HRO briefing
Companies are beginning to take more strategic approaches to
managing their human capital. Executives are focused on the big
picture: globalisation, organisational development, executive
succession, workforce planning, compensation policies, and other
important issues that impact corporate performance, profitability,
and shareholder value. In order to concentrate on these issues, HR
executives are seeking outsourcing partners to manage the
day-to-day human resource functions such as payroll, benefits, and
recruiting. Instead of investing thousands of euros in technology
upgrades and personnel training, companies are forging
relationships with suppliers that have already invested and are
further investing in the same resources that the client company is
seeking.
Risk sharing is a concept closely related to outsourcing and the
idea of partnered investing. Because business conditions change so
rapidly, there are tremendous risks involved with making capital
investment decisions. Outsourcing firms make investments on behalf
of many clients, thereby sharing the risks of those investments
among a broader base.
Companies outsource in order to access specialised expertise and
resources. Suppliers provide specialised tools, techniques,
technologies, and knowledge that can only be maintained by a
supplier that has focused its learning and business on providing
top rate services in a specific area. Companies that specialise in
a specific area of your business are most capable of applying
innovation to a process, and thus drive the operation to another
level.
Payroll and benefits are the longest established and the most
common HR activities to have been outsourced. Increasingly, broader
HR processes and in a number of cases most HR activities are being
outsourced. The longest HR Outsourcing (HRO) deals are about five
years old. However, the trend to outsource HR is growing rapidly
and to our knowledge there are at least 10 large-scale deals for
comprehensive HR outsourcing being negotiated at this time in the
UK and Continental Europe.
By using payroll as a lever into the client-base and then combining
all HR functions into a full HRO arrangement, successful HRO firms
can substantially build their business within a relatively short
timeframe. This model offers companies end-to-end HR services:
payroll, self-service benefits administration for employees (401k
(in the US) and retirement plans), HRIS platform, contract and
direct staffing, and so on. This scenario provides firms with a
single delivery capability by managing a number of HR functions
with the firm's own resources and by integrating other
best-in-class service providers to provide a total outsourcing
solution. Full HRO allows management to focus more time and
attention on building its core business, rather than be tied down
with back-office administration.