HR outsourcing and ‘employee satisfaction’

Many organisations realise that shared service centres cannot replace their HR presence on the floor and the scope of HR outsourcing is, thus, evolving rapidly. Firms need someone to constantly communicate with their employees even as they navigate through the various HR systems. More Indian organisations may actually emerge with an HR outsourcing model which is a lot more humane and a lot less cost-driven.

Ganesh Chella

There is much delight among global HR Outsourcing (HRO) firms given that the global HRO business is expected to reach a staggering $100 billion by the end of this year and the growth trend continues to look robust.

While I am hearing a lot about costs being saved, very little is being spoken about what employees have to say about their satisfaction. I really wish we could get to hear more about this.

Fortunately, we do not have to try too hard to understand this. Given that most HR outsourcing arrangements are based on a “service delivery” model either through a centralised shared services model or a partial outsourcing model (Global Services, quoting Benchmarkreports.com) it is possible to predict this from some of the research and insights relating to the service delivery models for external customers.

HRO is an integral part of the BPO industry and its scope is rapidly evolving to include areas such as payroll, benefits administration, training, recruiting, performance management, compensation management and so on. Employees typically get support through the Web, mail, phone and a limited amount of face-to-face interactions.

Complete HR outsourcing is difficult and, when, attempted is likely to impact the employee’s every day experience of working in the organisation and, therefore, lead to poor satisfaction.

The reasons

HR outsourcing tends to under-deliver on the “people interaction” dimension of the employee value proposition.

In his book, We are all in Services now, Professor James Teboul defines value proposition as the benefits offered by the company as they are perceived by its customers in relation to competitive offerings. He has defined five key el ements constituting the value proposition.

Three of these five elements are extremely relevant when applied to an employee context:

the process interaction which defines how easy or difficult it is for the employee to interact with the organisation to get things done;

the people interaction or the extent of empathy, attentiveness, consideration, responsiveness employees get in their interaction and the extent to which the accumulated knowledge about the employee is reflected in the quality of the in teractions and the extent to which his interactions are enlightening and fulfilling;

credibility of results and reliability or the assurance that things will work as promised and that someone will intervene to fix it if it does not.

HR outsourcing firms depend on their ability to convert every HR need into a well-defined process and the resultant set of rules and steps to make it scaleable and standardised.

What is of concern is the over-dependence on the process interaction dimension at the cost of neglecting the people interaction dimension.

To me the difference between a credit-card customer and an employee is the fact that employees expect to be treated as integral members of the organisation with unique needs, aspirations and problems and count on the organisation and the HR professionals to use their accumulated knowledge about them to solve their problems well and with consideration and flexibility.

For the organisation, each interaction is meant to be an opportunity to sell the organisation’s value proposition, clarify its policies and practices, deliver key messages and develop an accumulated body of insight about what is on the employees’ mind. Most important, the interactions are great opportunities to reinforce the organisation’s commitment to the employee’s needs and expectations.

By defining these interactions as mere transactions, processes and service level agreements (SLAs) that can be outsourced, organisations are likely to lose out on delivering the empathy, attentiveness, respect, willingness to help, and a certain amount of grace and unity in the relationship that employees want. In fact, the problem becomes acute when things go wrong. The service recovery process is quite often messy and complicated.

HR operations cannot be separated from HR strategy

One of the key arguments in favour of HR outsourcing is that by outsourcing the operational aspects, HR professionals will be freed up to engage in more strategic issues. This is far from true. Many of the employees’ problems do not present themselves in neat and discrete ‘operational’ packets. The solutions to many issues are quite complex and often require the involvement of one or more managers, assessment of the potential impact of decisions on peers, judgment about making exceptions based on special considerations and so on. Quite often, insights to shape new policy emerge from a deep understanding of operational issues and implementation realities. Business leaders refuse to engage with HR on strategic issues unless some of their burning operational issues are addressed. The separation of HR operations from HR strategy is, therefore, untenable.

HR outsourcing cannot replace HR presence

Many Indian organisations realise that shared service centres cannot replace their HR presence on the floor. If the current trends are any indication, there has been a huge surge in the demand for HR professionals. The HR-to-employee ratio is not falling and is, in fact, being debated constantly. Organisations are realising that they need someone to constantly engage with their employees to communicate the value proposition, clarify their understanding of the same, support them even as they navigate through the various HR systems and processes, solve their problems and demonstrate to them that they matter.

In fact, the organisations with high engagement scores are the ones with “empathetic presence” and not “excellent processes”.

This trend is welcome and I believe that more and more Indian organisations may actually emerge with an HR outsourcing model which is a lot more humane and a lot less cost-driven. As the preferred destination to address the world’s outsourcing needs, may be India will show the way!