Like death and taxes, it is a certainty that any HR outsourcing contract will go wrong at some stage in the life of a contract, whether through service-delivery, technology, loss of key personnel, or disasters such as the recent oil terminal fire in the UK, which caused two major outsource providers to shut down and move operations.
Whether a contract survives these problems goes far beyond the contractual detail on penalties, liquidated damages, change control procedures, disaster recovery, and continuity planning. Fundamental to a continuing and successful relationship is the way in which the provider and the client manage the inevitable troughs and disasters that occur in the life of every large HR outsourcing contract.
During the negotiation and contracting phases, prior to contract signature, all providers and clients make great play of the need to build relationships and create a viable and working partnership. However, experience shows that such fine words and intentions often don’t translate into reality when things go wrong. Typically, the response of both parties to significant problems is to regress from a quasi-partnership mode of operation into a traditional customer/supplier relationship bound by the letter of the contract and adversarial behaviors.
Recently, while working at the behest of the client on the analysis of a major HR outsourcing contract in which both the provider and client expressed dissatisfaction, it became all too clear that both sides had reached the point of being adversarial and relying on the fine print of the contract to justify their positions. When questioned, they realized that they had stopped listening to each other. The following two comments were typical of the attitudes being presented:
Client: “They told us that unless we changed the technology and reduced the number of hand-offs, there would be no improvement in service delivery performance, but we ignored it.”
Provider: “We heard them say that managers were dissatisfied with the performance of the MSS service through the portal, but we felt they were just moaning for the sake of it.”
So, how do you stop this from happening and find calm waters in the midst of the storm? It is essential to look at the issues from two points of view.
Firstly, consider the structural and governance issues that must be addressed and, secondly, use an analysis of the relationship behaviors exhibited by the client and provider. To the structural and governance issues, it is essential for the client to build an effective service management organization (SMO) to govern the interface between the business customers of the HR service and the service provider so that issues that arise are dealt with at the source before they become, as one client expressed it, the 'elephant in the room'.
At the same time, both the client and service provider need to manage the overall relationship at a high level through executives who have the power to make rapid and incisive decisions without reference to long chains of command and various committees.
However, structure and governance will only take you so far. It is critical to nurture the relationship and recognize that there will be difficult periods and significant differences of opinion in the life of any contract. In making a successful and long-lasting partnership a reality, it is essential to focus on building a win-win relationship and to think in the long term.
Both parties need to recognize the short-term pressures each must bear. Two obvious pressures that clients and providers typically have to manage are business complaints to HR about diminished service when an HR generalist can no longer be relied upon to do everything for them, and pressures from senior provider executives who have to deliver against EBIT targets.
Both the client and provider have to look forward and build a pathway for long-term service and technology improvements. Both parties must be realistic in their expectations and recognize that they are part of a significant change process centered on the establishment of sustainable behavior changes premised on continuing collaboration and communication.
It both parties to recognize that partnership relations take time, energy, and effort to nurture and are potentially fragile and easily fractured. It requires courage from top-level leadership and an overriding belief in the long-term benefits provided by HR outsourcing to overcome the inevitable troughs and disasters. To truly understand this is to partly reach a solution that will deliver success to all parties in the relationship.
