Part 2: Is This a Solution to Help You Become More Strategic?

Robin Throckmorton, M.A., SPHR

In our Emerging Issues in HR article last month, I presented you with the steps involved in deciding whether or not outsourcing is a solution for your organization to consider:

Step 1:  Create a Team
Step 2: Conduct a Process Review
Step 3: Review Strategic Plan
Step 4:  Identify Core Areas
Step 5:  Decide What to Outsource

If you moved to Step 5 and still felt outsourcing may be a solution for you, you then decided what you may want to outsource.  Whether you are outsourcing all or part of the human resources function, the decision involves more than just HR and cannot be taken lightly.  You will need to follow the next five steps to ensure success.

Step 6:  Strategic Alignment
Whether it be a piece or all of your HR function, you need to create a business case to justify how the decision supports the company’s strategic plan.  A great way to pull together the information for this “business case” is to complete the same five steps you did when you created your team but now with a focus on outsourcing:

-          Desired  results:  what does this team hope to accomplish by outsourcing?  What are the potential benefits?

-          Potential barriers / obstacles:  what are some potential costs and barriers that may prevent outsourcing from being successful? How will you address those issues?

-          Supports:  what resources, people, or organizations could help the team?

-          Plan: what are the specific goals and expectations that you will have for a vendor providing the outsourced service?

-          Evaluation:  how will you measure the success of the outsourcing?

Be sure when you capture the results and obstacles that you analyze the cost and benefits of outsourcing the program versus retaining it in-house.  Include in your costs and benefits the dollars, time, quality of work, and pure sanity or hassle of doing the work.

Step 7:  Evaluate Vendors
The “business case” you create in Step 6 will also become the details of an RFP.  Your RFP should be very clear on exactly what you are expecting from vendors.  In your RFP, request that vendors provide you with facts and check lists and limit the amount of narratives that are provided to help you in your evaluation of the vendors.    

If you need help identifying potential vendors, you may find the following resources helpful:

-          HRO Today (http://www.hrotoday.com/)

-          Outsource Institute (http://www.outsourcing.com)

-          SHRM (http://www.shrm.org) – (New HR Outsourcing Forum recently established)

As you evaluate each vendor response, some things you may want to look for include:

-          How large the vendor is?  Can they handle your capacity?

-          What is the size of their typical client?

-          What are their payment terms (i.e. travel, phone, email, emergencies)?

-          How do they stay up to date on new technologies and HR issues?

-          What is their specialty or expertise? 

-          What recommendations or referrals do they offer and what do they say about their services?

-          How will the vendor’s culture mesh with your culture?

As you select your vendor, keep in mind this is a relationship that you will be building and maintaining hopefully for the long-run.  Both you and the vendor need to benefit from the relationship and have very clear cut goals and expectations to succeed.

Step 8:  Put It in Writing
Never rely on a handshake agreement but always put it in writing.  Be sure the contract clearly maps out the scope and expectations.  The contract should be very specific on the terms including fees and guarantees.  It should also detail how to terminate the agreement and what must be done upon termination (i.e. what needs returned).   It is tough to write a contract that is all encompassing of every issue you may encounter but be sure to anticipate possible issues that need both parties agreement.  It will aid in resolution down the road and ensure an ongoing relationship and success for everyone.

Step 9:  Communicate
This step is probably THE most important step to ensure the success of your outsourcing endeavor.  How many times have you ever been told by your employees that you communicate too much?  This is one of those situations where you need to communicate as often as you can as much as you can.  Do not underestimate how the change of outsourcing will impact each employee.  Without details from you on what is happening, why, and how it will impact each of them, they will fill in the blanks themselves.  As a result, you could see a huge impact on morale, productivity and loyalty.

Recently, I had a client who decided to outsource their IT function.  Due to the timing and sensitivity of the issue, the client chose not to communicate much if anything to the employees.  The employees felt something was happening but were not sure what.  When all was done, the IT function did get outsourced but morale and productivity in other areas of the company suffered immensely especially when groves of individuals from areas not even impacted by the outsourcing voluntarily left the organization for more security.

Don’t get caught losing key employees due to lack of communication.  Be sure you communicate the good and the bad as much as you can.  Also, be sure you prepare your managers for what to communicate and how to handle the situation since they will be the front line and first resource for communication with employees.

Step 10: Re-evaluate
Once you’ve begun outsourcing with the vendor, be sure to set dates to re-evaluate how it is working.  You will want to evaluate your decision to outsource based on the actual costs, benefits, and return on investment.  Is outsourcing giving you the results that you had anticipated during Step 6?  Also, be sure you evaluate the vendor.  Is the vendor meeting the goals and expectations you had for them?  Are you getting the feedback you anticipated from employees on the service being provided?  Do the goals, expectations, and/or fees need adjusted in any way?  You should do this re-evaluation as often as necessary to ensure the relationship and need stays on track, which will only add to the success of your decision.

Hopefully, I’ve armed you with the facts, thoughts, process, and tools to anticipate the outsourcing wave so that you can rise with the tide as needed rather than getting wiped out…remember…

  “Business changes come as waves gathering shape, gaining energy and momentum, then crash across the companies that find themselves in their path.  Those companies that anticipate and respond quickly to these waves of change can often rise with the tide; those that don’t are often crushed on impact.” 

-          Michael F. Corbett - Corbett & Associates, Ltd.

Robin Throckmorton, MA, SPHR, a Senior Human Resources Management Consultant is President of Strategic Human Resources, Inc. and Partner of e-HResources.com.