The Next Generation of HR BPO

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2 Contents How to Reap Business Value from Outsourcing HR Functions Without Losing Your Shirt... 3 Same Benefits As Before... 4 Setting A Higher Bar... 4 New Tools Around... 5 A Revamped Relationship... 5 Higher Expectations... 6 Old Challenges Rear Their Head of 7

3 How to Reap Business Value From Outsourcing HR Functions Without Losing Your Shirt The year was Lance Armstrong won his fifth Tour de France. Rapper 50 Cent topped the charts. And HR outsourcing was setting the world on fire. By placing basic HR processes in the hands of a single outside vendor, HR outsourcing promised to cut costs, enhance services and help HR professionals shift their focus from pensions and payroll to business strategy. The market reacted, driving unprecedented buyer demand. In fact, in its Human Resources BPO: Market Analysis, Forecast & Competitive Landscape report, Bostonbased research firm the Yankee Group predicted the worldwide HR outsourcing market would reach $80 billion by 2008, with the U.S. HR market accounting for more than half of the 2008 global total. And, according to a study conducted by the Conference Board in New York, HR Outsourcing: Benefits, Challenges and Trends 2004, 71 percent of the HR outsourcing clients surveyed said they would extend or renegotiate contracts with their current A failure to properly tend to a deluge of new contracts, and meet the sky-high expectations of customers, created a trough of disillusion around HR outsourcing... Jill Goldstein, Direct of Talent and HR BPO for Accenture outsourcing providers. But that was then. A failure to properly tend to a deluge of new contracts, and meet the sky-high expectations of customers, created a trough of disillusion around HR outsourcing and its ability to deliver real value, says Jill Goldstein, managing direct of talent and HR BPO for Accenture. The market was growing too quickly and there were too many providers trying to build their business. As the HR outsourcing movement foundered, Goldstein says many providers exited the market altogether while others either consolidated or quietly stepped away from the competition. But from 3 of 7

4 history s ash heap of cancelled contracts and dashed hopes, a new era of HR BPO is emerging. In fact, analysts forecast the global recruitment process outsourcing marketing will grow at an annual growth rate of 8.81 percent over the period of 2013 to We re all seeing the market re-emerge and client demand increasing which is exciting for us all, says Goldstein. Same Benefits As Before The laundry list of benefits remains relatively the same. For starters, HR outsourcing firms can provide services such as training, career development and coaching at a fraction of the price of in-house instructors. HR BPO firms can also create customdesign programs around payroll, benefits enrollment and recruiting a huge advantage over the one-sizefits-all approach dictated by software packages. No wonder a recent study indicates that 60 percent of companies worldwide now deploy outsourcing as a standard practice; an additional 19 percent say outsourcing is definitely in their future. Setting A Higher Bar Yet the resurgence of HR outsourcing carries brand new demands. No longer are companies looking to simply create greater efficiencies and cut HR costs. Nor is contractual compliance the sole measure of a successful HR BPO arrangement. Rather, organizations today are aiming to achieve real business value from their relationship with a third party HR BPO provider. We re having clients come to us because they need to improve the performance and productivity of their workforce and they have found that improving the HR operating model is a key success factor to achieving their goals in an accelerated time period, says Goldstein. Actionable insights, relevant forecasts, domain knowledge, analytics expertise they re all key ingredients companies now seek in any HR outsourcing arrangement. Companies are also raising the bar on technology requirements. According to Goldstein, HR BPO solutions are expected to allow for continuous improvement, identification of business needs and ROI. 4 of 7

5 New Tools Abound To achieve these goals, HR outsourcing firms are relying on a powerful new weapon: data analytics. There once was a time when a company interested in curbing high employee absenteeism rates would outsource their human capital management activities in order to identify which employees were leaving and when. At best, the relationship would be able to generate clues as to why some employees were requesting a leave of absence. But that s all changed thanks to HR outsourcing providers adoption of data analytics. Goldstein provides the example of a retail client struggling to manage the workforce performance and productivity challenges associated with high leave-of-absence rates. For instance, the retailer has discovered that, on a store level, high absenteeism is negatively impacting sales revenue. Desperate for a solution, the company turns to an HR BPO provider for answers. Next, the HR services provider crunches data related to employee performance and absenteeism rates to reveal the key indicators of when an employee is about to go on leave, and the common reasons for this leave of absence. By leveraging this data, the retailer is then able to identify a high risk employee, such as a worker whose spouse is about to have a baby. Rather than be surprised by a worker s request for leave, the retailer can now anticipate an employee s absence, chart the next 12 months of his employment, and encourage him to participate in the company s new-parent programs, as well as maintain constant communication with his employer. By responding quickly to an employee s changing circumstances, and pending leave of absence, Goldstein says, in this case, the retailer was able to safeguard productivity levels and minimize the loss of revenue due to employee absenteeism. The client actually measured that each of the 900 employees that went out on leave came back to work a day earlier, which is 900 days of productivity, says Goldstein. A Revamped Relationship Data analytics is not only changing the tools HR BPO providers use to help their clients but it s also altering the very nature of the relationship. As it stands, only 6 percent of worldwide HR teams feel they are experts on the use of analytics in talent management, according to a report from Bersin & 5 of 7

6 Only 20 percent (of HR Professionals) believe that the data they capture now is highly credible and reliable for decisionmaking in their own organization. Associates. In fact, only 20 percent believe that the data they capture now is highly credible and reliable for decision-making in their own organization. What s worse, finding people with the right blend of HR knowledge and analytics training is a daunting feat. In fact, most data analysts lay claim to highly specialized skills that take years of education and experience to carefully hone. Unfortunately, not all HR teams are ready to hand over their data to a third-party provider. When you have conversations with clients, there are those who are on the bandwagon and there are those who aren t quite there yet, says Goldstein. For those that are ready and willing to outsource their analytics activities, an HR BPO provider is not only a vendor but a strategic business partner, intimately familiar with a company s inner workings and able to parse information for actionable insights. Higher Expectations The ability to shape business outcomes is a top priority for HR teams interested in outsourcing their dayto-day processes. But that s not all. Companies are also looking to HR BPO providers to offer a potent combination of both industry expertise and years of experience. We can employ some pretty sophisticated knowledgeable people and empower them with some pretty strong tools because of our critical mass, says Goldstein. We also have the benefit of being able to share learnings from client A and transfer them to client B in the right protected environment. So even though organizations can build their own analytics teams and empower them with tools, they often find that we have the experience to deliver them faster. 6 of 7

7 In addition to offering seasoned talent and sophisticated tools, an HR outsourcing arrangement should also provide experts with years of experience. It s one thing to for an HR BPO leader to have countless university degrees and a host of industry accreditations. But HR teams today are looking for partners who have survived an array of labor markets and HR trends. Another emerging expectation of the HR BPO relationship is that service providers actually contractually commit to improvements in new hire retention and performance. It s not enough for an outsourcing firm to simply take over important processes and introduce new talent. Instead, HR teams want the promises made in an outsourcing arrangement to be contractually binding. Old Challenges Rear Their Head For all the progress being made in the HR BPO space, some of the same old challenges persist. For one, turning to an outsider for help with internal processes can create friction between an HR BPO provider and a company s in-house HR team. In fact, the arrangement can negatively impact morale, especially if HR professionals begin to feel as if their jobs are in danger. Companies can mitigate feelings of resentment by teaching their HR professionals to view outsourcing as a cost-effective approach to sourcing talent, as well as a potential boon to productivity. Another common challenge is finding the right HR outsourcing firm. For this reason, it s important to find a vendor capable of understanding a company s unique HR requirements and one who is willing to customize its products and services accordingly. Culture also counts for example, a large HR outsourcing firm may be less likely to understand the challenges facing the HR team inside a struggling startup. To determine whether or not an HR outsourcing firm is a good fit, companies should ask questions pertaining to a provider s communication style, what a vendor s expectations are of employee involvement and what kind of access is there to a dedicated account manager. After all, these representatives can play a critical role in handling change management processes, addressing client-vendor conflicts and setting project expectations. About Ziff Davis B2B Ziff Davis B2B is a leading provider of research to technology buyers and high-quality leads to IT vendors. As part of the Ziff Davis family, Ziff Davis B2B has access to over 50 million in-market technology buyers every month and supports the company s core mission of enabling technology buyers to make more informed business decisions. Copyright 2015 Ziff Davis B2B. All rights reserved. Contact Ziff Davis B2B 624 2nd Street San Francisco, CA Tel: Fax: marty_fettig@ziffdavis.com