The perception for HR outsourcing has changed from a cost reduction initiative to a strategic value proposition to the business. HR is no longer looking for technology support only in the transaction areas such as payroll and benefits administration. Experts agree that there has been a shift in the technology paradigm from transaction to strategic areas and the ideal service delivery model preferred by the best-performing organisations is to outsource the transactional functions and focus on the strategic areas like total compensation, planning and development, job evaluation, total rewards, employee communication and retention with efficient use of tools available in the market for these functions.

“A transformation of HR operations shifts the focus from a traditionally reactive and administrative function to one that is tightly connected to the business. The effect of this strategy is significant in making it possible for businesses to respond to market and human capital changes more rapidly. One of Buck’s research projects on HR transformation proves that implementing a shared services model, common and flexible policies and programmes, and consolidated technology across the corporation enhances the efficiency and credibility of the HR function,” says Raghvendra Singh, sales manager, APAC, Buck Consultants.

The growing trends

Industry gurus feel that a lot of organisations in Asia-Pacific are realising and investing in HR technologies centred on HCM (Human Capital Management) functions to increase efficiencies and focus on employee development needs. This trend is seen in the HR outsourcing arena as well. “Most organisations in APAC – with their inherent nature of business and being spread across multiple countries – also see a significant need for information consolidation and reporting against standard parameters and formats. Organisations’ HR and IT functions are increasingly focused on either implementing new HR technologies with higher degrees of automation or moving towards HR outsourcing with a wider functional coverage. The increased levels of awareness and desire to achieve higher efficiencies are pushing outsourcing vendors to be more competitive and provide better ROI on the organisations’ investments,” observes Sharat Bhupathi Raju, senior manager – Presales Ramco Systems, Singapore.

The use of the internet and Software as a Service (SaaS) are the two main trends at the moment, particularly in the global marketplace, Martin Stockton, group vice president of Global Business Development, Patersons HR & Payroll Solutions, comments on the emerging trends. “There’s certainly a backlash against ERP software with costly and lengthy implementation and the inability to efficiently fit countries where multinational corporations have ‘smaller’ operations. Therefore, there’s indeed a lack of true global coverage,” Stockton says. “Going away from dealing with local payroll processing and disjointed information, to being able to process payroll globally and consolidating that information in real time is becoming more of a priority – especially for organisations that need to meet regulatory compliance,” he elaborates.

The challenges

Although simple as it sounds, the process of adapting a new HR technology or moving towards an outsourcing mode requires a detailed due-diligence from the organisation’s end. It is important for organisations to make the decision based on where the organisation currently is and in which direction it intends to move in the future.

“For organisations intending to procure a new HR technology, the line between what they’d like to spend versus who’ll be the right vendor to meet the organisational process complexities needs to be validated. We’ve seen organisations finding it difficult to balance priorities between HR and IT requirements for a proposed HR technology, leading to failures in adapting the new HR technology. Such problems can be minimised by adapting a rating scale with adequate weightage for the respective requirements, and carrying out a detailed evaluation by the respective users on the proposed HR technology,” says Raju. “For organisations intending to move towards outsourcing, identifying the right mix of functions and services to be outsourced is critical. Following this would be identifying the right outsourcing provider to match the organisation’s needs to what they can offer. It’s important to evaluate the provider’s track record of successes in similar functions and services,”
Raju continues.

Singh corroborates and adds that although reducing costs is clearly one motivator to transform HR, far more compelling is the interest in generating value for the organisation. “The demand for HR to create value is also not new; however few companies have reached their full potential in this regard. HR professionals are expected to deliver more advanced and differentiated human capital skill-sets, create and maintain high-performing workgroups, offer technology platforms with increased functionality and direct access to information, and partner with business leaders to align people strategies with business goals to achieve corporate initiatives. But with the current rate of economic, competitive, and political change, organisation demands cost flexibility in all selling, general and administrative functions. The mandate for the HR function is to work better, faster and cheaper. The creation of a shared services model has to be a strategic initiative, with proper research in the alliance of strategic partners, by choosing which functions should be retained in-house with efficient use of technology and which functions are better managed in an outsourced environment.”

Conclusion

Needless to say, identifying the right mix of what is needed to what can be achieved in the planned HR technology/outsourcing implementation is critical for organisations to achieve the right ROI. “Organisations should first study and assess what is their current requirement/problem and what are their future plans before embarking on a HR technology/outsourcing implementation. Ensure the provider matches the organisation’s work culture and business practices,” suggests Raju. HRM

Expert speaks

By Caleb Baker, general manager, Managed Services – Asia, Talent2HRO

As HR becomes more complex and the HR function continues to evolve from administrative to strategic, the demands on HR increase. Timely and accurate information is critical to effective decision making and HR business leaders are under increasing pressure to analyse their workforces in more depth and in a more systematic manner than in the past. As a result, HR technologies have become more powerful, capture more data, and allow users to dissect data on many levels in order to report, analyse, and plan to the level of detail that modern business practices demand. Standard reports are still important, but HR technology needs to be powerful enough to provide comprehensive ad-hoc reporting capabilities, whilst retaining ease of use to ensure that users don’t have to become technical experts to extract and manipulate the information they need.

One of the biggest challenges faced by our clients is the problems caused by using multiple systems in different geographic locations. Many of these are legacy systems developed with technology that has simply not moved with the times. It’s not uncommon to find sophisticated multinational companies that have disparate systems for payroll, e-leave, learning & development and HRIS, none of which ‘talk to each other’. The companies would like to consolidate into a best-of-breed system, but often there has been so much investment both in terms of time and money in these legacy systems, that it is often difficult for them to build a business case to justify moving to a new system. Unfortunately, the costs of not consolidating systems and of using outdated technologies are often soft costs – inefficiencies, duplication, errors – so the true cost of staying with legacy systems is often underestimated.

Companies can overcome these challenges by undertaking extensive due diligence to ensure that the system they select, whether it is a fully functional HRIS, or a payroll processing application, is based on a platform that can interface with their other systems, and is not developed using a technology that will date quickly.

Selecting an HR outsourcing partner is a long-term decision. It is critical that the decision criteria include not only a rigorous evaluation of current capabilities and track record, but also a thorough analysis of the outsourcing partner’s vision for the future. HR outsourcing is still in its infancy here in Asia, although many companies have strong service offerings in key locations, to really leverage the benefits of centralisation and economies of scale, companies need to evaluate partners on their level of ongoing investment and their ability to deliver across an ever expanding portfolio of services and geographic locations. The full benefits of outsourcing are seen over the mid to long-term, so don’t just evaluate the here and now, look to the future and choose the partner that you feel comfortable will be able to grow with your business.

Quick tips

Through Buck research and the experience of over 100 transformations to an outsourced environment, the key points are as follows:

• Organise HRO around an overall strategic goal for HR and the business

• The change process is stressful, so be proactive in helping people maintain performance and build their readiness – don’t wait for problems

• Make communication a priority from the beginning and focus it on a consistent set of key messages

• Tailor communications by stakeholder group in terms of timing and content

• Make implementation a true partnership between the client and outsourcing vendor

• Ensure ongoing coordination among the work-streams towards an integrated service delivery model and stakeholder experience

• Design the new retained organisation to complement the new outsourced processes and technology – with aligned roles and training

• Manage change as part of the design and implementation activities for process, technology and people – not as a separate initiative

Source: Raghvendra Singh, sales manager, APAC, Buck Consultants

HR’s takeaway

HR should be focusing on three areas when planning to outsource:

Governance

We should think of governance as the guiding philosophy and management oversight structure that the board of directors and senior management team advocates to ensure that the decisions they make about strategy and the goals they set are implemented. When applied to administering outsourced functions, this definition of governance is not solely focused on duties such as selecting an outsourced provider and approving the changes in delivery model, which usually are responsibilities delegated to specific committees. It also concentrates on the intervening corporate goals of risk management, employee recruitment, retention and satisfaction, and return on corporate investments.

Vendor management

Vendor management is the extension of the organisation’s oversight policies and programs to vendors. The vendor is concerned with delivery of services through its people, processes, and technology. An organisation with strong vendor management oversight programs measures more than the vendor’s level of service demonstrated by service-centre statistics it periodically provides. Well developed oversight programs take a more active role when they also measure: documented processes and controls across the entire vendor organisation; tracking and implementation of service focused to meet both quality improvements and cost reductions; adoption of best practices in technology; implementation of HR strategies; ROI; and contractual monitoring and review.

Compliance

In an outsourced environment, compliance is the focus on the legal and regulatory aspect of service delivery and is one component of the governance and management functions described above. It includes being confident that outsourced services correspond with plan documents and employee communications.

As Buck research shows, outsourcing HR functions definitely brings a lot of value to the organisation by enhancing the service delivery but organisations should adopt a better vendor management program focusing on areas such as: employee-focused services; administration processing services; technology management; relationship management; risk management; compliance; and quality management.