Retained HR Organization: the Forgotten Part of HRO One of the essential factors in a successful outsourcing venture is the role that is played by that part of the organization that is not outsourced the retained organization. It should be remembered that the totality of the HR function incorporates not only that which has been outsourced, but also that which remains the measure of success is a function of how well these two parts combine to address the strategic, tactical and transactional requirements of the organization. There can only be a successful transformation of the HR functions if adequate attention is paid to the retained organization. The impact that an HRO has on the HR function is definitely not limited to those areas that are outsourced. The impact on what remains within the organization may be just as, if not more, critical. Few, if any, organizations currently undertake an HR outsourcing project with the sole desire of removing certain transaction-related processes from the ambit of HR. The more prevalent desire is to leverage HR outsourcing as a step towards a broader transformation of HR and its role in the organization. If an organization focuses its attention purely on the act of outsourcing the administrative and transaction processing areas, and ignores the strategic and operational impact, then it is not fulfilling its desire to be transformational. True transformation only occurs when the impact of change is felt throughout the HR organization, especially that which is retained as part of the business. Here we ll address the ways in which an organization can approach the reorganization of the retained HR organization in a way that ensures that the process is genuinely transformational. What does an organization typically seek to achieve by transforming its HR function? Efficient and high-quality service delivery Improving service quality, improving manager and employee access, strengthening integration and data capabilities, and reducing delivery costs Sharper focus on strategic HR services Configuring HR services to best support the business strategy and to maximize business outcomes Higher levels of contribution by HR professionals HR generalists and specialists focusing on the most strategic or highest value activities and roles Integrated HR leadership Stronger coordination and alignment across the entire HR function Tighter partnership with the business HR professionals working in partnership with business leaders, line managers, and other functions to drive overall business performance The tumult and the shouting dies The Captains and the Kings depart...
What are the characteristics of a successful HR transformation? HR can be regarded as being successfully transformed when the following elements are in place: HR Organization and Roles Clear governance and delivery models exist, with explicit employee, manager, outsourcer, and HR roles Centers of Excellence are issue-oriented and focused on strategy development and program governance Internal HR roles are actively managed away from transactional/ administrative/non-core activities Partnership management roles are strongly sponsored, clearly defined, and supported by internal management practices HR Competencies Emphasis is placed on strategy development, process management, and program oversight There is new delivery oversight, partnership development, and management skills HR Generalist competency development and selection processes are in place HR-for-HR programs are realigned (recruiting, rewarding, developing HR professionals) HR Processes HR processes are defined and managed as event-driven and end-to-end Processes are defined based on employee and manager requirements not siloed or HR-centric Management practices aggressively drive cost and service improvements Tight integration exists between internal/ external roles Non-core activities are aggressively automated or outsourced HR Technology Integrated technologies and interfaces tie together multiple providers and systems in a manner that creates a seamless user experience Robust data models allow for higher-value HR programs and analytics Strong technology planning and management practices exist that include the outsource partner HR Metrics Robust measurement capabilities exist to monitor, diagnose, and improve program and process performance Clear performance measures/reporting is received from outsource partners There is an expectation that outsource partner will be proactive in monitoring performance and identifying improvements/solutions What then are the desired attributes of the retained organization post outsourcing? Leadership Management articulates a clear vision and is capable of leading the transformation through implementation Communication and Involvement Build commitment to change and ownership of the change effort Change Roles and Competencies Define roles and ensure that the appropriate knowledge, skills, and tools are available for those involved in the change effort Measurement Establish change metrics to monitor progress toward transformation objectives Expert Vendor Management HR BPO requires a higher level of partnership, management competencies, and processes New Governance Models Governance processes and roles are more complex and require a new set of behaviors to be effective HR Process and Program Management A greater proportion of the work within HR is project-based, requiring strong program management processes and roles and stronger project management competencies; as more of HR s traditional work shifts to a third party, HR must manage to outcomes rather than tasks HR Strategy and Planning HR BPO contracts are long term, but changes in delivery capabilities need to be proactively managed so they can cost effectively adapt to evolving business needs 2
What are the steps in determining the structure and function of the retained organization? The transformation of the retained organization should not occur at the end of the outsourcing project. It should take place both before and during the outsourcing project, so that when the outsourcing commences, the retained HR organization is in place and ready to interact with the outsourced functions. There are three phases that can act as a rough guide to addressing the retained organization transformation: Before outsourcing commences Initiate project and develop detailed project plan Conduct Current State and Activity Analysis Gather information about the organization structure and role designs used in HR Gather information from customers regarding their current satisfaction with HR service delivery and their future business requirements Assess the level of the outsourced scope of services, and its impact to date on retained HR Assess the projected opportunities for streamlining retained HR duties based on process improvements and service delivery transformation (e.g., process workshops) Summarize the above information to identify and prioritize the key gaps between the interim retained HR and the longer-term desired organization Prepare retained organization strategy and harmonize with outsourcing scope Develop a business case that quantifies the investments and benefits of each proposed option, as well as the qualitative results to be achieved Create a high-level organization model and impacted roles, and identify key change impacts Design the Transition Governance Model for the retained organization Develop a high-level roadmap for implementation 1. Before the outsourcing project commences to ensure that valued members of HR staff do not leave or join the outsourcer 2. During the outsourcing planning phase to ensure that the planning of the retained organization transformation is in lockstep with the outsourcing plan 3. During the outsourcing implementation to ensure that activities carried out in respect of the retained organization are in harmony with the outsourcing project stages Set up project timetable and milestones. This will assist in determining what activities will remain once outsourcing has taken affect. This will serve as a basis for restructuring the HR organization. This will enable HR to redesign its role in a way that is most effective for its customer base. By comparing the outsourced processes with the total set of processes, it can be determined which processes will remain after outsourcing, and the activity levels required to perform them. This will identify areas of rationalization and consolidation of roles and processes in the retained organization. This will identify the roles, responsibilities, and skill sets still required for the retained organization. Determine the role of HR in the post-outsourcing era, and ensure that it is in harmony with what is being outsourced. This will ensure that the projected retained organization makes good business sense and is financially sustainable. This will facilitate the identification of key roles that need to be filled after outsourcing, and will enable the organization to identify those people that it will need to incentivize in order to remain with the organization. This will determine the rules of the road during the transition period, and control the interrelationship with the outsource partner. This dictates the sequence of events and the timeline for implementation. 3
During the outsourcing planning phase Determine and train the project team for the Retained Organization Transition Participate in the master planning process for the overall outsourcing transition and transformation Implement the Transition Governance Model for the retained organization Determine the structure of the interim retained organization (for the implementation period) and determine the headcount, roles, and levels in the interim retained HR organization Craft a retention strategy to ensure effective staffing of the interim retained organization Create the Change Management and Communications Strategy and Action Plan Conduct Change Readiness Assessment Actively engage in the process for employee badging and knowledge transfer for the transition period Ensure staff engagement through communication, role orientation, rewards, and development plans Obtain proactive sponsorship support from HR leadership for the project This will ensure that all project team members understand their roles and responsibilities. Coordination with the outsourcing master project plan is an ongoing requirement. Communicate the governance requirements to all stakeholders likely to be impacted. This will set up the structure and requirements to enable HR to operate during the outsourcing implementation period. It is essentially an interim HR organization. This will ensure that employees required during the transition period will remain in their positions. Reorganizing the retained organization is a major change exercise, and needs to be adequately planned and coordinated. This will identify areas of negativity that need to be addressed in order to make the transition successful. This will ensure that there is no conflict between the selection of rebadged employees and those required for the retained organization. This will contribute towards the smooth operation of the transition. Without ongoing proactive executive sponsorship, initiatives like this are not likely to succeed. 4
During the outsourcing implementation phase Implement the interim retained organization strategy developed during the previous phase Commence the implementation of the Change Management and Communications Strategy and Action Plan Coordinate with the outsourcer to ensure that the knowledge transfer process is operating efficiently Conduct Business Process Re-engineering for the activities to be performed by the retained organization Using the roles and responsibilities determined in the business process reengineering exercise, prepare role descriptions and competency requirements for each position Prepare a staffing plan for the retained organization, identifying those roles that will be filled by existing employees, and those that will be recruited; this may also involve retraining of certain employees Craft and execute a retention strategy to ensure effective staffing of the permanent retained organization Craft and execute a recruiting strategy to fill those roles not filled by existing employees Craft and execute a training program to provide retraining to those employees identified as requiring retraining Craft and execute a redundancy program for those employees who will neither be transitioned to the outsourcer, retained within the new HR organization, nor rebadged within the organization Develop the Operational and Vendor Management Governance Models Continue to reinforce executive leadership sponsorship by means of regular report-back sessions Work closely with the outsourcing PMO to remain appraised of the outsourcing progress Develop the metrics and mechanisms for monitoring the retained organization effectiveness and efficiency This will ensure that HR continues to operate effectively during the implementation period. This is an ongoing process, determined by the roadmap of changes occurring on a regular basis. There will be a significant need to educate the outsourcers in the operating models and processes being transitioned to the outsourcer staff members. This will create a new set of business processes that will support the retained organization s revised role. It will also crystallize the roles and responsibilities of the final retained organization. This will flesh out the organization structure, and facilitate the decision as to who should populate the various positions. It is important to remember that the criterion here is suitability for the new role, rather than length of service. This will ensure that employees required during the postimplementation period will remain in their positions. It is essential that new recruits are in place and onboarded before the implementation phase ends. This training should be completed before the implementation phase ends. Try to do this as soon as possible to reduce uncertainty, and to prevent the rumor mill. This will provide the governance models for both the continued operation of the HR retained organization, as well as the way in which the retained organization interacts with the outsourcing vendor. Sponsorship and support remain critical elements in the success of this type of project. This is an ongoing requirement. The effectiveness and efficiency of the retained organization will need to be evaluated against a new set of performance metrics. 5
Footnote When determining the project timetable for the retained organization, remember that there are some activities that are dependent on the timing of the outsourcing project, while others are independent of what is transpiring with the outsourcing. Items not related to the outsourcing timetable Develop operational governance model Develop transition governance model Develop vendor governance model Business process re-engineering Organization and staffing structure Selection of staff for retained organization Contact Us Peter Weinberg Telephone: 312.846.3059 Cellular: 312.404.9464 Fax: 312.846.3702 Email: peter.weinberg@buckconsultants.com Items dependent on the outsourcing timetable Change management and communications strategy and action plan All other change management and communications requirements Retaining and incentivizing staff for knowledge transfer All other knowledge transfer issues Retraining retained organization 1.866.355.6647 www.buckconsultants.com 2008 Buck Consultants, LLC. All rights reserved.