Out of the ordinary
Big outsourcing contracts have been replaced by smaller deals focused on less traditional tasks, such as mediation and staff surveys. Hashi Syedain finds out more
Date:
05 November 2009
Source:
Guide to HR outsourcing
Page:
20
HR outsourcing used to be all about payroll and recruitment. But the HR services now on offer go much further than that. Organisations are outsourcing everything from performance management to training administration, and conflict management to exit interviews. The trend is to mix and match in-house and outsourced services in a flexible way that suits the business, rather than signing up to a single all-singing, all-dancing HR contract.
“It’s all about getting cost reductions and efficiencies and putting resources into strategic HR, instead of administration,” says Andrew Spence, director at HR transformation consultant Glass Bead Consulting.
“We’re seeing fewer big outsourcing contracts and more smaller, single- service outsourcing.”
The contracts on offer are not necessarily all outsourcing in the strictest sense. In many cases the nub of the service is technology. But whereas buying software used to mean simply getting it installed onto your servers, today’s software solutions are increasingly available on a web-based platform.
This so-called “software as a service” model means that organisations don’t need to worry about installation, compatibility or complicated upgrade procedures because the software is hosted and managed externally. Furthermore, it is generally designed to be intuitive to use and therefore requires relatively little training.
“About 90 per cent of our customers use us to host their solution,” says Nick Adams, managing director of Workscape, which specialises in compensation and benefits software and performance management systems. Particularly with performance management, he adds, Workscape’s technology is replacing a paper-based appraisal system that managers don’t follow because it’s too cumbersome and easy to forget to do.
“A lot of organisations are very manual in their performance appraisal. They’re using Word documents or simple spreadsheets. But this technology supports the process and cuts down the paperwork,” says Adams.
In many cases technology providers offer additional services too, or “software as a service, plus service”, as one provider puts it. So, for example, TalentDrain, which specialises in staff surveys, such as exit questionnaires for departing employees, collates and analyses the data collected on behalf of customers and provides reports, benchmarking and consulting services in order to support the technology.
Sometimes outsourcing can be a temporary solution while a company builds its own in-house capability. TCM, which specialises in conflict resolution, operates a model that begins by providing mediation and case management services to clients, sending in its own trained mediators to help resolve client conflicts and using case management software called e-solve (see below). But it often goes on to help those same organisations build an in-house mediation capability.
A typical mediation process costs from £1,000 to £1,500, says TCM founder and director David Liddle. Setting up an in-house mediation service costs around £20,000. If only one employment tribunal hearing is prevented – at an average cost of £30,000 to the client – the in-house service has already paid for itself.
One consequence of the fact that organisations can now outsource so many activities is that HR professionals need new skills, says Spence.
“One of my top five questions when I advise HR departments about outsourcing is, ‘How good are you at vendor management?’
“Some organisations are not used to outsourcing and it makes them feel uncomfortable. It’s about building relationships and coming to an arrangement that is fair to both sides.”
Spence says his organisation has a list of 300-400 HR activities and tasks, most of which can be outsourced. You can’t farm out strategic issues such as your relationship with the unions, but you’d be surprised at what you can outsource.
“Take policy,” says Spence. “When I have the discussion with HR departments about what can be outsourced there are differing views about policy. Some think HR policy is core, others say you can buy your policies off the shelf.”
With so much on offer, how is an organisation to know which areas are worth outsourcing? A good starting point is to cost the process that you currently have in place by looking at the time taken to complete it and the volume of transactions, advises Spence. Volume is usually essential to make an outsourcing deal viable, he adds.
“The business case doesn’t always stack up. Look at the 80/20 rule [80 per cent of savings come from 20 per cent of processes].”
Sometimes the most unlikely candidates can be profitably outsourced. Training administration – the business of scheduling participants at training events and ensuring they have the right paperwork – can take up as much as 25 per cent of the time of a training department, says Spence.
“That can be outsourced.”
Case study: King’s College Hospital
King’s College Hospital in south London employs some 6,500 people and has a staff turnover of about 10.5 per cent, excluding clinical staff on fixed-term rotations. It used to run a paper-based exit questionnaire that it sent out to leavers, with a 20 per cent return rate. With such low numbers, it was hard to know if the issues raised in smaller departments were widespread or only the view of one individual, says staff resourcing manager Peter Absalom.
Two years ago the hospital outsourced its exit polling to TalentDrain, which creates online questionnaires and analyses results for clients. Since then the return rate at King’s has risen to 50 per cent, says Absalom, because the online questionnaire is much easier to complete. It is also cheaper than a paper-based system and enables the hospital to ask more questions, so yielding better information.
“By improving the rate of return we can be much more confident that issues are not one-offs,” adds Absalom.
The hospital compares the exit result with the results of its staff survey to ensure it draws the correct conclusions. “The two together tell us why people are staying and why they are leaving,” he says.
One of main things that has emerged is that pay is not a key motivator and that people mostly leave for career progression. This is not an issue that is easily addressed. But there have been some relatively simple interventions resulting from the surveys, such as putting a vending machine in an area used by midwives, who often work anti-social shifts. “Things like that raise morale,” says Absalom.
King’s had already been working hard to improve retention when it outsourced its exit questionnaires. It has brought down turnover from 22.5 per cent in 2001 to just over 10 per cent now.
Absalom believes that exit polling information does play a part in reducing turnover: “We get higher quality reports now. The richness of the data definitely puts the onus on managers to act.”
Case study: Arts Council of England
Every organisation has tensions between staff at certain times. Sometimes people sort out their differences, or resort to a grievance procedure. But often, problems fester, poisoning the atmosphere for those involved and the colleagues around them.
When workplace relationships go wrong at the Arts Council of England (ACE) staff now turn to TCM, an external provider of mediation services, to manage the conflict and to help bring the parties to a workable solution.
ACE has been using TCM for the past two years as a way of preventing issues escalating into grievances. The organisation employs around 700 people spread across 11 offices and has four HR business partners who keep an eye on office relationships.
If HR gets wind of a problem that the parties have not been able to resolve, the business partner will suggest mediation. It will typically be used for a conflict between a line manager and staff member, says Ian Matthews, head of employee engagement at ACE.
A TCM mediator then steps in and takes over the case until resolution, bringing the parties together and helping them arrive at an agreement on the way forward. There is regular follow-up for a year after that to monitor how they are getting on.
TCM provides conflict management services in different ways, including what it calls an outsourced service, whereby it manages cases, analyses conflict trends and then reports back to the organisation.
It’s not business process outsourcing in a traditional sense, but rather using an external provider to offer a service that wouldn’t otherwise be available, to prevent conflicts escalating to grievances or tribunals.
“People feel listened to with mediation,” says TCM founder and director David Liddle. “It’s more likely to result in an acknowledgement or apology. Most grievance procedures are very process-led. Mediation puts the relationship at the centre and refocuses the parties on what’s important.”