Merritt, HRO, HR BPO

Traveling the Yellow Brick Road

This article first appearead in the HROA Connections Newsletter occasional feature, Things I've Learned So Far. This contribution comes from Linda Merritt, formerly an AT&T executive with primary responsibility for its (pre-SBC merger) HR outsourcing relationship.

Traveling the Yellow Brick Road

By Linda Merritt

HR was already on the journey of change when I got there. Helpful HR partners next door were being displaced by self service as technology and shared service centers became major HR factors. Outsourcing was an accepted option for separately managed services such as benefits enrollment and savings plan administration. HR was in transition, not what it once was, but not yet what it will be, can be and needs to be.

As a long term agent of change, I wanted to help with the transformation of HR, but I did not anticipate that the pathway would be to become Contract Manager for one of the large, early comprehensive HR outsourcing deals covering more than ten HR service areas, hundreds of positions and many, many millions of dollars. Here was an opportunity for application in action, to shape something new, and to make a difference for HR.

We're Not in Kansas Anymore

The retained strategy and policy leaders now had to direct a vendor remotely according to statements of work and service levels, under a commercial contract, and not by direct observation, appraisal and career management. Gaining the deal service quality and financial benefits was mandatory. Tracking performance, volumes, and costs, and paying complex variable priced bills was all much more complex. Everyone involved would need to shift mindsets and management styles. We were on the yellow brick road -- with no road map.

The first governance office staffing plan I developed was rejected - by HR's own job evaluators! Contract management was rated as an administrative function; simply monitor vendor performance and pay the bills, right? HR's processes are dynamic and small problems can quickly blow out into escalated crises and may even lead to damaging expensive external legal and regulatory compliance problems.

Thankfully, the HR and Finance executives that supported the deal agreed and invested in the governance office. We brought together experienced leadership talent, staffed sufficiently to cover the start-up challenges and reach stabilization. Over time we migrated to a smaller team for ongoing operations. Don't be side tracked by the lure of false savings that undermine achieving the full value proposition; the savings, improvements and performance over the life of the deal. How well the services transition impacts the whole relationship, as well as the business and cultural reaction to the outsourcing.

Large scale HRO transitioning is a complex planning, communications and project management challenge that must be closely and jointly managed. Early service problems, no matter whose fault, set negative perceptions that can be hard to overcome. HRO can also be a mirror reflecting cultural uncertainties. Does this mean employees are less valued? Does this mean HR is less valued? Where will this yellow brick road lead HR? This part of the journey cannot be outsourced. Traveling the yellow brick road is also about guiding the inner journey to recognize the power of our own abilities and charting our own destiny.

Dorothy, the Scarecrow, the Tin Man and the Cowardly Lion

HRO governance is a road best traveled as a team with a broad range of capabilities, including:

• Building and maintaining alignment
• Results focused advocacy
• Objective problem solving
• Brokering agreements
• Project, process, and change management
• Contract administration and change control
• Performance results tracking, reporting and verification
• Financial management
• HR and IT/technology subject matter expertise
• Auditing, communications, documentation, and occasionally, walking on water

Our Service Management Office team included people with HR, financial, quality, business unit, IT and Payroll backgrounds. With the focus of a common challenge we were able to align our different talents, perspectives and strong natures into a collaborative team. Look across HR, finance, procurement, business units, or even go externally to bring in the full scope of skills and capabilities. We need not travel the yellow brick road alone.

Lions and Tigers and Bears, Oh My

Contention management skills are critical.  With a large comprehensive outsourcing with two or more of the following -- complex and dynamic services, significant personnel, process, technology and cultural change, multiple geographies, or changing business conditions - I guarantee you will need advanced managing contention skills on the governance team!

HRO contracts are complex commercial agreements based in legal terms, defined services, performance levels and financial arrangements. This is not the place for dry administrators (the paperwork is all in order, but no one is satisfied). Big dollars are on the table, but this is not the place for cold bottom-dollar-liners (the financials are all in order, but no one is satisfied). Nor is this the place for the nicest, gentlest, most helpful HR person. Core strength is needed to deal with the political, personal, project, technology and business challenges that arise.

Don't Make Me Get the Flying Monkeys

There will be a time when Toto runs into the forest of trash talking trees after the straw falling out of the flailing Scarecrow, while the Tin Man rusts from the tears of the Cowardly Lion.

Guess what, there were problems before you outsourced, they just may not have been as visible. This is major change on multiple levels. While the contract defines a certain level of goal alignment, it cannot cover all situations and in reality each party has differing needs and interests. We fussed, feuded, tossed data and danced about in a blustery manner on a frequent basis. Then we all took a deep breath and made an agreement.

Early on we established guiding principles as guideposts and we worked hard to keep alive the spirit of the deal. Mostly we represented our needs and interests to the vendor, but at times we were advocates for the vendor. Objective, professional, persistent mediation is needed to ensure the mutual goals are achieved without creating undue damage to either party's larger purpose.

Skip Arm in Arm

Even with all that Dorothy and friends faced, they had fun along the way, skipping arm in arm down the yellow brick road. We did not skip, but we did have fun. With the newness and fluidity of tasks at each stage of the outsourcing life cycle we had to integrate and use the full scope of our skills and capabilities. Several of us have said this was our best assignment and closest team experience.

At times we had to step back to see what was working well. Service levels were met, customer satisfaction improved and we achieved the planned savings. At the end of the day we had a strong relationship with our vendor and we had a partner to jointly face business challenges and even crises. Make time to offer recognition, be it awards of merit, bravery or heart-shaped clocks.

Getting to OZ

What have I learned? I learned that today's outsourced services can be helpful to HR's transformation by reducing the time and resources needed to manage and deliver many tactical and transactional HR services. HRO does not include a Wizard with magic effortless answers (no matter what is said in the sales pitch), nor is outsourcing the Wicked Witch that will consume, constrain or diminish HR.

Outsourcing offers no ruby slippers to return us home, which is all for the best. HR's journey is not to the past, but to the future. It remains our own quest to increase HR's strategic capability as an engine for human capital management - the true OZ.