HR Outsourcing: The operational phase

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1 HR Outsourcing: The operational phase A presentation to HROA EMEA by Brad McCaw, Senior Consultant, Towers Watson

2 Agenda Towers Watson research around Outsourcing Sourcing consideration Our client experience shows 2

3 About the HR Service Delivery Survey Towers Watson s 16 th annual survey of HR service delivery practices that includes trends in: HR function and organisation design HR technology and systems Manager self service HR shared services 1025 participants across 32 countries 34% of organisations were small fewer than 5,000 employees 18% EMEA headquartered 3

4 Anticipated Changes to HR Structure in 2013 or 2014 HR FUNCTION PROFILE STRUCTURE AND PROCESS Base: Those anticipating making a change in 2013 or 2014 (n = 364) 4

5 Top HR Service Delivery Issues by Frequency HR FUNCTION PROFILE TOP HR ISSUES (n = 994) 5

6 Outsourcing Trends in 2013 of global organisations outsource their Savings Plan Administration of global organisations outsource their Employee Relations activities of global organisations outsource their Pension Retiree Services of Succession Planning activities are outsourced of global organisations outsource their Pension Healthcare Services of global organisations outsource their Performance Management activities The 2013 HR Service Delivery results show that Global results and EMEA HQ organisations outsource similar HR activities. However, the results also evidence that organisations still retain key strategic HR activities in house. 6

7 Agenda Towers Watson research around Outsourcing Sourcing consideration Our client experience shows 7

8 Sourcing considerations Defining a HR vision Sourcing and redesigning retained HR Focus on People Strategy Simplify and standardise Streamline global service delivery Develop enterprise wide capability Reduce total HR cost Drive improved process efficiency & productivity Build capability & scalability Improve customer experience Key Sourcing Considerations Leverage partner s existing organisation to move transition risk to the partner Reach embedded processes (training), customer experience and working to SLA s Breadth and depth of service solution Leadership in Innovation service and technology Operating Reliability Delivery and Operational Excellence Price Agility (per employee, per transaction, etc.) Knowledge retention 8

9 Identifying where and how HR activities are best performed allows HR functions to develop a high performance service delivery model Strategic role and service analysis Is there a need for governance, consistency or fiduciary responsibility? Do business unit customers need this service? Yes No Yes No Organizational Implication HR Leadership Eliminate Center of Excellence Value analysis Does it provide a competitive advantage? No Yes Competitive advantage versus utility analysis Can someone else provide the same service cheaper and better? No Yes Outsource/Partner Deploy in most costeffective manner Does this service demonstrate economies of scale? Yes No HR Shared Service Imbed in Business Unit But outsourcing is not always about saving money 9 9

10 Key emerging attributes in HR Service Delivery Available Focused Dynamic Logic Driven Analytics On demand, accessible 24 X 7, high tech selfservice functionality Core, standard services (likely to be outsourced) Focus on differentiated services that bring competitive advantage Experts at flexing service delivery to meet variable demands Leveraging data/ metrics across functional areas to provide an enterprise wide view 10

11 A view from Everest Group Challenges Drivers There are both buy and sell side challenges that exist when considering outsourcing While cost reduction remains one of the considerations, drivers, such as scalability, standardization, access to better technology, and accelerated time to market, are important Currently, buyers are cautious in their approach and sign a relatively short term contract around transactional processes Everest Group Research,

12 Agenda Towers Watson research around Outsourcing Sourcing consideration Our client experience shows 12

13 Our client experience shows. the biggest modifications to contracts are generally made to: Basic fee structure Annual review / modification process for SLAs Inclusion of new metrics Fees at risk Increase / decrease scope 13

14 Our client experience shows. changes to governance are always required as expectations are not always aligned Move away from thinking you will set it up and walk away Clients need to become more commercially focused May require more oversight and governance than anticipated More work: Requires different, more mature, more analytical skills than anticipated Key to success: Collaboration can be key to reducing governance processes 14

15 Example best practices across clients have included: 1 Global contract model around a pain and gain share construct based on the right pricing model understand the dynamics (price per employee, transaction, etc.) 2 Strong and rigorous governance structure for oversight. Revise SLAs and focus on results only 3 Value of a selection process managed by an expert on HR outsourcing 4 Focus on the partnership to be more aligned, focus on innovation and re negotiate KPIs when necessary more than just focusing on the issues. 5 Realign every year on planning and coordinating to ensure a more smooth, defect free year and action plan 15

16 Appendix

17 Primary Responsibility for HR Activities HR STAFFING Global 17

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