Global Hr Outsourcing Dealing With the Long Tail
Multinational and global organizations are increasingly looking to utilize global HR Outsourcing (HRO) as a key strategy to deliver HR services across their entire global operation. Such organizations are likely to face the problem of the ‘‘Long Tail’’; whilst they may well have quite a few countries with scale – hundreds if not thousand employees in those countries – there will often be a long list of countries with relatively few employees where the value proposition for HRO is much less clear. There is no ‘silver bullet’ solution for the ‘Long Tail’, but consideration of the following nine rules will help organizations who are seeking the benefits of global HRO:
1. Match the HRO market to your particular ‘Long Tail’
Whilst there are global providers with operations in over 100 countries, buyers need to be aware that this presence may not extend to either current or future capability to provide the required HR services in all of those countries. At this point in time, many global service providers can realistically offer a broad range of services in at most 50 – 80 countries. ‘Top Tier’ HRO service providers can address this shortfall by acting as integrators of services, using local suppliers in ‘Long Tail’ countries. In these cases, client organizations need to be aware of the depth and breadth of the relationships between the integrator and the local suppliers, how process hand-offs will work and where responsibilities lie. Whether using direct capability, or through integrating local suppliers into the global delivery model, it is important to map the HRO service provider’s capability onto the organization’s actual need to see the art of the possible for global HRO.
2. Understand your HRO business case
Even when HRO service providers can offer services in the required countries, unless there are significant inefficiencies, then a financial case for full-service HRO to a ‘Long Tail’ of low cost countries with less than 200 employees is a rare thing. In these instances, any business case may need to be based on other legitimate factors that will drive business value. Such factors might include: greater business flexibility to manage business changes; the need to replace HR systems driving HR policies and processes across the business; or, the need to focus scarce HR resources on more value adding and strategic objectives.
3. Maximize the process scope
There are now international outsourcing solutions for most HR processes. Even for Payroll, suppliers can offer innovative approaches to centralizing control of dispersed and country specific processes, which utilize technology to manage a network of local specialist suppliers across the globe. Whilst such approaches are still relatively immature, they should not be dismissed as impractical. HRO service providers will make them work to improve their global HRO market offering.
4. Develop a standard HR Process Taxonomy
The starting point in preparing a solution to the ‘Long Tail’ problem is to prepare your list of HR processes or services and then define them to provide a common global HR framework. This taxonomy then becomes the basis for designing HRO solutions and modelling the possible options to see the impact on the business case and the financial cost-benefit analysis.
5. Define global v. local HR processes
Client organizations should consider which of the processes identified in the HR taxonomy can and should be delivered on a common, standardized global basis, and which are necessarily local in nature. For many organizations there are significant talent management advantages from operating common global processes for Performance Management, Development and Training. Similarly Workforce Data Management can also be a common process with a small degree of variability around the employee data that needs to be maintained in each country. Other processes such as Benefits Administration will almost certainly have a high degree of local content.
6. Understand the current situation
The HR taxonomy developed in rule number 4 can be used to collect and map data about the ‘as-is’ situation in each of the ‘in-scope’ countries. In particular, current delivery costs, the employee population served, current HR service levels and / or issues, the HR systems landscape, and any specific local requirements. Collecting this data using the HR process taxonomy provides a level of detail that can be sensibly used in designing a solution to meet business objectives within any financial business case constraints.
7. Be flexible in solution design
As well as considering what is and is not in scope for the HRO service provider for each process or service, it is also reasonable to consider which HRO services will be provided to specific countries. The global v. local analysis prepared under rule number 5 can be used to define tiers of services that can be provided to categories of countries. For example, all countries might receive “Foundation” services, e.g. common, global processes that can be supported from an offshore delivery centre and enabled by web-based technology solutions; e.g. Workforce Data Administration and Performance Management. A second group of countries might have English Language HR Language and Advisory Contact Centre services added to this, whilst the larger countries would get a “Full Service”; i.e. all processes in their native language. It may also make sense to consider multi-sourcing; using different suppliers for different processes to maximize the service – geography footprint, whilst optimising the financial case.
8. Involve your preferred service provider to create a sustainable solution
Following supplier selection, but prior to signing contracts, work in partnership with your chosen supplier in the overall solution design and how the basic service might be flexed as described under rule number 7. Client organizations should also consider how current or planned HR processes might be replaced by those offered as standard by service providers (and supported by their standard HR technology). By utilising the service providers existing solutions, it may be possible to stretch the extent of truly global HR processes.
9. Explore the “intangible” benefits
As previously highlighted, the inclusion of the ‘Long Tail’ is likely to weaken the financial business case – usually based on the cost-benefit of replacing in-house HR labor with that of an HRO service provider. Depending on the scope of the HRO it may be reasonable to quantify some of the benefits, that in simple financial cases, are considered to be intangible. For example: a global HR database and a common Performance Management system should drive improved business performance which can be quantified.
By considering these rules, client-side organizations can begin to understand the parameters and options involved in solving their particular ‘Long Tail’ problem, but be under no illusion: this is not an easy issue to solve and the devil is very much in the detail. However, through a methodological approach and careful, considered analysis, global HRO solutions are available to provide business value to organizations with a ‘Long Tail’.
1. Match the HRO market to your particular ‘Long Tail’
Whilst there are global providers with operations in over 100 countries, buyers need to be aware that this presence may not extend to either current or future capability to provide the required HR services in all of those countries. At this point in time, many global service providers can realistically offer a broad range of services in at most 50 – 80 countries. ‘Top Tier’ HRO service providers can address this shortfall by acting as integrators of services, using local suppliers in ‘Long Tail’ countries. In these cases, client organizations need to be aware of the depth and breadth of the relationships between the integrator and the local suppliers, how process hand-offs will work and where responsibilities lie. Whether using direct capability, or through integrating local suppliers into the global delivery model, it is important to map the HRO service provider’s capability onto the organization’s actual need to see the art of the possible for global HRO.
2. Understand your HRO business case
Even when HRO service providers can offer services in the required countries, unless there are significant inefficiencies, then a financial case for full-service HRO to a ‘Long Tail’ of low cost countries with less than 200 employees is a rare thing. In these instances, any business case may need to be based on other legitimate factors that will drive business value. Such factors might include: greater business flexibility to manage business changes; the need to replace HR systems driving HR policies and processes across the business; or, the need to focus scarce HR resources on more value adding and strategic objectives.
3. Maximize the process scope
There are now international outsourcing solutions for most HR processes. Even for Payroll, suppliers can offer innovative approaches to centralizing control of dispersed and country specific processes, which utilize technology to manage a network of local specialist suppliers across the globe. Whilst such approaches are still relatively immature, they should not be dismissed as impractical. HRO service providers will make them work to improve their global HRO market offering.
4. Develop a standard HR Process Taxonomy
The starting point in preparing a solution to the ‘Long Tail’ problem is to prepare your list of HR processes or services and then define them to provide a common global HR framework. This taxonomy then becomes the basis for designing HRO solutions and modelling the possible options to see the impact on the business case and the financial cost-benefit analysis.
5. Define global v. local HR processes
Client organizations should consider which of the processes identified in the HR taxonomy can and should be delivered on a common, standardized global basis, and which are necessarily local in nature. For many organizations there are significant talent management advantages from operating common global processes for Performance Management, Development and Training. Similarly Workforce Data Management can also be a common process with a small degree of variability around the employee data that needs to be maintained in each country. Other processes such as Benefits Administration will almost certainly have a high degree of local content.
6. Understand the current situation
The HR taxonomy developed in rule number 4 can be used to collect and map data about the ‘as-is’ situation in each of the ‘in-scope’ countries. In particular, current delivery costs, the employee population served, current HR service levels and / or issues, the HR systems landscape, and any specific local requirements. Collecting this data using the HR process taxonomy provides a level of detail that can be sensibly used in designing a solution to meet business objectives within any financial business case constraints.
7. Be flexible in solution design
As well as considering what is and is not in scope for the HRO service provider for each process or service, it is also reasonable to consider which HRO services will be provided to specific countries. The global v. local analysis prepared under rule number 5 can be used to define tiers of services that can be provided to categories of countries. For example, all countries might receive “Foundation” services, e.g. common, global processes that can be supported from an offshore delivery centre and enabled by web-based technology solutions; e.g. Workforce Data Administration and Performance Management. A second group of countries might have English Language HR Language and Advisory Contact Centre services added to this, whilst the larger countries would get a “Full Service”; i.e. all processes in their native language. It may also make sense to consider multi-sourcing; using different suppliers for different processes to maximize the service – geography footprint, whilst optimising the financial case.
8. Involve your preferred service provider to create a sustainable solution
Following supplier selection, but prior to signing contracts, work in partnership with your chosen supplier in the overall solution design and how the basic service might be flexed as described under rule number 7. Client organizations should also consider how current or planned HR processes might be replaced by those offered as standard by service providers (and supported by their standard HR technology). By utilising the service providers existing solutions, it may be possible to stretch the extent of truly global HR processes.
9. Explore the “intangible” benefits
As previously highlighted, the inclusion of the ‘Long Tail’ is likely to weaken the financial business case – usually based on the cost-benefit of replacing in-house HR labor with that of an HRO service provider. Depending on the scope of the HRO it may be reasonable to quantify some of the benefits, that in simple financial cases, are considered to be intangible. For example: a global HR database and a common Performance Management system should drive improved business performance which can be quantified.
By considering these rules, client-side organizations can begin to understand the parameters and options involved in solving their particular ‘Long Tail’ problem, but be under no illusion: this is not an easy issue to solve and the devil is very much in the detail. However, through a methodological approach and careful, considered analysis, global HRO solutions are available to provide business value to organizations with a ‘Long Tail’.
