HRO: The mission vs. myths
July 13, 2007
 By Keith Strodtman, senior vice president and general manager of Ceridian HRO |
| What is HRO?
Most of us are familiar with the traditional way to outsource human resources services, where a company chooses to use a provider to handle HR, payroll and/or benefits administration. Users enter employee and company-level information into software or Web applications and the outsourcing provider processes the information and sends the company reports, paychecks and other information as needed. This model has been around for 75 years. In the past decade, another model of outsourcing emerged: Human Resources Outsourcing (HRO) -- sometimes called HR Business Process Outsourcing (HR BPO) -- that takes traditional outsourcing one-step further. Companies elect to have an outsourcing provider manage all of the administrative tasks of various departments. The most frequently outsourced processes are human resources information systems such as HR, payroll and benefits, but there is also growing desire for Recruitment Process Outsourcing (RPO). How does it work? In the HRO model, the company retains a small, key group of specialists to manage the vendor relationship and answer specific higher-level questions that may arise. The company's employees can call the specialists at a toll-free number with questions about their paychecks, benefits or other HR needs. Companies may also elect to offer their employees access to self-service applications for time clock entry, requests for time off, and changes to their personal and dependent information. Often fraught with myths and misinformation, HRO is actually a business model that can help:
In fact, Gartner, a leading technology research and advisory company, estimates that by 2010, the worldwide HRO market will have grown by 23.5 percent over today's market space. Would my company benefit from HRO? To determine if HRO is a good solution for your company, you should first examine your current overall HR strategy. Ask yourself a couple of questions: Will your company support HR taking a more strategic role if the HR staff is freed from administrative tasks? Is HR seen as a business partner in your organization's planning and strategy? If the answers are yes (or you want them to be yes), then HRO can take over many time-intensive, administrative tasks. Your HR group can then focus on activities that add critical value to the organization, such as talent acquisition and development. Based on this high-level analysis, you may quickly see that HRO could be a good solution for your company. Or perhaps you have the unique situation where you get to "start over" with HR operations due to a restructuring, acquisition or merger. HRO can be very helpful in redesigning processes and procedures to implement a best-practices HR organization. Would I benefit from HRO? Let's look individually at each type of person that would be affected by implementing HRO and see what the benefits can be. Employee As an employee at a company that implements HRO, you shouldn't see a huge difference in how your paycheck is processed. You may notice that you have more ways to get answers to your HR questions. A big benefit of HRO is having a self-service solution that allows you to enter information such as address or beneficiary changes. Your company may also implement the ability to request time off and enroll for benefits online. In addition, many common questions can be answered via your self-service application. And if you ever just want to talk to a person -- you can. The Service Center provides telephonic support to answer questions, resolve issues and point you in the right direction. Manager With manager self-service, you can streamline your approval processes and get back to the business of managing people and not workflows. Less paperwork and rework, and fewer manual processes give you more time to develop and reward your employees, which means a more productive workforce. HR, payroll, benefits or recruiting professional When administrative tasks are outsourced, you are able to focus on strategic business planning. No longer burdened with paperwork and "fact checking" -- you have time to develop and implement new ideas to make your company more successful. Perhaps you've thought about creating a succession planning model, benchmarking HR best practices or even about offering a health and wellness plan. When you take administration off your plate, you can begin to make these things a reality. Executive With a single vendor for outsourcing HR, payroll, benefits and even recruiting -- you have a single point of responsibility for contract and account management. An HRO provider offers service-level agreements to ensure measurable performance, which can result in improved service delivery at a lower cost. The myths of HRO We've all heard some of the misinformation around human resources outsourcing. I'd like to take a minute to quell the rumors and perhaps help HRO seem a little less daunting. Myth #1: I will lose my job. This is a common myth around HRO. But if you've read the benefits above, you already realize that HRO may actually provide a better opportunity for you. Instead of piles of paper to manage, you can manage people and ideas. You can position yourself as a strategic asset that helps increase productivity and build the business. Myth #2: I will have to restructure my whole department. During the discovery and implementation process, your HRO provider should work with you on the best practices for structuring your team based on their experience and expertise. There is no "canned approach" to how your company should structure the HR team once HRO is in place. Myth #3: My employees will no longer receive top-notch service. HR, payroll and benefits professionals place great value on their relationships with employees for a good reason. You have a right to be concerned with making sure that level of service continues. By working with your HRO provider, you should clearly understand their capabilities and define your needs. Then you can openly share with your employees how the new customer service model will work, alleviating worries for them and for you. Myth #4: I will save 50 percent of my overhead costs by implementing HRO. Ah yes, the idea of saving money is always appealing. This percentage varies depending on who's spreading the myth that particular day. The reality is that HRO can help reduce costs in your organization, but each company needs to work with their outsourcing provider to determine their own savings. One company may be able to implement new procedures immediately; another company may wish to use a phase-in approach. Each situation is different, so no overall savings percentage can be provided that reflects the nuances and needs of the entire market. Keith Strodtman is senior vice president and general manager of Ceridian's HR outsourcing business. With over 15 years of experience in business process outsourcing, HR services, product management and finance, including involvement in the pioneering days of HR outsourcing, Keith is well versed in the benefits of HRO. As the leader of Ceridian's HRO business, Keith drives the development of HRO services and delivery capabilities, and is accountable for the on-going service provision to Ceridian's HRO clients. Under his leadership, Ceridian was the first mid-market provider to establish HRO as a dedicated business unit. |
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