innovative and effective HR solutions. She has held senior roles in both Accenture’s HR Service outsourcing division and its change management consultancy. She has also held senior HR positions within both the professional services and FMCG sectors. She has worked internationally within the manufacturing, telecommunications and professional services sectors. She has developed and implemented business solutions in the following core areas: •

Change management and culture transformation

•

HR strategy and capability review

•

HR outsourcing and shared services design & implementation

•

HR re-engineering

•

Pre and post merger integration activities

•

Performance and talent management solution design

Jane is a graduate in Modern Languages (Oxford) with a postgraduate degree in Human Resources Management (Middlesex). She is an Associate Member of the Chartered Institute of Personnel and Development. Ian Hunter and Jane Saunders are both founding partners of Orion Partners LLP, a specialist consultancy focused on delivering strategic HR transformation.

THOROGOOD PROFESSIONAL INSIGHTS

Contents

1

INTRODUCTION

1

2

THE NEW HR MODEL

5

HR Operating Model ...................................................................................6 Moving away from the old model..............................................................8 Freeing up HR to deliver...........................................................................10 Fulfilling the roles in HR ...........................................................................12 Role of the HR Business Partner..............................................................13 What does this mean for the line manager?...........................................15 The role of the line manager.....................................................................15 Line management concerns......................................................................17 Role of the HR Center of Excellence .......................................................19 Role of the Shared Service Center...........................................................23 Drive down SG&A (sales, general and administrative overhead) costs ...............................................................29 Create a clear relationship between costs and service..........................29 Improve service levels and quality...........................................................30 Maximize technology investments...........................................................31 Chapter summary of key messages .........................................................34

3

HR OUTSOURCING

36

What are the issues driving companies to outsource their HR functions?....................................................................................38 What are the advantages of outsourcing? ..............................................41 What are the disadvantages of outsourcing?.........................................42 How do companies take the ‘make’ or ‘buy’ decision for HR services?..........................................................................43 What are the critical factors to look for in an HR outsourcing partner? ..........................................................................44

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CONTENTS

What is the typical scope of an HR outsourcing arrangement? ..........47 What are the reasons that HR outsourcing may under deliver?..........49 Should the company fix the problems internally before considering outsourcing? .............................................................50 What is the likely future of HR outsourcing? .........................................53 Five guidelines to help achieve a great HR outsourcing agreement.....55

4

HR SHARED SERVICES

61

The model in more detail ..........................................................................62 The contact center and customer contact model ...................................63 Organizing around process ......................................................................69 Advantages of the SSC model..................................................................80 Disadvantages of the SSC model .............................................................81 Case study...................................................................................................82 Chapter summary of key messages .........................................................84

5

SKILLS FOR THE NEW WORLD

86

Managing operations ................................................................................89 Managing delivery ....................................................................................89 Managing customers.................................................................................90 Managing service ......................................................................................90 Managing suppliers...................................................................................91 Accepting new disciplines ........................................................................93 The importance of context........................................................................96 Process ........................................................................................................97 Engage ........................................................................................................99 Analyze......................................................................................................103 Analyzing the service ..............................................................................104 Predicting the future................................................................................104 Reading between the interpersonal lines..............................................105 Facilitate....................................................................................................105 Influence ...................................................................................................107 Technical skills..........................................................................................108

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CONTENTS

6

SUMMARY

109

Line management ....................................................................................111 Evaluating the functions performance..................................................114 Further leveraging of technology and outsourcing.............................115 Changing the skills and career path for HR .........................................117 Where should HR focus next?................................................................120 References ................................................................................................121

APPENDIX

122

Scope of services .....................................................................................123 Organization development .....................................................................125 HR strategy...............................................................................................126 Labour relations.......................................................................................126 Payroll .......................................................................................................127 Employee development...........................................................................129 Resourcing/recruiting .............................................................................130

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Chapter 1 Introduction

Chapter 1 Introduction

“The HR profession should not be defined by what it does, but by what it delivers” ULRICH 1997

This report is about the future of the Human Resources (HR) profession; and in particular the changes in the organization, roles and skills through which the profession delivers value. The development and adoption of new organizational solutions such as the creation of ‘shared service’ organizations for the delivery of back-office HR transactions, combined with the growing interest in outsourcing (of both single services such as recruitment and training as well as the entirety of the HR administrative operation), has posed a new set of challenges and opportunities for the HR practitioner. These trends have also occurred at a time of heightened scrutiny of the role of the HR executive. The economic uncertainty of the last few years in many industrial economies, the growth of globalization and the increased pressure on Boards of Directors has led to demands that HR revalidate its contribution to the business. The ability to contribute to the strategic debates within a boardroom will increasingly be seen as important as the depth of technical understanding of HR processes, tools and techniques. The change in expectations combined with the continued pressures to squeeze costs, restructure and deliver headcount reductions will ensure that HR Directors and their teams truly need to partner with the business leaders they support, and seek to demonstrate their ability to deliver strategic advice while serving their internal customers with fewer resources. However, while repositioning HR as a strategic partner makes sense to many at a conceptual level, on a day-to-day basis it may be a little unrealistic. Only those who are truly in significant positions in the organizational hierarchy can realistically claim to the label of ‘business partners’. Those occupying positions much below board level may struggle to make the impact that the business partner role demands.

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1 INTRODUCTION

The move to models based on a combination of shared services, outsourcing and business partnering has resulted in many HR directors focusing their functional teams not just on do-ables but on deliverables. Setting the shift to more strategic roles together with the associated increase of exposure does not sit happily on the shoulders of the more traditional personnel practitioners. Significant numbers of HR staff are in danger of being disenfranchised from the new HR model, because they are deemed not to meet either the necessary commercial or intellectual benchmark. Indeed, it is possible to envisage an HR community in 5 – 8 years time that is perhaps 50% or 60% smaller in numbers employed than at present. This may well be the price that the HR profession has to pay to enjoy the shift in perception of HR by business leaders as the value that the function adds is enhanced by the new organization models, the increased take-up of technologies allowing employee and manager ‘self service’ of routine administrative tasks and the growth of the adoption of the HR business partner role. The opportunities and challenges posed by the adoption of outsourcing and shared service solutions are explored in Chapters 3 and 4 respectively. A brief scan of the nationally advertised positions in publications like ‘People Management’, ‘Personnel Today’ or ‘HR Director’, shows that increasingly companies are looking for candidates who can demonstrate: •

Exposure to line activity (i.e a period spent outside of HR within a business function such as finance, marketing or sales).

•

Evidence of a wider business education than the traditional qualifications offered by the somewhat tired curriculum of the UK’s Chartered Institute of Personnel & Development. Increasingly, the CIPD qualification is being passed over in favour of an MBA or specialist MA/MSc.

•

The ability to demonstrate the basics of business literacy such as being able to read and comprehend financial statements and sophisticated statistical analysis.

•

Clear, precise and decisive verbal communication skills backed up by an ability to shape and deliver a commercial solution not just a series of options.

These requirements reflect the desire to find HR leaders with commercial literacy and represent a fundamental shift in the perceptions of what it takes to be a successful contributor as a senior HR manager. This trend will only grow and become more commonplace. Chapter 5 of this report looks at the skills and competencies which the authors believe will be critical for professional success in the HR arena over the next decade.

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1 INTRODUCTION

The ideas and thinking contained in this report are based on the collective experience of the authors’ consulting practice, within Orion Partners which amounts to over 55 years spent working with, and consulting to, the HR profession. Furthermore, Orion Partners completed a series of in-depth interviews with over 60 HR leaders working in all sectors of UK industry, including the public and not for profit sector. Of those we interviewed nearly 70% believed that the HR department was falling short of meeting the expectations of the business that it supported. Over 90% were looking to improve the contribution that their teams made to the organization, and in excess of 75% felt that the move to outsourcing and shared services would allow those left in the core function to focus on value added activities. A particular area of both interest and concern, amongst our interviewees, was the frustration felt at the inability of the profession to prove its strategic worth in numerical and quantifiable terms to chief executives. Many HR leaders are looking at the use of concepts such as key performance indicators, service level agreements, service and account management activities and tracking mechanisms, such as the balanced score card, to record and monitor the efficiency and effectiveness of the function. It will increasingly be unacceptable for the HR Director to say ‘I don’t know’ when asked to prove his or her department’s contribution. The introduction of these new tools and approaches, and in particular the skills required to manage internal relationships using the concepts of service and account management, will require extensive up-skilling for many in the profession.

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Chapter 2 The new HR model HR Operating Model Moving away from the old model Freeing up HR to deliver Fulfilling the roles in HR Role of the HR Business Partner What does this mean for the line manager? The role of the line manager Line management concerns Role of the HR Center of Excellence Role of the Shared Service center Drive down SG&A (sales, general and administrative overhead) costs Create a clear relationship between costs and service Improve service levels and quality Maximize technology investments Chapter summary of key messages

Chapter 2 The new HR model

HR Operating Model “Companies now are finding that the HR issues are, in fact, center stage to business competitiveness. The intellectual capital, core competencies and organizational capabilities are all the pieces that are central to success.” ULRICH – ‘HUMAN RESOURCE CHAMPIONS’, HARVARD PRESS, 1997.

Background The previous chapter has discussed the drivers for the changing nature of HR’s role; the business’ perception of the function, the need to execute strategy and the need for metrics to demonstrate success and targets for the future. There is a real and frequently voiced view within HR and the broader business community, that HR has not always had the tools to deal with these issues. Where in the past HR has possessed in some part the skills to engage, it has not always given itself the opportunity to do so. Clearly there have been barriers to HR’s effectiveness in the way it was organized and this chapter seeks to examine some of the issues and solutions proposed to tackle these. Traditionally HR has often held very direct and ‘open door’ relationships with employees. In doing so it has fulfilled an essential gap in the business – the voice or advocate of the employee. It has also filled the role of facilitator and executor of all people related processes, regardless of whether these were necessary or HR was the most appropriate method of delivery. There is now a set of pressures

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that are emerging that demand that HR is able to respond in a different way to meet them. The pressures come from differing directions: From the CEO •

Focus on ‘core competencies’

•

Companies retrench to focus on core activities

•

Creates pressure on HR to ‘prove its worth’

From the CFO •

Pressure for cost reduction

•

Benchmarking against sector high performers

•

Requirement to demonstrate the ROI for HR activities

From line manager •

Support for them to have the autonomy to manage their teams

•

Tools to improve the performance of their teams

•

Less labour intensive interaction with HR

From employees •

Improving service to employees

•

Modern employees act as ‘volunteers’ and demand high standards of service from HR

•

Employees have a new one-to-one relationship with companies

To meet these pressures the HR profession has begun to articulate new ways of creating value through the function. A new model has emerged in recent years that aims to provide HR with the platform on which to deliver its promise. The new model requires HR to position itself to engage with the business at the right levels, in the right ways. We shall examine the organizational structures that allow HR to tackle the challenges it faces today and the approaches HR leaders have used to deploy these.

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The new roles The above pressures are broadly driven by four themes: 1.

Strategic – drive the business strategy forward.

2.

Financial – demonstrate functional cost reduction and value.

3.

Change – work with and lead the business through change.

4.

Performance – improving the performance of individual employees and teams.

HR must organize itself to meet these and demonstrate that it is achieving them. Delivering this clearly has two key components that HR must develop; the skills to achieve and the organizational design to allow it to engage. We shall tackle the new HR skill set within Chapter 6. Prior to this we will consider the new roles and structure that allow HR to take on these challenges.

Moving away from the old model HR has traditionally delivered its services via a hierarchical model with the following types of activity delivered by all team members:

Strategic

Planning, design tracking, research and strategy development

Execution

Direct contact with HR customers, strategy delivery and process advice

Administration

Co-ordinating and scheduling process execution, inc. data entry and form processing

A recent study of the work performed by HR Managers within a US Insurance company (Global Human Resources, 2000) looked at the types of work completed by managers who were working within the following roles: Specialist – Focuses on a specific area of HR activity, e.g. payroll, employee relations or HR Information Systems. Generalist – Traditional HR management roles, focusing on a broad range of HR activities including: legal, policy interpretation and staffing issues.

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Administrative – Managing the processes that support people management policies, including payroll, recruitment and on-boarding administration. The findings were not uncommon in many HR functions in that much of the managers time was taken up with administration activities in support of their roles.

80

Administrative 70 Execution

70

Strategic 60

50 42

44 37

40

30

39

24

24 18

20 9

10

0 Administration

Generalist

Specialist

Fig 1: % of time spent on key types of activity in each HR role.

Regardless of the focus of each role, the majority of time is spent completing administration. For the Specialist – they are not deploying their deep content knowledge and maximizing the development of that in relation to the business needs. For the Generalist – they are not spending time engaging with the business to ensure the ‘people’ side of improving business performance is covered. For the Administrator – there are still problems. They are focusing too heavily on the completion of administration type tasks, rather than spending more time on focusing on how to improve their efficiency.

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Allowing these roles to support the business more effectively and focusing on delivering the value that HR can create, requires a new view of the structure of HR delivery.

Freeing up HR to deliver A model has emerged in the last few years that allows us to focus on the four challenges of: 1.

Strategy;

2.

Financial performance;

3.

Change management; and

4.

Business performance improvement described above.

This model seeks to focus HR delivery on a framework that promotes specialist knowledge and positions it to deliver on the challenges presented to HR.

Future/Strategic focus

Strategic partner

Change agent

Processes

People

Administrative expert

Employee champion

Day-to-day/Operational focus Fig 2: The Ulrich model (Ulrich, 1997) Here new roles are mapped out for HR. Each role combines to focus on delivering improvement within the function and within the business.

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Through this model HR can tackle its challenges in a holistic way. HR is able to tackle the strategic issues by having a Strategic Partner who clearly focuses on them. Through an Administrative Expert, the function is able to demonstrate it is supporting the financial goals of the company by focusing on having an efficient and high quality service. The function is also able to focus on the employee relationship and improving employee capability, by the establishment of the Employee Champion role. Finally, the Change Agent role allows the function to meet the challenges of the changing business environment and positioning the business to execute strategy.

METAPHOR

ROLE

ACTIVITY

DELIVERABLE

Strategic Partner

Management of strategic resources

Aligning HR and business strategy

Executing strategy

Administrative Expert

Management of firm’s infrastructure

Re-engineering process

Building an efficient infrastructure

Employee Champion

Management of transformation and change

Listening and responding to employees

Increasing employee commitment and capability

Managing transformation and change

Creating a renewed infrastructure

Change Agent

Through demonstrating its control of internal efficiency and quality, the HR function can build the credibility to support its right to engage with the business in the other areas.

“Basic transactions are a measure of you as an employer and your employer brand” DOMINIC MAHONY, HR DIRECTOR, UK – TUI

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Fulfilling the roles in HR With the organizational model established to meet the challenges, we must now address filling them to enable their delivery. Much discussion on the development of the ‘HR Business Partner’ (HR BP) role has focused on strategic delivery. To take this view ignores the holistic approach, established prior to this, as essential to meeting the challenges of the future. The HR BP will need to operate in a number of areas, supported by additional parts of the HR function and wider business to take on the challenges described. The model must approach each quadrant of HR’s delivery model and fill it in the most effective way. Each sector requires different skills to be effective. The pull of inappropriate activity in each area must be removed. The following model aligns our delivery approach with the roles necessary to deliver.

Strategic partner

Change agent

HR Executive/HR BP

HR BP

Shared Service Centre

HR BP

Administrative expert

Employee champion Fig 3: Roles in the Ulrich model

Each sector requires a distinct skill set that we shall consider later in the report. We shall at this point examine the nature of each role and how they interact.

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Role of the HR Business Partner The role of the HR BP is one that has started to become more prevalent in companies today. When implemented completely it represents a real shift away from the Generalist HR Manager role.

Fig 4: A comparison of job adverts for a Generalist HR Manager and a Group HR Business Partner (People Management, 2003)

The HR Business Partner role is closely aligned with the business. As can be seen in the above recruitment advertisements, the role is far more actively engaged with the business. The Group HR Business Partner role sees HR travelling out to business units, developing an indepth understanding of the businesses needs and objectives. Whilst there is still the need to deploy a broad HR technical knowledge, the key outcome is the effective application of policy advice, influencing skills and deep understanding of how the application of proven technology can assist the delivery of the businesses strategy.

In a recent US study, HR was perceived as being at its most effective when it engages with the business on HR BP model, as it is closer to the business, its goals and issues. LAWLER AND MOHRMAN, 2000

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This pulling together of all the available tools at HR’s disposal lies at the heart of the role and presents some very real challenges for HR.

AVERY DUFF, GLOBAL HR DIRECTOR, EMI MUSIC, NOTES:

“you (the HR BP) need to be equal to or better than the best people on your bosses’ team, understanding how each area makes money or adds value”

To achieve this, individuals in the role need to overcome a number of issues. •

They must have the credibility to engage with the business.

•

They must be accepted into the management team in order to understand its objectives and provide direction.

•

They need a deeper skill set than the technical one previously held by HR (e.g. legal and process compliance).

•

They must be able to access the right technical and administrative support to enable it to deliver.

These issues point to the heart of the HR BP role. This requires a supporting infrastructure of expert knowledge and efficient administration to allow that detachment to take place. The following sections of the report examine the other key component parts of that support.

RUSSELL MARTIN, HR DIRECTOR AT PRUDENTIAL UK NOTES:

“The issue of preventing the HR BPs ‘going native’ is key. As they do so, the HR function begins to lose its integrity of strategy and thinking. This also represents a real risk in that it can be viewed by employees as compromising the role of HR as ‘Employee Champion’. HR becomes too closely aligned with ‘management’.

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What does this mean for the line manager? The delivery of the new HR model has to look outside the HR function for support. Much research has focused on the need for line managers to ‘own’ their people issues. They are closest to the issues and are often the face of the company to their teams. As such, there is a compelling argument for providing line managers with the skills and tools to improve their ‘people skills’. A study in the pharmaceutical industry found that employees in this knowledge intensive industry were more likely to leave a company to follow a good line manger than for more money (Arlington et al. 2001). In addition, the intervention of HR in staff relationships with line managers and HR process transactions, is often a source of significant inefficiency in an HR function. Examples of intervention by HR of limited value: •

HR staff passing CVs to managers who are recruiting.

•

HR spending time dealing with minor disciplinary issues where the process and facts are clear.

•

HR involved in keeping vacation logs and conducting return to work interviews.

It would often be quicker and more efficient for HR to step out of the process and allow the line manager to deal directly with such issues. In this section we shall look at the role the line management community has to play in delivering a new model for HR.

The role of the line manager The line manager at each management level has a key role to play on delivering the new HR model. The depth and scale of their role varies across each of the quadrants of HR activity. The model below highlights the scale of line management involvement in each of HRs roles.

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Strategic partner

Line Management

HR

Line Management

Change agent

HR

HR HR

Line Management Line Management Administrative expert

Employee champion

Fig 5: The scale of contribution of the line manager The junior line manager is clearly not well placed to act as a Strategic Partner in HR terms. This work encompasses the development of HR strategy and aligning it to the business strategy. The senior line management team does have a fundamental role in this space by signing off, at an executive and business unit leadership level, the HR strategy the business will be taking. Indeed, the HR leadership team can only define this by developing a partnership with the senior management and executive team. The line manager will take only a limited role in ensuring HR is an Administrative Expert and is able to operate and run an efficient function. It can however, supply requirements and approval to the models and approaches HR uses to deliver an efficient service. The role of Change Agent presents a greater opportunity for the line manager. HR can be the instigator, facilitator and owner of the co-ordination of people issues in change programmes, but the line manager is often the delivery arm and owner of the overall outcome. Finally the role of Employee Champion is potentially the area that the line manager can make the greatest contribution. Line managers have the closest relationship with their employees and have day-to-day contact that provides the potential for deep understanding of employee attitudes. A clear sign that line manage-

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ment is listening to and engaging with, employees will improve employee satisfaction significantly (Holman 2002). The line has access to the information that can inform, guide and confirm HR strategy, policy development and business change.

Line management concerns By moving what may have been previously seen as ‘HR activities’ to the line manager, a number of issues are likely to be encountered. More often than not, these are raised by line management themselves. Skills – Much has been made of the need to raise the skills of line managers, particularly at the first line level. Indeed, a recent industry conference for HR Directors, The HR Forum in 2003, took it as a key theme (Richmond Events, 2003). Line managers are often in their positions because they possess technical knowledge about their field of operations, rather than their people management skills. Developing their skills to take on this role will require the following two areas to be developed: •

HR policy and process knowledge.

•

People management skills.

The first should not be an attempt to instill the entire HR handbook in the line management community. Clearly, they will need the basics to ensure legislative and company policy compliance. More importantly though there will need to be the right level of expert support, provided either through an HR Center of Excellence or Shared Service Center. The nature and scope of these entities will be discussed later in this chapter. The second will need to be developed at the point of need, where skill gaps are found. In the longer-term, it makes sense for these skills to be part of the core skills or competencies of line management that the business selects and recruits to. Communications – In any programme of change this is a key area. Here it is even more so, as line managers must understand clearly what their role is, where they can get support and why this change is happening. Without clarity in these areas the change will fail. In certain HR roles, for example ‘change agent’ and ‘employee champion’ the line manager has a significant responsibility. If they do not have a clear view of

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the above points they will not be prepared or able to deliver. Line management need the skills, process support and ‘voice’ within the organization to be able to fulfill the role the model demands of them. Without these, they will quickly feel disempowered and unable to meet the challenges. Where this happens, HR will find itself carrying out activities it believed it had passed to the line manager. As a result it will be back to a position where its focus is poor and, worse still, with a significant loss of credibility.

“If the line can be included in the change process its success, as with any change management programme, is more likely. Furthermore, if the junior line management levels see that this is something that is sponsored and actively participated in at the highest levels, the change programme will be more credible and successful.” DANIEL FLINT, HR DIRECTOR UK AND IRELAND – ACCENTURE

Value – HR is just one of the business support functions that is looking to move more of what has traditionally been seen as its role, to the line manager. IT departments have been asking employees and line managers to take on activities such as application updates, self-installing software and moving the onus for problem resolution onto the individual, for over 10 years,enabling them to reduce costs. Finance departments have been moving more of the role of approval and tracking to the line manager, to enable it to focus on the core activities of financial management and planning. HR could potentially just be adding to this burden. If the line manager is unable to see any benefit in taking this work on, then it is unlikely to engage. There is little value in HR just ‘pushing’ the same work onto the line manager as it will cause resentment and damage its credibility. There must be a transformation that enables the line manager to see that it is of value to them, their employees or the organization, to ensure take up. This may be found through the use of technology to ‘e-enable’ basic administration or reporting; for example, entering overtime payments. By ‘e-enabling’ transactions we are providing employees and line managers with the ability to undertake HR transactions at their convenience, directly using the HR Information Systems. Often this is provided by self-service applications in enterprise systems like SAP or PeopleSoft. The completion of paper forms that need to be found, completed and despatched to HR each time is eradicated. Other ways may be through process

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re-engineering. For example, all sickness could be reported directly to an HR Shared Service Center, which can then centrally manage the tracking and reporting of sickness. This example also creates significant value for the organization. It can now take a corporate-wide view of sickness absence, quantify the cost of the problem and develop measures to control it.

Role of the HR Center of Excellence Thinking back to our new model of HR, we have established that the HR Business Partner is able to create the best outcome by focusing on delivering against the specific needs of a business. They must apply deep knowledge of the business alongside broad HR technical and process knowledge. Having said that, they will not be able to tackle key business issues as a Change Agent or Employee Champion, without the support of those who can bring subject matter expertise to bear on people management strategies. As such, HR needs to have the support of the deep technical knowledge the business has traditionally sought from HR. Areas like Compensation and Benefits, Employee Relations are areas where specialist knowledge has evolved within HR teams. Likewise, the line management team holds the closest relationship with employees in many businesses and has a basic understanding of people management policies and practices, but will need detailed support from the same group of HR specialists when their business issue demands it. If the line manager is seeking to tackle a retention problem for example, it is at this point that the role of the HR Center of Excellence comes in to play. We may look to the skills of a concentrated team of ‘Compensation and Benefits’ experts to evaluate reward strategies that may mitigate the losses.

Scope The scope of activities covered by the Center of Excellence (CofE) will vary by the nature of HR challenges faced by the industry sector it supports. For example, in the retail industry with high volumes of recruitment activity, those managing the corporate recruiting policy and programmes will often reside within the CofE. In the manufacturing sector, teams of employee relations specialists may be based in the CofE and travel to business units when required to provide local face-toface support and advice. Activities are included if they require deep process and technical knowledge. The types of activity that are typically found within a CofE are shown below.

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HRIS

Pensions and leavers

Payroll and benefits

Employee Relations

Training

Performance Management

Recruitment

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•

Operational HR subject matter experts

•

One stop shop for the business

•

Loci of functional knowledge

•

A focus for best practice and policy enforcement

•

Staffed by ‘consultant’ resources and case workers

Vendor management

Fig 6: Scope of activity for the HR Center of Excellence Recruitment – This may include teams of recruiters who support and plan largescale recruitment programmes, and who may be deployed to the business to support sophisticated selection centers where line managers and local HR BP teams have insuffficient resources to complete the selection process. It would be expected that these teams would manage the corporate recruitment brand, as the image and channels by which an employer wishes to be seen in the recruitment market. Performance Management – These individuals would be able to support the business with policy and design advice as the business unit goes through its performance management cycles. This could be expected to cover feedback and appraisal processes. Training – Training design and training programme management resources reside here. It may also be appropriate to locate any delivery resources here as well. It would be expected that external training provider relationships should be managed by this team, to ensure maximum value is extracted from these third party relationships. It will also ensure that these relationships, and any favourable commercial and pricing arrangements, are accessible across the whole business. All business units can benefit and further advantages can be gained by presenting a greater volume of business to the supplier as a single buying organization. Employee Relations – Dependent upon the level of unionization of the industry or company, the Employee Relations team may focus on managing union relations.

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More broadly they will be the team who will support the business on the execution of legal compliance, discipline and grievance processes, redundancy and sickness absence processes, and head up the consultation process with both formal and informal employee representatives. Payroll and benefits – This team will be able to offer a specialist reward policy, payroll, benefits and tax advice. They would be the group called on to deal with programmes to deliver business goals through employee incentive programmes, or manage the pay and tax complexities of moving staff around the globe. Pensions and leavers – Specialist pension advice may also reside in this team where it is managed within HR. They would be operating at a level that is able to support the business in M&A activity and defining pensions strategy. This group will also provide advice on the management of exit programmes from the business, frequently looking to implement surplus staff policies prior to redundancy. HRIS (Human Resource Information Systems) – The composition of this group will be dependent upon where expertise for maintaining the HRIS lies. Full technical support may lie within HR or the IT function. At the least, we would expect to find ‘super users’ of the relevant systems who may maintain structures and user profiles. Vendor management – This function may be integrated within each of the above Center of Excellence areas. This team though, is required to assess the ‘make or buy decision’ and build supplier relationships to support the business to achieve the right service levels and service costs. There are frequently very strong links with the wider procurement function activities and expertise. Other activities – Dependent upon the structure of the HR function, it may also be expected that Occupational Health and Health and Safety teams would be based within this unit.

Organizational design of the Center of Excellence The objective of the Center of Excellence is the formulation and dissemination of knowledge and learning around key HR processes to the business, and within the HR teams working as Business Partners in the business. They also define the policy implemented by the HR Shared Service Center. As such, those working in this area of the HR organization will tend to be formed into teams of projectbased resources or as teams managing cases of activity, for example, a discipline or grievance case that is complex or moving towards the final sanctions of the policy.

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Project based resources provide an important means for the business to gather experts and apply them efficiently across the business. By having the HR BPs and the business call upon these resources, HR is able to assess each request and allocate resources to those projects that it feels are of the highest priority. Case-worker staff tend to exist in the areas of discipline, grievance and equal opportunities support. They are able to act as a point of support for line managers, engaging with them and staying with the case as it progresses to conclusion. By owning the case to conclusion they are able to drive the process through to ensure it is conducted in compliance with legal timeframes. A key part of the team’s role is that of a point of escalation for the staff in the Service Center. Complex queries to the SSC, which cannot be answered via standard process and policies, will need resolution in the CofE. As a result, contact with the business will often at first be by telephone or e-mail. Depending on the nature of the case or project request that may be as far as the contact method progresses. Where substantial project work or a particularly complex case is to be addressed, contact must be face-to-face. As such, the teams must be mobile.

Benefits of the Center of Excellence The introduction of this organization provides for a number of benefits, which allow for the maximum value to be created by the new HR model. They can be summarized as follows: •

Experience in specialist areas can be easily accessed by the whole business – it is not just to be found in one site, or business unit.

•

Learning can be shared easily across the experts – this drives an overall increase in service quality.

•

Greater consistency can be achieved in policy interpretation – this can also bring disadvantages as below.

•

The Subject Matter Experts (SMEs) can be more efficiently deployed – staff can work on a project basis wherever the business sees the priority need.

One of the key charges levelled against the new HR model is that it looses detailed knowledge about ‘how HR works best’ in a particular company (Trubshaw, 2002). The culture and tacit knowledge about how people management activities should be defined and introduced are supposed to be lost as the HR teams get closer to the business and move away from HR. The Center of Excellence provides a

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means to address this issue and indeed creates a more favourable situation that the old model allowed. Experience has shown on implementing this model that it can lead to resentment at a local business unit level, in both HR and the line management communities. Previously HR and the line management may have had discretion (welcome by the business or otherwise) to tailor policy and its implementation to the local requirements. These may or may not have been in line with the overall corporate requirements and objectives. Nonetheless the line management and local HR had complete discretion over the actions they took, regardless of corporate mandated direction. This discretion destroys the HR function’s ability to disseminate good practice and management control. An all too well known situation is the disciplinary activities of the business being unchecked, resulting in expensive Employment Tribunal cases. In certain circumstances, common reward and remuneration practices or standard recruitment processes, may for reasons of corporate identity and operational efficiency, require business units to adhere to a corporate standard set by the CofE. These will be needed despite local business unit objections. Where flexibility is required, SMEs can be organized to support specific business units to ensure their local needs are met and understood, through communication with HR BPs and the local management team. The extent to which local flexibility is balanced against the corporate need for compliance to group policies, is one of the key areas of challenge when implementing a CofE model.

Role of the Shared Service Center “The Shared Service Center (SSC) is fundamental to the delivery of the role of HR as ‘Administrative Expert’. It provides the focused administrative excellence that drives financial efficiency and HR credibility through the quality of its output, ‘getting the basics right, every time’. Whereas the Center of Excellence was able to provide the focus for the businesses HR expert knowledge, the Shared Service Center provides a focus for efficiency. SSCs have been able to deliver 20-40% savings to organizations that implement them.” (CORPORATE LEADERSHIP COUNCIL 2002). SCOPE OF THE SSCS

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The scope of the SSC will be driven by the company’s operating requirements and market sector. The key element is that it enables the consolidation of similar HR administration activities from multiple business units. By consolidating processes, an SSC is able to better control transactional administrative activities, drive out costs and create a platform for investment in new technologies. SSC staff are judged on the degree to which they can deliver process excellence. The service is delivered through multiple channels of access to drive efficiency, including the web, telephone and e-mail. Dependent upon the location of the SSC, there may be face-to-face contact if they share the same site or are in close geographical proximity to the employees and line managers they serve.

Pensions and leavers

Payroll and benefits

Employee Relations

Training

Performance Management

Recruitment

Contact centre •

Provides a focus for operational control and investment

•

Enables the consolidation of processes from across the business

•

Allows for flexibility in capacity utilization

•

Managed by process management experts

•

Staffed by teams with customer service skills – not primarily HR skills

HRIS

Vendor management

Fig 7: Scope of activity for the HR Shared Service Center Contact center – This forms the principle entry point for customers to contact the SSC. This will usually be by e-mail or telephone. Staff should have sufficient access to information and systems that will allow them to address user queries and resolve simple actions immediately – ideally 80% of emails and calls should be resolved at the first point of contact. This creates a means to drive service improvements for users. HR is available via a convenient means of contact for the employees and line manager, at times that suit them. The contact center is also fundamental in the support of the Center of Excellence and the establishment of Business Partners. By creating a first point of contact that is able to filter queries, only those issues that require high-level expert

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intervention will be raised to the Center of Excellence staff and only then on to Business Partners. Recruitment – The teams here would be executing the processes around CV/resume management, interview scheduling, early stage interviewing, test center administration, contract production and induction. Performance management – Processes managed here include the administration of appraisals and the processing of the outcomes into the reward mechanisms and notification activity. Training – These activities will concentrate on the administration of training. This may be the booking of training with internal and external delivery providers, the scheduling of training courses for internal provision, venue booking and curriculum management and updating. The utilization of vendor management relationships established by the Center of Excellence training teams will be deployed here. Employee relations – The Shared Services team may be able to offer low-level advice here. This may include information on basic processes, but will also involve the management of employee files and data for investigations. Payroll and benefits – The team here will be involved in benefits administration. This will include registration of employees and liaising with third-parties to ensure the provision of these benefits. A key role will be the execution of the payroll. This may be only the build to gross element, which is passed to a payroll services supplier, or the full end to end process. Processing of ‘Share Save’ plans and other reward incentives (bonuses and option type rewards) may also be administered here. Pensions and leavers – Processes executed here will include pensions administration and the management of pensioners and employee scheme member records, deductions will be advised to payroll and the pensioner payroll run itself where it is not outsourced. HRIS (Human Resource Information Systems) – The teams here will be mainly involved in data entry and the production of standard reports. Subject to the level of sophistication of the systems much of this will be ‘eEnabled’. This is a key way to drive efficiency and savings. Vendor management – This team will focus primarily on the purchase ledger aspect of the HR procurement cycle and vendor performance tracking. Where this activity is not performed by the finance function, invoice reconciliation and tracking will be executed here.

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Organizational design of the SSC There are a number of essential aspects to the design of the SSC. We will go on to explore them in more detail in chapter five, along with the staffing requirements and skill sets required to deliver the model. In summary though, they are detailed below. Service management frameworks – A major departure from the traditional HR operating model is the establishment of a means of publicly codifying the service and seeking to govern the standards of its operation, through pre-agreed service levels. These concepts may be relevant within the Center of Excellence, but are more usually found in the SSC. These represent a very public shift in HR to a ‘customer centric’ service delivery model. The nature of the measures and amount of resource a company invests in them is very much driven by its intentions for the SSC. The more commercial its operating approach, the more robust the service measures tend to be. Customer charging mechanisms, when used are also built in here. Standardization – A key concept in delivering the savings from shared services is the ability to standardize processes across business units. This is fundamental in allowing the efficient use of resources. The assets of the service center will largely be the people and technology. The easier it is for them to be used across all ‘customers’ the greater the opportunities for driving efficiency. Standardization will also drive quality improvements. The task execution will be simpler and contain less inherent opportunities for mistakes to be made. Centralization – Standardization alone will only simplify processes. Centralizing the delivery resources and processes will allow the real savings and efficiencies to be realized. This relies on the concept of ‘asset specificity’. The less specific an asset (people, processes or technology) is to a particular operation, the greater the range of operations it can be used with in eliminating any under-utilization. Quite simply, this will drive up the return on investment in any asset in the shared service environment, as the opportunity to use that asset is greatly increased. It is this concept that is fundamental to gaining real value from centralization. Without it, it is simply a consolidation exercise that may only really promote knowledge sharing. A common example is the existence of different pay processes across each business unit. They may be standardized in each location, but the benefits are really driven through as the process is centralized. Here the assets required to input data, execute the process and produce pay slips can be rationalized as ‘dead time’ is used up.

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Technological enablement – A key thrust in the development of a shared services approach is the use of technology to reduce processing effort. This can broadly be split into three approaches. The first uses tools like the web and telephone data entry technology, to move the ability to perform transactions to the line manager or employee. A commonly cited example would be the ability for an employee to be able to change their home postal address on-line. This may be through the web front-end of one of the large-scale ERP applications (e.g; Oracle, SAP or Peoplesoft). An alternative approach may be through the development of a web front-end to a number of legacy applications. The second uses tools like the web and mobile text messaging as a means to keep employees up to date with HR information. Text messaging may be used when staff need to be reminded to complete a transaction. A web site may be used to provide a reference point for policy information or to take staff through a process. The third approach uses workflow management technology to reduce human input to a process and to drive its timely execution. Workflow technology works on the basis of ‘pushing’ actions to users when they require completion. So where a job vacancy requires approving before advertising, the system will e-mail the approver with a link taking them to the approval site. Once completed the job will be ‘pushed’ by the system to the relevant internal job board, internet site or paper media. Whilst this workflow is available within the ERP packages, it is often expensive to customize to suit a businesses specific process. As a result, stand-alone workflow applications may be used.

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BT HR Portal BT Group have over a number of years developed a sophisticated HR portal for their staff. As users log on they are able to see a user profile that is tailored to their role and position in the company. It links HR policies and processes to life events, for example having to move house. In this instance an employee can be directed to a section where they can update their address in the HRIS, check holiday allowances to schedule time off to move, and complete relocation processes on-line if required. This approach moves control of the process and some of the effort to the employee. It also uses technology to update databases once and once only. The process is simpler for the employee as they have just one point of reference and do not have to visit numerous parts of the HR department to move through the process.

Benefits of the SSC The Shared Services model has been successfully developed within a number of functional areas such as IT, finance, procurement and now HR. In many ways, HR was one of the last to start to reap the benefits of this approach in terms of streamlining its administration. Nonetheless, the benefits it has sought as a function have been the same. Below are some of the commonly cited benefits from implementing Shared Services (Quinn, Cooke & Kris, 2000): •

Drive down SG&A (sales, general & administrative overhead) costs

•

Create a clear relationship between costs and service

•

Improve service levels and quality

•

Maximize technology investments

Has this happened? In many organizations the above have been difficult to deliver. Indeed the barriers to achieving them can seem insurmountable. Below we explore some of the realities and approaches to achieving the benefits forecast for Shared Services in HR.

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Drive down SG&A (sales, general and administrative overhead) costs Very real cost savings are certainly achievable. Having said that, whilst HR must take a frugal approach to delivering its administration, it is often an under-funded function in many businesses. As a total percentage of SG&A costs it is also often one of the smallest. The cost of HR of a figure of 1% of total company net revenue is not unusual (EP-First 2003). If it can deliver a 20-30% reduction in costs then that may be a rather unimpressive £ or $ figure for the CFO, particularly where any investment to get there is substantial. The key is not to focus on solely the cost savings, but to really understand the value that is created. The HR budget is not the only financial measure (and is a very small measure) of the people management impact on the bottom-line. With the right metrics, HR can begin to demonstrate that it may be able to operate more cheaply, but also develop the consolidated information to track its impact elsewhere. For example, in tracking and managing absence. This will deliver a far greater contribution to the bottom-line.

Create a clear relationship between costs and service A highly attractive proposition for any internal business support function is the ability to be seen as more than an overhead cost that provides little benefit. Shared Services promised this in creating a clearly defined set of services that could be related back to a cost for delivery. Business units can often select the services most appropriate to them and see a change in cost accordingly. In this environment a view of the value of the services to the end user is accessible to the user. An issue that has been encountered is that pricing is not always clear. Businesses are often reluctant to spend time and money developing internal charging structures and schedules that are easy to understand. The same can be said of the necessary service governance frameworks. These instinctively feel like another overhead to manage an overhead. However, they are essential in ensuring the focus of the Service Center is directed at continuous improvement and meeting user requirements. Too frequently HR does not quantify and track its performance . It is up to the HR Service Center to develop performance metrics that go beyond cost and charges to demonstrate the value and quality they provide. A simple approach

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is that of a balanced scorecard that covers cost, quality and provides improvement targets. User surveys also provide a very valuable means of assessing general satisfaction and setting improvement goals. This also sends out a very clear message to customers that you value their input and requirements, and publicly strive to meet them.

Improve service levels and quality Centralized services and standard processes should make process execution more consistent and intrinsically easier for operators to get right every time. Improved process quality is particularly attractive in recruitment and payroll processes. Here mistakes create a disproportionately bad impression of the HR function. Whilst this is true and our comments about service improvement metrics may set challenging targets to meet, there are often real barriers to achieving this. It can be difficult to standardize processes across business units. Tradition, ‘the way things have always been done round here’, unionization, employment contract requirements and the genuinely specialist needs of a unit all have to be dealt with to prevent this occurring. Clearly, where a business may have very different needs, allowances will always need to be made. For example, if one part of the business operates a telephone based customer service and the other highly skilled project based resources, the recruitment process will need to be different. The key to change, in other circumstances, lies with a clear business case for doing so and effective stakeholder management. Where standardization makes clear financial sense the business will find it difficult to resist change. Key stakeholders, at all levels, will need to be brought on board. It is also worth selecting the right ‘battles’. If a process is one where a part of the business articulates its culture (e.g. in its performance management processes) these may be best left alone and accepted as non-standard. Work in Shared Service can be mundane and this leads to operators’ boredom and errors. Many service centers have found that effective job rotation and clear progression through the career structure are essential in preventing this.

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Maximize technology investments The implementation of Shared Services is often cited as an essential platform for the real benefits of HR technology investment to be realized . The consolidated nature of the organization provides an environment where technology can really support efficient transaction processing. This is particularly true where investment is to consolidate multiple HRIS, implement ERP systems, or build employee web or telephone access to HR services. The consulting and technology companies may see the above as a truism, but the reality can be very different. In terms of shifting the burden of transaction processing onto employees (e.g. in address changes), the actual cost savings in many businesses are very small. In addition, processes within companies often have to change rapidly to meet business requirements. This creates a need to then change any workflow and re-train staff on new processes. The real cost of this effort is then frequently ignored when the business considers the change necessary. Even when it is, the business may be frustrated by the prohibitively high costs of change, and blame HR for being a barrier to responding to the market. Furthermore, inconsistent access to technology can be a problem. Do employees have access to the web or a telephone during their working day? If not, the predicted savings will never be realized. Tackling the above requires clear work analysis to support a business case for utilizing shared services. There needs to be a focus on finding ways to tackle big-ticket costs, not on delivering ‘flashy’ technology. An example may be where the investment in web access for employees to change their personal details may be substantial, but offers little return where few have web access in their working day. A better approach may be to focus on the processes less seen by employees such as entering weekly overtime payments, or areas like sickness absence recording and reporting by HR. Where this is automated via workflow, or delegated to line management (whilst few may see this technology) the savings in HR effort may be very substantial.

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Case study

THE MODEL IN ACTION

Over the last few years Prudential UK has moved to the model described above. It currently employs c.400 employees in HR, serving an employee base of around 7,000. The climate of change that often drives the implementation of a new HR service delivery model was clear at Prudential. Just two years ago the employee base stood at over 12,000. A review of their implementation allows us to see three key aspects of the model: •

An holistic implementation of the model brings the greatest benefits.

•

The stability and control the SSC brings is unparalleled

•

The business strongly welcomes the closer relationship with HR through their HR BPs

The model currently deployed can be seen below.

– 14 HR BPs Strategic partner

Change agent

HR Executive/HR BP

HR BP

Shared Service Centre

HR BP

Administrative expert

Employee champion –400 other HR staff

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The HR Business Partners are a highly focused group who are supported by a geographically mobile, project based team of Specialist Support staff. These Specialist Support teams form the equivalent of the Center of Excellence. Here the CofE covers Employee Relations, Resourcing, Internal Communications and Learning and Development. They work as virtual teams wherever the business need and project arises. The SSC is fronted by the ASK HR call center function that provides the principle point of contact for employees.

The role of technology Supporting the SSC and ASK HR is the HR intranet which contains the key policies and processes. As a predominately office based organization this approach works with the PC literate work force who have constant access.

Implementation During an interview Russell Martin (HR Director UK) had the following comments on the implementation of the model:

Benefits realized •

HR transactions are now standard and can be delivered anywhere

•

As a result of the above, staff can be trained to deliver them to a higher standard and the processes’ stability is greatly improved

•

Over 90% of all Recruiting is now handled through the SSC. HR has control of this key process

•

HR targets are measured against EP First’s benchmark metrics to benchmark performance and set targets for improvement

•

Business managers have come to include the HR BPs as part of their organization structure, demonstrating that they truly have got close to the business

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Issues encountered •

Business Partners have no budget of their own, thus ensuring they draw on the CofE teams and the SSC

•

The approach to implementation needed to be sudden to force the pace of change. Five HR businesses were merged into one overnight

•

Over 60% of the operational savings were made from the move to the model and not the deployment of new technology

Chapter summary of key messages •

The ‘old’ HR model does not have the focus, business engagement and understanding to deliver for today’s organization

•

We need a model that can get closer to the business’ objectives, manage employees effectively, drive change and deliver bottom-line efficiencies

•

The new HR model is a holistic approach – no part can stand alone

•

The new HR function is one that can demonstrate that is has control of its own business before engaging with the rest of the organization

•

A new model for HR cannot be executed by HR alone, do not underestimate the role of the line manager

•

Integration of the operating model elements is the key to creating value

•

Innovation and creating a ‘value proposition’ for the business, employees and the line manager is the key to gaining buy-in and execution support

•

Does your HR function possess the right people and skills to do this?

References and further reading Arlington, Steve, Delany, Kevin, Dempsy, Jo, Matthews, Joanne and Peck, Jonathan – The future of Pharma HR, PriceWaterhouseCoopers, 2001. Cheese, Peter, Brackely, Hep and Clinton, David – The high performance workforce study, Accenture, 2003.

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Corporate Leadership Council – Trends in HR Service Delivery, 2002. Global Human Resources – Extract from a study around the content of HR professional roles, 2000. Holman, David – Employee well-being in call centers, Human Resource Management Journal, Vol 12, Issue 4, 2002 HR Index Benchmarks, EP-First Worldwide. 2002/2003 Richmond Events – The HR Forum (A conference for UK HR Directors), 2003. http://www.hrforum.co.uk/. Lawler, Edward and Mohrman, Susan – Beyond the vision: what makes HR effective?, Human Resource Planning, 2000. People Management, Chartered Institute of Personnel and Development, February and March 2003. Quinn, Barbara, Cooke, Robert and Kris, Andrew – Shared Services, Mining for Corporate Gold, Prentice Hall, 2000. Trubshaw, Jonathan – Effective People Management, Helping Authorities Deliver on the ‘White Paper’ Challenges, Employers Organization, 2002. Ulrich, David – Human Resource Champions: The Next Agenda for Adding Value and Delivery Results, Harvard Business School Press, 1997.

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Chapter 3 HR outsourcing What are the issues driving companies to outsource their HR functions? What are the advantages of outsourcing? What are the disadvantages of outsourcing? How do companies take the ‘make’ or ‘buy’ decision for HR services? What are the critical factors to look for in an HR outsourcing partner? What is the typical scope of an HR outsourcing arrangement? What are the reasons that HR outsourcing may under deliver? Should the company fix the problems internally before considering outsourcing? What is the likely future of HR outsourcing? Five guidelines to help achieve a great HR outsourcing agreement

Chapter 3 HR outsourcing

“HR Outsourcing as a concept is now where IT Outsourcing was in the early 1990s. The innovators and pioneers have laid out the ground and the next wave will be the pragmatists and later adopters who will only follow a trend after it is well established.” HR DIRECTOR, FT 100 COMPANY

Outsourcing can be defined as the transferring of an internal business function, or group of related activities and assets, to an external supplier or service provider who is prepared to offer a defined service for a specific period of time and at an agreed price. In this section of the report we would like to summarize the state of the HR outsourcing market. The analysis is divided into ten key areas: •

What are the issues driving companies to outsourcing their HR functions?

•

What are the advantages of outsourcing?

•

What are the disadvantages?

•

How do companies take the ‘make or buy’ decision for HR services?

•

What are the critical factors to look for in an HR outsourcing partner?

•

What is the typical scope of an HR outsourcing arrangement?

•

What are the reasons that HR outsourcing may under-deliver?

•

Should the company fix the problems internally before considering outsourcing?

•

What is the likely future of HR outsourcing?

•

Five rules to help achieve a great HR outsourcing agreement.

Orion Partners are particularly well qualified to comment on the process and challenges of HR outsourcing as members of our team have led or played key roles, in two thirds of the biggest full back-office outsourcing deals signed in the UK since 1999. We have also advised on US and international HR

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outsourcing deals at an executive level. It is this unparalleled hands-on experience that has shaped the key learnings and recommendations at the heart of this chapter. The use by companies of external third parties to provide services that had previously been applied internally is not a new trend. Since the early 1970s, the HR function has increasingly looked to source the provision of some of its activities from suppliers who can do the work more effectively and at less cost. The provision of pension and payroll services, relocation and employee incentive programmes, and the delivery of training and development activities, are just a handful of examples of activities that have an established history of successful outsourcing. The significant change in thinking over the last ten years has been the recognition that the main ‘added value’ activities performed by the HR specialist have little to do with repetitive, transactional administrative activities, and much more to do with strategy and policy. This change of mindset has led to some companies, most notably BP, BAE, BT and Cable and Wireless in the UK, deciding to outsource the entire administrative HR ‘back office’ activities to external suppliers.

What are the issues driving companies to outsource their HR functions? There are many different pressures and drivers that are encouraging firms to consider seriously the outsourcing route. The particular set of drivers for an individual firm will vary according to the industry and history of the company. However, experience indicates that the following factors are usually found behind any outsourcing business case:

There are more important business matters on which to focus resources The debate over a company’s and function’s core competencies has led to the identification of a set of activities that a firm must focus on to be successful and a set of activities that are deemed non-core to the business. Research by Personnel Today indicated that HR staff spend up to 85% of their time on managing standard administrative processes and only 15% on strategic activities. In best practice companies these percentages would typically be reversed. By outsourcing these non-core business activities, HR functions can focus the managerial effort on delivering the strategic and high impact policy matters, such as winning the war

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for talent, which are of true value to achieving business goals. Consequently, the time and effort required to manage routine administrative and data management work can be avoided and internal resources can be re-deployed to more useful work.

The need to reduce the cost of the HR function The increasing pressure from global competitive pressures experienced by almost all large companies, together with the search for synergies following the wave of mergers and acquisitions in the late 1990s, has led to huge pressures on functional leaders to reduce their internal costs. The Conference Board published research in 1999 that showed that nearly 80% of all firms were targeting their administrative functions, including HR, for contributions to the achievement of cost reduction targets. The tightening economic environment, collapsing stock market valuations and the decline in year on year annual growth rates in the first years of the 21st century, have only made these pressures more acute. HR functional costs can be a significant proportion of any firm’s back office overhead – anywhere between 5 and 15% of total support function overheads1. To retain credibility with line managers and senior executives, the HR leadership team need to contribute to achieving better margins and supporting competitive advantage by moving to a continuous improvement mindset and rigorously seeking cost reduction opportunities.

The need to increase service efficiency A very common driver behind outsourcing is the need to respond to changes in internal customer expectations. Research by the Saratoga Institute (owned by PriceWaterhouseCoopers) has revealed high levels of dissatisfaction with HR service levels, with HR scoring on average between 3 and 4 out of 7 from line managers, indicating the need for HR to enhance its service offering. Furthermore, widely publicized advances in technology and in particular, the spread of e-HR direct services allowing the employee and manager to do many administrative tasks on-line, has created pressure on the HR function to consider new more efficient service delivery channels.

1

Though typically the full cost of the HR function as a percentage of total costs is around 1%

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Advances in technology The developments in Internet and intranet technologies over the last five years have dramatically changed the options for delivering HR services. E-HR, as the use of intranets and the Internet to improve the effectiveness of a firm’s people is commonly known, can have a dramatic impact on both how HR services are delivered and the location of those who deliver the services. The elimination of the need for most hard copy paper documentation has freed up the HR function to rethink the whole basis of how it delivers its services using a combination of web-tools, email, call centers and integrated information systems, to provide quicker access to better information at a time of the users choosing. HR outsourcers are able to provide access to these proven technologies at a price that is highly attractive to many potential customers.

Greater acceptance of the concept of outsourcing Increasingly, many organizations have experience of one or more major process that has been more or less successfully outsourced. The comfort of positive experience has made it more acceptable for companies to consider extending the concept outside of the more traditional outsourcing targets (e.g. Finance, Payroll, Distribution and IT) into other functions such as HR where the economics of outsourcing can also be leveraged.

Emergence of a credible supplier base Companies located in the UK and North America are well served by a raft of proven and competent suppliers of a full range of HR services. Specialist HR outsourcers such as Exult (www.exult.net), Xchanging (www.xchanging.com), and ACS (www.acs-inc.com) provide a full service offering to potential clients together with a group of reference clients who can articulate and confirm the advantages delivered by the outsourcing route. Needless to say, these pioneering clients can also provide wise words around the risks and challenges of implementing an outsourced solution. More traditional outsourcing providers, looking to play in the HR space, have joined this group of specialist providers and deepened the choice in the market. For example, Accenture HR Services (www.accenture.com), International Business Machines (www.ibm.com), Rebus (www.rebusgroup.com), and EDS (www.eds.com) have all been active in the HR outsourcing area and have all won clients in the last two years. This arrival of a credible supplier base has been a significant factor in pushing outsourcing onto the HR agenda.

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Providing a platform and momentum for change Companies have also acknowledged that often they may be able to afford to finance the change, but lack the internal capability, corporate will and need to demonstrate something very radical has happened. Outsourcers tend to be supported by experienced change management teams who are able to quickly move to implement an outsourcing solution. There is no delay in waiting for internal resources to become free to begin the programme. From the perspective of speed of implementation, the commercial pressure created by the contractual relationship also drives the provider to move as fast as is reasonably possible to get the service operational. In addition, engaging a third-party to handle all or large areas of the HR process, signifies to the organization that things are changing in HR and fast. HR outsourcing is still new enough to signal a change in direction for an organization. When Cable & Wireless outsourced the administration of their HR function in 2000, their programme leadership admitted they could not have achieved the change they did without the momentum created by working with an outsourcer.

What are the advantages of outsourcing? During 2003 we undertook a comprehensive review of the state of the UK and US HR outsourcing business on behalf of one of our clients. This study, combined with our experience of working on the key deals with BP, Cable & Wireless, BT and Accenture, has led us to identify the primary advantages and disadvantages of outsourcing. The main advantages of outsourcing that clients of Orion Partners have identified include the following: •

Savings in time to deliver services

•

Increased organizational efficiency

•

Clearer alignment around roles and responsibilities for the retained in-house HR team

•

Greater focus of energy and resources on the core business of providing strategic advice and deep policy expertise to business managers

•

Improved quality of transactional services

•

Significantly enhanced ability to measure the day to day service and productivity achievements of the HR function

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•

Clear success measures and agreed service level standards, make transparent service expectations on both sides

•

Better access to state of the art e-HR and information systems

•

Significant reduction in costs (typically greater than 25%)

•

Increased levels of positive customer feedback

What are the disadvantages of outsourcing? The main disadvantages of outsourcing that clients of Orion Partners have identified include the following: •

Requires the development of skills in third party account management which may not naturally exist within the company

•

Takes time for the retained HR function to adjust to having to focus on managing ‘outputs’ from the outsourcer rather than managing the process which delivers the outputs

•

A poorly designed scope of services and ill defined service levels can encourage inflexible responses from the outsource supplier if not carefully managed

•

The transfer of knowledge to the outsourcer requires effort and dedicated resources which is not always sufficiently costed in the business case

•

There may be a perceived loss of control

•

When outsourcing contracts come to being renewed, the outsourcer is normally in a stronger bargaining position than the client organization because of the cost and effort required to either transfer or take the contract back in-house.

•

The signing of an outsourcing contract is the beginning, not the end, of the process. It takes dedicated effort to successfully manage the contract and the issues that will arise on a day-to-day basis as the relationship with the outsourcer beds in.

•

If an outsourcer has been driven down during negotiations to an unrealistically tight budget, then it will not be incentivized to put its best people on the contract. Service standards can be threatened if unrealistic prices have been agreed resulting in a lose:lose situation for all involved.

•

As the business environment and challenges change for the client organization the contract with the outsourcer will need to be revised to reflect new business priorities and realities. Unless properly set up, this change control process can be distracting for both sides of the deal.

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How do companies take the ‘make’ or ‘buy’ decision for HR services? There are a number of issues that will influence the decision to either retain transactional and administrative activities in-house or to buy the services externally. Orion Partners’ experience and research shows that the following ten factors are the key determinants that effect this decision: 1.

How does outsourcing fit with your overall company’s strategic needs? If the organization has a history of success in other parts of the business, then it is politically much more likely that the HR function will receive the support to outsource some of its basic services. Conversely, organizations where outsourcing is not a proven approach are likely to be highly conservative and resistant to supporting an outsourcing deal.

2.

Does the company have a view about what core competencies must be kept in house and what can safely be outsourced? Has a detailed scope defining what services and activities are to be offered for outsourcing been drawn up and approved by key stakeholders?

3.

Does the company have a complete view of its internal HR costs, cost drivers and the potential savings that outsourcing could deliver? A detailed business case needs to be created that factors in all the costs and benefits (savings) from the outsourcing solution over the term of the deal.

4.

Has HR considered ‘internal outsourcing’ (or insourcing) and explored how setting up an in-house shared service function might deliver many of the benefits of outsourcing, but with a greater degree of retained control? Increasingly, organizations are choosing to re-engineer the services in-house though the creation of a shared service and then look to outsource the shared service to be run by a third party.

5.

Have the technological challenges around outsourcing been fully considered? Does the company have the skills and capability in-house to manage a successful e-HR programme?

6.

Does the organization have a clear view about the capabilities and reputation of each of the main outsourcing providers? Has there been an assessment of who will best suit in terms of geographic and cultural fit, as well as breadth and depth of service offerings?

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7.

Has the HR function standardized and simplified its processes and procedures prior to considering outsourcing? If not, then there is the risk that the function is outsourcing inefficiency and likely to pay more than is necessary for future services.

8.

Has the concept of outsourcing been discussed fully with HR’s customers (employees and business managers) and other key stakeholders in the organization? Will they support an outsourcing initiative?

9.

Does the HR function have a view of the key success measures that will be used to judge the performance of the outsource provider? What are the main criteria that will be used to select the outsourcing partner?

10. What is the history of the organization in terms of managing complex transition processes? Is there the organizational will to see an outsourcing initiative through to completion? It is in reaching the answers to these questions that organizations typically come to the conclusion about whether to outsource their HR operations or whether to undertake in-house service improvement initiatives. HR outsourcing is not for the feint hearted but for those who think through the options, and are prepared to take the time to consider and resolve the critical issues identified above.

What are the critical factors to look for in an HR outsourcing partner? Once the decision to outsource has been taken, the next key decision is to decide which external provider to partner with. Our experience shows that the main factors to be considered when selecting a provider include: •

A proven track record – organizations need to understand the outsourcer’s capability in depth. Do they have proven experience of delivering the full range of services required and at the scale that the business needs?

•

Service flexibility and reliability – will the provider be able to match or beat current service standards? Will they be able to balance the demands of their other clients and ensure that the needs of the new contract are met? Do they have the flexibility to respond to sudden changes in demand or to manage the introduction of new services that

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the client might require over the duration of the contract? How reliable is the service? Is evidence available from other clients of the satisfaction with service and the extent to which standards are reliably predictable? •

Financial stability – thorough due diligence should be undertaken to ensure the long-term viability of the outsource partner. Any financial instability within the outsourcer is likely to have a negative impact on service, and will undermine the outsourcer’s ability to invest in technology and process improvements. Furthermore, if the outsourcing deal is to extend over a lengthy period of time (and most deals are between 5 and 10 years in length) then a company will want to ensure that the provider has the financial muscle to survive.

•

Cultural compatibility – the outsourcer needs to understand both the client organization and the expectations of the employees to be served. Ideally, there will also be a sense of shared common values between the two organizations.

•

Geographic scope and location strategy – does the outsourcer have presence in the primary geographies in which you operate? What level of synergy is there between your locations. This will impact the numbers of staff who may transfer and the level of knowledge that can be easily retained.

•

Approach to standardization – the organization will need to understand the level of standardization that may be imposed by the outsourcer and the impact on the organization’s processes. This will affect both cost and service levels.

•

Process management capability – is the provider able to demonstrate that its operational management team understand the risks that come with delivering high profile processes like HR processes, including payroll? Does it have the tools in place to assess them and mitigate them? Can it also manage processes efficiently to deliver year on year incremental savings either for service re-investment or to be shared as margin/savings?

•

Readiness to invest in transition management – the medium to longterm success of an outsource relationship will be heavily predicated on the initial investment in transitioning, communication and change management activities. Corners cut at the outset may impact on service delivery at a later stage and erode the cost savings over the term of the deal.

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•

Strategic sourcing capability – what is the range and scale of third parties (supplier alliances and joint ventures) managed by the outsourcer? What kind of economies of scale are they able to apply to ensure the right quality at the right cost?

•

Commitment to investment in technology – what is the outsourcer’s technology strategy? What kind of relationships do they have with the major application providers? Are they able to provide technological support across the full range of IT platforms and software tools that are required?

•

Quality of team – organizations should feel confident in the knowledge and experience of the team allocated to manage their account. The outsourcer should also guarantee an acceptable level of continuity of team from pre to post contract and beyond. Frequently, outsourcing contracts will specify key individuals who must be associated with the delivery of the service for a fixed period.

•

Governance – what is the outsourcer’s proposed approach to governance? Does it engage the right stakeholders? Are issues and risks dealt with in a structured and proactive manner?

•

Transition skills – how effective has the provider been in managing past transitions. Do they invest in the in-house teams of change and transition managers necessary to support a complex transfer of people and assets? Do they demonstrate the competency to manage change against tight timescales and often conflicting priorities while maintaining service? What has been the experience of previously transferred staff?

Overall, the success or failure of an outsourcing deal will come down to a question of trust. Outsourcing deals that work well rely less on the beauty of the contract, the brilliance of the deal team or the technological or process excellence of the provider, but more about the degree of chemistry and organizational empathy between the client and the outsourcer. The extent to which the two organizations are able to develop the personal relationships and the mutual belief in each other’s integrity and determination to do the right thing, will be the determining factor between success and failure.

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What is the typical scope of an HR outsourcing arrangement? The scope of HR outsourcing deals differs dramatically from deal to deal. Although some basic outsourcing models have been around for many years (e.g. the outsourcing of resourcing and recruitment processes to external agencies or the outsourcing of payroll and training delivery to third parties), full scope HR outsourcing has only emerged since the end of the 1990s. It is not uncommon nowadays for large organizations to consider outsourcing the majority of activities within the HR function. The scope of activities that are usually considered for outsourcing are shown below:

Frequently Oustourced

Occassionally Outsourced

Pension

Strategy

HR Employee Recordkeeping

Employee Health programmes Payroll

Rarely Outsourced

Planning Relocation

Employee and Manager HR advice

Training Delivery

Business Partnering

Management development

HR Transaction processing Recruiting

Employee assistance programs Awards and Incentives Programs

Talent Management

Fig.8: Scope of HR outsourcing

The key decisions about what is included within the scope of the contract will be determined by the company’s philosophical view of what it considers its core competencies. By core competencies we mean those capabilities that the firm must excel at in order to sustain competitive advantage. Once that has been identified , then those services or support activities, which are not integral to or close to the core competencies, can safely be included in the scope of discussions with

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an outsourcer provided that the company is convinced that the service can be better accomplished by an outside provider. One golden rule for both parties agreeing an outsourcing contract is to bring absolute clarity to the scope of services that are included in the deal. Ambiguity concerning the services to be provided will rapidly lead to a souring of relations as confusion and irritation will intrude on the relationship between client and outsourcer. Typically, the first schedule to any outsourcing contract will be a detailed written summary of the scope of services to be included. This sets out the responsibilities of both the outsourcer/supplier and those of the client. An example of part of a schedule covering the activities in the area of Employee Development is shown below. A more extensive extract from a Scope of Services schedule is attached as Appendix A to this report.

EMPLOYEE DEVELOPMENT

OUTSOURCER

CLIENT

Identifying/defining key jobs, competencies, people

X

Assessing talent scope/depth

X

Managing developmental transfers and rotations

X

Developing coaching and mentoring plans

X

Managing high/low performers

X

Identifying succession candidates

X

Monitoring performance and providing corrective action

X

Approving assessments and development plans

X

Developing employee development policy and strategy

X

Identifying key curriculum needs of key programs

X

Creating and utilizing competency models

X

Supporting the competency process design and deploying employee development tools and resources (future Leveraged Operations)

X

Conducting external research and identify best practices for employee development processes (future Leveraged Operations)

X

Tracking, monitoring, and administering employee development programs

X

Providing standardized management reporting

X

Developing career planning, succession programs/tools (future Leveraged Operations)

X

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The process whereby these detailed scope of service schedules are agreed, whilst being often a painful and drawn out process, are fundamental to the success of any deal. In the experience of Orion Partners it can take 6 to 12 weeks to agree a final scope of services. It is only through investing the effort in establishing total visibility about who is responsible for each element of a service, that the client can be satisfied that they know what they are buying and the outsourcer draw comfort that they fully comprehend what is expected of them. Of the various deals that Orion Partners have advised on, the shortest scope of services has run to 24 tightly typed pages, while the longest extended to nearly 60 pages.

What are the reasons that HR outsourcing may under deliver? During our extensive work with organizations going through the outsourcing cycle, we have typically discovered the following to be the main reasons why HR outsourcing does not deliver on its promise: •

Ill defined scope of services, with no clear mechanism for measuring service standards.

•

Inflexible commercial agreement that is unable to accommodate changes in business needs without time consuming and costly re-negotiations/ change request procedures.

•

Failure to establish an internal function to account/service manage the outsource supplier in a professional manner.

•

Poor definition of respective roles and responsibilities of client and outsourcer.

•

Inappropriate use of change control mechanisms to allocate blame rather than as productive management tools.

•

Overselling and under-delivery by the outsourcer, without proper management by the client.

•

Failure to manage the expectations of the retained HR function, who may feel threatened by change and do not have a clear vision of how best to add value in the new world.

•

A failure on the in-house function to relinquish administration, creating confusion between both parties and frustration.

•

Lack of attention paid to joint tracking and realization of benefits.

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•

Over dependence on technological solutions such as employee and manager self service, which may have poor take-up rates and generate data integrity issues.

•

Reluctance of business managers to accept the outsourcing arrangements.

Should the company fix the problems internally before considering outsourcing? One thing of which the client of any outsourcer can be certain, is that during the course of negotiating the deal the outsourcer will have assessed the ‘size of the prize’ available after the contract is signed. By this we mean that the outsource provider will have spent considerable effort looking at the current inefficiencies of the clients operations and will have clearly identified and ranked opportunities to continue to provide the agreed level of service but at a lower cost. Some of these savings will be through doing things ‘smarter’, others will be achieved through the scale economies that the outsourcer should be able to access due to its volume buying power combined with its in-depth experience of how to operate low cost transactional processes. Other savings may, however, be readily attainable by the client prior to the deal being agreed. A wise organization will seek to put its own house in order prior to calling in the services of the outsourcer. Those who choose not to do this can almost guarantee that they are handing over a great deal of hidden gold to the outsourcer who will all too gladly take over the inefficiencies and then speedily improve their operating margins at the client’s expense, by implementing any quick wins available by simple performance improvement initiatives. Typical performance improvement opportunities that an outsourcer will seek to implement are set out in the table below. The list includes a description of each opportunity, the impact on value drivers, and the expected cost savings associated with each. For many organizations it would be sensible to implement these initiatives before handing over operations to the outsourcing supplier. Failure to do so can result in significant value creation opportunities being handed over on a gratis basis to the supplier fortunate enough to do business with such a generous client.

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PERFORMANCE IMPROVEMENT OPPORTUNITY

DESCRIPTION

COST DRIVER IMPACT

ANNUAL COST SAVINGS

Centralization of HR transaction processing

The introduction of some form of internal shared service will often result in the achievement of savings in the cost of processing basic transactional activities of up to 20%. Savings are especially attractive when combined with moves to standardize processes (see below)

•

Reduced cost per personnel transaction

High

•

Reduced cost of physical infrastructure

•

Reduced cost per payslip

Implement standardized processes across the organization

•

Reduced cost and improved accuracy of all personnel transactions

•

Increased throughput and management productivity

•

Reduced paperflow and number of forms

Migrate all employee information available on one technical platform/ database to reduce error and need for double entry

•

Reduced data entry

•

Improved accuracy of reporting

Real-time reporting of HR information from one database. Enable managers to derive useful information about their teams and areas of improvement (e.g. absence and competency skill gaps)

•

Reduced number of HR administrators

•

Improved availability and accuracy of reporting

Implement HR cost planning allowing HR cost budgeting to be carried out based upon real organization structures and grades

•

Reduced need to send HR details to Finance

•

Increased accuracy of budget calculation

Standardize HR processes

Eliminate information silos

Improved management reporting

HR cost planning

High

Low

Low

Medium

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PERFORMANCE IMPROVEMENT OPPORTUNITY

DESCRIPTION

COST DRIVER IMPACT

ANNUAL COST SAVINGS

Manpower planning

Implement manpower planning support to better manage internal resources and utilization of external contractors. Resource allocation models and plans can help reduce dependency on overtime to meet peak demands.

•

Reduced cost of recruitment agency fees

High

•

Reduced number of open positions

•

Reduced cost of overtime worked

•

Improved employee retention & productivity due to faster recruitment & reduced open position time

•

Competency modelling allows for alignment of employee capability with overall business strategy

Implement automation of predictable and routine benefits and allowance changes (e.g. Allowances automatically calculated based upon shift/route; rate determined automatically)

•

Reduced management time and manual processing time

•

Increased accuracy of allowance payments

•

Reduced Headcount

Implement automated web based recruitment processing using a proven tool (e.g. Brass Ring) with resume management tool (e.g. Resumix) to filter applicants and reduce effort required to identify and shortlist appropriate candidates.

•

Reduced time and cost to Recruit

•

Reduced Paper Filing and Storage

Implement recruitment and training based upon competency management

•

Reduced cost of recruitment

•

Improved retention of talent

•

Improved value of training

Benefits and allowance management

Automate recruitment process

Competency management based training and recruitment

Medium

Medium

High

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PERFORMANCE IMPROVEMENT OPPORTUNITY Data entry at source

DESCRIPTION

COST DRIVER IMPACT

Implement e-HR (employee self-service/ manager self-service) for employee details and overtime information. Managers and employees are allowed to access data about themselves and their teams from their workstations

•

Reduce data entry requirements

•

Elimination of data fragmentation

•

Avoidance of double keying of data

•

Improved data quality

•

Supports shift, allowance, overtime and annual leave management

ANNUAL COST SAVINGS High

Of course, not all of the above opportunities will be available to every company but the table does indicate the type of opportunities that the street-wise client will look to introduce ahead of negotiations with any outsourcer. Organization’s should be looking to outsource an operation where the ‘low hanging fruit’ of opportunity have already been harvested. Why hand-over a better profit margin opportunity to your chosen supplier than you need to?

What is the likely future of HR outsourcing? The implications of HR outsourcing are huge: Full back-office HR outsourcing will be a projected $40+ billion industry worldwide in 2004, and there are many multi-billion dollar limited-scope single service line providers that have thrived for decades. Many commentators believe that HR Outsourcing is where IT Outsourcing was a decade ago. If this is only partially correct then over the next decade the global market for full HR outsourcing services could quadruple. It will be interesting to see what changes happen in the competitive landscape. While many established players exist within individual service line HR process silos (i.e. training providers or recruitment providers), the early leadership in full service HR outsourcing has not come from these familiar names. Instead, the leading firm in terms of revenue and clients is Exult, a company that was formed less than five years ago. Other HR BPO players have only recently entered HR from other markets, primarily from non-HR processing services (Convergys)

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and from IT outsourcing (Accenture, ACS, EDS, IBM). A few HR firms also have won initial HR BPO contracts, such as Aon, Fidelity, Hewitt, Mellon and Adecco HR Services. But the presence and leadership of so many non-HR firms in HR BPO is a major change in the competitive environment. Will this continue or will we see a consolidation in the number of full service providers? We would expect to see some degree of consolidation, especially outside of the US, where HR outsourcing growth has not met the initial optimistic expectations of the late 1990s. The key driver will be on the buyer side. Do HR departments want to ‘go full HR BPO’ or stay with multiple ‘limited scope’ single service line providers? In the US it appears that clients are prepared to go for the ‘full monty’. This is not so in the UK where the number of ‘full service back-office HR deals can be counted on the fingers of one hand. One very interesting development however, is the potential of the offshore market. The sales sharks from the leading management consultancies are circulating back-office functions dangling the promise of 50% – 60% labour cost savings opportunities, if companies move their HR back-offices to the Indian/Asian subcontinent. HR offshoring, or geographic sourcing as some providers coyly call it, involves the transfer of HR administrative and call center services to overseas locations. In 2003, McKinsey estimated that the global market for HR offshoring would rise by over 70% annually over the next five years, to create a sector worth nearly £27 billion. It is likely that the lion’s share of this growth will come from contracts transferring overseas from the UK and the USA to India, China and Thailand. This sort of growth has been predicted for trends such as HR outsourcing, and this market so far has disappointed, lagging about 40% behind the excited predictions for growth made by analysts at the start of the new millennium. Will offshoring be different? Orion Partners are noticing significantly increased interest in offshoring, not only from clients, but also from some key suppliers in the HR outsourcing market. Both Exult and Xchanging have invested in developing offshoring capabilities in 2003. Exult are showing a significant commitment to offshoring and have established an administrative center in Mumbai, employing 200 people. Exult are also exploring ‘multishoring’ to build on the flexibility of offshoring, with which work can be moved around various global transaction centers.

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In 2003, recruitment agency Adecco became the first UK agency to open an office in India, as it seeks to build a local operation in supporting the high number of call center jobs being outsourced to the region. India may be the prime destination for relocated UK contact center jobs, but will it be so attractive for the relocation of all HR work? The CIPD is sceptical, arguing that the legal and cultural differences between Asia and the UK will inhibit the growth of offshore service, limiting it to basic administrative roles. The transfer of advisory work has proved to be problematic to outsourcers based in the UK, so will be even more of a challenge to providers located outside Britain. Instead, closer low-cost locations may benefit. IBM, recent winners of the contract to outsource the Proctor and Gamble HR function, is rumoured to be setting up an HR outsourcing facility in Budapest. This will reverse the IBM model deployed to date, where IBM has offshored HR processes from various continental European locations to Portsmouth, proving that the UK can gain as well as lose jobs through offshoring. As yet there is no clear answer on the future of HR offshoring but it will be very interesting to watch developments over the next few years.

Five guidelines to help achieve a great HR outsourcing agreement To ensure that your company will obtain the service levels and cost benefits desired, it is necessary that the executives in HR who are being outsourced understand the details of the outsourcing agreement so they can attempt to influence them before the contract is signed. These five rules will help establish some of the operating requirements and infrastructures necessary for a successful relationship.

1. Get the outsourcing agreement right Even if the HR Director is not the final point for signing off an outsourcing agreement, they will need to play a key role in evaluating the competency of the provider and providing a framework of knowledge to ensure the interests of the company and the employees are well served. Most companies have a motivation for considering outsourcing. This motivation is frequently misplaced during the throes of due diligence, solution building and contracting. Every negotiating team should establish a short-list

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of its reasons for outsourcing (e.g. operating costs, improved service, cost avoidance, headcount reduction, etc.) and then test the vendor proposals against the list. This is not as easy as it seems. If there is a dedicated ‘deal team’ in place, its idea of success and completion may be different from the executives who will have to manage the ongoing relationship. Many executives discuss having a ‘seat at the table’. In this instance, the seat at the table is the negotiating table. The intent is to receive agreed services at an agreed price for a period of time. If services and price don’t match, there will be unpleasant consequences later. A corollary to this is to remember the provider also needs to make money. If the deal is too one-sided, then service or investment in new technology and processes will suffer, as the outsourcer will refrain from allocating its best people to support your contract on grounds of expense. It is critical that the team negotiating with the provider avoids letting the cost focus overwhelm the service focus. Typical sourcing initiatives fall into two groups: Sole Negotiation and Request for Information/Request for Proposal (RFI/RFP). The RFI/RFP route may be conducted by internal resources or by a sourcing consultancy or consultant (such as Orion Partners). Typically, the RFI/RFP route, while requiring more up-front effort, will typically, through the application of market forces, enable a more commercially competitive deal to be struck than sole negotiation with one supplier. The business development spend will be substantial for all the players, so be prepared to make the process of being ‘sold to’ as easy as possible. Taking an open approach with items like volume data to suppliers shows to the vendor a commitment to the process. They will value this as a clear commitment on your side that builds trust, by showing you value their investment in working with you. You are also signalling that you are committed and looking for a long-term partnership. In addition to understanding the process, there needs to be a clear definition of roles and responsibilities. Identify decision-makers, advisors, constituents, key staff and the deal team. Each has a distinct role and together they will ensure objectives are met and support the previously established definition of success. In addition to the decision-makers, a project management office (PMO) must be established to ensure work is done and deadlines are met. The PMO is established when it appears a contract is likely and continues throughout transition. Some organizations have the PMO established when RFIs are issued. The staffing and ownership of the PMO is usually the responsibility of the client at the outset of the process though it is common for joint teams to be formed with the outsourcer as the process evolves and a partnering approach develops.

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2. Change and transition management cannot start early enough Change and transition management is all about ensuring the organization supports the business initiative. It’s also about leadership and communications. The effort should begin before any potential vendor is involved. There must be a communications strategy to ensure employees, especially those who may be at risk, understand the reasons and feel they will have some level of protection during and after the vendor selection. This is not easy and if your organization does not have the professional staff to support this effort, outside resources may be necessary. Different constituencies have separate interests and needs. The change management process must include all of them. In HR outsourcing, the most common alignment of the internal groups includes employees, human resource leadership and senior/line management. External groups could include financial analysts, shareholders, unions/works councils and current third-party providers. The internal programme should work in tandem with the provider’s programme to ensure clarity and consistency of message. Note that ‘change and transition management’, as defined here, is leadership change management and is different than the change process that accompanies the actual operations. Once operations begin, there will be a change process with elements such as change orders and work orders, which help structure changes to the services offered or the process or technology whereby services are delivered. If there is a large IT component involved, make the distinctions early to reduce confusion.

3. Get the transition right In the simplest definition, transition is all about getting processes and people from the client’s internal control to the outsourcer’s external control. For this process to work, internal teams and individuals (resources) must be a willing part of the process. This takes some effort if employees’ positions are at risk. It may be necessary to devise retention programs for key employees. Turnover during this phase must be controlled or orderly transition will fail. Transition can be further defined as the detailed, desk-level analysis and documentation of all relevant tasks, technologies, workflows and functions. It also covers the movement of people if they are in-scope. If the process is to be moved ‘asis’, the focus is on the current state.

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If the process is to be transformed, changed or will use new technology, the focus should be on managing the journey across the gap between the current and future state. Process transition: The provider will assign team leaders to manage one or more processes. The teams will include staff from both client and vendor. The team members will be needed for significant amounts of time. Make sure that sufficient, and preferably full-time resources, are devoted to the transition. During the transition process, documentation is created and assembled. Job shadowing may be part of the methodology. The client should sign off on the readiness of the provider before accountability moves to them. People transition: The scale will depend on the nature of the contract. If there are employees moving to the provider, the usual process of interviews, job offers and acceptance periods will follow, although in countries such as the UK there may exist legislation which stipulates that certain ‘in scope’ staff must transfer (with protected employment rights) to the new provider and therefore formal selection is irrelevant. It may be necessary to devise retention plans for key employees, and severance plans and reassignment programs for impacted staff. Expenses for retention and severance plans are generally borne by the client. People issues must be a major focus of leadership during the critical transition process. Technology transition: If the provider will be assuming licenses or operations of client-owned systems, applications or infrastructure, then all in-scope systems must be identified and documented. Licenses, maintenance agreements, hosting, LAN, WAN and telecoms are subject to review and may be part of the transition. If separate entities will manage applications and/or hosting, protocols must be established to ensure roles and responsibilities are clear. The governance process will be finalized during transition. This is the fundamental basis for managing the relationship during the ‘build’ and ‘operate’ phases of the relationship. There are multiple models for this subject; the key point is to appoint individuals with sufficient authority to manage the relationship on a day-to-day basis. The governance methodology should cover the operational change process and issue resolution as well as the actual contractual relationship. Web portal design and content also need to be part of the governance process. Service level agreements (SLA) and key performance indicators (KPI) are determined as part of both the contract and transition period. They are generally finalized at the end of transition, although they may be re-opened at an agreed time if new processes or technologies have been implemented. One word about

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service level agreements (SLAs): Don’t over measure, instead look for leading indicators. On a recent Orion Partners’ project the client originally requested that more than 200 pieces of information be tracked and measured but eventually agreed that 9 key indicators were all that was truly necessary.

4. Love your client (account) manager HR process outsourcing agreements are long-term, complex and personal relationships. As end-to-end BPO is not commoditized, it takes ‘care and feeding’ to make it work. Legally it is a client-vendor relationship, but it can and should work collaboratively as a partnership. Both parties will have relationship managers. These individuals ensure that changes occur in a timely, orderly manner and that issues are resolved appropriately. Selection criteria for the client’s manager should focus on relationship skills, knowledge of the organization, business case and analytic skills, and reputation within the organization. They should also be senior enough to make decisions in a timely manner, without further approvals, within defined boundaries. Give a good reference, where deserved. This is a very significant way to signify approval of the results and relationship. It’s almost as good as paying invoices in a timely manner!

5. Get over it – it’s a new, braver and better world Moving to an outsourcing model will not make you more strategic. What it will do, by eliminating large organizations and consolidating SLAs, is allow more time to understand the needs of the organization. Understanding the basic business better allows you to propose and implement more creative and effective strategies. In addition, your provider will have more resources and access to best practices to support those business objectives. Outsourcing can be an enabler to becoming more strategic. Do not allow the retained HR organization (i.e. that part of the HR team that did not transfer to the provider) to fall into the trap of remembering the pre-outsourcing days as being the land of milk and honey. They need to focus on how they make the new model work and on how they make their new ‘transaction free’ roles most valuable to the organization they are paid to support. It is frequently necessary to provide detailed attention and support (for example role definition workshops, specialist coaching, external consulting interventions) to help the HR Business Partners realize the full benefits of the redefinition of their role that the HR outsourcing agreement has enabled.

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Outsourcing is based on outcomes. The client defines the outcomes and the vendor supplies the means. Once trust is established, the total team can create a true partnership to the betterment of all. As more and more organizations move to an outsourced model, choices and processes will improve and the journey will become easier.

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Chapter 4 HR shared services The model in more detail The contact center and customer contact model Organizing around process Advantages of the SSC model Disadvantages of the SSC model Case study Chapter summary of key messages

Chapter 4 HR Shared Services Previous chapters have looked at the need for changes in the operating model deployed by HR and a generic scope and organization to tackle the challenges outlined. At this point we shall examine the means by which HR can become an ‘Administrative Expert’, fulfilling a key element of its role. HR needs to demonstrate that it is in control of its operating costs, the quality of its output and the ability of its processes, to meet the changing needs of the business over time. As with the finance, IT and procurement functions, HR can look to the shared services environment for an answer to these challenges.

The model in more detail

Pensions and leavers

Payroll and benefits

Employee Relations

Training

Performance Management

Recruitment

Contact centre

HRIS

Vendor management

Fig 8: The shared service center model

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As can be seen from the above the primary difference organizationally for HR, is that the focus is on areas of HR process, rather than serving individual business units. This presents a significant shift away from HR’s traditional approach to executing HR processes. Some of the benefits and issues in doing this are explored below.

The contact center and customer contact model In terms of delivering improved customer experience and providing a platform for efficient operation, the customer contact model is key. We will consider the components of the model, how they drive the performance of the Shared Services Center (SSC) and some considerations around implementation and design.

Many to one, not many to many Within the traditional HR function any employee is free to engage any member of the HR team available to discuss an issue. There may be some filtering by speciality, for example there may be a team of payroll staff at each site who may be known to staff and therefore will handle most payroll related queries. The reality though is that frequently the local HR team takes the full brunt of a range of enquiries. No matter how significant, no matter whether they are the most appropriate person to answer that query, and often most frustratingly, no matter what they are doing at the time! HR professionals find themselves handling multiple queries coming into one member of staff, themselves! ‘One to many’. As a model, perversely, this has attractions for both employees and the HR team. On the face of it the employees feel they have found someone who can ‘own’ their problem for them, regardless of any frustration at not having the right person. The local HR team may feel that they are close to the employees, and that contact with employees on any matter provides an opportunity for HR to build its knowledge base of employee concerns. This is seen to better enable HR to fulfill its ‘role’ as the business’ thermometer of employee attitude. Arguably though these ‘benefits’ carry a downside that in reality outweighs the upside. For employees, they are tied to trying to track down a member of the HR team, encountering voicemail or an empty chair. They may find themselves being referred elsewhere, necessitating further delay in answering their enquiry. For HR there is a very real question about the value of this ad-hoc contact with employees. In a time of sophisticated employee surveys and other communication forums, can HR really get beyond hearsay with this approach? More importantly, HR needs to give itself the space to meet the challenges the business is offering up to the function. Constant distraction is not a suitable environment

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in which to deliver change. ‘Many to many’ is a more manageable and sustainable approach to the delivery of high quality HR services to employees, and the business at large We shall now go on to examine a model that, as a fundamental part of Shared Services, allows HR to tackle the weakness in the ‘many to many’ approach. Allowing it to focus the multitude of employee and line management contact with HR into one channel.

The model in detail The following model has evolved with companies in the last few years, to provide a means by which all employee and line manager contact with HR is funnelled to the most appropriate point of resolution. Its focus is on getting the enquiry or transaction completed at the earliest opportunity and in the most efficient way.

Employee, HR BP, Manager and external queries

100% Means of resolution

Service Centre

On-site or Corporate

66%

Self service

18%

Contact centre

10%

Support teams

5%

Centre of Excellence

1%

Strategy

Fig 9: The customer contact filter

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Self-service – A key element for HR in tackling its role as ‘Administrative Expert’ is the need to operate an efficient means of processing transactions and enquiries. Self-service has become a central means by which HR functions can achieve this. Transactions covered in this way tend to be data updates to employee records (these may be personal details or data associated with a process like a new salary figure). It also provides a means for employees to have access to data to resolve their own enquiries (on-line policies or HR process descriptions). There are some very clear factors that limit the effectiveness and scope of this approach. We have previously touched on the point of the availability of the technology to employees, during their working day. A PC kiosk approach has been tried in a number of manufacturing sector organizations, with limited success. For employees who do not work with PCs on a daily basis, the necessary IT skills may not be available across the employee base. Furthermore releasing staff from front-line activities to spend time at a kiosk may not be operationally acceptable. Staff working in high-volume production-line environments or remotely from office facilities, have particular difficulties accessing this type of service. Nonetheless, there are some very powerful examples of this approach working in an office based environment, where staff are prepared to devote time to interacting with the technology. The lesson is that, where there is a benefit to staff and line managers in using the self-service approach, the results will be very positive. The benefits are similar to those seen for users of the recently introduced on-line banking. The information and ability to complete transactions is available at employees’ convenience. For staff working outside normal office hours the service is always ‘on’. Through well designed web sites the ease of interacting with the on-line service is greater than having to find a member of the HR team, by phone or in person. Contact center – The contact center may interact with employees by e-mail and telephony, but fulfils two very clear roles in this contact model: •

An alternative access point for web or intranet based services

•

A point of query for information that is presented on-line or general HR questions

Operators are enabled to have the same systems access as employees and line managers to complete transactions on their behalf. Clearly, over time this will come at a higher cost than self-service and the aim must be to reduce this through the increased use of self-service. With call center seats at some large company operations costing in the region of £50,000 per annum to run, the savings case is compelling.

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The second function of the contact center must be approached as a fundamental component of its role if it is to be successful. This has three parts: •

a range of queries that can be resolved,

•

knowledge management; and

•

contact resolution.

For an HR contact center to be successful it must be able to offer employees assistance on a range of HR activities that is broad enough to reinforce its position as the most useful first point of contact with HR. Ideally, it should be able to tackle queries and support transactions that cover the whole employee life-cycle from recruitment to leaving. If its focus is very narrow, it indicates to users that they may as well continue to visit the HR function’s office as most of the assistance they need remains there. Once a contact center is established as the next point of contact for employees after self-service, the integrity of the information it holds and disperses is crucial to its continued use by staff. It can achieve this through formal and tacit means. As policy and process change, the contact center teams must be kept up to date and trained on the changes and their implications. The contact center can also begin to add real value by gathering a live bank of ‘frequently asked questions’ and their answers about HR policy and process. As the team ‘learns’ from handling questions, it can begin to build up a body of knowledge that allows it to offer policy interpretation based on scenarios that have been encountered before. The final point is very much linked to driving user take-up and credibility in the service. These contact centers must be organized using the above knowledge management tools to ensure callers are not passed around the HR organization unnecessarily. Where low proportions of contacts cannot be resolved users are once again presented with a compelling argument for going direct to HR staff and HR staff once again become burdened. A target of 80% of all queries/problems resolved at first point of contact is achievable. Support teams – The next point of contact for users will be the support teams. The support function is where the majority of the processing work is completed. As a result, they will hold information on processes and cases that will be of a more detailed nature than it is possible for staff to access via self-service or the call center. Their role is once again not to offer real policy interpretation, but to be the point where users can action processes and check progress. Center of Excellence – Where detailed policy interpretation is required, or there is a need to progress detailed or complex casework (e.g. on grievance or discipline matters) enquiries will need to be passed to the Center of Excellence.

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Fundamentally though, the basic policy interpretation can be completed at the contact center level, freeing these staff to focus on dealing with line managers and employees on complex matters and project work, supporting the development of the business. Strategy teams – The final point of resolution for an employee or line manager contact to HR is the HR senior management team. Issues should only ever hit them in the smallest of numbers. A reasonable objective would be less than 1% of enquiries needing to be dealt with by them. They will only be required to intervene in casework of high risk and significance to the company, and where policy interpretation sets real precedent. In ensuring this is the case, they can be freed to focus on planning for the people management requirements of the business in the future and assess the implementation of today’s HR strategy.

Implementing the customer contact model We do not seek here to offer a complete guide to implementation but to examine some of the lessons learned from previous implementations. A number of common themes emerge from recent experience. Driving employee take-up – We have already seen that for employees to engage with this model they are assuming some of the burden of administration. It needs to be borne in mind that HR is not the only function following this approach – the move began over 10 years ago to move IT support to remote help desks. The friendly ‘techie’ is no longer at the end of the corridor. More recently, finance has moved in the same direction, looking to employees to take on more responsibility. For example, raising purchase orders on-line. The Procurement and Facilities functions are chasing employees’ time too! The key is to provide a tradeoff for their efforts, or an enhancement that makes the investment of the employees’ time worthwhile.

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Accenture HR Services Ltd pensions web-site – the trade-off for employees The HR outsourcing arm of Accenture in the UK has developed this site. It is a good example of self-service creating a ‘value proposition’ that entices employees to engage on-line. Users can: •

Change personal details

•

Model payment levels over time periods to assess current benefit levels

•

Check company policies and pensions processes

•

Review the details of the schemes available

•

Check nominated beneficiaries

•

Print off the forms that are needed to manipulate their schemes (today these require a physical signature by law)

Clearly, there are advantages for the administration team in the completion of administration by employees. It is important the benefits to the employee of being able to use the planning tools at their convenience provide a reward for taking on the administration burden.

The right model for the right culture – A dogmatic approach to implementation throughout the programme and scoping can only be self-defeating. There are fundamental elements of this approach that unleashes its value to the business. At the beginning of an implementation it is worth understanding how a business’ culture will respond to this model. Where a company tends to communicate by email, processes should be set up that are initiated by these methods, rather than solely by telephone. Creating a process that has to be started by phone in an email culture, will only create the barriers that limit the role of the SSC and the efficiencies it can create.

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Powergen – a local SSC When Powergen implemented Shared Services for HR they did so at their main Head Office site in Coventry. The HR Leadership team felt that the culture of the business would not respond to ‘HR by telephone’ and employees still wanted to be able to talk face-to-face with staff at all levels in the SSC. This approach works for Powergen in that it allows them to achieve the benefits of Shared Services. They have also achieved a customer service model that is consistent with their culture and maximized employees’ perception of the levels of ‘customer service’ from the center.

Organizing around process The driver for achieving the benefits of the Shared Services model is the consolidation of activities around process. This section will explore some of the key themes in doing so, building on the overview contained within chapter two. As HR delivery teams in the SSC focus on process rather than business units, tackling the following areas will drive success: •

Including the right processes in the SSC

•

Organizing the workforce in new ways

•

Measuring for success

These points are explored in more detail below.

Including the right processes in the SSC A key decision that will need to be addressed at the start of and throughout the lifetime of the SSC, will be that of its scope of activity. If the benefits of deploying the SSC are revisited, the following selection criteria can be identified. Run at high volume – Where processes are run only very rarely, the opportunities for driving economies of scale become very limited. They will then be out-weighed by the cost of change in bringing them into the SSC. Administrative in nature – This requires processes to be deliverable with limited content knowledge and experience of the area of HR in question. They also tend

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to be repetitive and require limited autonomy of decision-making in execution. This allows for less experienced staff to be engaged in the delivery of the work, ensuring that pay costs are kept to a minimum. It also frees more senior skilled staff to work on more complex work in the Centers of Excellence and as Business Partners. Able to be standardized – As previously discussed in chapter two, the key to gaining efficiency from limiting asset specificity is the standardization across the customer base. As staff move into new roles they are also able to be trained more quickly. A set of standard stable processes allow for knowledge to be codified within process manuals and training guides. In terms of day-to-day management and driving service improvements, the standardization of processes across areas of the business increases quality. Processes are easily repeatable and moving from running a process for one area of the customer base or another, present little need for operators to change systems and ways of working. Where there are barriers, the resources become redundant as they are unable to be deployed onto other areas of work easily, or there is a costly retraining effort as the need to move them arises. Able to be centralized – The benefits of standardization can only be realized if the processes can be centralized in core locations. This allows for the resources required to deliver the service to be moved easily from one process to another, to meet fluctuations in demand. Where this is not the case, as with a lack of standardization, resources become redundant, as demand for their work may slow down beyond expected levels. At this point they cannot be rapidly deployed elsewhere within the service center to ensure they are effectively utilized. A lack of centralization also promotes quality issues as processes end in one location and are completed in another. The handover point can be a weak link in the quality chain as information about the transaction and ownership for completion is lost in the handover. Able to be technologically enabled – Transactions requiring significant manual intervention can be delivered using the SSC model and indeed, this may be preferable from a quality and control perspective. The key to fully exploiting this approach will be to concentrate on moving transactions within a process to a technology platform. These allow workflow tools to be used where the pushing of an operation to the next actor required to continue the process, can be automated. They are also able to automate data production and storage. Data can be captured at the point of production so HR has access to a live database from which to derive useful management information. This point may seem obvious, but it is surprising the number of organizations that are unable to tell you how many people they employ!

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Moving processes on-line – Integrated HR applications The rise of the Enterprise Resource Planning (ERP) software from companies like; SAP, PeopleSoft and Oracle has tended to dominate the market for automating processes through their integrated HR modules. These players have tended to target large corporate customers as they seek to sell applications which integrate data and workflow across multiple corporate functions: Procurement, Supply Chain, Finance and HR. These are by their very nature and implementation prohibitively expensive for small to mediumsized companies. Indeed there has been a growing body of evidence that suggests the financial and business benefits from implementing these are often unrealizable in practice. An alternative is the smaller application providers, whose offerings tend to be specific to HR activity (providers like HR Visual, ASR Computing, Microsoft Great Plans or Snowdrop Systems) or to an industry sector (where, for example, they will offer HR, Finance and Supply Chain management for the motor retail industry). These offer reduced functionality, but may provide a more cost effective and tailored solution. Pros of integrated HR applications: •

Integration work with other corporate systems (e.g. HR to Finance or Payroll) to another is already completed.

•

Information is always drawn from one data set that is consistent.

•

Processes are pre-defined within the technology and do not need costly configuration to set up.

•

In-built workflow can be used to ‘push’ transactions to employees, managers and administrators to promptly action them.

Cons of integrated HR applications: •

Data must be migrated from old legacy applications to the new database or old data must be archived and not accessed.

•

Pre-defined processes are rarely right for a business and will require customization to set-up or may not be usable at all.

•

As processes and workflows change over time they may need costly reconfiguration, if that is indeed possible.

•

As systems are changed any future up-grades that may be necessary, as technology and legislation moves on, will also have to be customized and costs incurred again.

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Moving processes on-line – Workflow tools These are highly flexible tools that draw on a single or multiple databases. They can if necessary, be linked to legacy systems. They are configured to automate processes that are specific to each business. Indeed, they are flexible to the point of being used in any part of the business where automation would provide efficiencies. As processes are designed within the business, the application designers can reflect those within the systems to move the operation of them on-line, automating steps and prompting users for input, as it is required. Pros of workflow tools: •

Processes that completely meet your business requirements can easily be implemented.

•

Information can be drawn from legacy databases that my have sprung up over time across different parts of the business.

•

In-built workflow can be used to ‘push’ transactions to employees, managers and administrators to promptly action them.

Cons of workflow tools: •

Application providers are often required to complete changes at high cost to each process, as changes are required over time.

•

Interfaces to all other company and third-party systems are required to be built by the software provider and the on-going maintenance costs of these are high.

•

Design costs can be very high as processes either need to be captured before implementing, or designed from scratch at the outset.

There will, of course, need to be exceptions in the criteria of processes that are included in the SSC that will depend upon the organization’s requirements of HR. Low volume and non-standard processes, like running an Executive Payroll, will need to be completed. As the process management expertise and junior staff required to complete the work reside in the SSC, it will make sense to deliver these from here.

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A similar issue has been faced by organizations that have undertaken significant M&A activity. Here there may be numerous groups of employees who have non-company standard terms and conditions of employment. This may require the running of very small non-standard overtime payment or benefit entitlement processes. In summary, a process meeting one of the above criteria on its own will not deliver the efficiencies, control and quality improvements this model can provide. They form an integrated set of selection criteria/dependencies, that only when harnessed together do they enable the full benefit of the model be realized. The most successful implementations always ask the question, if the process does not meet all these criteria should we run it in the SSC or should we run it at all?

Organizing the workforce in new ways As we have seen, organizing around process forces us to tackle the issues of how essential the process is for the business, and how it might me delivered more efficiently via process change or technology. The other important factor will be the staff working within the SSC. The traditional HR career path is very clear in most HR professionals’ minds. The entry point is either at HR Administrator or Graduate level. The next move is to a generalist HR Officer role. There may be some specialization at this point, for example, in Learning, Employee Relations or Compensation and Benefits, before a move to a generalist or specialist HR Manager role. The role of HR Director then beckons. The skills required are of legal and process knowledge, coupled with administrative and ‘people’ skills. The changing skills required of HR are addressed more specifically later in this report, but the SSC environment presents some very distinct challenges to the career of the HR team member. The SSC environment brings new challenges to staff that, due to their previous roles and junior nature, they will have never have faced before. The business is now the ‘customer’ – Staff will now have an explicit focus on ‘service’. The model is dedicated on improving access to HR as the ‘quid pro quo’ for engaging with the call center or self-service. The spotlight will fall on each employee and manager interaction with the center. The comparisons with call center and service center experience employees have elsewhere will be very easily drawn. We are all familiar with receiving poor service from a utility supplier or bank call center. The SSC staff will be facing the very same challenges. Clearly, customer service training helps, but the type of staff selected to work within this environment may not be the same person type as the traditional HR Administrator. Frequently HR SSCs recruit customer services staff without HR

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knowledge, rather than the traditional HR Administrator (Corporate Leadership Council, 2001). The knowledge management tools and training are able to provide them with limited experience. Giving or ‘not’ giving the customer what they want – As a central objective of the SSC model is cost control, the range of activities the SSC provides is a key factor in achieving that control. The operator within the service center is now the first line gatekeeper to HR administration requests. In a discrete office, a request to run a process in a new way, or complete an administration task that may not clearly be HR’s responsibility, could have been over-looked and undertaken. With the very clear service scope for the SSC that defines its operating costs, this opportunity for the business disappears. Ad-hoc non-standard processing may drive up costs that the business does not wish to bear. The issue of charging for this is addressed later in the chapter, but for the staff on the front-line they will now be the ones who have to say ‘no’. More preferably though, they will say, “maybe, but at this cost”. This is often seen as a decline in service by the business and the staff must be supported through this. The business needs to be engaged in understanding why this is happening and providing staff with the right training and ensuring that the right channel is used to answer these queries. A clear charging structure and process for handling non-standard requests on the intranet will provide the information to help ease frustration. Channelling these queries directly to a management team that is managing the SSC’s relationship with the business, gives the caller access to someone who can explain the rationale for the service being defined the way it has been. They are then able to work with them to achieve the right result for the requestor. This may be a new service item or modifications to current services. All managed within the context of the business’ financial constraints and HR strategy. Securing the next generation of HR talent – Approaching this issue requires a holistic view of the function. Working within process silos will often not provide the breadth of experience that the traditional introduction to HR provided, or offer the development path for an HR career. The skills to progress in the SSC will be around process and team management, rather than deep HR experience. As much of the policy and strategy work is carried out beyond the remit of the SSC, content knowledge can be difficult to develop. Clear planning is required and must be visible to staff to ensure they are able to see the route to developing an HR career, if they so desire. The SSC can provide a very broad range of experience across the full employee life-cycle. Using this model to gain that exposure should not be underestimated in career planning for HR staff (Corporate Leadership Council, 2001).

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An example of this change can be seen within the junior levels of the SSC. Staff working on front-line operations in the contact center should be recruited for their customer services skills rather than their HR knowledge. An ease with customers on the phone and the skills to manage them is not easily developed. Training on HR processes is something that can be relatively easily achieved. Using secondments to the business or other internal HR delivery organizations can develop the HR skill set. Indeed, that exposure and breath of experience will be a welcome addition to many HR professional’s skill set.

Measuring for success The movement of processes to the SSC presents a number of concerns for customers and stakeholders as it occurs. Customers see their HR service moving from the office down the corridor to a site which may be miles away. Line managers and executives may see themselves as losing part of their empire where HR is closely aligned to a business unit. For HR itself, having secured the business’ buy-in and investment funding to move to Shared Services, it must demonstrate that it is delivering on its objectives and continually improving. The means to tackle these issues is found in the role of service governance and benchmarking. The table below highlights the essential structures that the SSC will need in place if it is to address the concerns raised above.

REQUIREMENT

STRUCTURE

A reference to the Executive team driving business strategy, to ensure the SSC’s objectives are aligned with this group.

Executive Steering Group or Review Board

Ensuring the SSC has formal links with its customers to respond to their requirements.

Relationship management roles

Customers need a means to have confidence in the remote service.

Service level agreements

Customers and the SSC itself need a means to capture service issues to assess trends and demonstrate resolution.

Issue or non-compliance management

A demonstrable improvement plan, covering both financials and service.

Continuous improvement targets and benchmarking

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Executive Steering Group or Review Board This forum will be essential in developing the SSC and ensuring key stakeholders voices are heard throughout its lifetime. As the focus is on service, the means to ensure key executive and staff groups (CIO, CFO and Procurement) are onboard can be through this body. This body can also perform a vital policing function over the competing demands of the business units consuming the services of the SSC. Business units may desire to procure the services of the SSC from elsewhere if they have local relationships with suppliers (e.g. training or recruiting). This forum will be invaluable in setting the ground rules for the business here and acting as arbiter of these tensions. If the business has set the model as being one of compulsion to always obtain service from the internal SSC, then it is enforced here. There may be a need over time to change these principles. This will be the forum within which to close off that debate.

Service level agreements (SLAs) As processes are implemented within the SSC, clear SLAs will need to be agreed with client business units. These enable the SSC to: •

Demonstrate quantitatively that processes are being delivered to agreed standards.

•

Establish standard service levels against which it can justify increases in cost and effort when they need to be exceeded (the rush job).

•

Create a reference point against which the SSC can be benchmarked over time and with other organizations.

Key issues with SLAs are often as seen below: •

Each client always wants 100% compliance, but is that always worth the cost and is it realistic?

•

How many SLAs are really necessary to track performance? As tracking them is an overhead, then keeping them low and highly relevant and focused on strategy is key.

•

They do not always have to focus on process steps (e.g. time to send out a letter), better to focus on the output to maximize opportunities for process improvement.

Defining these with key stakeholder groups and balancing the costs required to meet them is a challenge that must be addressed three to six months post imple-

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mentation. It is rare that any HR function tracks these sorts of measures, so historical data that can be committed to is not available. A commitment to measures set at the wrong level or that are too expensive to meet within the cost targets of the center, will only undermine the credibility of the organization.

Issue or non-compliance management Customer dissatisfaction and poor performance within the Service Center can be encountered as a problem for the following reasons: •

New processes are bedding in the SSC staff and employees are testing their knowledge.

•

The business does not accept the delivery model or the scope or nature of delivery of services.

•

Processes have been incorrectly designed and are not suitable to be delivered at volume at the right quality standards.

•

SSC employees simply fail to meet pre-agreed SLAs or customers do not have a clear understanding around what the SLA should be.

Each one of the above problems will start with customer feedback that the SSC has failed to deliver the service the customer expected. Each one can only be tackled when: 1.

The failure is tracked;

2.

Acknowledged to the customer that they believe there to be a problem;

3.

Investigated to understand the real root cause of the problem; and

4.

The fault corrected and advised as such to the customer.

Where mechanisms for doing this do not exist, customer resentment will build up and fatally undermine the SSC’s operation. The investigation allows the operation to demonstrate that it takes the voice of the customer seriously. Tackling the root cause prevents the issues reoccurring. Finally, advising the customer of the resolution path demonstrates that the operation is credible in its commitment to deliver high standards of service. An important feature of this approach is its use in stakeholder management over the lifecycle of the SSC. Those who may object to the presence of the SSC or have not felt that they understand how it interacts with this model, will take a negative perception into any instance of service failure. Their perception of fault will always lie with the SSC, rather than anywhere else. The tracking and investigation allows their perception to be challenged. If they do not understand the

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means of interaction, SSC staff are able to explain how to get the most from the service. In the early days, much dissatisfaction with the service will be derived from user frustration at having to deal with new ways of working.

Continuous improvement targets and benchmarking The centralization of processes provides for stable and visible evaluation of the process to be made. Once SLAs are agreed and a non-compliance process established, the operation can begin to gather the data and plan for continuous improvement and learning. The diagram below demonstrates the cycle used by SSC managers to assess the requirements for improvement and developing a change in performance.

IMPROVEMENT ACTIVITY

ROUTE CAUSE ANALYSIS

SLA failure SLA failure

SLA SLA achievement achievement

Service Issue Service Service Issue Issue

Fig 10: The continuous improvement cycle

The above only provides for a constant attainment of a static level of performance. It is unlikely that this is going to be acceptable once the operation is established. As the SLAs are achieved each measuring period, there is a need to decide if they are at the right level. They may need to be raised, lowered or remain static.

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This decision-making process is best executed within the context of the HR strategy and an appraisal of other operations within relevant companies. Where the HR strategy is clear, for example the delivery of lean HR processes to support low margin FMCG Manufacturing, we can apply this to focus on setting SLAs that target process execution cost rather than process execution times. A view then needs to be taken on what level the SLA should be set. At this point the balance must be struck between attempting to run a process at too low a cost to be operable in reality and one that looks low cost but in fact could be lower. Here the role of benchmarking becomes essential in agreeing these targets. This has been achieved through informal benchmarking groups that exist within industry sectors, or via formal benchmarking companies, like EP-First Worldwide. The focus of either of these two approaches is on evaluating operations within market sectors across the full range of performance, from the best to the worst and placing the benchmarked organization within that range. Measurements may be financial (e.g. cost per hire) or operational (time to fill a vacancy). This approach is not a simple one. A great deal of care and expense is required to establish benchmarking programmes. The following are points to bear in mind: •

Establishing the component elements of benchmark figures is extremely difficult. One company’s recruiting costs may not have the same cost components and overhead allocations as another.

•

Publicly available benchmarks may not address the value creating parts of your processes. Time to hire is a commonly tracked measure, but offer to hire conversion rate may be more appropriate in a market where talent is scarce.

•

A poorly defined, irregular process creates a worthless comparator. If we cannot define with regularly what a process contains it will not provide a stable point of comparison.

Benchmarks then are no panacea and where the publicly available ones are not appropriate, others will only be established at significant cost. Nonetheless, they and the process they support have a vital semiotic role in the move to Shared Services. They make clear statements to the organization that the HR function is prepared to put a mark in the sand by which it can be judged. The function will then aspire to improve on that and continue to do so. These are the messages that support the work of the function as it seeks to engage with Senior Management in leading the company.

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We have discussed in detail the mechanics of the Shared Services model and the ways in which they bring control to an organization’s HR administration function. It is important to step back and be clear about some of the advantages and disadvantages for an HR function in delivering its administrative services in this way.

Advantages of the SSC model Scalability – One of the key challenges facing the HRD today is the change in shape of the business. M&A activity drives very rapid increases and decreases in employee numbers served. Organizing around process in consolidated locations provides an ideal environment in which to scale up or down the capacity of the HR administration organization. The standardized processes lend themselves to being easily trained by new operators. The centralized location also allows the movement of staff to areas of high demand when demand drops off in other areas, as a company divests parts of the business. The standardized processes are also a robust way of integrating new staff in to an organization with ‘the way we do HR round here’. HR is in control of its business – The challenge we address elsewhere in this report of the need for HR to find the space, skills and credibility to add new value to an organization is absolutely supported by the model. If HR is to sit in with senior managers and advise them on running their business, HR needs the credibility to join them. An efficient SSC is a very clear and powerful way of making the point that HR is focused on business value and efficiency and is publicly stating that it will strive for more. HR administration’s value can be defined – This has benefits on two fronts. The administrative services provided by HR are clearly defined and the means to obtain them are clear to employees and line managers. More importantly, it provides a framework from which HR can build and present the value proposition to the business for its services. If the business wants a service carried out within a faster SLA, HR can articulate what that will cost the business as a deviation from the standard. This provides the business with a clear commercial choice to be made. This allows HR to speak the same commercial language as the business, but also empowers managers to control their interaction with and hence costs of people management.

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Disadvantages of the SSC model Standardization forces hard decisions – The need to achieve standardization in the methods of HR administration, creates some difficult conversations for the function with the wider customer base. When consolidating activities into a SSC it is typical that every business unit claims that its needs and ways of working in HR are the only way it can work. Inertia, a lack of capacity to absorb change and political will drive this behaviour. It may even be that the highest revenue earning or profitable area of the business may be shouting the loudest. Either way, managing the development of standard processes will require HR to strike a fine balance between, business strategy, HR strategy, the financial business case for the SSC and genuine business need. If the project is signedoff by the CEO, CFO and CIO at a high-level before proceeding, it becomes far easier to have a reference point against which to make those decisions and explain the rationale to the business unit requiring the deviation. It is also wise to ‘pick the fights’. Every company has processes and policies by which it articulates its culture. They are often the few that are seen by employees and other stakeholders in action (e.g. a recruiting or discipline process). If these need to fly in the face of good process design, but form a very small part of the service, it is better to let them go. The pill will be easier to swallow elsewhere. No escaping HR forecasting and planning – Consolidating process creates much higher densities of transactions being processed in a single location, using greater and more costly bodies of resource. The scale of error is much greater when that resource is under-utilized or over-stretched. Before the SSC, HR could ‘just get in a temp’, or work late. Now the SSC management at all levels needs to be able to plan in detail. Bringing in temporary staff at short notice may mean a significant training requirement and a potential dip in service quality as new staff go through a learning cycle. Where demand is not planned for, whereas before an HR administrator could just pick up a small project they had been putting off, now large numbers of under-utilized people and technology represent a very significant cost to the business. In short, the company will need to be more disciplined in forecasting the demand for HR administrative services. It is up to HR to facilitate that discussion and process. It will often be a task that HR has been unused to doing it itself in detail, let alone the business. It is usual to predict headcount numbers, or total recruit or total redundancies. Now we need data on the number of training bookings, or the number of emails to a call center. Without this information, running an efficient operation can be a near impossible task.

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Case study

Royal Mail – Shared Services at scale The Royal Mail Group is one of the largest and most prominent employers in the UK. With over 170,000 employees for HR to support, it presents one of the most formidable challenges HR as the ‘Administrative Expert’ could face. Prior to the creation of the Shared Services operations, HR was delivered along business unit lines on a regional basis. Each region had its own Recruiting, Training, Pay and Administration team. These teams were running hundreds of legacy databases and applications to manage HR transactions. The need to leverage the benefits of the SSC approach could not have been more necessary. As part of the implementation of an internal market and shared service approach in all business support functions, HR created its SSC capability between 2000 and 2003. ORGANIZATION

HR created three main delivery units employing over 1000 employees. •

Transaction Services – the HR administration operation providing

•

Payroll input

•

Employee data changes

•

Recruiting administration

•

Benefits administration

•

Pensions

•

Attendance

•

Training and Development Group – the training operation

•

Training strategy

•

Training design (often outsourced)

•

Training delivery (often outsourced)

•

eLearning

•

Assessment center administration and delivery

•

Occupational Health Services – the health and welfare operation

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Location The operations were consolidated as below: •

Transaction Services

•

Two main offices in Sheffield and Manchester (each servicing a distinct employee type)

•

Four pay input offices, down from 17 after the first phase of consolidation

•

Training and Development Group

•

Three residential training centers

•

Occupational Health Services

•

One main location in Bristol with satellite offices for seeing employees

Technology •

Three main large-scale ERP systems, one for each employee group

•

Supported by small local legacy systems to complete specialist activities

Key points to consider There is a very clear grouping around processes. Allowing the centralization of each regional function’s own HR function and driving very significant efficiencies. This also allows for process improvement to be achieved in a more focused and effective way. With the exception of the pay centers, each location has restricted itself to serving a particular employee group that has distinct process needs from the other. So, though they could be delivering the same named process (e.g. benefits admin) the underlying process is different due to the employees’ terms and conditions of employment. As such, there is no value in bringing all the benefits admin processes together as they are different for the two types of employees. There is often no ’one size fits all’ for technology. The business has learned to live with the different platforms after they had been consolidated to service only a single workforce. The additional investment of running one single ERP would far outweigh the improvement in processing and data management. They have also recognized that ERPs cannot manage every process. In specialist areas like pensions legacy application that have been tailored to the company scheme are far more effective than an off the shelf solution.

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Chapter summary of key messages •

In order for HR to demonstrate that is able to engage with the business it must provide leadership in its operational management – it must become an ‘Administrative Expert’

•

By adopting the Shared Service model, HR can implement a ‘many to many’ approach to employee and line management contacts, using the most efficient and customer focused processes.

•

Managing the way the business interacts via ‘self-service’ or a call center requires careful assessment of the suitability of each channel for the end user to be accepted by them and be successful through broad take-up.

•

In organizational design terms, the requirements of SSC staff are not immediately the ones traditionally recruited for in junior HR roles. Your next generation of talent will need to be developed using new approaches.

•

The SSC model allows HR to define very clearly its offering to the business and track the impact it has through executive governance, customer focus and using performance measures to demonstrate continued improvement.

•

Use external benchmarking exercises with care as they can be difficult to complete. Frequently the baseline most relevant to HR’s customers is the internal measure of how much things have improved against a previous period’s performance. Use them to drive the case for change, rather than allowing them to become the ‘Holy Grail’.

•

Service Level Agreements should drive the delivery of outputs to the business that enable the HR strategy. Measuring anything else is a distraction.

•

The SSC model can provide the HR Leadership team with a scalable HR organization that provides the control to execute strategy and respond cost effectively to the business requirements.

•

The model’s very attractions will also enforce discipline on the business in its interactions with HR. These will be very new and need to be managed within the context of what the organization as a whole can afford and will culturally accept.

•

In terms of organizational design, process and technology, the best SSC implementations recognize that the past cannot be ignored and one size never fits all.

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Further reading and references Benchmarking Costs in Service Centers, The Corporate Leadership Council, The Corporate Executive Board, April 2001. Brian Becker Mark Huselid & Dave Ulrich, The HR Scorecard, Harvard Business School Press, 2001. Robert Cooke, Andrew Kris & Barbara Quinn, Shared Services – Mining for Corporate Gold, Prentice Hall, 2000 HR Index Benchmarks, EP-First Worldwide. 2002/2003. HR Service Centers in Europe, The Corporate Leadership Council, The Corporate Executive Board, November 2001. Vance Kearney, Don’t Leave the HR Out of eHR, People Management, The Journal of the Chartered Institute of Personnel and Development, February 2002. Peter Reilly and Tony Williams, How to Get the Best Value from HR: the Shared Services Option, Gower 2003. People Management, The Journal of the Chartered Institute of Personnel and Development, October 2003.

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Chapter 5 Skills for the new world Managing operations Managing delivery Managing customers Managing service Managing suppliers Accepting new disciplines The importance of context Process Engage Analyze Analyzing the service Predicting the future Reading between the interpersonal lines Facilitate Influence Technical skills

Chapter 5 Skills for the new world

“The skills that the average HR Director possesses today are not those that will be relevant in five years time. Some of the profession recognize this but most remain in blissful ignorance” INTERNATIONAL BLUE CHIP HR DIRECTOR

The previous sections of this report have sought to provide insight into the structural changes that have impacted on the HR function. We have seen that the emergence of new delivery models has changed the emphasis of the generalist role. Transactional activity is progressively being automated, centralized or outsourced. Specialist skills are being concentrated in Centers of Excellence and this has meant a major change in the nature of roles held by HR professionals. Structure is one thing, but the key to successful delivery lies in the skills to execute. Now, more than ever, the function of people management is seen as a business enabling discipline. Line managers have understood the principle that the way an organization manages and develops its people can change the way it functions and have a direct impact on its success. The ownership of those processes should lie with the line manager, but for HR to establish and embed its role in shaping the strategy, it needs credibility. Credibility is far from being a given. In the past, it may have come from fear – the ‘cop’ element of the ‘cop vs. prop’ expression sometimes used to describe the function. ‘You’d better behave, or you’ll be sent to personnel’ – is perhaps a simplistic view of the line’s perception, but one that would still ring true for many. It is unlikely to have come from the ‘prop’ component of the HR role, or the tea and sympathy brigade, as they may otherwise be known. Although many managers would have often been only too pleased to relinquish the ownership of difficult people issues to a willing HR helper, this would generally have earned the HR function gratitude rather than respect. We are clearly exaggerating here for effect, but unfortunately, we suspect that the skills associated with HR still lie predominantly in these areas, rather than in those of strategic thinking, business insight and change management.

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Although there is some evidence from Orion Partners research of an acknowledgement that the traditional HR skill set needs to change, the development route for individuals joining the profession appears to have remained largely unchanged. In the discussions we had with senior HR executives, the pace of change often appeared to be forced from outside, by an osmosis of skills brought through individuals joining from other business disciplines. They appeared disappointed and dissatisfied with the relevancy of the ‘official’ professional development available, though acknowledged that the broader sphere of management education had more to offer. Waiting for the profession to ‘sort itself out’ did not appear to be an option – with the evolutionary model of survival of the fittest appearing to be the one likely to prevail. In this section of the report, we would like to review the key skills groupings we believe to be relevant to the effective operation of new service delivery models. In parallel, we would like to assess the impact on the traditional skills development routes used by the profession. It is not the intention of the authors of the report to provide a full toolkit, as this would warrant a report in its own right. However, it is hoped that this section will provide sufficient guidelines as to the key requirements for success and will encourage the reader to probe further into the areas they find to be of particular interest. We have divided the skills requirements into four key areas: 1.

Managing operations

2.

Managing suppliers

3.

Business partnering

4.

Technical skills

Interestingly the first three categories draw little on what would have typically been thought of as the core HR skill set. This is not to belittle the technical HR skills which have served so well in the past, but the very fact that up to three quarters of the skills required to deliver an effective HR service are not ‘traditional’ HR skills, should be a wake up call for both the profession and the bodies which seek to represent it.

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Managing operations The first of our skills groupings is one of the areas where we perceive the new HR delivery models to have had the most impact in terms of skills requirement, but also where we see least evidence of the requirement being met in either the recruitment or development market. If organizations take the do-it-yourself option and seek to standardize and centralize transactional activity into a shared service center operation, it may be that as much as seventy to eighty percent of the HR function is brought together into one services entity. The management of this operation will require a very different set of skills from those that may have been used to lead a local admin team. Whereas, the skills to manage the latter will have largely been about content expertise and supervisory skills, the requirements of the former will require a whole new toolkit. In our experience, organizations do not necessarily always recognize the scale of this change and can find it difficult to identify the right individuals to manage these operations. Whereas an individual’s functional knowledge might traditionally have been the key success factor, the ability to run large-scale processing teams, along with well honed customer service and account management skills are more likely to be the talents needed to succeed. It is for this reason that organizations implementing large-scale shared service operations have often looked to other parts of their business rather than HR, to source these skills. Managers have often been brought in from customer service operations where the challenges of delivering service, managing customer end users and managing business clients are par for the course.

Managing delivery The secret to managing a large-scale delivery operation for HR is no different than in any other part of the business. It requires well-defined processes that are captured and documented in such a way as to be easily mastered by the people employed to deliver them. These must also be easily refreshed to ensure that they are accurate and current at all times. The roles of individuals within the organization need to be clearly defined, with simple interfaces and handoffs wherever possible. Individuals need to understand what is expected of them in terms of performance and feel motivated to deliver their best. They must also understand the consequences of failing to meet expected levels of performance and feel that performance gaps will be handled equitably. So, easy really, just like managing any other successful team! All joking aside, these skills may be generic to managing large-scale teams, but this is not often an area where HR professionals have had a great deal of experience.

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Managing customers We have commented in a number of areas on the need for HR to take less of an internal perspective and focus more on the needs of its customers. In managing a shared services operation, understanding customer requirements and creating a culture within the organization that is responsive and customer focused, will be key to the new model’s success. We have talked about some of the mechanisms for achieving this, including regular cross-functional forums, employee surveys and ‘mystery shopper’ programmes. However, it may be that in order to bring about a shift to this way of thinking, an infusion of capability from parts of the organization for which this is standard practice, may jumpstart the development of these skills.

Managing service This component of managing operations will be standard practice for outsource providers who will have a formal contract with an agreed governance framework, schedule of services and service level agreements as its foundation. In an in-house operation, the internal relationship will inevitably lack the commercial teeth of a contractual arrangement, but similar disciplines should still be followed if the commercial tension that is one of the principles of the shared service model is to be created. The emphasis in the skill set required for an effective account manager will be different in one key area. The ability to build strong working relations and then understand and interpret client needs is critical in both scenarios. However, it is the need to identify ways of transforming needs into additional sales/revenue opportunities that is clearly less of a priority in an in-house operation. The other skills required to manage the service dimension are very similar in both environments. A disciplined approach to the definition of both service level agreements (to be met by the service center) and their reverse operating level agreements (to be met by the rest of the business, including HR) needs to be adhered to if the service center is to be able to report on service, track trends and identify improvement opportunities. If the decision is taken to price services, the same rules of transparency and simplicity that make for successful outsourcing arrangements should still apply. A level of comfort with numerical data and the fundamentals of activity based costing will be an essential skill for any individuals running this kind of operation.

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The final group of skills we would identify as key to the effective service management are those required for conflict resolution. A core requirement for ensuring both the smooth transition to a shared services arrangement and an on-going stability of service is an effective issue management process. This enables both the delivery team and their customers to identify issues with the service, undertake root cause analysis and make the necessary arrangements to ensure that the issue does not reoccur. Described in this clinical way, this sounds like a simple process to manage. In reality, issues raised will often spark emotions in the SSC delivery team and the customer team, and tact, diplomacy and an ability to diffuse emotions and focus on fact will make for an effective player.

Managing suppliers In previous sections of this report, we have seen how many organizations have examined their business requirements and then their own internal capabilities, and have decided that their interests would be better served by outsourcing a variety of elements of their HR service provision to third parties. The nature of the relationship between the HR function and its suppliers will differ based on two key criteria: 1.

Strategic importance of outsourced function

2.

Percentage volume of service delivered

The more strategically important a service and the greater percentage of HR activity it represents, the more critical effective supplier management will be to its success. With some of the full scope HR BPO deals we have already discussed, the outsource provider will be responsible for delivering up to seventy percent of the organization’s HR requirements. In these circumstances, it is important for those managing the contract and the relationship to understand those factors that are most likely to contribute to a superior performance. To succeed in this complex area, HR professionals will learn a great deal from their colleagues in the Procurement function, whose knowledge of the technicalities of contract negotiations etc. will be invaluable. However, in our experience, a procurement led approach which may place great emphasis on the letter of the contract, may

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ignore the subtleties which are more likely to result in a mutually beneficial relationship. It is our view that the key drivers are:

Identifying what matters A typical outsource contract will have a detailed schedule of services as well as a list of contractual service level agreements which dictate the standard to which the services should be performed. This will generally be the minimum standard to be expected by the customer and often service penalties resulting in reductions in contract fees will be invoked if service levels are not met. Performance against these agreed standards will generally be the focus of regular service performance reporting, which will provide detailed information about achievement levels. Experience of managing this process enables us to say that often the reporting would indicate that the service is running to agreed levels and that performance expectations are being met. However, the perceived levels of customer satisfaction would often indicate the opposite, with the sense that the green traffic lights on the service reports ought rather to be blinking on amber or red. This is because the in-house function often fails to clearly identify and specify what really matters. Time and effort is often wasted in the wrong areas because honest dialogue does not occur between the two parties. It will be critical for anyone responsible for managing a major outsourced relationship to invest time with the provider to sharing the key cultural and organizational drivers for success.

Partnering for success Partnering may seem an overused term, but those organizations who work with providers to establish this kind of relationship will generally see a return on their investment. If we think about the term ‘partner’ in a business sense, it is our view that it describes a relationship that has three key features: •

Complementary skills – This describes the fact that an external provider will have been chosen for specific skills, scale or reach not possessed by the customer. Enabling the supplier to leverage these attributes by specifying desired outcomes but allowing them latitude to best manage the process is likely to have better results. Initially, this may feel like relinquishing too much control but levels of confidence in a supplier’s ability to deliver will tend to increase over time.

•

Shared objectives – The notion of a common purpose is critical to a successful partnership. In the context of managing an external supplier this is about the in-house function retaining ownership for

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meeting the business’ requirements, whilst the outsource provider relies on meeting those requirements to secure both current and future revenues. Ensuring clarity about which objectives can meaningfully be shared is critical. To put it bluntly, an external supplier will need to make money with the in-house function providing the business with a service it wants at a cost it can afford and is prepared to pay. Being in a position to hold open and honest dialogue about these subjects is likely to lead to better answers all round. •

Shared risk – This feature is clearly linked to the concept of shared objectives. Applying careful consideration to the way each party can be incentivized to assist the other in the achievement of their objectives is a key skill. This may be about helping the organization to understand the impact of different ways of doing things, e.g enabling recruitment candidates to be sourced through the most cost effective channels by ensuring that recruitment activity is forecasted and planned wherever possible.

Accepting new disciplines We may traditionally associate the HR function with discipline in the context of organizational standards of performance or procedure. However, discipline in the sense of financial control or measuring service performance are relatively new disciplines for the function. It is for this reason that often individuals who have not worked within the HR function, but have held roles in areas such as customer service management, can be well suited to some of the new roles that are emerging in HR. The control mechanisms that are in place in many organizations to manage the interface with the customer, are very similar to those required in monitoring the performance of suppliers and drawing on the skill set required to manage these processes can be very useful. It is obvious that there are other skills that are important like understanding the basics of contract law and managing finances and budgets that will be useful in managing suppliers effectively. These are generally skills that can be brought to a team by colleagues from other disciplines and acquired over time. However, as we have stressed, it is important that these are not seen as the primary skills for managing external contracts. The right blend of an understanding of the service itself and the processes needed to manage it is what is required, or the real value of the relationship will not be achieved.

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Skills for Business Partnering

“I choose my business partners… you don’t become one just because it’s your job title.” EXECUTIVE VICE PRESIDENT, OPERATIONS, GLOBAL TELECOMMUNICATIONS COMPANY

Our research has led us to question the validity of ‘HR Business Partner’ as a distinct job title. Interestingly, it is not a title that has been adopted in any of the other business support functions. Marketing, Finance and IT professionals appear to be comfortable with self-explanatory titles like Brand Manager or Financial Controller. Is this because they lack the insight and vision of the HR profession to see their role positioned at a more strategic level? Or is it rather that they see less need to justify their existence with a title that takes the ‘it does what is says on the tin’ approach and whose impact relies on literally spelling out the link into the business? When introduced as a concept some ten years ago, the value of the term was in the distinction it made from the HR generalist role, with its focus on technical HR skills rather than the broader business application. It stressed alignment with business objectives, and therefore by inference, a more strategic contribution. Although we may question the appropriateness of the job title, we do feel it appropriate to identify a specific group of skills required by those HR professionals who provide the dedicated senior level interface to the business. We would define this as being those individuals who have responsibility for working with a defined part of an organization to develop its HR plan. In the delivery models we have discussed in earlier sections of this report, this plan would then generally be executed as required by a combination of line management, resource from a specialist center of excellence and an HR services function, be it in-house or outsourced. Our research has enabled us to work with some very talented HR professionals who are undoubtedly adding significant value to their respective organizations. However, these individuals are amongst the select few who have arrived at the top of their profession. Although they were operating in diverse industries, and had often followed quite different routes to arrive in their posts, they were uniformly critical of the skill level of the profession as a whole. When asked to comment on their assessment of the ability of those currently in Business Partner roles to fulfill the requirements of the role, the average estimate was that only

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thirty percent had the capability to meet the needs. In examining the skills requirements for effective performance in these roles, we have identified a number of core themes. The language used to describe groups of skills may have differed slightly by organization, but there was nonetheless a commonality underlining the capabilities required. We have grouped these into five key skills groupings, which we have chosen to capture under these active headings: 1.

Process

2.

Engage

3.

Analyze

4.

Facilitate

5.

Influence

CONTEXT

Influence

Engage

Facilitate

CONTEXT

CONTEXT

Process

Analyse

CONTEXT Source: Orion Partners 2003

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As we review these categories in more detail, there is one specific question which we will need to consider, and that is – how many of the competencies and behaviours we are describing can be classified as skills that can be learnt, and how many would fall more appropriately into the category of innate characteristic? We do not intend to be so bold as to argue the science behind the acquisition of abilities as a result of training or practice, as opposed to those that we appear to possess just by the very nature of the people we are. However, there certainly appear to be components of the skills needed that no amount of training and development will instill. Whether these are the ‘must have’ skills that make the real difference is probably a subjective consideration, as so many other factors will influence an individual’s ability to make an impact within an organization – culture, climate, and timing – to name but a few. However, what does appear to be true is that it is these generic business and management skills, as opposed to the traditional ‘technical’ HR skills, that will dictate the influence of and ultimately the value added by the successful HR person.

The importance of context In our experience, the skill categories are common across industries. Our research enabled us to test this theory in many different environments – from FMCG to telecommunications, financial services to oil and gas, and public sector to professional services. The one thing that does differ, however, and which plays a critical role in the effective deployment of this skills framework, is context. Although the skill groupings are common, it is the ability to find the correct emphasis in a given context that will determine the level of success an individual will have. Slavish implementation of those approaches considered ‘best practice’, irrespective of the organizational culture and climate, may at best be futile and at worst counterproductive. A common thread in our discussions with the executives we interviewed was the notion of organizational maturity. Many had worked for a fairly diverse group of companies and yet were quickly at ease managing the different people challenges faced by the different organizations they had worked for. The concept of maturity may sound somewhat patronizing, implying an organization’s ability to accept more or less sophisticated approaches. The converse can also be true, hinting at an organization that is less receptive to change. In our conversations it was the sense and knowledge of where an organization was at, and then the chameleon like ability to hone one’s skills to identify those that would have most impact, was what was most critical.

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Process HR functions have traditionally been associated with processing high levels of administrative transactions, but the transition to understanding the key inputs and outputs of a process, and then organizing activity around process, represents a new way of working. Often HR has lost itself in the detail of a particular process, with the end result that all available time and energy is focused on the doing and not on the thinking and analyzing where they can add greater value. They have also often focused on processes in such a way as to convey ownership of them – whereas this ownership should really lie with the line manager. The outcome of this approach is that the line manager often relinquishes responsibility for the core people processes that should be at the heart of productive organizations. Performance management is an obvious culprit that springs to mind. How often are parts of this process seen as tasks that HR inflicts on the business? Those tedious forms that HR hound you for to the point at which you hastily complete the mandatory documentation, without actually engaging in the active dialogue that is supposed to be the whole point of the process in the first place! We exaggerate for effect, but it is not that an expertise in process is not important, but that it is about managing process and being in a position to ask the ‘so what’s’ about output that the Business Partner’s skill should lie. The adoption of new service delivery models and specifically the increase in business process outsourcing have forced a change in behaviour in the management of HR processes. A desire to control every part of a process, and often to specify unreasonably high levels of bespoke tailoring to what should be standard HR processes, make a service both more cumbersome and costly to manage. Although each organization will have its own specific requirements, there are a large number of processes that should be able to be performed in a standard way. If there is quantifiable business value in deviating from a process, e.g. it has been proved that employee retention is increased by handling employees in a specific way, then it will be acceptable to tailor. However, for the significant majority of processes, the argument that ‘Our part of the business is different’, is unlikely to make commercial sense. The skill required here is the ability to translate organizational needs, specify the outputs required and then work with the service delivery organization to agree the best method for measuring them. If this proves difficult, one of the underlying reasons is that it requires a relationship of trust and mutual understanding between different teams, either in-house or outsourced, and trust takes time to develop. Indeed, not only does trust take time to develop, but should there be a breakdown in the relationship, however small, caused perhaps by an operational mistake, then trust takes at least twice as long to be regained. The flip side of the control argument is though the service

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organization should manage the detail of the processes, from a customer perspective, ownership of the outputs will still lie with the Business Partner. Outsourcing or indeed, centralizing certain services into a shared services arrangement is not an excuse to ‘throw stuff over the wall’ and hope that somebody picks up the pieces. Again we come to clarity over output and the ability to understand the parts of a process that are the key levers for improvements in levels of cost or quality. If trust is one of the reasons behind a reluctance to relinquish the detail of process management, the other is lack of clarity for the Business Partner about what this will mean for his or her own role. Dealing with the nitty gritty and ‘getting stuff done’ has often been the comfort zone. A critical component of any transition to a new HR operating model is the careful planning and communication of the impact this change will have. This point was stressed time and again during our interviews with both HR executives and representatives of the outsourcing providers. The alternative is an HR community ‘in sabotage mode’ (Alan Bailey, Xchanging HR Services ) who faced with uncertainty, will take it upon themselves to micro-manage the process rather than use their newly acquired time and space to intervene in the business at a more strategic level.

Owning outcomes – a new way of thinking about process Daniel Flint is HR Director for Accenture plc in the UK and Ireland. His HR team comprises a central policy group, a small dedicated recruitment team and a larger team of HR Business Partners who work directly with the consulting and outsourcing practices. The vast majority of the transactional HR activity is outsourced to Accenture’s HR outsourcing division, Accenture HR Services. Although a wholly owned subsidiary of Accenture, the contract between the outsourcer and its parent company is a full commercial arrangement, with contractual service levels and guaranteed cost savings targets. “The initial outsource took place in the summer of 2000. This saw the successful transition of a large number of our core HR processes. However, one of the promises of the original agreement had been not just that the processes would be delivered to the same standard but at lower cost, but also that we would see an increase in effectiveness and efficiency. Eighteen months into the contract much had been achieved, but the scale of transformation was still not as high as it might have been.

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As a team, we decided to take a serious look at the existing scope of our agreement and carry out a joint review of all the processes we were managing. Our objective was to eliminate what we referred to as the ‘wavy line’ syndrome... the wavy line being the level of complexity of process handoffs between our outsourcing partner and us. In order to address issues, the two organizations formed a joint team and set to the task of: •

Specifying desired outcomes

•

Eliminating unnecessary handoffs

•

Identifying opportunities for process automation

The project was very successful and has resulted in the elimination of a significant number of handoffs and substantial cost savings. Engagement in the process was also of significant benefit to the Business Partner team who have been able to see the concrete shift in their role from one of delivering the process to managing.

Engage “You need to be equal to or better than the best people on your bosses’ team. You need to understand how every function either makes money or adds value to the business if you’re ever going to be able to engage.” AVERY DUFF, HR DIRECTOR, EMI MUSIC

Lack of engagement is not generally a criticism that can be thrown at the HR function, if engagement means commitment. However, the critical set of skills we would like to review in this next section is those that enable the HR Business Partner to engage at the right level in the business, on the issues that matter and will deliver real business benefit. Implied in the quote above is the notion that for real engagement to happen, the successful HR Business Partner needs to be as commercially astute as any other of the functional executives at the table.

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This means that in order to add value, an individual must understand the fundamentals of how their business operates. He or she should be as able to articulate the organization’s value proposition as the sales or marketing professional; as able to describe the key financial levers and metrics as the accountant and to demonstrate as clear an understanding of the key operational issues as any of the organization’s operations executives. If the purpose of this section is to describe the skills required for success, we should also comment on how these skills may be acquired. Understanding the basics of how businesses operate is initially a question of theory and should be within the grasp of anyone able to pick up and digest standard business textbooks on strategic planning, marketing and finance. This then needs to be made more relevant, both in terms of understanding the specifics of the particular business within which you an individual is operating, but also in an appreciation of the current economic, political and environmental issues facing all businesses. Acquisition of the latter comes in two ways. The first is a healthy appetite for doing one’s own daily research – reading an informed general publication such as the Financial Times and the trade press for a particular industry or sector. The second is perhaps better described as an approach or attitude of mind, as it comes from a natural level of inquisitiveness. An individual that talks regularly with his or her business colleagues, listening and probing to understand the issues, will continue to improve their level of fluency in both the content and language of their business. There is clearly a third component and that is simply experience. As we review some of the other skills requirements for the successful Business Partner, experience will stand out as a critical feature. It suggests that to be truly effective in the role an individual will have had the opportunity to operate in a number of different environments, ideally having spent a period of time outside the HR function.

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Business Engagement – No Home Goals A man who believes passionately in the need to engage with the business, is Paul Nolan, HR Director at The Football Association. A charismatic individual and not one afraid to speak his mind, Paul is highly sceptical as to the general level of business awareness of HR professionals. One of the primary reasons he believes this to be the case, is that HR executives are not able to engage in the core of their business, because they often fail to understand the fundamentals of how and why their organization functions. This has not been the case for Paul. His career in HR started at Rolls Royce and then saw a move to the food industry where he spent 12 years, with a heavy emphasis on industrial relations roles. It was at this early stage of his career that he already became acutely aware of the business impact of his work. In low tech, low margin production environments like those of the bread and milk industries, a detailed understanding of the operations as well as a comprehensive appreciation of the sectors competitive landscape were prerequisites for the tough front line roles he held. His current role has meant a complete change of environment- for a scouser with a passion for his home team, being appointed as the HR Director at The Football Association, must have seemed a dream come true. However, it was not his love of the game that made him the right candidate for the job. Indeed, when Adam Crozier was appointed to the role of Chief Executive of the FA in January 2000, his recruitment specification for all the Executive team posts he filled was explicit. He was looking for business professionals all of whom needed to demonstrate top team experience in FTSE 250 companies. In our conversation with Paul, we learned about the transformation that has occurred at The FA since the late 90’s. Profit – new terminology for the body, but part of the change required was a need to think and act like a business – has increased ten fold. Two thirds of the staff employed are new – 40% of them graduate and 62% of then female. Average age has fallen from 57 to 36. The challenge faced by the organization was to rebuild its capabilities and transform it from a bureaucratic and insular part of the sporting establishment to a commercially minded, people-based service organization that is strongly positioned to maximize from its unique global brands.

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As a driving force in the change programme that ensued, Paul needed to focus on three key areas: •

Talent

•

Climate

•

Leadership

In order to get the organization thinking in a new way, Paul had first to demonstrate himself a thorough understanding of the commercial challenges it was facing and work with his fellow executives to identify the skills and behaviours that would help create the right climate for change. Crozier had effectively given him the brief to reposition the organization as an employer, with all that that entails. In our discussions, we did talk about some of the traditional HR interventions that were introduced support the change; a new performance management and reward strategy; a job levelling exercise that took the original eleven grade structure that had covered the one hundred and eighty employees to four levels covering all roles from CEO to receptionist. However, the bulk of the conversation was about how The FA were going to rebuild their capabilities to enable them to deliver commercial success. It was clear that Paul has achieved a significant amount in delivering an effective HR strategy for the business, but only because his ability to engage with his fellow executives has ensured that it is a strategy that is fully aligned to the needs and aspirations of the organization. “Ultimately, HR leaders add the greatest value when they anticipate the future capabilities that their organizations will need to deliver advantage in their marketplaces and set about building them. Sadly most HR people in my experience tend to respond and react to their organizations and in doing so are never in a position to significantly effect the performance of their businesses.”

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Analyze “There are too many HR people out there who are really just working on a wing and a prayer. They base their work on assertion and belief…” CHRIS DYSON, EUROPEAN MANAGING DIRECTOR, HAY GROUP, QUOTED IN HUMAN RESOURCES MAGAZINE, APRIL 2003

A wing and a prayer may seem like an uncharitable description of the approach taken by HR professionals to their work. The comment was made in an article written specifically about the poor quality of measurement practices in the function. However, it seemed a useful one to use when coming to the third grouping in our skills framework – Analyze. We would hate to count the number of HR people we have encountered, who would admit quite openly to not being particularly comfortable with numbers and it would be easy to assume that this group of skills relates primarily to numerical proficiency. However, in our view, the problem-solving and analysis skills required go far beyond an easy relationship with numbers. The truly effective business partner will need to demonstrate an ability to analyze across a number of key dimensions, and always with the objective of arriving at the answer to the question, ‘So what?’ If we were to go to any of the competency frameworks used by successful organizations, we would be sure to find a section covering problem-solving and analysis. The language would change slightly according to the culture and identity of the organization but we are confident that similarities would emerge. Our research has led us to believe that there are three key areas in which the Business Partner needs to apply these widely accepted generic skills. •

Analyzing the service

•

Predicting the future

•

Reading between the interpersonal lines.

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Analyzing the service At the risk of falling into the trap of an internal focus that we have said can all too often be a weakness of the HR function, we would start by asserting that a pre-requisite is an ability to analyze and understand the effectiveness of the HR function itself. This is true both in terms of cost and quality, and implies an ability to measure the level to which the function contributes to the organization’s success. We talked earlier about the ability to demonstrate the same level of commercial awareness as colleagues in other functions – a good starting place would seem to be the HR function itself. We have seen that efforts to improve the effectiveness of the HR service may require investment in new technology or the adoption of new methods of service delivery, which again may require upfront investment to execute. In the long queue for capital or project expenditure, only those with a carefully articulated business case that identifies current costs, benefits, funding requirements and the subsequent return on investment, can expect a hearing, let alone a large dollop of cash.

Predicting the future It is in this area of analysis that the HR Business Partner can potentially add most value to an organization. It is also here that the integrated nature of the framework we propose is perhaps most evident. At the beginning of this section, we talked about the importance of context and we have also discussed the need to engage with the business. It is a combination of understanding both the context and the commercial or organizational environment, that the application of analytical skills will have most value, as it is this combination that enables HR to look ahead and see the people challenges that will face the organization. We would not need to look far to find a dozen quotes from leading business thinkers on the need for agility in the face of change. If HR is to play a leading role in creating that capability, it needs to be able to analyze both the internal and external markets and draw from them the conclusions that will ensure the organization is best prepared for the future. Being ahead of the curve may occasionally be based on luck, but is more likely to be a result of regular reviews of both internal and external indicators to assess the need to hone or change strategy.

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Reading between the interpersonal lines Our focus so far in this section has been on hard analytics – the need to work with concrete data to facilitate fact-based debate about an organization’s people priorities. The emphasis has been perhaps in reaction to the view that HR professionals more traditionally focus on the softer dimensions of organizational issues. However, as with all cries for change, we must be careful not to imply that the pendulum should swing too far in the opposite direction. The fact that the function would sometimes benefit from a more rigorous approach to cost analysis, does not mean that any less attention should be given to monitoring the subtler components of an organization’s make up. An understanding of the psychology of the workplace and the behavioural theories that govern individual and team responses to situations are not subjects that are the unique preserve of the HR function. A formal occupational psychology qualification may still be a route into working in this area, and HR may be seen as the guardian of some of the processes that help ensure the psychological health of an organization. However, it should be HR’s role to help analyze such issues at a macro level and then identify the appropriate processes and interventions that will enable individual managers and employees to operate more effectively. In our view, identifying issues and working as a coach to individuals is not the role of HR – rather the facilitation of these activities through the line.

Facilitate “I fundamentally believe that the management of HR is a key task of the line manager....it is not something done by HR professionals.” SOURCE: CIPD REPORT 2001, VOICES FROM THE BOARDROOM

This quote is taken from a report undertaken by the CIPD seeking the views of senior executives on the HR function and its contribution. It should not surprise as it has long been the view that HR’s role is not to manage the people processes, but rather to equip managers with the appropriate skills and expertise to manage more effectively. However, in discussions with those interviewed for this report, it appears that this is an area that business partners have found difficulty in relinquishing control. Whether this is through force of habit or through fear of the

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consequences of leaving managers to their own devices, the underlying reasons are unclear. Application of some of the basic principles of coaching and facilitating would appear to be what is required. There are many schools of coaching and facilitation, and we do not wish to embark on an examination of all the possible techniques – which would and have warranted many publications in their own right. However, one of the fundamentals of coaching is about knowing when to lead and when to let go, creating expertise in others and not dependency. The effective business partner will know his or her audience, understand their objectives and work with them to ensure that they manage the people component of their specific role or project effectively. Different individuals or groups of individuals will require a different style of facilitation, which will vary according to both capability and attitude. A useful matrix outlines the differences in approach, but all have the objective of achieving the best performance by releasing people’s own experiences, abilities and potential for improvement.

HIGH WILL

Guide

Delegate

LOW WILL

Direct

Excite

Source. The Tao of Coaching, Max Landsberg

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Influence “You know that you may have the ultimate veto, but you must also recognize that any power it affords will be lost the first time you use it.” AVERY DUFF, HR DIRECTOR, EMI MUSIC

The final grouping of our business partner skills we capture under the heading of influence. As the above quote implies, representatives of the HR function may often be in the position of asking the organization to face thorny issues or take difficult decisions. As guardians of organizational policy and also as those with the responsibility for ensuring compliance with employment legislation, HR may have the power to dictate a certain course of action. However, it will be most effective when it is able to work with the business and exert its influence in a way that will engender trust in its judgement and an acknowledgement of both the human and commercial implications of chosen routes. We don’t want to suggest that the HR business partners will only be successful if they are able to assume the role of all-knowing organizational sages, but that the instinctive knowledge of when to make a call, and the ability to at least get other senior managers to listen and acknowledge the impact of certain decisions, will differentiate them from those that help shape decisions, rather than mop up afterwards. We asked at the beginning of this section whether all those skills identified were ones that could be learnt or whether some were more likely to be innate personality traits. It is in the area of influencing that we may be most likely to argue the key skills are difficult to learn. The importance of presence is difficult to quantify and though it may be affected by an individuals physical presence is more likely to be influenced by their ability to articulate the issues in a clear and concise fashion, in a way that resonates with those present. Demonstrating a sound understanding of a given situation and then giving insight into the pertinent issues will tend to provide a better guarantee of being listened to than anything else.

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Technical skills And now to our final section which we have given the rather mundane title of technical skills. As we said at the outset this is not to diminish in anyway the value of the deep functional skills that are critical to the profession’s role. However, the focus of this report has been on the evolution of new ways of delivering service in HR. We have seen the evolution of the concept of centers of excellence, which seek to provide a focus to these skills. To provide genuine strategic value to an organization the skills clearly need to be deployed within the context of its objectives and its values, as well as other key factors like its competitive position. The requirement for specialist skills will differ according to an organization’s particular needs. For example, the employee relations expertise will be critical to some but irrelevant to others. Access to talented management development professionals would arguably be of value in any organization, but the depth of an in-house capability is likely to vary according to specific needs. It is our belief that the nimble model for the development of these skills will get the right balance between an in-house team that understands the specific requirements of the business and an ability to source in-depth functional skills at the point of need.

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Chapter 6 Summary Line management Evaluating the function’s performance Further leveraging of technology and outsourcing Changing the skills and career path for HR Where should HR focus next? References

Chapter 6 Summary The model we have described is being implemented across the UK, US and Europe in large and medium-sized corporations. In the UK some of the best known names in the corporate world have adopted this model of HR delivery into their businesses. They have taken up the challenge of implementing a new model for HR within the context of their own circumstances and cultures. The following are just a few who are making this model work and finding out for themselves the benefits and pitfalls that need to be tackled: •

Barclays Bank

•

Lloyds TSB

•

Amey

•

British Telecommunications

•

Centrica

•

Shell

•

TUI

•

British Petroleum

•

Royal Mail

•

Prudential

•

Cable and Wireless Global

•

Accenture UK Limited

Looking at how each has tackled the challenge through the course of our work and research at Orion Partners, we can identify a number of issues that face the function as it implements this model. This chapter will consider the implications of the model for the profession as it looks towards the future.

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Line management The roles for HR and the line manager in the future Whilst much has been written about the need for HR to raise its game in delivering business results, we have placed an equal focus on the role of line managers in delivering ‘people management’. Line managers are the face of the organization for many employees and the new HR operating model seeks to place them back into that relationship. This is entirely in line with the feelings of business leaders, who have seen HR as ‘getting in the way’ of line managers and their employees, as we discussed in chapter five. Chapter two, ‘The New Model’, described the role of line managers in enabling the model to perform. This allows HR to be freed from carrying out the activities that should be an intrinsic part of the line managers’ role, for example: •

Identifying employees individual development needs;

•

Managing team members performance; and

•

Dealing with local succession planning within their teams.

These are all areas that HR has frequently either seen as its’ area of operations, or as an area where line managers ‘cannot be trusted to operate’. The best line managers and business leaders resent this. They need to be able to build and lead their teams. These activities are key in enabling them to do this. A review of the recruitment pages of the national press will show advertisements for business leaders seeking to filter business managers by this skill set. HR has spent many hours looking to recruit these qualities in managers and then frustrating them by clipping their wings. One of the key challenges presented by the implementation of this model is going to be HR addressing the change in its role in the appropriate way. Too often the question of line manager capability has been addressed by HR doing the work for them, to ensure that these activities happen. In the future, HR needs to address the route cause of a lack of line management capability and enforce its’ accountability for performing in this area. Our model of HR as a Business Partner requires HR to have the space to focus on the broader business, setting the frameworks and evaluation methods to deliver this behaviour. The Finance function sets a framework of a budget or revenue target, agreed with the businesses leadership, for managers to work within. It then provides the reporting tools against which to manage and track performance. It does not attempt to manage the business for them to deliver the targets. HR will need to learn to avoid doing that very thing.

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Creating value for line management We have also touched on some of the concerns of line managers as HR steps away from this area. As HR executes the role of Administrative Expert it will need to guard against the mistake of pushing ‘people management’ and administration back to the line manager. As HR looks to technology and selfservice to deliver reductions in operating costs for the HR function, it faces some real risks. The business case for shared services and HR outsourcing will often rely on moving the administration burden from HR to line management and employees. The shift ends up not bringing benefits to those groups but also adding to their burden. Here internal efficiencies to HR are delivered, but the function destroys its credibility and places a new burden on the line manager. This misplaced interpretation of the Administrative Expert role must be guarded against as HR implements the new model. The focus must always remain on the total benefit to the business, rather than solely to HR. The cost of the HR function often amounts to a relatively small part of the total operating costs of the business. A 30% improvement in efficiency here may be a very small contribution when compared to the additional cost of administration moved to the business, as it swallows operational resource. The Administrative Expert role needs to focus on getting its own house in order and, through that, delivering value to the business. They will then do so by reducing the HR administrative burden and creating an infrastructure that allows the business to better manage its people. We have seen this work particularly well where shared services and outsourcing create Management Information systems and access to processes that enable them to more easily execute people management processes. Absence reporting data and analysis, access to on-line training catalogues that group courses by employee role, competency or skill set are all examples of value-added outputs from an improved HR administration infrastructure. Here both examples offer managers new information and tools to improve employee performance. They do actually reduce HR’s direct involvement with the manager and employee. Having said that, both are established by an HR function that understands the business strategy and the best practice HR interventions to support that.

Co-ordination of the roles The preceding chapters have described quite clear roles for HR and an organizational model for delivering them. New HR teams and roles are being created – the ‘HR Business Partner’, the outsourcing supplier and the Center of Excellence. As HR engages in such structural change it is easy for the function to lose sight of the ‘customer’s’ view of its service.

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“...this fragmentation of the HR function is causing all sorts of unintended problems. Senior managers look at all the fragments and are not clear how the function as a whole adds value. Neither are they sure that it wouldn’t make more sense to outsource the lower-value end (to low-cost providers), the top-value end (to strategic consulting firms) and the employee-facing part (to line managers)” GRATTON (2003)

At Orion Partners, we have often seen that the HR function does not move in unison as it implements the new model. Those driving the shift to Shared Services, outsourcing and Centers of Excellence often cause resentment in their colleagues in Corporate HR and business unit/HR Business Partner roles. The sharp relief that the SSC model throws all of HR’s activities into is uncomfortable for some. The performance metrics and focus on outputs can be an unpleasant spotlight that some may resist moving into. As a result, the HR function looks to be a function that is not moving in the same direction, concentrating its efforts in delivering improved business performance. On the other hand as the HRBPs focus on delivering for their business, they find that they are not supported by the Operations element of HR. They find themselves being dragged back into the activities they sought to move away from, to cover for poor quality delivery of HR shared services activities. Throughout the change process, HR can never forget that the exercise is one that seeks to deliver improved business performance. Each new HR organization must be united in a clear model that is mapped out by the HR leadership. This must be re-enforced throughout the communications and the function’s evaluation approach. This is a message that the HR Leadership team must own and rigorously enforce.

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Evaluating the function’s performance There is still a very real gap between what most HR functions see as evaluation of their business contribution and what is required. Much is driven by a focus on a model that does not really challenge its taxonomy sufficiently or is rigorous in its application. In many HR functions, measuring the performance of the function in adding value to the business is seen as an unnecessary overhead, rather than a central element of actually delivering performance. The commercialized nature of the shared service and outsourcing models will embed the use of performance metrics in the operation of the HR function. The challenge for HR is to understand how best to utilize them. HR and accounting academics have spent a good deal of time attempting to describe the means by which the ‘value’ of people can be totalized, tracked and reflected within the balance sheet (Mayo 2001/Huselid, Becker, Ulrich 2001). The implementation costs of taking these approaches (cash and time) are substantial and are more than most organizations can support today in HR. Yet there is a balance that needs to be struck. There is a very clear need for the function to track its performance and the success of its interventions. HR has to recognize that its metrics are the tools by which HR can drive change. Implementing best practice in organizations has always required the establishment of a case for change (usually a financial one!). If it is to undertake the change process we have discussed, the focus of HR’s evaluation approach needs to support and drive that. The role of evaluation metrics are also key to the development of some of the skills we have discussed and the positioning of HR at a senior level. Quantitative measures are the language of the boardroom and HR needs to be able to use them regardless of how the function has traditionally felt about them. The HR profession will need to continue to develop its approach to evaluation. Benchmarking has a role to play, as we have discussed, in evaluating best practice across external organizations. In addition, strategically focused balanced scorecard reporting has a role in engaging the executive leadership team around the value added by HR. At an intervention specific level, HR must define evaluation criteria for it to work. This will serve to make its case for an outcome focused approach to HR and allow it to drive improvement cycles within its own activities.

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Further leveraging of technology and outsourcing We have identified that technology and outsourcing are playing a key role in implementing a new model for HR. The perils and pitfalls of engaging with these have been discussed, as have the benefits. These discussions represent the beginning of the process of fully utilizing these for HR. Recent outsourcing and IT activities have focused on HR working out how best to use these tools and overcoming ingrained resistance to them. They have begun to provide benefits, but the challenge is now to really integrate them into the continued development of the function.

“Over the past 30 years the back office has been a huge DIY free-for-all. Companies have committed themselves to massive IT investment and waves of re-engineering consulting that only serve to make their back-offices more resistant to change. The results have been deeply disappointing. While the manufacturing productivity index averages 320 against 100 in 1980, services lag at a deeply unimpressive 140. Error rates in the typical back office (about 30 per cent on a good day) would bring a factory to its knees.” ANDREWS (2002)

HR now needs to look to real process management expertise to integrate the technology investment it has made in the shared services/center of excellence operating model. Companies have started to look to process management techniques like Six Sigma to drive the next stage of efficiencies from their shared services operations. These move HR process management away from the traditional HR manager and into the realm of the professional HR operations manager. The role of ‘Director of HR Shared Services’ is now established as a distinct member of the HR Leadership team (Sunday Times, February 2004). The development and crystallization of their subordinate organization and its skill set will surely follow.

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“This is a key role in the HR Leadership team and will be responsible for HR service delivery using call center technology, internal account management, managing external alliance partnerships with Recruitment Advisors and various HR services providers.” ADVERTISEMENT FOR DIRECTOR OF HR SHARED SERVICES (SUNDAY TIMES, FEBRUARY 2004).

In addition, the growth of offshoring activities in sectors where HR operations tend to lag and then follow will bring it into sharper focus. The impact of this will present real challenges in how to utilize this development. As we reviewed in Chapter three it does offer the prize of significantly reduced payroll costs, though HR will do well to review the experience of other back office functions in this area.

“By 2008 the IT-enabled services sector is projected to earn 24 billion dollars in revenue for India” AGENCE FRANCE PRESSE, 2002

Key decisions will need to be addressed in the following areas: •

The scope of offshoring

•

The location of offshoring

In terms of scope, the problems with language and culture differing from home countries may mean that offshore HR call centers never become a reality. They present challenges that are yet to be fully overcome in the banking sector, despite their significant investment. Nonetheless, for high volume transaction processing it may still be attractive. This could be particularly true as outsourcers begin to standardize their processes across multiple clients and create sufficient scale to invest in multi-client HR processing centers offshore. Companies like IBM and Accenture have already begun to do so. Location will also present a challenge. The geo-political climate continues to be uncertain across the world in new offshoring centers like India (e.g. Mumbai) and China (e.g. Dalian). As a result, near-shoring may become more attractive

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as they represent more stable options. Locations in the eastern edges of the European Union may offer opportunities here, as the outsourcers seek to build on their Finance and Procurement processing centers there. It may well be that most individual organizations will never achieve sufficient scale to justify the investment to take their processes offshore without the support of outsourcers.

Changing the skills and career path for HR We have seen that the implementation of shared services, outsourcing arrangements and the business partner model have changed the traditional career path of the HR professional. The severing of the traditional route in, through the administration or graduate ‘first job’, is a result of the development of efficient HR service operations. The skills required to progress within these organizations are those of operations management, rather than the traditional junior HR skills. A deep understanding of ‘six-sigma’, the quality management toolkit (Pande, Neuman and Cavanagh, 2003), is arguably preferable to an understanding of ‘Kirkpatrick’s four levels of learning evaluation’. In addition, the development of centers of excellence requires staffing by experienced practitioners who the business will trust and see as ‘expert’ for their business. There is little place for inexperienced staff to gain the very opportunities they need to develop. They are unable to fulfill the role the business is looking to them for when calling on this function. These issues force the HR management team to think more carefully than ever before about the routes for developing talent. The organizational design of these operations becomes more important than ever to ensure talent is drawn in from different routes from internal and external sources. It seems in this light to make sense that the best operations managers within the business could find a role within the HR shared service function. Joining HR would allow them to transfer business knowledge and operations best practice from the business. As they leave they do so with a deeper understanding of people management practices and, rather selfishly for HR, as a standard bearer for the function. This has started at IBM with the move to look to the MBA pool of talent to populate the HR function.

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Frank Persico, IBM Corporation’s Director of Executive Resources and Development commented recently in the Financial Times on taking on MBAs from US and UK Business Schools: “The thinking was that we could take advantage of more of the analytical business-based experience of MBAs [and] take in the raw talent and they could learn the specifics and technical issues around HR once they were in the organization.” “...the willingness of MBA graduates to change roles in the organization is another reason for their appeal as recruits. We have some people moving into finance for one-year rotational assignments and these folks take that as a matter of course – they tend to be more flexible.” MURRAY, 2004

As HR functions become more comfortable with the idea of drawing their staff from the business and external sources, the function becomes less inward looking. Importantly, the best thinking from the outside begins to permeate through the function and challenges it to continuously improve. From where we stand today, the HR job being the stepping stone for the CEOs role is a long way off – though we would never see it as being so. We at Orion Partners believe that the acquisition of skills can become an essential element in the development of any business leader, as valid as a period spent in Marketing or Finance. How else can business leaders get past the embarrassing cringe that comes with the stock statement ‘people are our greatest asset’? Understanding the specialism of business focused HR will provide them with the tools to actually turn it into reality. Beyond the pool of talent HR draws from we believe there are other skills the function will need to develop.

Relationship management As a formal skill set, the real challenge lies less in the development of the skill, but more in the environment where it is used. Relationship management, by its very nature, is the assessment of the needs and objectives of multiple parties,

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internal and external and at all levels. It then requires the delivery of solutions to meet them to achieve aligned objectives. It is not defined or shaped by any real hierarchy. Most HR functions tend to operate within a hierarchical environment and may continue to do so as that is the culture of the organizations they serve. Regardless of that, the HR professional in our model must develop true relationship management skills and operate outside of that structure. A further challenge may be that they must, because of the very hierarchical nature of their organization, use the skill without seeming to! Without this skill set the full value of the model can never be exploited. The parties we have described as interacting with the business and HR are too disparate to be managed any other way. As third-parties engage with the business to deliver HR service and the relationship with the internal function becomes more commercialized, there is a need to align these parties’ interests. This will be the means by which value is created for the organization as a whole.

Change skills This report has focused entirely on the changes that HR functions are making in order to grow and improve. This cycle of change will not end once the model has been implemented. Its purpose is to continue to drive change through continuous improvement of business performance. As a result, HR must have the skills required to manage change at the heart of its organization. The need to develop real project management skills is essential. There is a role for secondment to external functions to gain this. HR, though, still needs to go beyond this. Change skills must be richer than understanding the mechanics of managing change. The influencing skills to gain the buy-in to the change programme must be present. The stakeholder analysis and management related to the above will be essential as HR raises its head more and more above the parapet, proposing business change through an organization’s people. These are business-wide initiatives that will have a very high profile. Not all will be keen to see HR take this role or follow. The final element of this skill will be being able to qualify the impact of change in financial terms. HR will need to become more adept at presenting and tracking its case for change within a formal business case. As each back-office function becomes leaner, the wins become harder and the investment cash for change more keenly fought over.

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Where should HR focus next? We have examined the notions of a new HR operating model shifting the focus to having real impact on the business and evaluating that. Shared services, outsourcing and the business partner model are all designed to create efficient definition and delivery mechanisms for HR interventions. We at Orion Partners see this as creating the space for HR to shine in applying its technical skills. It is a means to open up the real opportunities for HR to contribute. The new HR operating model sets the foundation for allowing the mountains of research by academics and thinking by HR professionals to deliver improved business performance. Today the field of HR and organizational development is one of the most widely covered by business school researchers. Through the model we have described, HR can find the means to fully leverage that. It will be able to focus on the application of people management best practice and frameworks to demonstrably improving the performance of the company. For too long businesses and HR functions have not had the data capture and reporting tools to undertake meaningful analysis of the following key areas. These are ones that Orion Partners believe it will be essential for HR to tackle for the future: •

Talent management

•

Flexible working

•

Performance management

It is almost impossible to undertake rigorous Talent Management if you do not have consistent data on how employees are performing, which are excelling or lacking and planning the progress of the people that will drive the organization forward. Even then, when these have been identified, you need live data on how interventions to develop them are working. By having the administrative systems in place to capture data in real time and the right relationships with the business to understand its goals and ‘stars’, HR can make a greatly enhanced contribution. By getting flexible working to work for a business, the benefits can be great for the company. Today’s employment world is one of very real psychological contracts with employees and the need to retain rare skills. HR can, by providing the business with the tools to manage flexible working efficiently and easily, and working on programmes to embed the required cultural changes, open up these opportunities. Employees can engage in a way with the company that suits their needs. The part-time career is not lost as they find the working

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pattern enforced on them by their circumstances is not accommodated for by the company. If the Performance Management processes are ‘clunky’, bureaucratic and removed from any perceived impact that they are never used, the line manager can never really be responsible for its people. There will always be the excuse that managing their performance (and being accountable for it) is too hard and distracts from running the operation. This is a completely perverse situation. Line managers need the tools to empower them to own their people’s performance and their function/team’s business performance. This is a contribution that no other function can make. By HR being a true Business Partner, Administrative Expert, Employee Champion and Change Agent it can provide the tools, methodologies, culture and information analysis to the business to allow it to truly get the best from its people.

References Agence France Presse, Indian IT Leader Warns of Complacency in Business Process Outsourcing, 21st November 2002. Andrews, David Back Office DIY is Penny-wise, Independent on Sunday 17 Nov. 2002. Gratton, Lynda The Humpty Dumpty Effect, People Management, May 2003. Guest David, King Zella, Personnel’s Paradox, People Management, September 2001. Huselid Mark, Becker Brian, Ulrich David, The HR Scorecard: Linking People, Strategy and Performance, Harvard Business Review, 2001. Mayo Andrew, Human Value of the Enterprise: Valuing People As Assets – Monitoring, Measuring, Managing, Nicholas Brealey Publishing Ltd, 2001. Murray, Sarah, HR Spies Source of Business Talent, Financial Times, Feb 02, 2004. Pande, Peter, Neuman Robert, Cavanagh, Roland, The Six Sigma Way, McGraw Hill, New York, 2002. The Sunday Times Appointments, Head of HR Shared Services – Fujitsu, 15th February 2004.

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Appendix Scope of services Organization development HR strategy Labour relations Payroll Employee development Resourcing/recruiting

Appendix

Scope of services Training Training as a process includes training needs assessment, course materials development, logistics co-ordination, conduct of training and training leader selection, training effectiveness assessment and post training follow-up. Delivery of training materials includes traditional classroom, self-study, computer-aided training and third party training delivery mechanisms. The client shall develop training strategies and policies, develop and deliver training programs based on needs analyzes and assess the cost/benefit of training programs. The outsourcer shall administer course schedules, registration, confirmations and training materials. The outsourcer shall also administer attendee evaluations of training programs and tuition reimbursement. TABLE LEGEND

X

Performs Responsibility

A

Approves

TRAINING

OUTSOURCER

CLIENT

Developing training strategies/policies and linking to business needs

X

Conducting needs analyzes, incorporating competency models

X

Developing communications content of key messages regarding training strategy

X

Defining approval level by stream for training

X

Assessing and evaluating ROI/cost benefits of training programs

X

Providing data needed to assess and evaluate ROI/cost benefit of programs Locating industry related, technical training course offerings

X X

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APPENDIX

TRAINING

OUTSOURCER

Developing training sourcing and vendor strategy

CLIENT X

Researching and identifying qualified and appropriate vendors and training offerings from which CLIENT will select

X

Compiling proposed listing of course offerings

X

A

Determining and authorizing future course offerings

X

Defining and prioritizing training needs

X

Developing/delivering/maintaining business specific programs based on needs analysis assessment

X

Delivering non-technical corporate and cross stream training

X

Managing and maintaining vendor relationships for Outsourcer retained vendors

X

Managing and maintaining vendor relationships for CLIENT retained vendors

X

Administering attendee ratings and evaluations of training programs

X

Administering course schedules, registration, materials and brochures, and confirmations; tracking(internal/external) training program participation and recording maintenance

X

Determining employee eligibility for courses

X

Monitoring training expenses/spending against established budget

X

Administering tuition reimbursement including submission of tuition reimbursement guidelines, applications and forms. Reviewing tuition reimbursement requests/applications.

X

Approving tuition reimbursement request

A

Administering central training facilities

X

Managing and distributing standardized management reporting (internal/external)

X

Tracking of continuing education credits by employee (including obtaining validation of credit worthiness of courses)

X

Responding to inquiries on training courses and registration

X

Developing and disseminating of communication tools to assist in scheduling and registration for training programs including web-sites, co-ordinating training program communications, and sending course certificates to employees on completion of training

X

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APPENDIX

Organization development Organization development focuses on organization design and ensuring organization effectiveness. These activities include business and new venture organization consulting, managing organizational improvement efforts and overseeing organization consulting supplied by third parties. Assessment of existing and proposed organization models and reorganizations will also be major activities in the area. The client shall define its organizational strategy and organization changes. The outsourcer’s role is limited to providing data, support, analysis and projections about the integration or effect of a given divestiture, acquisition or major organizational change.

ORGANIZATION DEVELOPMENT

OUTSOURCER

CLIENT

Developing and executing organization strategy and structure

X

Sponsoring process improvement initiatives

X

Implementing organizational changes due to restructuring and reorganizations

X

Consulting in change control management

X

Defining desired culture/ values

X

Analyzing and managing divestitures/ acquisitions/JVs/ alliances

X

Providing data and support in the evaluating, reporting and planning of divestitures/acquisitions/JVs/alliances.

X

Performing business consulting

X

Planning, attitude surveys/ organization diagnoses

X

Developing action plans from results of attitude surveys/ organization diagnoses

X

Managing external consultants

X

Designing organization structures

X

Supporting, with data, the development and conducting of attitude surveys/organization diagnoses

X

Providing standardized management reporting

X

Supporting the development of action plans and process refinement approaches consistent with Organization Development initiatives (future Leveraged Operations)

X

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APPENDIX

HR strategy HR strategy develops the long-term HR strategy for the client and ensures the linkages to organizational goals and business objectives. In addition, HR strategy directs the development of the HR function and maintains ties to outside entities thereby introducing new HR concepts into CLIENT The client shall define the HR strategy for themselves. The outsourcer shall provide guidance and support to the client in completing this task.

HR STRATEGY

OUTSOURCER

CLIENT

Developing of HR policies and strategies

X

Creating business-linked HR strategies

X

Managing cultural alignment

X

Creating long-term HR strategy

X

Establishing methodology for best practice research, trend analysis and measurement

X

Recommending methodology for best practice research, trend analysis and measurement (future Leveraged Operations)

X

Providing standardized management reporting

X

Conducting trend analyzes and best practice research on how HR process management supports the CLIENT HR strategy (future Leveraged Operations)

X

Labour relations Labour relations promote and maintain effective relationships between the client and its employees. Relationship management, for example, with any client works councils, trade unions, collective bargaining units, employee forums and all client employees includes negotiations, problem/issue management, and interfacing with regulatory entities on behalf of the client. The client shall provide the direct interface to any of its works councils, trade unions, collective bargaining units, employee forums and to all its employees. The outsourcer shall provide support and data to the client to facilitate this interface.

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APPENDIX

LABOUR RELATIONS

OUTSOURCER

CLIENT

Developing labour relations strategies/ policies/plans

X

Developing labour/management co-operation programs

X

Negotiating collective bargaining contracts

X

Implementing collective bargaining contract agreements

X

Handling of incidents/case management and day to day management

X

Interfacing with legal counsel and other CLIENT functions

X

Managing and assessing implication of non full-time employees (contractors, temporary, etc.)

X

Managing union organizing drives

X

Developing works council, employee forum and bargaining unit strategy

X

Providing data to support works council , employee forum and bargaining unit strategy

X

Representing CLIENT in National Labour Relations Board, works councils, employee forum and other collective labour hearings

X

Incorporating labour agreement decisions into affected HR support processes (i.e. benefits plan changes, pay plan changes, etc.)

X

Providing standardized management reporting

X

Providing data that supports the administration of grievance, disciplinary and arbitration procedures

X

A

Payroll Payroll processes include the collection of time and attendance data, management of employee earning and deductions, calculation of gross and net pay, and processing employee payments. Additionally, the payroll function will compute and file payroll related taxes, manage mandated deductions and perform the accounting transactions necessary to accumulate labour expenses at the detailed level including all general ledger interfaces. The client shall define pay delivery policies and standards. The outsourcer shall administer the payroll process including payroll transaction processing, employee payment and statutory reporting.

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APPENDIX

PAYROLL

OUTSOURCER

CLIENT

Establishing pay delivery policies and standards

X

Establishing banking relationship requirements

X

Establishing the funding process and related cash management issues

X

Monitoring requirements related to pay

X

Responding to employee issues/inquiries on pay and time

X

Supporting payroll rationalization and identifying payroll trends

X

Communicating errors and corrective actions

X

Responding and participating in payroll audits

X

Adjudicating payroll disputes

X

Maintaining wage and rate tables

X

Maintaining earnings and deduction codes

X

Processing and validating time and attendance data

X

Performing gross to net calculation

X

Under CLIENT ‘s direction and support, performing automatic money transfer to/from taxing authorities, banks, benefit providers and other providers

X

Calculating and processing payroll for international and expatriate employees

X

Calculating and processing regular and special deductions/allowances

X

Processing statutory/legally required deductions (garnishments and levees)

X

Validating and reconciling net pay

X

Under CLIENT ‘s direction and support, printing and distributing checks, check stubs, pay statements and automated transfers

X

Under CLIENT ‘s direction and support, processing deposits of net pay transactions

X

Collecting and filing payroll taxes (periodic and year- end)

X

Sending annual earnings and deductions statements to employees

X

Responding to inquiries from taxing authorities, CLIENT payroll customers and third parties

X

Distributing payroll costs to general ledgers

X

Preparing monthly, quarterly and annual payroll reconciliation

X

Preparing bank account reconciliation

X

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APPENDIX

PAYROLL

OUTSOURCER

Reconciling payroll taxes

X

Providing payroll reporting

X

Calculating final severance pay

X

Performing calculation to integrate short term disability payments with Workers’ Compensation payment when appropriate

X

Tracking and accruing paid sick time, vacation, leaves of absence and personal time off

X

Tracking and monitoring employees on unpaid leaves of absence

X

Providing special check /exception processing services

X

Providing interfaces with unemployment offices

X

Co-ordinate production and distribution of payroll stuffs

X

Communicating major payroll problems to CLIENT employees

CLIENT

X

Communicating major payroll problems to CLIENT

X

Providing standardized management reporting

X

Managing time data capture and entry

X

Employee development Employee development identifies employee development needs and ensures that these development needs are planned with the employee and the supervisor. Development tool construction, managing the execution of development, tracking employee development plans, and succession planning are all included. The client shall define employee development policy and strategy and shall interface directly with employees on their individual development plans. The outsourcer shall support the client in the design and delivery of employee development programs, identify best practices, and track, monitor and administer these programs.

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APPENDIX

EMPLOYEE DEVELOPMENT

OUTSOURCER

CLIENT

Identifying/defining key jobs, competencies, people

X

Assessing talent scope/depth

X

Managing developmental transfers and rotations

X

Developing coaching and mentoring plans

X

Managing high/low performers

X

Identifying succession candidates

X

Monitoring performance and provide correction action

X

Approving assessments and development plans

X

Developing employee development policy and strategy

X

Identifying key curriculum needs of key programs

X

Creating and utilizing competency models

X

Supporting the competency process design and deploying employee development tools and resources (future Leveraged Operations)

X

Conducting external research and identify best practices for employee development processes (future Leveraged Operations)

X

Tracking, monitoring, and administering employee development programs

X

Providing standardized management reporting

X

Developing career planning, succession programs/tools (future Leveraged Operations)

X

Resourcing/recruiting Resourcing/recruiting includes setting a resourcing strategy, conducting workforce planning and performing the hiring process, which includes candidate pool solicitation, assessment, negotiation and orientation activities. Vendor administration, logistics and assessment of resourcing strategies are also included. The client shall develop resourcing/recruiting related policies, conduct workforce planning, refine employee selection criteria, and assess and select candidates. The outsourcer shall track open requisitions, manage candidate pools, develop candidate lists and maintain and administer job posting systems.

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APPENDIX

RESOURCING/RECRUITING

OUTSOURCER

CLIENT

Setting strategic direction

X

Refining selection criteria – identifying specific needs

X

Developing resource related policies

X

Conducting workforce planning

X

Negotiating offer

X

Communicating oral offer

X

Preparing and distributing offer package

X

Selecting candidate

X

Assessing finalist candidates

X

Managing university/professional relationships

X

Establishing selection criteria and resource requirements

X

Managing and maintaining vendor relationships for Outsourcer third parties

X

Managing and maintaining resourcing/recruiting vendor relationships for CLIENT third parties

X

Developing/managing workforce modelling

X

Maintaining workforce planning data

X

Administering temp/contract employee contracts

X

Tracking pool of contract employees

X

Identifying specific job openings with appropriate job descriptions

X

Creating and tracking open requisitions

X

Tracking and managing candidate pool for open requisitions

X

Applying selection criteria to the candidate pool for open requisitions

X

Developing candidate list for open requisitions

X

Assessing candidates (pre-screen/short-list)

X

Managing schedule logistics

X

Conducting testing

X

Tracking/storing resumes

X

Tracking new hires

X

Managing advertising, electronic recruiting and other sources of recruiting

X

Performing background check

X

Performing security screening

X

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APPENDIX

RESOURCING/RECRUITING

OUTSOURCER

Performing business/ location specific orientation procedures

CLIENT X

Performing standard orientation procedures

X

Providing applicant tracking

X

Receiving and processing unsolicited applicant letters and e-mails

X

Maintaining and administering job posting systems (internal and external)

X

Providing standard management reporting

X

Business/location specific exit procedures, including exit interviews

X

Performing standard exit procedures

X

Administering leave of absence policy

X

Tracking employees on leave and employees returning from leave

X

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Other specially commissioned reports BUSINESS AND COMMERCIAL LAW

The commercial exploitation of intellectual property rights by licensing

The Competition Act 1998: practical advice and guidance

CHARLES DESFORGES

SUSAN SINGLETON

£125

£149

1 85418 285 4 • 2001

1 85418 205 6 • 2001

Expert advice and techniques for the identification and successful exploitation of key opportunities.

Failure to operate within UK and EU competition rules can lead to heavy fines of up to 10 per cent of a business’s total UK turnover.

This report will show you: •

how to identify and secure profitable opportunities

•

strategies and techniques for negotiating the best agreement

•

the techniques of successfully managing a license operation.

Insights into successfully managing the in-house legal function BARRY O’MEARA

£65

1 85418 174 2 • 2000

Damages and other remedies for breach of commercial contracts ROBERT RIBEIRO

£125

Negotiating the fault line between private practice and in-house employment can be tricky, as the scope for conflicts of interest is greatly increased. Insights into successfully managing the In-house legal function discusses and suggests ways of dealing with these and other issues.

1 85418 226 X • 2002 This valuable new report sets out a systematic approach for assessing the remedies available for various types of breach of contract, what the remedies mean in terms of compensation and how the compensation is calculated.

Commercial contracts – drafting techniques and precedents ROBERT RIBEIRO

£125

1 85418 210 2 • 2002 The Report will: •

Improve your commercial awareness and planning skills

•

Enhance your legal foresight and vision

•

Help you appreciate the relevance of rules and guidelines set out by the courts

•

Ensure you achieve your or your client’s commercial objectives

For full details of any title, and to view sample extracts please visit: www.thorogood.ws You can place an order in four ways: 1 Email: [email protected] 2 Telephone: +44 (0)20 7749 4748 3 Fax: +44 (0)20 7729 6110

t +44 (0)20 7749 4748

e [email protected]

4 Post: Thorogood, 10-12 Rivington Street, London EC2A 3DU, UK

w w w w. t h o r o g o o d . w s

The legal protection of databases SIMON CHALTON

Email – legal issues £145

SUSAN SINGLETON

£129

1 85418 245 5 • 2001

1 85418 215 3 • 2001

Inventions can be patented, knowledge can be protected, but what of information itself?

What are the chances of either you or your employees breaking the law?

This valuable report examines the current EU [and so EEA] law on the legal protection of databases, including the sui generis right established when the European Union adopted its Directive 96/9/EC in 1996.

The report explains clearly:

Litigation costs MICHAEL BACON

•

How to establish a sensible policy and whether or not you are entitled to insist on it as binding

•

The degree to which you may lawfully monitor your employees’ e-mail and Internet use

•

The implications of the Regulation of Investigatory Powers Act 2000 and the Electronic Communications Act 2000

•

How the Data Protection Act 1998 affects the degree to which you can monitor your staff

•

What you need to watch for in the Human Rights Act 1998

•

TUC guidelines

•

Example of an e-mail and Internet policy document.

£95

1 85418 241 2 • 2001 The rules and regulations are complex – but can be turned to advantage. The astute practitioner will understand the importance and relevance of costs to the litigation process and will wish to learn how to turn the large number of rules to maximum advantage.

Tendering and negotiating for MoD contracts TIM BOYCE

£125

1 85418 276 5 • 2002 This specially commissioned report aims to draw out the main principles, processes and procedures involved in tendering and negotiating MoD contracts.

International commercial agreements REBECCA ATTREE

£175

1 85418 286 2 • 2002 A major new report on recent changes to the law and their commercial implications and possibilities. The report explains the principles and techniques of successful international negotiation and provides a valuable insight into the commercial points to be considered as a result of the laws relating to: pre-contract, private international law, resolving disputes (including alternative methods, such as mediation), competition law, drafting common clauses and contracting electronically. It also examines in more detail certain specific international commercial agreements, namely agency and distribution and licensing.

For full details of any title, and to view sample extracts please visit: www.thorogood.ws You can place an order in four ways: 1 Email: [email protected] 2 Telephone: +44 (0)20 7749 4748 3 Fax: +44 (0)20 7729 6110 4 Post: Thorogood, 10-12 Rivington Street, London EC2A 3DU, UK

S e e f u l l d e t a i l s o f a l l T h o r o g o o d t i t l e s o n w w w. t h o r o g o o d . w s

HR AND EMPLOYMENT LAW

Employee sickness and fitness for work – successfully dealing with the legal system GILLIAN HOWARD

£129

1 85418 281 1 • 2002 Many executives see Employment Law as an obstacle course or, even worse, an opponent – but it can contribute positively to keeping employees fit and productive. This specially commissioned report will show you how to get the best out of your employees, from recruitment to retirement, while protecting yourself and your firm to the full.

How to turn your HR strategy into reality TONY GRUNDY

£129

1 85418 183 1 • 1999 A practical guide to developing and implementing an effective HR strategy.

Internal communications JAMES FARRANT

£129

1 85418 149 1 • 2003 How to improve your organization’s internal communications – and performance as a result.

Data protection law for employers SUSAN SINGLETON

£129

There is growing evidence that the organizations that ‘get it right’ reap dividends in corporate energy and enhanced performance.

1 85418 283 8 • 2003 The new four-part Code of Practice under the Data Protection Act 1998 on employment and data protection makes places a further burden of responsibility on employers and their advisers. The Data protection Act also applies to manual data, not just computer data, and a new tough enforcement policy was announced in October 2002.

MARK THOMAS

£69

1 85418 270 6 • 2001 Practical advice on how to attract and keep the best.

Successfully defending employment tribunal cases

1 85418 008 8 • 1997

This report will help you to understand the key practical and legal issues, achieve consensus and involvement at all levels, understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed.

New ways of working STEPHEN JUPP

DENNIS HUNT

£95

Why do so many mergers and acquisitions end in tears and reduced shareholder value?

Successful graduate recruitment JEAN BRADING

Mergers and acquisitions – confronting the organization and people issues

£99

£95 1 85418 169 6 • 2000

1 85418 267 6 • 2003 Fully up to date with all the Employment Act 2002 changes. 165,000 claims were made last year and the numbers are rising. What will you do when one comes your way?

t +44 (0)20 7749 4748

e [email protected]

New ways of working examines the nature of the work done in an organization and seeks to optimize the working practices and the whole context in which the work takes place.

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A practical guide to knowledge management SUE BRELADE, CHRISTOPHER HARMAN

£69

•

What you need to watch for in the Human Rights Act 1998

•

TUC guidelines

•

Example of an e-mail and Internet policy document.

1 85418 230 7 • 2003 Managing knowledge in companies is nothing new. However, the development of a separate discipline called ‘knowledge management’ is new – the introduction of recognized techniques and approaches for effectively managing the knowledge resources of an organization. This report will provide you with these techniques.

Applying the Employment Act 2002 – crucial developments for employers and employees AUDREY WILLIAMS

£129

1 85418 253 6 • 2003

Reviewing and changing contracts of employment ANNELISE PHILLIPS, TOM PLAYER and PAULA ROME

£129

1 85418 296 X • 2003 The Employment Act 2002 has raised the stakes. Imperfect understanding of the law and poor drafting will now be very costly. This new report will: •

Ensure that you have a total grip on what should be in a contract and what should not

•

Explain step by step how to achieve changes in the contract of employment without causing problems

•

Enable you to protect clients’ sensitive business information

•

Enhance your understanding of potential conflict areas and your ability to manage disputes effectively.

The consequences of getting it wrong, for both employer and employee, will be considerable – financial and otherwise. The Act affects nearly every aspect of the work place, including: •

flexible working

•

family rights (adoption, paternity and improved maternity leave)

•

changes to internal disciplinary and grievance procedures

•

significant changes to unfair dismissal legislation

•

new rights for those employed on fixed-term contracts

•

the introduction of new rights for learning representatives from an employer’s trade union

This specially commissioned new report examines each of the key developments where the Act changes existing provisions or introduces new rights. Each chapter deals with a discreet area.

Email – legal issues SUSAN SINGLETON

The Act represents a major shift in the commercial environment, with far-reaching changes for employers and employees. The majority of the new rights under the family friendly section take effect from April 2003 with most of the other provisions later in the year.

£129

1 85418 215 3 • 2001 What are the chances of either you or your employees breaking the law? The report explains clearly: •

How to establish a sensible policy and whether or not you are entitled to insist on it as binding

For full details of any title, and to view sample extracts please visit: www.thorogood.ws

•

The degree to which you may lawfully monitor your employees’ e-mail and Internet use

You can place an order in four ways:

The implications of the Regulation of Investigatory Powers Act 2000 and the Electronic Communications Act 2000

2 Telephone: +44 (0)20 7749 4748

•

•

How the Data Protection Act 1998 affects the degree to which you can monitor your staff

1 Email: [email protected] 3 Fax: +44 (0)20 7729 6110 4 Post: Thorogood, 10-12 Rivington Street, London EC2A 3DU, UK

S e e f u l l d e t a i l s o f a l l T h o r o g o o d t i t l e s o n w w w. t h o r o g o o d . w s

SALES, MARKETING AND PR

IImplementing an integrated marketing communications strategy NORMAN HART

Defending your reputation SIMON TAYLOR

£99

1 85418 120 3 • 1999 Just what is meant by marketing communications, or ‘marcom’? How does it fit in with other corporate functions, and in particular how does it relate to business and marketing objectives?

1 85418 251 • 2001 ‘Buildings can be rebuilt, IT systems replaced. People can be recruited, but a reputation lost can never be regained…’ ‘The media will publish a story – you may as well ensure it is your story’ Simon Taylor ‘News is whatever someone, somewhere, does not want published’ William Randoplh Hearst

Strategic customer planning ALAN MELKMAN AND PROFESSOR KEN SIMMONDS

£95

£95

When a major crisis does suddenly break, how ready will you be to defend your reputation?

1 85418 255 2 • 2001 This is very much a ‘how to’ Report. After reading those parts that are relevant to your business, you will be able to compile a plan that will work within your particular organization for you, a powerful customer plan that you can implement immediately. Charts, checklists and diagrams throughout.

Insights into understanding the financial media – an insider’s view SIMON SCOTT

£99

1 85418 083 5 • 1998 This practical briefing will help you understand the way the financial print and broadcast media works in the UK.

Corporate community investment CHRIS GENASI

£75

1 85418 192 0 • 1999

BRYAN CASSIDY

Supporting good causes is big business – and good business. Corporate community investment (CCI) is the general term for companies’ support of good causes, and is a very fast growing area of PR and marketing.

t +44 (0)20 7749 4748

European lobbying guide

e [email protected]

£129

1 85418 144 0 • 2000 Understand how the EU works and how to get your message across effectively to the right people.

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Lobbying and the media: working with politicians and journalists

Managing corporate reputation – the new currency

MICHAEL BURRELL

SUSAN CROFT and JOHN DALTON

£95

1 85418 240 4 • 2001

1 85418 272 2 • 2003

Lobbying is an art form rather than a science, so there is inevitably an element of judgement in what line to take. This expert report explains the knowledge and techniques required.

ENRON, WORLDCOM… who next?

Strategic planning in public relations KIERAN KNIGHTS

£69

At a time when trust in corporations has plumbed new depths, knowing how to manage corporate reputation professionally and effectively has never been more crucial.

Surviving a corporate crisis – 100 things you need to know

1 85418 225 0 • 2001

PAUL BATCHELOR

Tips and techniques to aid you in a new approach to campaign planning.

1 85418 208 0 • 2003

Strategic planning is a fresh approach to PR. An approach that is fact-based and scientific, clearly presenting the arguments for a campaign proposal backed with evidence.

£125

£125

Seven out of ten organizations that experience a corporate crisis go out of business within 18 months. This very timely report not only covers remedial action after the event but offers expert advice on preparing every department and every key player of the organization so that, should a crisis occur, damage of every kind is limited as far as possible.

FINANCE

Tax aspects of buying and selling companies MARTYN INGLES

Practical techniques for effective project investment appraisal £99

RALPH TIFFIN

£99

1 85418 189 0 • 2001

1 85418 099 1 • 1999

This report takes you through the buying and selling process from the tax angle. It uses straightforward case studies to highlight the issues and more important strategies that are likely to have a significant impact on the taxation position.

How to ensure you have a reliable system in place. Spending money on projects automatically necessitates an effective appraisal system – a way of deciding whether the correct decisions on investment have been made.

Tax planning opportunities for family businesses in the new regime CHRISTOPHER JONES

£49

1 85418 154 8 • 2000 Following recent legislative and case law changes, the whole area of tax planning for family businesses requires very careful and thorough attention in order to avoid the many pitfalls.

S e e f u l l d e t a i l s o f a l l T h o r o g o o d t i t l e s o n w w w. t h o r o g o o d . w s

MANAGEMENT AND PERSONAL DEVELOPMENT

Strategy implementation through project management TONY GRUNDY

High performance leadership £95

PUBLISHED BY CRF PUBLISHING IN ASSOCIATION WITH THOROGOOD

£282

1 85418 250 1 • 2001

0 95443 900 7 • 2003

The gap

A major new report combining solid research, case studies

Far too few managers know how to apply project management techniques to their strategic planning. The result is often strategy that is poorly thought out and executed.

and contributions from expert thinkers. This 234 page report analyzes contemporary leadership for success, failure and derailment. It examines what leaders and

The answer

leadership enablers – HR/OD directors/VPs who have to

Strategic project management is a new and powerful process designed to manage complex projects by combining traditional business analysis with project management techniques.

plan, deploy or build leadership – must do. And it makes challenging recommendations.

For full details of any title, and to view sample extracts please visit: www.thorogood.ws You can place an order in four ways: 1 Email: [email protected] 2 Telephone: +44 (0)20 7749 4748 3 Fax: +44 (0)20 7729 6110 4 Post: Thorogood, 10-12 Rivington Street, London EC2A 3DU, UK

t +44 (0)20 7749 4748

e [email protected]

w w w w. t h o r o g o o d . w s

Focused on developing your potential Falconbury, the sister company to Thorogood publishing, brings together the leading experts from all areas of management and strategic development to provide you with a comprehensive portfolio of action-centered training and learning. We understand everything managers and leaders need to be, know and do to succeed in today’s commercial environment. Each product addresses a different technical or personal development need that will encourage growth and increase your potential for success. •

Practical public training programmes

•

Tailored in-company training

•

Coaching

•

Mentoring

•

Topical business seminars

•

Trainer bureau/bank

•

Adair Leadership Foundation

The most valuable resource in any organization is its people; it is essential that you invest in the development of your management and leadership skills to ensure your team fulfill their potential. Investment into both personal and professional development has been proven to provide an outstanding ROI through increased productivity in both you and your team. Ultimately leading to a dramatic impact on the bottom line. With this in mind Falconbury have developed a comprehensive portfolio of training programmes to enable managers of all levels to develop their skills in leadership, communications, finance, people management, change management and all areas vital to achieving success in today’s commercial environment. What Falconbury can offer you? •

Practical applied methodology with a proven results

•

Extensive bank of experienced trainers

•

Limited attendees to ensure one-to-one guidance

•

Up to the minute thinking on management and leadership techniques

•

Interactive training

•

Balanced mix of theoretical and practical learning

•

Learner-centered training

•

Excellent cost/quality ratio

Falconbury In-Company Training Falconbury are aware that a public programme may not be the solution to leadership and management issues arising in your firm. Involving only attendees from your organization and tailoring the programme to focus on the current challenges you face individually and as a business may be more appropriate. With this in mind we have brought together our most motivated and forward thinking trainers to deliver tailored in-company programmes developed specifically around the needs within your organization. All our trainers have a practical commercial background and highly refined people skills. During the course of the programme they act as facilitator, trainer and mentor, adapting their style to ensure that each individual benefits equally from their knowledge to develop new skills. Falconbury works with each organization to develop a programme of training that fits your needs, this can incorporate not only traditional classroom style learning but also involve our coaching and mentoring service or advise on the development of internal mentoring programmes. Mentoring Falconbury delivers a world class, individual mentoring service for senior executives and entrepreneurs. The purpose is to accelerate corporate success dramatically and to enhance personal development. Mentoring involves formulating winning strategies, setting goals, monitoring achievements and motivating the whole team whilst achieving a much improved work life balance. The issues are addressed at regular meetings, with telephone discussions in between. Sometimes, an unexpected issue will require an additional meeting at short notice. Coaching Developing and achieving your personal objectives in the workplace is becoming increasingly difficult in today’s constantly changing environment. Additionally, as a manager or leader, you are responsible for guiding colleagues towards the realization of their goals. Sometimes it is easy to lose focus on your short and long-term aims. Falconbury’s one-to-one coaching draws out individual potential by raising self-awareness and understanding, facilitating the learning and performance development that creates excellent managers and leaders. It builds renewed self-confidence and a strong sense of ‘can-do’ competence, contributing significant benefit to the organization. Enabling you to focus your energy on developing your potential and that of your colleagues. For more information on all our services please contact Falconbury on 020 7729 6677 or visit the website at: www.falconbury.co.uk