HRO and a Culture of Analytics: Part 2

Service level agreements (SLAs) are probably the most thought about key metric connected to outsourcing. Operational metrics that measure process performance are important. The practice of measurement can also be innovative and strategic.

Let’s stay with IBM as an example and move to the HRO services group, which serves almost 2m users in 99 countries with 29 languages.  I spoke to several IBM’ers including Kerry Violette and Janet Hunter.  Both are a part of IBM’s HRO efforts to enhance the employee experience, increase customer satisfaction, and use intelligence and innovation to enhance differentiated value aligned with IBM corporate goals and initiatives, including the Smarter Planet agenda.

One of IBM’s new programs underway to enhance the employee experience is the “Next Generation of Measures,” and several new HRO contact center metrics are being trialed.  When complete, the new metrics will be rolled out to all clients.  Better measures rely on better data. Cleaning up data and adding more fields takes a certain amount of client effort and IBM is working first with those clients who are ready to step up to a new level of contact center activity analysis.  In addition to the data tracking efforts, client employee users will be surveyed about the contact channels used and will assess the level of effort expended to reach resolution.

IBM HRO, led by Mary Sue Rogers, was an early leader in creating a client advisory group, which encourages feedback, input into prioritizing improvement investments, input about the creation of new service offers, and cross-client sharing and learning.  As clients will tell you, and the IBM HRO team knows, it is not uncommon to “see green, but feel blue” when using traditional SLAs.  And yet, understandably, contractual service metrics focus on the services and processes that are under the vendor’s control.  Another 2011 initiative, Beyond Sat 360, is designed to go beyond contractual obligations and cover processes end-to-end, including client and even third party components.  The program will also aid IBM’s assessment of current drivers of customer delight and retention.

Beyond Sat 360 is an outgrowth of both corporate initiatives and the client user group.  It will take a deep dive view of processes to identify opportunities to reduce nonproductive time and effort for both parties and identify the biggest bang for the buck improvements.  Current HRO clients may opt into the beta test and help develop the program and its deliverables.  Data collection and analysis, reports, and dashboards will be a big part of the program including client participation in diagnostic interviews and surveys.  IBM is partnering with Clear Picture/Organizational Metrics to support the research.

The assessment opportunity is free to participating beta clients. If successful, who knows, this could become a new service offering, as have other programs that started with the client advisory group.

How is your HRO vendor using measurement in innovative and strategic ways to improve their services, provide you more value, and deepen the client relationship?

Linda Merritt, Research Analyst, HRO, NelsonHall

Differentiating HRO – Use What You Know

How many ways can a HRO vendor differentiate?  The lowest total cost, the latest and greatest in technology, the broadest range of services in the most places, etc.?  When there are multiple reputable service providers, vendors have to reach further to create HRO differentiation.

In the early days of HRO, it was sufficient for a vendor to provide services that were as good as what had been provided in-house, becoming the base of most service levels (SLAs).  HRO vendors quickly found that meeting SLAs did not equate to overall client satisfaction, with clients stating that while they may have been getting what they contracted for, they were not getting what they wanted or needed.

Today, “as good as” is not good enough.  HRO service providers need to know more than the client in each service area.  Knowing more may be in the form of compliance and reporting expertise, local knowledge of covered geographies, advanced application use, or even change management expertise.  Client confidence that the selected vendor does indeed “know how” is important.  Confidence that the vendor will be a partner in what happens next is even rarer and is a key differentiator that top tier HR clients seek.

Times of uncertainty create opportunity to build client confidence with your ability to see around corners or at least keep up with the twists and turns.  Consulting capabilities are particularly important in HR.  But, even top consulting capabilities will not build the HRO practice if there is no flow-through of learning and innovation as well as improved process and performance.

Many HRO service providers with roots in consulting offer forward-looking research, publications, webinars, and even conferences to help clients keep up with best practices, new trends, and regulatory happenings, all while demonstrating thought leadership and subject matter expertise.  Many names come easily to mind including Accenture, ADP, Aon Hewitt, Ceridian, IBM, and Mercer.

For example, Towers Watson has published human capital research and recently released its latest HR services report.  Kenexa’s client conferences also offer sessions of broader related HR practitioner interest.  Finally, Infosys provides a good example of application expertise and consultative relationship management when it brings tailored ideas to clients on how they can improve their processes.

Vendors that offer multiple service lines or are an industry leader in a particular area can cross data streams.  Think of ADP’s weekly report on employment or Administaff who has PEO trends that show which U.S. regions are leading and lagging in returning to growth for the small business market.  Also, ACS, a Xerox Company and IBM support client interaction opportunities that can lead to innovation communities.

How can data from IT, F&A, or even Ceridian’s Pulse of Commerce Index be tapped for HRO?  Think about how you can go beyond the obvious and use everything in your kit bag to develop leverageable and differentiating HR and HRO insights.

Linda Merritt, Research Director, 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