Human Resource Outsourcing (HROs) organizations are focused on staying on top of current and emerging HR practices, laws, and regulations. Their core business capability is finding the ways to make client organizations more efficient by fulfilling some or all of their HR functions. Outsourcing what is typically known as non-strategic activities allows client companies to focus on what's core to their business and to allocate their limited resources for growth.
We interviewed three industry experts to learn more about what HROs bring to the client organization.
A "Typical HRO Portfolio ?
According to Devlin, the CEO of NetPEO, outsourced activities may include many of the non-revenue producing Human Resources (HR) activities such as recruiting, payroll, workers' compensation, periodic audits, benefits planning and shopping, wage compliance, and more.
Based on Devlin's experience, client companies are generally open to working with 3rd parties to manage these non-business critical activities.
Outsourced HR services can range from single or multiple competencies. Thus companies that provide HRO services may have many functional or industry specializations. Sylvia Stokes, of the Leadership Connection, commented that HROs can better focus on the singular discipline or domain and achieve high efficiency levels in it. As an example, Stokes discussed her experiences working with payroll and bookkeeping of 3rd party organizations.
There are cost and efficiency tradeoffs with different approaches and the client company should first decide what functionality should be outsourced and then go about finding what HRO vendors and/or software technology packages do the job.
Are HRO Organizations The Beacons Of Change?
Innovation is the name of the game according to Dimitri Flore, the manager at FIMPE. He explained that because the central business activity of an HRO is in the human resource services, client organizations expect third parties to be on top of the latest developments in the indstry. What's more, he tended to see innovation as one of the key differentiators of the human resources outsourcing industry overall.
Devlin indicated that many companies are aware that their internal HR organization needs to evolve with the rest of the company, however they often do not have the resources or capacity to do it. The President of NetPEO shared his observation that client companies tend to be more conscious of maintaining the burden of the legal responsibility over non-mission critical areas of an organization.
"As the government tries to regulate the labor markets, the greater the need to gather the info, to track the changes, to identify the laws that matter. It is even more the case now for Federal rather than State laws, stated Devlin.
Finally, Stokes summarized with her perspective based on the working experience on the client side. According to her, client organizations expect HRO organizations to be abreast of new ideas and trends.
What Are The Expectations Of Interactions with HRO Organizations?
Our experts attributed successful interactions with client organizations to high degrees of trust and reliance of the client organizations. Stokes stated it is critical that expectations are defined up front and commitments are achieved on the client's executive team to do their part to share the information and resources where applicable.
One of the reasons why trust is critical has to do with the fact that often HROs need to work with internal personnel data and clients may be sensitive about any privacy issues that may arise. In actuality, in our experts' opinions, HROs should be able to obtain and work with relevant data for analysis without touching anything sensitive or private. Devlin commented that in his experience most companies are open to sharing their data if it helps in the analysis. Stokes concurred with a comment that once the trust is established, client companies generally are allowing their relevant data to be externally hosted..
Devlin explained that an HRO should be able to access only the necessary HR information. Thus, it is important to communicate specifically what data needs to be accessed, how it will be utilized, backed up, stored, and even disposed of if appropriate. Stokes added, "I think there is always hesitation about sharing information& The client has to be clear about what they are getting into. HRO's should strive to develop a trusting relationship with the client.
The other reason why it is necessary to build a strong trust with the client company has to do with established company culture. The HROs must be aware that they are entering a client organization with established culture, morals, and standards. Sometimes these non-tangible elements are detrimental to the organization, which may be why they are there. But, on the other hand, company culture may be the glue that holds the organization together and an HRO should be conscious of protecting that culture and the existing balance in the organization where appropriate.
Stokes adds, "Strategic insight is crucial for outsourcing of processes related to executive positions.
Flores summarizes the key expectations as Trust. Reliability, and Flexibility.
Developing Working Relationships with an HRO
A client HR organization should be on the same side with the HRO team. It is important to include the client's HR team, if there is one, in all of the planning meetings. Internal teams should feel like they are players, have a role assigned to them, and should contribute to the ongoing data exchange and/or activities. In reality, according to our experts, a "perfect accord between the client HR and third party experts is not that common and does require continued mutual effort to develop. It is important to realize that in the long term, cooperation is more beneficial to all the parties involved.
On the positive side, according to our experts, a relationship with an HRO is expected to be simpler than internal. Based on Stokes' experiences, external experts are perceived experts operating on an executive level. Often they are there only for a short time, often in a "Superman capacity - they come, they identify the need to be addressed, do their work, and leave. If third parties operate out of their own offices or provide web-based services, interoffice politics are even less issue prone.
