The modern era of HRO
The modern era of HRO
As we approached the 21st century, technology and management trends converged to launch the modern era of HRO, and propelled the broader application of outsourcing across all of HR In the mid-2000s, a number of
HRO deals were soup-to-nuts contracts; but some vendors underestimated the complexity of the work. Still, organizations have been expressing interest in smaller-scale, discrete HR outsourcing projects. And experts say the economic downturn itself has increased demand for outsourcing, given the promise of cost savings. The past 10 years have been a journey for companies outsourcing HR and for the providers of those services. Both endured significant challenges as they tried to find formulas that worked.
As we enter the second decade of HRO, it is clear outsourcing is here to stay: It has become a critical component of a company’s cost-effective delivery strategy. Nowadays, companies are better equipped to navigate the challenges of HRO implementation and create a model for improved operational effectiveness.
Experts suggest that any company considering HRO should first be clear about their short-and long-term goals. Some reasons that companies choose to outsource their HR:
- Increased focus on core business: Companies want to spend their discretionary management time and energy on their business.
- Access to improved technology: Companies with less-sophisticated automation capabilities have greater tendencies to outsource than companies with better technology and automation capabilities.
- Outsourcing improves quality: According to industry research, HR department personnel who were surveyed indicate that their number-one criterion in choosing an outsourcing vendor is quality of service.
- Ability to outsource strategic functions: Few companies can afford to hire full-time experts in every area of HR, such as benefits planning. However, HRO providers can stay more up-to-date with current practices in those areas because it’s their primary business.
- Rely on best-in-class change management: HRO affects the entire organization rather than just one functional department. Even when well-planned, this complexity requires more effort than is typical of most organizations’ change management capabilities. HRO fundamentally changes the way employees receive HR services, and is extremely visible within the organization. That visibility affects managers, business unit leaders and project team members whose jobs may change or be eliminated. As a result, HRO change-management efforts must not only address the needs of end users, but also the concerns of all stakeholders touched by the transformation.