HR Outsourcing How to do it Right

HR Outsourcing How to do it Right IDC Human Resources Forum Midwest March 27, 2007 Atul Vashistha CEO, neoit www. neoit.com

Agenda About neoit Background on HRO HRO Market & Market Trends Potential Benefits of HRO The 7 Secrets of Successful HRO Q&A All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 2

Silicon Valley Austin Bangalore Manila Mumbai New York About neoit A consulting firm singularly focused on helping Global 2000 improve operations and grow their business by capitalizing on services globalization SM Deep globalization experience and expertise Recognized industry thought-leaders Track record of advising on successful client transformation Trusted advisors to C-level executives and management Knowledge Operations Expansion & Research Improvement & Growth Risk Management All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 3

Background on HRO Outsourcing/offshoring of HR processes can generate significant cost savings as well as quality and productivity benefits. Domestic outsourcing: Select HR processes has been going on for some time Emergence of a more robust vendor community and more reliable offshore infrastructure facilitates more aggressive HR strategies by leading companies Full HR outsourcing/offshoring: Still in the early stages The challenges should not be minimized All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 5

HR Organizational Processes HR as a function in an enterprise holds strategic value. The long term strategic vision of the organization relies largely on HR policies which directly impacts its People Strength. In an organization that has a fully developed HR department, the internal process can be classified into three different layers. The factors that influence this classification are parameters like Long term Vs. Short term factors Top management involvement Focus Process based Vs. Decision based Continuous Vs. Adhoc, etc Long term focus High involvement of top management Focus on enhancing people assets Decision based Very low frequency Linked towards long term goals Involvement of top management in transition and setup Augmenting people strength key focus Mix of decision based and process driven Short term focus No involvement of top management required Focus on execution of routine activities Process based; no decision making Periodic; repetitive All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 6

HR Functions Activities Scope for Outsourcing HR Functions Strategic Collaborative HR Policy formulation Aligning HR goals with that of organization Manpower planning Retention planning Major labor issues Professional recruitment Change management Benchmarking Training and development Workforce management HRIS Performance management Regulatory compliances Extremely critical and confidential Service provided by specialist HR consulting firms. Not outsourced to traditional HR BPO providers. Can be outsourced once systems are in place Increasing willingness to outsource Administrative Payroll management Benefits administration Pension administration Non-professional recruitments/background recruitment activities Routine activities - can be easily outsourced Widely outsourced All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 7

HRO Verticals and Key Activities Recruitment & Staffing Solutions HR Admin Solutions Payroll Solutions Benefits Solutions Learning Solutions Job requisition management e Recruiting and job site administration Recruitment ad strategy and development Candidate sourcing, screening (initial screening, back ground checks, drug screens etc), selection, and tracking Candidate pool management Interview scheduling Offer administration Orientation and onboarding, providing welcome kits Responding to unsolicited resumes HR portal and self service Application Compensation administration Performance management Policy administration Employee record management Management reporting and analysis Severance/ separation Flexible payroll architecture, leveraging client systems or service providers backbone Multi-jurisdictional administration and compliance Integrated global reporting Managing flexible spending and compensation management accounts Health and welfare services Multi-jurisdictional administration and compliance Carrier administration Retirement services and pension administration Leave management Alternative training delivery support, such as e-learning, distance learning, and JIT simulations Work/life programs Capacity and utilization management Content development and management Integration with logistics, billing processes, and facilities management All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 8

HRO Market The HRO market is estimated to grow to $32.1bn by the end of 2007. The industry will witness a CAGR of 13.3%. 40 20 17.6 All figures in $ Billion 19 22 25.2 28.5 32.1 0 2002 2003 2004 2005 2006 2007 HRO Growth by Year All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 10

Key Market Trends War for Talent Particulary for Globally Savvy Supplier consolidation Emergence of Offshore option Wider acceptance of HR Outsourcing client markets Self Service Growth of comprehensive HR outsourcing service provision Growth in outsourcing from wider geographies All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 11

Potential Benefits of HR Outsourcing Quality Improvement Minimizing defects with standardized processes Improving HR program effectiveness HR Consolidation Combining multiple HR functions and centralizing them to a shared service center Automation Enabling self-service through advanced speech recognition, Web, and IVR tools, which reduces capital investments and provides Benefits of HR Outsourcing Cost savings Cost savings through Automation Quality improvement Integration of services Service Integration Unifying interrelated processes to improve efficiencies Process re-designs End-to-end streamlining of HR business processes and implementation of best practices All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 13

The 7 Secrets of Successful HRO 1 Embrace Globalization 2 Welcome It As A Transformation Lever 3 Take a Lifecycle Approach 4 Align Business And Globalization Objectives 1 Assign The Best People 5 6 Implement a Strong Governance Model 7 Embrace A Continuous Improvement Mind-set Source: Atul Vashistha, neoit All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 15

Practice #1: Embrace Globalization 1 1 Embrace globalization across the the business 2 2 Ask Ask why why it it cannot be be done elsewhere 3 3 Mandate it it 4 4 Keep an an eye eye on on the the future All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 16

Practice #2: Welcome It As A Transformation Lever Leadership Commitment 1 Organization Design & Structure 2 Process Redesign 6 3 Change Management 5 Education & Development 4 Communications Source: neoit All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 17

Practice #4: Align Business and Globalization Objectives Quality Need for consistent quality and service levels Control Ownership preference as influenced by risk & culture factors Corporate Strategy Business plan, goals and results expectedacquisition, cost structure, growth, flexibility, risk aversion, profitability, cash etc. Social Responsibility Issues related to job loss, globalization, employee upheaval, etc. Globalization Strategy & Readiness Framework Industry Activity Offshore actions of competitors and industry players Risk Manage stability, security, privacy, volatility, etc. Company Culture Affinity for outsourcing & globalization including past experiences Cost Savings Need for reducing cost or fundamentally altering business model Ensure that business strategy drives services globalization Why are you looking at globalization? What part of your business strategy does it help you execute? What are you going to do? Is the organization ready for this? Source: neoit All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 19

Practice #5: Assign The Best People Globally right leaders are selected and assigned to launch and manage the program Strong participation from the CEO and C-Level Executives Attention and recognition by senior management makes it attractive to lure the best talent Team practices strategic learning Ensure team members are globally savvy All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 20

Importance of Being Global Savvy Competencies of managers and leaders have changed in the face of outsourcing and globalization Need for Global Management talent Subtle differences in the competencies, and characteristics that are necessary for global managers to be successful Managers cannot necessarily keep managing in the same way as before and still be successful as a global manager. Source: Lori Blackman, DNL Global All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 21

Are You Global Ready? Tool: Global Readiness Self Diagnostic* Based on Competency Study of more than 250 managers Self assessment tool Some sample questions: I handle difficult on the spot questions well. I am able to integrate local and global information for decision making. I am able to develop cultural differences as a source of strength for the organization. I have a global perspective in developing a business strategy. I am able to manage and delegate within a changing environment. *Source: Lori Blackman, DNL Global All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 22

Practice #6: Implement A Strong Governance Model 4 4 1 1 5 5 2 2 3 3 neoit M5 Framework All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 23

Practice #7: Embrace A Continuous Improvement Mind-Set Are our globalization efforts healthy? Onsite Operations Strategy Offsite Operations Programs such as Six Sigma are People part of the ongoing Operations operations Technology Compliance Industry All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 24

Services Globalization SM : The Future Emergence of Services Supply Chain Location Manufacturing Supply Chain Services Supply Chain Production Inventory Transportation Location & Labor Service Outsourced Delivery Governance BENEFITS Lower costs Faster time to market (JIT) Higher quality Flexible capacity Innovation Risk diversification All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 25

Next Steps Identify those activities within the end-to-end HR processes that would maximize the value creation if outsourced Identify the challenges from an implementation perspective such as: Organizational resistance Unstable or nonstandard processes Subscale deployment of FTEs Language and/or other cultural issues Identify the Leader/Champion for outsourcing and offshoring Design the communication strategy for Internal and External audience All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 26

Contact Information Atul Vashistha CEO atul@neoit.com 925.355.0557 neoit Global Headquarters 2603 Camino Ramon, 2nd Floor San Ramon, CA 94583 USA Bangalore, India 210, Bellary Road Upper Palace Orchards Bangalore - 560 080 India Manila, Philippines 8/F Pacific Star Building Senator Gil Puyat Ave. cor Makati Ave. Makati City, Metro Manila, 1200 Philippines www.neoit.com

Are You Global Ready? Global Readiness Self Diagnostic Tool Evaluate your global readiness using the free selfassessment test found at: http://www.myglobalcareer.com/global-ready/ For more information on this tool, visit www.dnlglobal.com All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited 29