Service Delivery Model options for HR departments and outsourcing strategy

1. Human Resources – Transformation
November 2013
Stephanie Baruk + 1 646 318 2214 sbaruk@chappuishalder.com

2. Service Delivery Model: Outsourcing
 Operating costs and staff expenses reduction
 Access to skills and expertise not available
internally
 Better service quality with a more results
oriented approach
 Heightened focus on core and strategic
activities
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Transformation and Optimization
drivers for HR organizations
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Strategy: Business Partnership
 Focus on more strategic activities to
make HR departments perceived as
a business partner
 HR Strategy development with new
performance measures (HR
Scorecard/KRAs/KPIs)
Technology: Automation
 Automation of HRM systems
 Cloud computing based HR systems
 Advanced Analytics with predictive
modeling
Efficiency: Process Redesign
 HR policies, processes and frameworks
streamlining
 Better alignment with the strategy
 Performance metrics and service levels
monitoring
Context and Stakes
The changing landscape calls for a deep transformation of HR departments, moving from
administrative‐focused to business‐focused organizations
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3. Context and Stakes
The Human Resources Outsourcing Market has steadily grown over the last decade
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– Outsourced to Aon Hewitt: HR administration,
performance management, payroll, time keeping, Health
and Welfare administration, learning, recruiting technology
– Outsourced to ExcellerateHRO (ex‐EDS): call center for
employee and manager support, system support, payroll,
benefits, pension administration
– ~200 employees
– ~150M$
– Outsourced to FECO Adecco: recruitment process, benefits
administration, Health and Welfare administration, payroll
– Outsourced to Aon Hewitt: payroll, workforce administration,
Health and Welfare administration, recruitment services,
compensation administration
– Outsourced to Pinstripe the recruitment process
65% 22% 3%
55%Employee contact center
18%
5%
Recruitment / staffing
35%
2%
10%
20%60%
2%43% 20%
20%
Workforce data management / Analytics
Payroll 40% 20% 3% 37%
Benefits Administration
20%
Shared services center
Offshore captive center
Outsourced
Managed in house
What is outsourced
 Administrative processes are the most commonly outsourced
 A distinction between core/non core and strategic/non
strategic activities is made to perform the analysis
 The processes most likely to be outsourced are:
• Retirement program administration
• Health and Welfare administration
• Payroll
• Call center
• Time keeping…
Breakdown by function
A few examples in Financial Services

4. Context and Stakes
HR Outsourcing to deliver both strategic and administrative excellence
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 Cost reduction: Reduce operating costs through the
standardization, centralization and automation of key activities;
reduce staff expenses with workforce optimization
 Control improvement: Track legal and compliance risk more
effectively
 Expertise: Find expertise not available internally with resources
more likely current on recent developments, especially in a context
of higher complexity and multiple regulatory environments
 Capacity and flexibility: Increase process capacity without having to
bring on a number of full‐time recruiters (HR departments having
gone through numerous hiring/layoff cycles due to business
volatility)
 Focus on strategic and core activities: Shift resources from
administrative to more strategic and core activities, HR department
being perceived as a strategic business partner
 Service delivery improvement: Move toward a client‐service
orientation and metrics‐driven approach
 New technology: Provide new technology not currently available
 Process streamlining: Allow processes to be streamlined through
standardization and centralization of some activities
Main benefits identifiedWhy are you outsourcing
5%
10%
15%
18%
23%
27%
33%
36%
41%
42%
44%
45%
47%
55%
56%
Other
To improve metrics / measurement
To make up for a reduction in HR staff
To avoid the cost of major investments in technology
To gain access to vendor technology
To make up for the lack of in house talent / expertise
To allow HR staff to focus more on strategy
To provide consistent / improved service delivery
To reduce the number of HR staff and related staff expenses
To allow the company to focus on its core business
To offer additional services
To streamline HR functions
To gain access to vendor talent / expertise
To control legal risk / improve compliance
To save money / reduce operating costs

5. Context and Stakes
Key Success Factors of outsourcing initiatives
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• Transformation strategy not in line
with overall business approach
• Lack of clear strategy overview
• Organization not ready to support a
significant transformation initiative
Strategy assessment
• Ensure that transformation strategy to be established is a real lever of
the whole business strategy
• Assess qualitative and quantitative benefits of the outsourcing
• Perform a proper current state assessment and check the organization
“readiness“
• Resistance and lack of cooperation
from Middle Management
• Outsourcing constraints not
properly identified
• Difficult to identify functions to be
outsourced
Feasibility study
• On‐board team leaders at the beginning of the project and implement
follow‐up on a regular basis and ensure a full commitment
• Analyze the existing process entirely to identify potential stickiness or
overlaps with other departments
• Combine with a sub‐process analysis to make sure all opportunities are
addressed
• Don’t outsource a problem, “fix then shift” rather than the reverse
• Difficult to select the right
outsourcer for a long‐term
partnership
• Split of accountabilities not always
clear
Vendor selection and
contracting
• Make sure that the outsourcer’s culture is conducive to building a
trusted working relationship and has a proven methodology aligned to
your preferred long‐term strategy
• Include in the contract penalties for breaches of minimum acceptable
service standards and performance levels and put controls In place to
monitor not only activity, but outcomes
• Clearly define and assign accountabilities in the SLAs
• Difficulty for the in‐house teams to
apprehend who is in charge of what
• ROI not delivered and late detection
of hidden costs
• Quality level of services decrease
and customer dissatisfaction
Transition &
Oversight
• Set up a project structure with frequent committees, comprehensive
project tools and an escalation process with costs and savings tracking
• Define a clear communication plan
• Define KPIs to assess team’s performance on a regular basis (quality,
timeliness, workload, satisfaction…)
Key Success FactorsMain takeaways
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