Since we have been on the theme of outsourcing this week I thought of adding a few more points to summarize the overall issues.

Do you need to change the way HR operates?

There are a number of drivers, both financial and more philosophical, for one
considering outsourcing in general. Here some of the more common ones
do any of these sound familiar in relation to your organisation?

• Organisations that have a history of outsourcing other activities (for example
finance, IT) may decide that HR is simply ‘next on the list’.
• Cost reduction may often be a driver, because costs and profit are the most
easily measured and understood potential benefits.
• Outsourcing may be used as a way of reducing risks (legal or financial)
associated with HR activities.
• Outsourcing providers generally claim to be able to carry out HR activities more
effectively than can be done in-house.
• Outsourcing providers may be able to offer expertise that’s not available
in-house (for example, compensation and benefits advice).
• Moving aspects of HR administration to an outsourcing providers has potential
to free up HR people to focus on strategy.
• HR functions are under increasing pressure to prepare meaningful
people management metrics.
• New HR or organisational leaders with positive experiences of outsourcing
HR in a previous organisation may wish to repeat the programme in their new
employment.
• The organisation may be growing rapidly (organically or through
acquisitions), placing strains on the existing HR provision.

Any of these drivers may prompt HR teams to think about the way they deliver services.
The following illustrates some of the questions that you’ll need to ask, before
deciding on the right solution for your organisation.

Do we need to change the way HR department operates?
Review existing HR provision.
Are the admin processes effective?
Does it have sufficient HR policy and strategy expertise?
Is it cost-efficient?
How much do we need to change the way we deliver HR?
Major transformation?
Minor tinkering?
How do we change it?
Internal
Mainly external provision
Mainly internal plus limited external provision
Internal with external supportor
or

Is outsourcing the appropriate approach to
achieving your goals?

Outsourcing currently has a high profile as a solution to many HR issues and
opportunities. It can be a sensible and valuable strategic choice for organisations.
However, the fundamental issues and opportunities that outsourcing seeks to deal with
can be solved with other alternatives. Even when outsourcing is the most appropriate
approach it will usually not solve organisational issues on its own, but will need to be
implemented in conjunction with other initiatives.


How much could you outsource?

Taking the decision to outsource a particular HR activity doesn’t necessarily mean that
the organisation hands over responsibility for all aspects of that activity. Often (but not
always), process management and data are outsourced, while control of strategy and
policy-setting are retained in-house.

Case study


Standard Chartered: building your own shared service centre

Standard Chartered Bank employs 33,000 people in over 550 locations, serving 56
countries and territories across the Asia-Pacific region, South Asia, the Middle East,
Africa, the United Kingdom, and the Americas. It is one of the world’s most international
banks, with employees representing 80 nationalities. Standard Chartered has effectively
set up its own HR Shared Service Centre (HR SSC), which it runs itself from Chennai in
southern India.

Three main drivers influenced this decision. First, there was a desire to improve the
quality of the HR service. This was followed by a desire to review and improve the
structure of the HR function, enabling it to deliver higher value. The third driver was the
belief that the new set-up could bring significant cost savings.

Prior to the decision to create an ‘in-house’ shared service centre, various ideas around
re-engineering the HR function were being considered. At the time, there was a range
of disparate HR processes and structures across the businesses. There was too much
duplication of effort and time spent on non-value-adding activities and too little on
critical areas such as engagement, performance management and talent development.
Outsourcing was considered briefly – in part to ensure the re-engineering effort reviewed
all options and evaluated the merits for each, and also to look at what outsourcing
providers could offer in terms of potential cost reductions. Standard Chartered concluded
that there was a strong business and technical case that its own people could ‘do it
better themselves’.

The project began in Autumn 2000 with a thorough review of what would be required.
Today, all people data across 56 countries is managed in the shared service centre. More
complex, as well as standardised HR processes, are delivered from Chennai. In addition,
over 50 per cent of employees are paid out of the HR SSC, and the HR SSC administers
27 pensions schemes across 17 countries, all employee share options and share schemes.
There is also a sophisticated service on offer relating to employees’ international mobility.

Standard Chartered employees and managers from all over the world are also supported
by a contact centre, which resolves their enquiries about these areas of HR activity.

International mobility and share administration are examples of the organisation’s
activities that have deliberately been brought in-house. Standard Chartered’s experience
is that with the new shared service centre, it is now able to deliver these services
better – and for less – itself. More importantly, it has allowed Standard Chartered’s HR
function to focus on growth areas and invest in value-added services. The bank has not
experienced difficulties attracting talented people to work in its shared service operation
in Chennai. There are large numbers of graduates looking for work. Many of those who
work for Standard Chartered have a Master’s degree in Human Resource Management.
The focus now is on looking in more detail at appropriate talents and on honing their
strengths and skills for the best service delivery technology. Information supplied by Tim Miller and Luis Rojas. From CIPD –London sources

Prof.Lakshman Madurasinghe