Fast and flexible scaling is one of the major benefits of HRO. Scaling up is a lot more fun than scaling down, but both are important, take time, and consume resources. One of the toughest challenges in HRO is maintaining staffing and margins at the same time through the ups and downs of client demand and the overall economy.
Recent times required painful and expensive downscaling as HRO client demand and employment levels dropped, reducing volumes and overall spend. Significant expenses were allocated for staff severance and consolidation of real estate. Even in periods of growth, merger and acquisition “savings” targets are based largely on staff downsizing to reduce overlap, followed by real estate consolidation. Whether a service provider is growing organically or via acquisition, or responding to reduced demand, maintaining appropriate staffing capability, capacity, and expense is critical.
HRO is slowly recovering with RPO leading the way while some areas are still waiting for their upturn including learning and MPHRO. New deals are occurring, renewals are going well, and existing clients are once again increasing scale and scope, at least at a modest level. All good and welcome news!
HRO service providers are confident enough to prepare for a return to growth and make select expansions. At the same time, they know they need to add client load with a minimum of new hiring as pricing pressure is still intense. And this is not even mentioning the need for maintaining an experienced and qualified staff to satisfy client employees and other end-users in the ever changing world of HR.
On the upside, clients are growing in sophistication and understanding of HR outsourcing options. While onshore delivery still leads, especially for voice, acceptance of offshoring has reached the expectation that HRO vendors should offer multi-shore delivery options. Nearshore options and the use of non-voice channels like chat allow leveraging more work to selected centers, increasing the need for and the value of a truly global service delivery network.
Recent HRO service provider expansions include:
- TriNet – Added three new U.S. offices
- CPH – Opened a new office in Sydney
- Futurestep – Added a global recruitment operations center in Houston
- NorthgateArinso – Invested in a new global HR delivery center in Hyderabad, India; opened offices in Russia, the Czech Republic, and Istanbul; partnering with ICAP Group in Greece
- Edvantage Group – New e-learning production center in Denmark.
Expanding the coverage of service locations helps avoid the war for talent and damaging attrition rates in the hottest spots as well as providing increased options for clients.
Buyers, do more than look for an SLA on turnover. Ask about the vendor’s current and future plans for managing staffing and service flexible coverage. Does your service provider show that they are at least as, or more, sophisticated as you are in workforce planning and management? They should be.
Linda Merritt, Research Director, HRO, NelsonHall
HRO Insights 
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