Does HRO Stifle Innovation?

A question since the earliest days of HRO has been, what about innovation? We all want cake and want to eat it too, and that’s what buyers have always wanted: lower costs, improved performance, and innovation in HR business process management. Even when a deal was structured for the lowest cost pricing and standard SLA performance, clients soon asked “where’s the innovation?”

Knowing if a service provider is a market leader in HRO innovation is important to some clients, especially those companies that use innovation as a competitive advantage. Perhaps an equally important question is can an innovative company risk using HRO and will it help or hurt?

The Forbes List of The World’s Most Innovative Companies may help us determine if HRO providers can be innovative and if HRO is being used by innovative companies. The list is based on an “innovation premium” which is defined as “the premium the stock market gives a company because investors expect it to launch new offerings and enter new markets that will generate even bigger income streams.”

First, can HRO providers be innovative? Well, ADP (#87) is on the list of the top 100 that includes the likes of Apple, Google, Amazon, and Starbucks. Infosys (#15) is on the list and it also offers HRO services. Congratulations to both ADP and Infosys!

Next, can innovative companies risk using HRO? Yes, they can and they do. Here are some of the top 100 companies on the list known to use HRO and their vendor partners. Notable is IBM HRO with at least three clients on the list: P&G, Kraft, and Avon Products. IBM HRO focuses on large market HRO and clearly can be a valued partner in HR transformation with leading innovators.  Other partnerships include Unilever with Accenture; KAO with ADP; Kellogg and PepsiCo with Aon Hewitt; and Agilent with NorthgateArinso. RPO providers are also represented with the triple threat of The RightThing providing RPO support for Amazon, Campbell Soup, and Praxair. I am sure there are many more connections to HRO among the top 100. Congratulations to all, let’s have a piece of cake in their honor!

According to the newly published “The Innovator’s DNA,” the 3P framework for innovation is people, processes, and philosophies that foster innovation as everyone’s job and there are key leadership skills and behaviors than can be developed to weave innovation DNA into the company. Of course HRO, even at its most innovative, cannot make a client an innovator. That must come from within. HRO can support each element of the framework for innovation and become an enabling partner to clients that are innovative or those that are striving to be.

Do you have an innovation premium? Is your HRO service provider capable of enhancing your journey of innovation?

Linda Merritt, Research Analyst, HRO, NelsonHall

Paradise by the (HR) Dashboard Light

Waxing nostalgic, I couldn’t resist using the title of Meat Loaf’s 1977 hit song for the title of this blog. And although “paradise” may be a bit of a stretch, dashboards are a vital tool in HRO as they enable both clients and service providers to gain real-time access to critical data – such as provider and outsourced process performance – via a graphical display.

There are a number of different types of dashboards in use today, including those which track and measure service level agreement (SLA) performance, those which are part of analytics services and used more broadly to track and display HR metrics and track strategic initiatives, and those which benchmark a variety of an organization’s HR-oriented characteristics against industry standards. Today I’m focusing on SLA performance dashboards, but we’ll cover other types in future blogs.

SLA performance dashboards are used to monitor, measure and regularly report on a provider’s adherence to the contractually agreed upon service levels. Dashboard findings are typically gathered by the provider and reported on a monthly basis to senior executives, HR leaders, operational managers and their teams, and key stakeholders within the client organization to enable a quick, at-a-glance view of provider performance against the agreed upon SLAs.

While it varies among client companies, commonly tracked SLAs include:

• Payroll timeliness and accuracy versus the agreed upon target

• Recruitment cost and time to hire as compared to the agreed upon benchmark standard

• System availability versus the agreed upon target

• Time to resolve Tier 1 and Tier 2 inquiries as compared to the agreed upon target. An example of a Tier 1 SLA is for a call center to answer 80 percent of calls within 30 seconds, and a Tier 2 is for 95 percent of cases closed within two business days

• Customer satisfaction versus the agreed upon target

These dashboards depict the status of each service level with a stop light-style indicator. Green confirms the service level has been met or exceeded. Yellow warns the service level is in danger of being unmet unless corrective action is taken. And Red means the service level was missed and immediate corrective action must be taken to resolve the problem, root cause analysis conducted and process improvements put in place to prevent it from happening again.

A Red may also mean providers face financial penalties. In my own experience from my days at AT&T and in intervieiwng over 150 buyers and providers, financial penalties are rarely assessed for a missed service level. The most important things the client and provider are concerned with are immediately resolving the service level failure and preventing a miss from happening again. If Green status is maintained in the subsequent measurment periods, it’s likely no penalty will be assessed. Most buyers and providers understand the focus needs to be on a spirit of partnership to work through problems and prevent them from recurring, rather than creating a contentious relationship.

Dashboards are also commonly used in monitoring the progress of major HRO projects tracking key activities, timelines and budgets. The project managers may need huge and inticrate charts and spreadsheets, but a one page summary with clear indicators is more useful in executive and governance meetings.

As NelsonHall recently published in its report HRO Analytics: Utilizing Analytics to Improve Outsourcing Experiences, dashboards are a useful vehicle to display analytics as well as benchmarking and SLA data. In my role at AT&T I found the dashboards we used were very useful tools to keep everyone informed and focused on any needed issue resolutions, as well a good way to reinforce the efforts and activities it took even when things were going well. Stay tuned for future dashboard-related blogs.

Gary Bragar, Lead HRO Analyst, NelsonHall