New wheels of HR-outsourcing

1 New Wheels of HR- Outsourcing
Abstract
World over, outsourcing is the key trend shaping the future of Human Resource function and the role of
HR. Commonly referred to as Human Resource Business Process Outsourcing (HR BPO) or simply
Human Resource Outsourcing(HRO), the outsourcing model is the wheel of HR in the new age
organizations. With superior technology and advanced process, HRO can bring in measurable benefits
for an organization at lesser cost and defined service levels.
New Wheels of HR: Outsourcing

New Wheels of HR - Outsourcing
Human resource management is a process of bringing people and organizations together so that the
goals of each other are met. The role of Human Resource (HR) manager is shifting from that of an
administrator and screener to the role of a planner and change agent.
Indian organizations are also witnessing a change in systems, management cultures and philosophy due
to the global alignment of Indian organizations. There is a need for multi skill development. Charles
Handy also advocated future organizational models. Such organizational models focus on people centric
issues and call for redefining the future role of HR professionals. And at the same time, Businesses are
demanding high performance from all the Key Stakeholders in Business. On this demanding playing field,
it requires non-stop innovation and a consistent drive to become more efficient. Technology and cost
savings are not enough – increasingly, the competitive edge for any global player is people. And
increasingly people and the HR direction and philosophy have become the cornerstone for delivering
superlative performance for any Business.
CEO’s envision that HR function should be focused entirely on strategic activities, and not performing the
regular transactional activities. CEO’s mandate is no way compromising the employee related
transactions that sustains the satisfaction for the employees but is based on well proven premise that
contribution and real value for HR lies elsewhere. The structure which emerges for HR is a team
consisting of a of high-level contributors, perhaps internal consultants, HR process designers and Change
Champions— leaving all the transactional and administrative activities to vendors for which those
processes are core.
More than a decade after large U.S. companies began to adopt shared services in HR, this delivery
model has proven its worth by cutting administrative costs, reducing transaction errors and generating
greater employee satisfaction with basic HR processes. In India as well companies form their human
resources vision and charter to give them a competitive edge in Talent Acquisition, retention and
Management, and developing/ aligning employees to meet business goals, HR shared services has
entered an era of increased relevance and value.
World over, Outsourcing is the key trend shaping the future of HR. Traditionally HR has been a support
function to support the Business critical processes. As the organizations are striving to be best in both
growing and maturing markets, the focus on performance and efficiency has grown manifold.
In such relationships, a company contracts with a vendor that rents its skills, knowledge, technology,
service and manpower for an agreed-upon price and period to perform functions the client no longer
wants to do. Much attention has focused recently on the outsourcing of staffing, including temporary and
contract workers, and IT professionals.
A much less noticed, though growing, business has been that for human resources business process
outsourcing, either HR BPO or more commonly referred to as HRO (Human Resource Outsourcing)-
Starting with payroll processing, outsourcers now offer to take over virtually any HR activity — or even the
entire function.

With increasing focus on HRO, there are business benefits to specific standards for HRO, further
enabling movement up the value chain by leveraging an equally shared partnership between supplier and
buyer. As HRO evolves, organizations have new choices for delivery options that reflect the strengths of
their prospective business partners. Some of these investments will produce real benefits for the HR
industry in general. It is up to you to make critical decisions about how they will impact your organization.
HRO varies based on company-specific circumstances. However, certain common elements are usually
present when you are thinking to outsource the function:
 Companywide consistent policies and processes, from which standardized, automated
transaction processing can be achieved
 A central knowledgebase
 Some use (often extensive)of employee and manager self-service applications from a Web
portal
 Most often, but not always, a single HRIS (Human Resource Information System) platform
 A contact center, internal or outsourced, for fielding queries and handling other tasks by
phone, e-mail and chat
For decades, administrative matters related to compensation, benefits and personnel policies have
consumed HR’s time. Now, most, if not all of these processes can be standardized, centralized and
automated through a HRO. This frees HR to apply its energy to talent management, organizational
development and other strategic endeavors that contribute directly to meeting business goals. In time,
adopters will reap the double-barreled benefit of cutting costs and boosting HR’s strategic impact.
What can’t be Measured can’t be Achieved
Most people would agree that, in the past, HR has lacked the sophistication level of measurements that
most other corporate functions are accustomed to today. However, during the past few years, HR has
increasingly focused to deliver value with making the HR output completely objective for the Business.
These improved metrics and analytics are the result of not only increased sophistication from the
mathematical perspective but also specific research on real-life HR problems.
It started with Technology solutions - ERP systems have also been a help to some buyers seeking to
improve their analytics, but the hard management disciplines for creating a measurement culture in HR
are often still lacking.
However with the surge of HRO, organizations have real options to generate change within their
organizations. We have looked at metrics in recruitment like – Cost per hire, Time to fill etc. But HRO has
thrown a completely new paradigm to measure HR.
HR typically would have common needs when it comes to various areas within HR but a lot would get
differentiated on what vision and final objective an organization needs to have.
However, there are fundamental aspects of performance one would need to track to bring in more
objectivity. HRO organizations have already invested in producing the best practice around operating
standards and the associated analytical tools to go with those standards.

Outsourcing Creates a Focus
One of the pluses of going through the outsourcing procurement process is that you will learn much about
your organization.
The outsourcing process forces you to understand how your processes are being handled currently and
how they compare to others in the industry. A detailed “As is understanding” of the process through
scientific diagnostic tools helps to evaluate where you currently stand.
This end result won’t be some fancy consulting report but a set of expectations that will chart out
deliverables for Business. These decisions will really focus thoughts about what you need or don’t need,
since you will be immediately translating them into real money.
Let’s take the example of Recruitment process – One has traditionally looked at “cost per hire” and “time
to fill”. However, measurements through HRO throw some startling metrics to watch out for. One could
calculate the cost of every resume that is put in the process.
With outsourcing this process, one will have a saving of
30% and processing cost of each resume is 0.7x; you have
put some money on the table to think about.
To illustrate this further, let’s say on an average your HR
junior management team spends 40% of their time on
employee query management and your middle management
tier is spending 20% of their average time on escalation
related to employee queries. With an HR team of 20 people
with 3 managers, your organization spend is 8.6 FTE (Full time equivalent) on just employee query
management.
And on top of this there is no definitive service level measurement. However, with HRO relationship, HR
decision maker is empowered with that information and can demand about service level measurements:
not whether they should be 99.5 percent versus 99.9 percent but whether these are the measurements
that really impact the mission of the organization.
HRO Leads to an Overall Impact
HRO empowers leaders to have real-time views of their organizations for their vision and charter. At the
end of the day, the success or failure of HR will not be based upon how long it takes to answer a call in
the contact center but rather around a much broader set of business metrics.
Already, areas of HR that lend themselves to better standards via HRO include the obvious services
surrounding employee recruiting commonly known as RPO, payroll and other Retirals administration
activities, as well as identification and administration of benefits plans.
In addition, HROs are developing capabilities that will help organizations produce better results when it
comes to managing workforce productivity, reducing liability exposure for employee relations issues, or
being able to model global workforce changes to mirror changes in the business requirements.
You may call HRO as a ‘Business process outsourcing’ ‘Business Improvement’ or may be ‘Business Re-
engineering’ for that matter and maybe an ‘HR transformation’, or something else entirely? Whatever you
choose to call it, the name signifies a lot about mindset, objectives, and approach to implementing HRO.
With an HR team of 20 people with
3 managers, your organization
spend is 8.6 FTE on just employee
query management.

None of the above is accomplished without some pain.
Standardizing and then centralizing processes are the first two steps
toward creating an HRO model, whether internal or outsourced. In
highly decentralized companies, this can take several months. Some
adopters choose to begin with only certain aspects and do the rest
over time.
The journey of HRO process would evolve in three stages to reap
the actual benefits:
A company can launch HR shared services with more than one platform, but it isn’t easy. It is far better to
standardize on a single platform for payroll and Human Resource Management (HRM) databases. A
company needs to budget time and money if the move to HRO will require a new implementation of
standard software.
The biggest challenge is Change management. Employees must learn to use self-service and the
Helpdesk center, not the HR representative which is available in person at their location, to solve
• Standardize processes and policies
• Minimize variances across
policies, systems and processes
• Move to a Single location
• Streamline Roles, Processes
• Outsourcing/ Co-Sourcing
Redesign
Standardization
Centralization
• Process driven organization
• Key Performance Indicators
through exhaustive service
levels
• Central shared service center
• Lean Processes
• Defined roles for HR Specialist
• Have one system across
locations
• Implement global standards
• Digitization of processes
ExampleBuilding Blocks for HRO
• Establish a service culture
• Organize around end-to-end
processes
The biggest
challenge is
Change
Management
In a leading Insurance company, Business leaders initially resisted HR Outsourcing because
they wanted their HR people to work on their problems. The top management, however,
wanted HR team at the business units to focus on human capital issues not on administrative
tasks and that mandate had to be driven with both HR teams and the Business Line Managers.
HR had to lead the way saying “HR will solve the problems, it’s just going to be in a different
fashion – a more predictable and dedicated channel”.

problems. Line managers must be convinced their dedicated HR specialists will provide more valuable
service once they offload administration. HR team must adapt and retrain for new roles.
Some of the Tangible benefits of HRO are going to be:
 Streaming (and optimization, if applicable) process work flow
 Improved data and content accuracy
 Automate redundant tasks and eliminate errors and rework to 0%.
 Reducing/eliminating print, distribution (forms, manuals, newsletters, etc.)
 Identify Non Value Added for HR Operational activities.
And the most important is the cost benefit for the savings from centralization. It could range anything in
range of 10% to 40% depending on the stage of the organization. One metric is the HR FTE to employee
ratio which could use to measure the obvious ROI (Return on Investment) from an HRO model.
The figure illustrates one of the most widely researched ROI for effectiveness of HRO in terms of direct
cost savings.
The savings most often come from reduced staffing in HR. In the
Hackett study, “world-class” HR organizations—defined as the top
quartile of 125 companies benchmarked— spent on average 13
percent less on HR per employee (see chart 1, “Total HR Cost Per
Employee,” above) and they had 15 percent fewer full-time HR staff per
1,000 employees than the others in the study.
Case Study
PeopleStrong’s client, a Telecommunications company with
approximately 8,000 employees in offices across India, had moved
structure with Centers of Excellence, and had also outsourced benefits
administration to multiple vendors.
The result: change in HR and new processes and organization. As the
company looked to the future, however, it recognized that these improvements were not enough. Its core
business was very profitable and also was growing very fast. HR’s internal customers felt their basic
service needs were well met, but they wanted HR to be more proactive in providing assistance in various
areas such as single channel for all the employee needs, workforce planning, change, and talent
development.
The business wanted to further increase cost savings and did not want to have any capital investments in
HR technology. HR leaders, therefore, set out to engage in further HR outsourcing, which ultimately led to
a choice of HR Service Centre (HRSC). The choice of this is significant for at least three reasons:
 This was not just outsourcing, it was a redesign of the service delivery model.
 Internal HR team had new responsibilities.
 HRSC was to build on and improve HR experience in leading change efforts.

Positioning HRO Internally
The HRO solution included a new HR service centre, several new technology applications such as an
applicant tracking system, increased manager and employee self-service, a new benefits management
tool, a new time and attendance system, and the transfer of contact center responsibilities and technology
maintenance to PeopleStrong.
HRSC required that the joint client/PeopleStrong team implement many new processes, tools, and
responsibilities.
A Steering Committee comprising senior client and PeopleStrong executives oversaw the project. A
business case, showing the investments and returns expected, was approved.
There was also a significant redesign of the retained HR generalist organization. Previously, these
generalists had supported all types of HR activities, including administration, delivery, employee relations,
staffing, training delivery, and, when possible, strategic consulting to the business. Now, however, the
new technology and self-service capabilities from HRSC allowed for fewer generalists focused on higher
value activities for the business.
In addition, a new staffing organization was created that focused solely on the recruiting-related activities
for which the generalists were no longer responsible.
Because of the significant changes involved, HRSC also required upfront and ongoing stakeholder
communication and change management. There were many stakeholders affected by HRSC, including
senior executives, HR employees, line managers, employees, other external vendors, and a host of
people involved in the project itself. HRSC employed a change and communication plan, with dedicated
resources, to help ensure the stakeholders’ understanding and readiness.
Implementation and Readiness
HRSC was implemented by a large project team comprising of client and PeopleStrong stakeholders led
by a Project Steering team (PST). The PST was responsible for the overall project plan and for project
coordination and execution. Under the PST was a set of teams responsible for areas such as HR
Transactions team, Contact Centre, Payroll & Benefits.
Each team was tasked with implementing the methodology: Discover Design, Develop, Test, Deploy, and
Evaluate.
A separate, but related, effort was needed to implement the new HR generalist organization. This
included redesign of the future roles and competencies, as well as evaluation of the current team on
capability and assessment in line with new structure.
Some team members were reassigned within HR or outside HR. Rigorous communication and training
helped prepare team for their new roles, processes, tools, and relationships.
Integrating change management and communication activities into the overall project plan helped to
make stakeholders aware of, and involved in, the implementation.
Examples of these activities include:
 Regular broad communications from the senior Head of HR, to different stakeholders in the
process – very key to address the Business leadership team;

 Monthly “awareness sessions” with HR leaders and their customers (i.e., business managers)
focusing on the changes affecting them;
 An email box to solicit ongoing feedback and questions from key stakeholders, used to
compile FAQs; Involvement of end-users during design validation sessions (e.g., different
stakeholders validating the process workflows);
 Focus groups/interviews with each process regarding stakeholder impact.
 Throughout, in the process it was made sure that stakeholders’ needs were met and that
teams were coordinated toward the broader business goals.
Key Learnings
For this organization, the lessons are ongoing as HRO is implemented and adjustments are made. Its
past experience with HR change has raised awareness and helped them to improve the approach for
design, coordination, and change.
Some of the key lessons learned may seem obvious but, unfortunately, they are violated in many HRO
implementations. For that reason, we reiterate them here.
 HRO is an overall strategic goal business first and then for HR.
 Design and implementation activities needs to be built around three key ingredients -
Process, Technology, and People — not as a separate initiative.
 Make implementation a true partnership between the client and outsourcing vendor.
 Internal HR organization needs to complement the new outsourced processes and
technology — with aligned roles and training.
 Communication is the game changer from the beginning and needs to be focused around
consistent set of key messages.
 Build partnership around various teams for a smooth rollout.
 The change process is stressful, so be proactive in helping people maintain performance and
build their readiness — don’t wait for reactions.
Ensure ongoing coordination among various teams towards an integrated service delivery model and
consistent experience.

About PeopleStrong
PeopleStrong is a leading platform based mpHRO (Multi-process HR Outsourcing) and Technology
company, headquartered out of Gurgaon in India. We enable Business Leaders and CEO's in
transforming their people agenda. Our proposition value is further enhanced by the fact that customers
see us as trustees of HR Transformation, partnering in their prime objective of creating Happy
Organizations. We have implemented some of the largest HR Service Centers in Asia Pacific. We deliver
employee services across regions and time zones for more than 300,000 employees and have hired
more than 40,000 employees through a unique technology interface coupled with high end decision
making Tools for people data. We are the first company in the space to be successfully assessed on
SSAE16.For details more details, visit www.peoplestrong.com
Corporate Office
PeopleStrong HR Services Pvt. Ltd.
A-10, Infocity, Sector 34, Gurgaon-122001, Haryana, India.
Ph no: 91 124 4782400
Email: contact@peoplestrong.com
Bengaluru | Delhi | Gurgaon | Hyderabad | Mumbai
Author’s Profile
Shelly Singh - Chief Business Officer
Shelly Singh is the Co-Founder and Chief Business Officer at PeopleStrong and is responsible for Process
Solution development, Special Initiatives, Service Line Expansion & Delivery Excellence. An HR process
specialist with rich experience in setting up HR processes, policies, as well as rolling out end-to-end
implementation plans, she has worked with companies like Sony, Flextronics Software, Hewitt & high-
end technology start-ups.
Shelly is the first woman board member on PeopleStrong’s’ Board since inception and is also the
National Treasurer, for NHRDN.She was also awarded the Young HR Professional Award from the
NHRDN recently.
Shelly has a Masters Degree in HR & International Business from NMIMS and a Bachelor’s degree in
Physics from Punjab University.
Shelly can be reached at shelly@peoplestrong.com

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