This is the fourth post in our exclusive blog series on “Key Imperatives for Successful Global HR Outsourcing Partnerships.” Over the coming weeks we will dive deeper into each topic. You may find the full collection of blog posts here.
We described in the previous post how the game has changed not only for HR leaders, who have now found that the HR function has become a central strategic pillar, but also for their managed services vendors with whom they require a deeper partnership with in order to achieve their strategic HR goals. Today, we will be diving into our third topic on the need for better levers to extract the full value out of an outsourcing relationship.
This is the third essential ingredient in achieving a successful global HR outsourcing partnership, of which we listed there were five including:
Global cohesion vs. local flexibility & compliance
Managed services as enablers of strategic HR
Smarter levers for outsourcing value
Co-create to innovate
Keeping an eye on the digital bottom-line
Key values of HR outsourcing
No one can deny that people are the most important asset of any organization. Therefore, companies around the world are taking more strategic approach when it comes to managing their HR. Outsourcing day-to-day HR activities allows business leaders to focus on strategic HR issues which directly impact corporate performance and shareholder value. The benefits of outsourcing include excellent quality, reliable supply, and, in some cases, rock bottom prices.
However, its value can extend beyond the lowering of costs (which should be the only factor under consideration in an outsourcing partnership) to one that enables innovation and employer differentiation.
Smarter levers for HR outsourcing value
The game has definitely changed for payroll and HR outsourcing. As discussed above, labour cost is no longer the most common reason for outsourcing these functions – it’s to mitigate risk, avoid development of in-house capabilities and circumvent technological limitations.
In some cases, the myopic focus on extracting lower costs out of outsourcers has led to fractured employee experiences as well as vendor landscape, while delivering uncertain benefits to the organisation due to the attendant increase in overheads. Yes, operational and commercial excellence matters - it’s time to zoom out to the bigger picture and look elsewhere as well, as strategic value can come in many different forms in outsourcing.
Buyers have matured. Many of them have gone through a cycle of payroll outsourcing with one or more of the major service providers, and this maturity has given them the knowledge to ask more from their payroll and HR platforms. Similarly, the market has evolved to match, as some buyers have found that finding strong, smaller scale players has been more beneficial - as the flexibility and cost advantage they provide allows the buyer to get tailored services and platforms, instead of being asked to either conform to rigid service templates, or cough up for customisation.
Clients are increasingly looking for flexibility from their outsourcing arrangements, with “contracts that pivot” that allow them to leverage the same contract across geographies, new employee bases and scope of services with adjustable commercials and service metrics. The freedom and circumventing further procurement rounds amplifies the avoidance of the very opportunity costs that such outsourcing arrangements were designed to alleviate. It takes a HR outsourcing partner that engages with its clients as a strategic partner and not just a run-of-the-mill factory line service that will make this a reality.
OS HRS is a trusted multi-country payroll outsourcing provider for Fortune 500 companies around the world. We pride ourselves in the ability to co-create with our clients, working together to solve their HR and business problems to achieve their overall strategic objectives. Find out more about our collaborative innovation process in our case study, Driving HR innovation with a global automotive R&D centre. Our experienced team is ever-ready to help you get started on your HR and payroll outsourcing journey. Talk to us today!
