Springboarding into an HRO Spring

I like research and survey reports that provide a springboard effect. In addition to offering valuable data and insights in and of themselves, good research can launch our thinking in many directions. I am very right brained and approach data in both intuitive and analytical ways. Data “talks” to me, sometimes challenging and hectoring, but more often it lights up a pathway, and occasionally it helps make connections not seen before.  

Let’s look at a few data launching points from two recent studies, CedarCrestone’s 2009-2010 HR Systems Survey, and Towers Perrin’s Achieving Effectiveness in HR Outsourcing study. Each has a very different perspective, but each has elements of the same story.

According to Towers Perrin’s (now Towers Watson) annual HRO large market buyers survey, HR is much more aware that significant change is needed to support the retained HR staff after outsourcing. In 2006, 41 percent of respondents agreed that the retained organization needs to change to a great or very great extent to leverage the full value of the HRO model. In 2009, agreement had risen to 57 percent, an almost 40 percent increase. A total of 92 percent agree that some change is needed, but “some” underestimates the actual needs.

The Towers Perrin research shows there has consistently been a drop-off in client satisfaction with outsourcing, usually between year one and three – the terrible two’s. CedarCrestone also indicates that it takes time to achieve the full benefits of new applications and self-services, whether in an internal shared services or an outsourced environment. Look at any change management model and that mid-process dip is there.

Both reports show gains in HR-to-employee staffing ratios and less HR staff doing administrative work, largely impacted by adoption of self-services, which will provide the initial cost benefits. But less administrative work does not necessarily mean that HR is more effective or strategic, which is what ultimately provides long-term business value. 

A deep understanding is needed to be prepared for what the services being purchased will do, and what the retained HR organization must do; this may take re-skilling and will definitely take time and effort. Both studies point out the need for change management to attain the full value of new HR technologies and service strategies. Towers Perrin’s research points to addressing HR’s issues and its needed changes in roles and capabilities. CedarCrestone points to addressing resistance to technology that initially impacts adoption, but goes on to highlight a larger issue – integration across applications. 

In addition to services and applications that work and provide direct value, integrated data from many sources and applications is needed for use by the transformed HR staff to enable analysis and provide decision-impacting information to the enterprise.

Addressing people, process and technology issues on both the vendor and buyer side can lessen the depth and length of the normal dip, providing a springboard to faster benefits realization in systems, services and business results. A nice leap for HR and HRO indeed! 

Linda Merritt, Research Director, HRO, NelsonHall

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