HR and Talent Management Steering Committee
Wednesday 29th June 2011
This event, chaired by Yvonne Williams, NOA Board Member, discussed best practice in HRO and paved the way for a NOA best practice guide for HRO.
Yvonne introduced the event and commented: “Ideally the role of this steering committee is to produce a best practice guide for HRO. HRO has changed a lot over the last few years and the market has matured tremendously.
“HRO is a very people focussed practice. Getting it right is extremely important as bad news travels a lot quicker than good news. Getting it wrong can be disastrous for many organisations.”
Paul O’Hare, Partner, Kemp Little, presented on the legal aspects of outsourcing HR and discussed current trends in the sector among with variations in contracts.
Paul said: “Most of the trends in this presentation are not unique to HRO, such as multi-sourcing, but they are definitely prevalent in the area. However in HRO there seems to be push towards quality and service rather than cost which is usually the primary driver in other outsourcing agreements.”
Outcome based pricing models linked to objectives are becoming more common throughout HRO and many other areas of outsourcing
Current Trends in HRO Contracts
- Shorter deal terms
- More diversified sourcing strategies (driven by multi-sourcing and distinction between transactional and consultative HR functions) and delivery models
- Drive towards standardisations (adoption of SaaS and cloud-based solutions)
- Changes to pricing models / pricing terms
- Increase in number of terminations and exits
Jim Brannan, CEO, Bcerta, said: “Someone managing many outsourcing agreements should not have to manage completely differing and inconsistent strategic practices. There has to be some level of consistency throughout and element of standardisation.”
Strategic workforce planning and analysis should come before recruitment, assessment and selection however in practice it is often the other way around. There is often a drive towards organisations looking ahead at their exit strategies.
David Williams, Partner, Kemp Little, said: “People are beginning to try and change exit agreements, they want to know where they will stand. It is something that can be negotiated and we have seen many positive examples of this renegotiation.”
Paul Hare agreed and said: “It is extremely important to plan your exit strategy in advance and understand the charges for getting out of a contract earlier. Many organisations do not realise the charges that can be accumulated for getting out of a contract earlier.”
Termination and exit
90% of retenders awarded to incumbent (TPI Report Q1 2010)
Key Points
- Inadequate termination rights
1. Especially for repeated service level failures
2. Importance of clear termination for convenience rights (with any exit changes pre-agreed)
3. Realistic exit periods – with ability to extend
- Poor exit planning
1. Robust contract terms – but often a failure to observe them
2. Contract incentives re testing and updating
- No agreed parameters on exit costs
- Dangers of ‘black box’ outsourcing
Paul discussed the evolution of HRO Contracts and the drive towards standardisation and adoption of SaaS / cloud-based HR solutions
Key Points
- Especially common for transactional HR services
1. Payroll / benefits administration, employee records etc
- Typified by increased adoption of SaaS and cloud-based solutions in HR sourcing contracts
- Drivers / Facilitators
1. Reduction in costs and lower (implementation) risk)
2. Increased prevalence / reliance of technology and improved internet / networking capability
- Implications for HRO contracts
1. Confidentiality, integrity and availability of HR data – risk allocation implications
2. Understanding – and documenting – ‘target operating model’
HR contracts: Pricing trends
Key Points
- Financing of deals (transition costs etc)
1. Impact on deal term, termination fees, ability to benchmark
- More flexible price bands – to deal with major reductions in the workforce
- Impact of ‘change control’ on customer business case
- COLA and ForEx risk – Offshore / rightshore deals
- Trend towards more ‘accountable’ pricing models
1. Move from input-based models towards output – and outcome- based pricing models
Yvonne concluded the seminar and said: “The global aspects of HRO are a big challenge. The foreign exchange risk is high as you are dealing with a variety of people and communication and service levels are of great importance. A HRO best practice guide would be invaluable for the sector and address many of the challenges that can arise.”
Steering Committee Actions:
• Paul O’Hare to share the slides to be shared to everyone and suggestions for guidelines to be email to Stephanie. HRO Specific
• July Session 1: Two end-user organisations to provide insight (BP and Lloyds) good experiences and bad experiences
• August Session 2: Two supplier firms to provide insight
• September Session 3: Advisory / Legal to provide insight (care studies)
• October: Production of the HRO best practice guide
• November: Launch at the NOA Summit and Awards
Best Practice Framework
- Look at what can be outsourced
- Look at the risk assessment for the services
- Bad experiences / good experiences
- Delivery of risk assessment
1. Methods of delivery (offshoring, multisourcing)
- Executive summary of HRO
- Title to be decided.
Attendees:
Yvonne Williams - NOA
Emily James – BP
Pau O’Hare – Kemp Little
Mike Gibbs – KPMG
Kathryn Dooks – Kemp Little
Richard Monaghan– Lloyds banking
Vijai Balachandra - Infosys BPO
David Williams – Kemp Little
Jim Brannan – Bcerta
Paul Corrall – sourcingfocus.com
