HRO Staffing – A Balancing Act

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

The Next Shore for HRO – Finding Cultural Compatibility

HRO clients have become more open to multishoring to gain cost, scalability and flexibility advantages. And as the major HRO vendors have globalized their service delivery capabilities, some portion of the work is increasingly likely to be done offshore in order for their clients to benefit from optimized services. 

Voice services have been the most challenging area to find culturally compatible locations with a scalable English speaking talent base. According to the new NelsonHall market research report, “BPO Delivery from the Philippines,” the Philippines is a growing location for both voice-based and back-office BPO services, with more than 386,000 personnel across a growing number of service providers. The largest segment by far is customer management services for the U.S., with F&A, especially order to cash outsourcing, as the next largest.  Major BPO vendors, including Convergys, IBM, Infosys, Logica, NorthgateArinso and Wipro, are already there.

HRO services are there as well. HRO is a small, but growing, portion of the service base in the Philippines. The top HRO services supported are employee care and payroll.  With HRO service providers using sophisticated workflow technology and processes, portions of service lines can be handled from just about any location. In the Philippines, initial screenings for RPO, and enrollment and inquiries for learning BPO are supported, as are employee data management, benefits administration and mobility services.

Right now services from the Philippines are highly centered on the U.S., followed by Canada and the U.K. Future growth is expected from English-speaking Asia Pacific countries like Australia and New Zealand. In addition to organic growth for the services already located there, healthcare from both the payer and provider sides is seen as a good opportunity for expanded services.

Latin America is also growing as a BPO region. I recently spoke with country representatives from Chile and Jamaica, and both countries would like to add HRO to the other BPO service lines already migrating to Latin America as it grows as a near shore region and as its own market.

The HRO community can look forward to a wide range of shoring options and cost points. The HRO back-office location will increasingly be by vendor choice, and less and less visible to clients. HRO voice services will remain a client decision to balance cultural compatibility, scalability, flexibility and cost.

Linda Merritt, HRO Research Director, NelsonHall