Tim Palmer advises on the best way to achieve HR transformation
I was talking recently to a number of experienced HR services providers and buyers. We were sharing common problems that people tend to experience when they approach HR transformation, in particular outsourcing elements of the HR function.
A recurring theme in the discussion was the importance of understanding and documenting the intent of outsourcing throughout the arrangement. This seems obvious – but from my experience working with European organisations at the start, middle and end of their HR transformation journeys, when there is a lack of understanding about why they are undertaking the programme, it becomes a real issue.
Our discussions went along the following lines:
Decide on a destination before embarking on your journey
In most cases, organisations know why they start a transformation programme. It might be cost reduction, capability enhancement, control management or data related. But as further decisions are made, the lines can become rapidly blurred between the real and assumed intent of the programme.
For instance, one organisation set off on a journey to save 35% of costs, only to learn in the process that once HR costs were clear and under control, the CEO would sanction investment in new capabilities. The cost savings agenda was ultimately dropped.
Potential buyers of HR outsourcing services should document their intent in a sourcing strategy and test and iterate that intent throughout their preparation and selection process, making sure they continue to source services against their real objectives.
Back-seat drivers will alter the route
Whilst working with procurement teams and sourcing consultants can be helpful in getting a contract signed, sealed and delivered, if they approach their role in the wrong way they can prevent the development of a clear understanding of mutual intent.
Too much third-party intervention can prevent the establishment of relationships and the full understanding of a proposal. Arms-length processes are very likely to result in arms-length solutions that fail to meet requirements. The search for ‘apples to apples’ comparisons, which dominates many selection processes, can dilute the full value of a service provider’s proposition.
Buyers need to have collaborative, interactive selection processes, with multiple opportunities to meet their potential service providers at multiple levels of seniority. Procurement and consultants should help buyers decide, not make the decision for them.
Time changes everything
The length of time it can take to agree an outsourcing contract means that the intent will often have moved on from when the selection work started. In the extreme, this can result in the contract being so unacceptable that the project is stopped, either just prior to or just after signing. And the risk is only likely to increase in these more uncertain economic conditions.
The 12-plus months that it is taking to agree multinational outsourcing contracts is simply too long. Buyers need to find ways to inject and maintain momentum in their sourcing programmes. They also need to ensure that the contract includes sufficient flexibility to accommodate any changes that may occur.
Let the buyer beware
The contract needs to reflect the intent. I have met a number of companies where this is not the case. Either their contracts have been poorly structured and negotiated, or decisions taken during the contracting process change the overall intent.
The net result is often disappointment, when the people working with the contract on a daily basis fail to realise the benefits they thought would be achieved. Buyers need to be very diligent in this process, making sure they completely understand what they are buying.
Start as you mean to go on
Finally, the intent needs to be kept alive during transition and beyond. It is too easy to get to the finish line of a contracting process, only to forget that you have really just reached the start.
The original intent in the sourcing strategy, amended as necessary during the contracting process, should now come back to the fore. It should be the focus of the communication programme, helping explain the why and what of the selected approach. And the outcome should be tracked against the intent – did we achieve what we set out to achieve?
In many companies, it is too easy to skip this most obvious step. The people involved in constructing the deal move on and the rules are subsequently rewritten to suit what actually happened.
Success factors of having clear intentions
So how will you know if you’ve achieved all this? If I think of relationships that I’ve worked on where the behaviours and activities are properly aligned with the intent, they involve:
- Faster and smoother selection processes.
- Commercial terms that cater to the specific requirements of the situation.
- Mutual incentives built in, encouraging parties to do the right thing.
- Service providers using their established assets, but clients still feeling that they receive a tailored service.
- Both parties making reasonable financial returns.
- A lack of 'noise', with the inevitable issues handled within the established governance processes.
- A contract that evolves and which is renewed – several times.
Ultimately, having a clear, transparent and where possible shared intent, is a critical success factor for any outsourcing initiative.
