HRO and Innovation – a Changing Dynamic

Linda Merritt, HRO Research Analyst, NelsonHall

Last week the Human Resources Outsourcing Association’s (HROA) Publications & Practices Committee held a webinar on collaborative innovation in HRO with industry experts Lisa Johnson, director of recruiting, North America at Gate Gourmet, Rolf Kleiner, senior vice president and chief innovation officer at Kelly Services, Inc. and Dr. Greg McLaughlin, senior vice president of research & development for Global Targeting, Inc.

Understanding Innovation

Innovation has been a conundrum for years for HRO buyers and suppliers. There are many ways to define the word ‘innovation’ and that makes it hard to be sure each party is speaking the same language. All three experts agreed that open discussions between clients and service providers are needed to develop a mutual understanding of what innovation means in the context of the relationship and contract.

Greg walked us through aspects of innovation range from the conceptual “innovation is an experience”, to the practical “innovation begins with a need and ends with an outcome that creates a competitive advantage.”

Lisa looks for HRO suppliers with the spirit of innovation – backed by experience. Rolf looks for employees who “rise above the white noise” to work on special innovation projects that also support talent management.

Innovation and Continuous Improvement

The HROA Buyers Group’s survey on innovation and continuous improvement showed there is a commonality in basic definition and understanding developing across the community of buyers, service providers, and advisors. From the words of HRO community members:

• Continuous improvement is an enhancement of a product, service or process that already exists:
  • Increased operational efficiency, improved user experience, ongoing, incremental, and step changes
  • Efficiency and effectiveness gains that “keep pace with the market”
• Innovation is something new and different:
  • Cutting edge, transformational, precedent setting, competitive advantage, disruptive, and dramatic
  • A significant and often transformational change that, once introduced, “you wonder how you ever lived without it.”

The HRO community is in agreement that continuous improvement and innovation should be a collaborative effort between the HRO service provider and the client:

• 92% of respondents agree that this collaborative effort is what should be happening between service provider and client, but only 59% see that as true now, with 40% of buyers and only 22% of providers agreeing that collaboration is actually happening in the marketplace right now
• 77% agreed that innovation should be a collaborative effort among the parties, with agreement from 100% of advisors, 60% of HR practitioners, and 83% of providers.

 The Innovation Gaps

Significant gaps – and therefore opportunities – remain:

• 75% of respondents said that continuous improvement is in the HRO contract
• Only 42% agreed that innovation is included in the HRO contract.

In the next blog I will be getting practical about innovation in HRO.

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The Logic in Logica’s Focus on MPHRO

Linda Merritt, HRO Research Analyst, NelsonHall

Logica has long been an HRO service provider in the U.K. and Europe. With much of its HRO revenues from payroll, it has been a bit quiet on the multi-process HRO (MPHRO) front. So I wasn’t sure that I saw the logic in Logica’s increased investment in MPHRO capabilities, especially when there are other major MPHRO players already in the economy-constrained market.

The HRO group at Logica recognized the developing opportunity for MPHRO as some buyers, especially second generation HRO users and multi-country businesses, began to want more than just transactional low-cost contracts. This created space for an HRO partner to help clients transform HR to increase business and workforce agility in responding to rapidly changing market conditions.

Logica is emphasizing its transformational HRO capabilities by:

• Assisting organizations to align their HR objectives and services with those of the wider organization and manage HR against business goals such as increased employee engagement
• Change management and ensuring that change management is both carried out up-front and carried through to a detailed sub-process level using service simulations to promote operational change as necessary
• Composing a common HR process taxonomy to be used as a common language across both outsourced processes and the retained HR processes
• Program management and its real-time PMO tools.

In terms of process design, the company is looking to use a set of standard Logica HR processes for Logica-delivered processes; for client-retained HR processes, it will provide workflow tools. Logica is also looking to encourage innovation beyond minor process improvements by establishing jointly managed innovation funds and innovation groups with its clients.

In technology terms, Logica currently supplements Oracle’s PeopleSoft HCM 9.1 and Oracle’s E-Business Suite with specialist HR applications where necessary. It may also consider SAP-based HRMS implementations downstream.

To date, the investments are starting to pay off. BPO, including HRO, was the fastest growing segment for Logica in FY 2011, up 23.8%. In the last 12 months, Logica has also been awarded several major MPHRO contracts including:

• BAE Systems:  a six year contract supporting 33,000 participants in the U.K. with a new single-tenant, hosted Oracle HR platform; payroll services; absence and attendance; employee care; and administration services in support of talent management functions including recruiting and learning
• Ahold, a Dutch headquartered supermarket retailer: a nine year contract supporting ~100,000 participants in the Netherlands, Slovakia, and the Czech Republic with a new Oracle PeopleSoft 9.1 platform; HR administration services; HR service desk; and payroll services, which will be subcontracted to ADP.

Other MPHRO contracts were awarded by a British telecom and a Swedish financial services firm, both for five years.

Logica is well underway working its five year roadmap for services development, which includes strategic new services, increasing its partnership ecosystem, and practical elements like adding more mobile apps. Logica is also a relationship-focused partner, and that trust factor, along with results realization from the new wins, will help it continue to grow in MPHRO. Logical indeed!

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