BPO: 7 common mistakes
Are you making the common mistakes that impact your Payroll & HR performance and outsourcing agreements?
Choosing a BPO solution is an important stage of an organisation's evolution. The increased efficiency, expertise and experience that BPO can give to a business is the reason why more organisations than ever before are looking to outsource their Payroll and HR solutions.
However, as the BPO market matures, so the complexity and range of systems and providers can cause confusion. Organisations and decision-makers must ensure that they have the right information and the relevant advice in order to choose the best option for them and their business. To help make that process an easy one, the following report highlights the common myths and realities that surround BPO, and highlight the realities.
Outsourcing, when based on misunderstanding or miscommunication, can be a fraught experience. However, by revealing the myths, such mistakes can be avoided and a true long-term partnership can be formed between the business and the provider.
- Mistake #1: "We've always done it this way"
- Mistake #2: "Misunderstanding what BPO really is"
- Mistake #3: "Fear of losing control"
- Mistake #4: "Not believing in standardisation"
- Mistake #5: "Buying on price alone"
- Mistake #6: "Insufficient partner evaluation"
- Mistake #7: "Not providing stakeholders with a holistic approach"
"We've always done it this way"
Most organisations highly value their HR function, and rightly so. Their knowledge of employees and internal procedures are second-to-none. The EY Global payroll survey (2013) finds that 28% of companies still rely solely on a complete in-house payroll delivery model, for example.
When asked what they considered to be the main driver for their existing HR & payroll operating model however, the largest number stated that it was simply the way things had always been done. They had not had the time to re-assess whether BPO would provide a suitable alternative. As organisations compete in ever-changing marketplaces however, having the flexibility offered by BPO services could be of benefit.
"Misunderstanding what BPO really is"
The term 'BPO' can often get confused with other outsourcing solutions. Indeed, HR outsourcing has a large variety of options and acronyms, including: Application Management Outsourcing (AMO), Application Service Provider (ASP), Software as a Service (SaaS), Managed Services, Comprehensive Outsourcing Services and Business Process Outsourcing (BPO), to name just an important few.
The choice must ultimately come down to the business case. Outsourcing elements of IT infrastructure or application management is an option that some business's choose. However, if they were looking for a comprehensive service that could transform the HR function, then they may come to regret opting for a functional arrangement rather than the full service provided by BPO. If there is no transfer or risk and responsibilities, then it is not BPO: therefore it is important for organisations to understand the full range of options before choosing a provider.
"Fear of losing control"
The idea that Payroll and HR outsourcing can generate a degree of uncertainty internally. One key concern is who will control the HR process and manage the security of internal data once it has been transferred. That is not just a concern for the Finance and HR Departments. The wider leadership team also fears any loss of control of sensitive company information. However, what is often overlooked is that BPO can actually create a safer system for data security, while the control rests firmly in the customer’s hands.
"Not believing in standardisation"
The concept that Human Resources needs to operate more like a business and help contribute to the bottom line was popularised by David Ulrich a leading HR academic and consultant. To achieve this, HR leaders need to have key performance indicators (KPI’s) and consistent and reliable data points to assess the operations. Without standardised Payroll and HR processes, you cannot determine how efficient you are. A single system and data repository that enables reporting and analytics requires the integration of Payroll and HR data, common policies, processes, and tasks into one platform. With 37% of mid-sized companies’ data left sitting in Excel (ADP Global HCM Study, January 2014) or similar types of databases, the value of standardisation and putting all data into one system, accessible to not just HR, but also Executives, Managers and Employees, cannot be underestimated.
"Buying on price alone"
HR Departments are under constant pressure to contribute to overall company savings and to find ways to reduce costs. Outsourcing can therefore seem an effective and attractive means of doing so. However, focussing purely on cost is to only see a small part of the picture. A board's decision is more likely to be influenced by the wider benefits of HR outsourcing.
Pay and Benefits magazine argues ('Payroll Bureaux: Working in partnership', August, 2012), “Today’s organisations are looking for a strategic approach to their payroll processes, with the main drivers behind adopting bureau services being to increase effectiveness, reduce overheads and aid business continuity while reducing risk and responsibility.” It concludes, “While cost is a major driver, it should never be the only factor.”
"Insufficient partner evaluation"
Payroll and HR Administration is strategic, yet it is too often treated as a commodity. Some companies invest little time when selecting service providers, while others may not use the right criteria. This may be why only 25 per cent of businesses are happy with the solutions they have in place, according to The Hackett Group’s 2013 Global Payroll Performance Study. Selecting an outsourcing partner is a complex task where various factors and criteria needs to be considered to make the right choice for the business, yet the EY Global Payroll Survey (2013) found that close to 40% of companies surveyed were so disillusioned with their existing outsourcing partner that they were considering switching.
"Not providing stakeholders with a holistic approach"
BPO helps Finance and HR to clarify the role of Payroll and HR experts and reallocate them on processes with more added value. But that doesn’t mean it is simply an internal HR project that the rest of the organisation can ignore. In fact, to enjoy the full benefits of Payroll and HR outsourcing the whole organisation has to be on board from start to finish. If executives and the wider employee base are not engaged, they may end up with solutions they do not want; if they are allowed to influence the project from the start, however, they are likely to be active supporters.