Outsourcing Human Resources Functions How, Why, When, and When Not to Contract for HR Services

by Gildner, Scott B.; Cook, Mary F.

• ISBN13: 9781586440688
• ISBN10: 1586440683
• Edition: 2nd
• Format: Paperback
• Copyright: 2006-09-28
• Publisher: Society For Human Resource Management

Summary

Outsourcing or offshoring your HR department? Many American companies, including the Bank of America, Best Buy, BP, Delta Airlines, Goldman Sachs, Goodyear, IBM, the Marriott, Motorola, PepsiCo, Procter & Gamble, and Sun Microsystems are outsourcing HR. US federal and state governments spend billions each year doing so also. The question is no longer if companies will outsource HR but when.Cook and Gildner detail the best methods of outsourcing HR in the US. A complete discussion of outsourcing that not only explains all of the basics but also gives HR professionals and corporate executives practical tools with which to make an outsourcing decision, identify functional candidates for outsourcing, learn how to define requirements, draw up a request for proposal (RFP) and a request for information (RFI), assess the proposals and bidders, contract for services, expand vendor management expertise and manage outsourced functions successfully. The sample contracts are available on CD-ROM.

Author Biography

Mary F. Cook is the founding partner of Mary Cook & Associates, a human resources consulting firm based in Scottsdale, Arizona. Mary has many years of experience as a human resources generalist and consultant. She has written more than a dozen books on the subject of human resources management and is an international lecturer on that topic. Her books are published in several languages around the world. Scott B. Gildner is a Partner and Managing Director of HR Global Practice at TPI. Scott is responsible for the development of TPI's strategic business process direction and the overall leadership of the practice. Scott's knowledge derives from practical experience assisting global organizations in the selection and implementation of HR sourcing solutions. Throughout his career, Scott assisted large, multi-national organizations implementing business process service offerings. Prior to joining TPI, he established Gildner & Associates, and as the owner and president, he leveraged his extensive outsourcing and benefits consulting experience to grow the organization into the largest sourcing advisory firm specializing in human resources. Scott is considered to be among the most experienced and influential consultants within HR sourcing. Scott holds a Bachelor of Arts in Risk and Insurance from the Honors College at Michigan State University. He is also a Fellow of the Society of Actuaries and a charter member of the HR Outsourcing Forum, an independent group of organizations who benchmark, research and develop best practices for the HR Outsourcing Industry. Both authors live and work in Scottsdale, Arizona.

Table of Contents

Preface	ix
Acknowledgments	xi
Introduction	xiii
PART I Identifying Critical Outsourcing Issues, Making the Decision, and Establishing a Plan
What Is HR Outsourcing?
Why Outsource?	3	(4)
Advantages and Disadvantages of HR Outsourcing	7	(1)
Alternatives for Outsourcing	8	(2)
What HR Functions Should or Should Not Be Outsourced?	10	(3)
The Outsourcing Life Cycle	13	(2)
Making an Outsourcing Decision
Understanding the Nature of the Decision	15	(1)
Visioning	16	(1)
Defining the Scope of Services for Consideration	17	(1)
Calculating Baseline Costs	18	(3)
Identifying Strategic Alternatives	21	(2)
Modeling the Alternatives	23	(2)
Considering Nonfinancial Justifications for Outsourcing	25	(1)
Building Your Presentation to Management	26	(1)
Managing Expectations	27	(2)
Establishing an Outsourcing Plan
Setting Organizational Goals and Reaching Consensus	29	(1)
Establishing a Timeline	30	(2)
Selecting the Vendor	32	(4)
Negotiating a Good Contract	36	(1)
Communicating the Decision	37	(1)
Building a Rollout Schedule	37	(1)
Managing the Ongoing Relationship	38	(3)
PART II Defining Your Requirements, Selecting a Provider, and Communicating the Decision
Defining Your Requirements
The Service Delivery Model	41	(5)
Performance Penalties and Incentives	46	(1)
Service Level Agreement Framework	47	(1)
Sample Service Level Agreement	48	(3)
Identifying and Prequalifying Vendors
Identifying Types of Outsourcing Vendors	51	(2)
Probing Vendor Solutions	53	(1)
Identifying Potential Providers	54	(1)
Researching Providers on the Internet	55	(1)
Prequalifying Potential Providers	56	(1)
Using a Request for Information	57	(2)
Preparing and Analyzing a Request for Proposals
Establishing Your Selection Criteria	59	(2)
Handling Fees in the Selection Criteria	61	(1)
Structuring the Request for Proposals	62	(1)
Integrating Your Vendor Selection and Contracting Processes	63	(1)
Probing for Vendor Capabilities	64	(1)
Requesting Fee Proposals	65	(1)
Satisfying Internal Sourcing Requirements	65	(1)
Distributing the Request for Proposals	66	(1)
Supporting the Vendors as They Develop Their Reponses	66	(1)
Using Technology to Simplify the Process	67	(2)
Analyzing the Request for Proposals, Selecting Finalists, and Making a Decision
Summarizing and Analyzing the Vendor Proposals	69	(1)
Analyzing Fee Proposals	70	(2)
Selecting Finalists	72	(1)
Refining Your Selection Criteria	73	(1)
Performing Due Diligence	74	(1)
Identifying Your Preferred Provider	75	(1)
Negotiating the Best Deal for Your Organization	75	(2)
Communicating the Decision
Taking a Strategic Approach to Outsourcing Communications	77	(1)
Communicating the Positives and the Negatives	78	(2)
Using a ``Five Ws'' Approach to Communications	80	(1)
Identifying the Methods of Communication	80	(1)
Considering Three Communications Scenario	81	(1)
Planning for Communications	82	(6)
PART III Outsourcing Specific Functions and Processes
Outsourcing Workforce Administration
Definition of Workforce Administration	88	(1)
Prevalence of Outsourcing	88	(1)
Marketplace Alternatives	88	(2)
The Right Strategy for Your Organization	90	(1)
Key Considerations	90	(2)
Services to Outsource in Conjunction with Workforce Administration	92	(1)
The Future of Human Resource Information Systems	92	(4)
Outsourcing Benefits Administration
Definition of Benefits Administration	96	(1)
Prevalence of Outsourcing	97	(1)
Marketplace Alternatives	97	(1)
The Right Strategy for Your Organization	98	(1)
Key Considerations	99	(1)
Services to Outsource in Conjunction with Benefits Administration	99	(2)
The Future of Outsourced Benefits Administration	101	(3)
Outsourcing Payroll Administration
Definition of Payroll Administration	104	(1)
Prevalence of Payroll Outsourcing	104	(1)
Marketplace Alternatives	105	(1)
The Right Strategy for Your Organization	106	(1)
Key Considerations	107	(1)
Services to Outsource in Conjunction with Payroll Administration	107	(1)
The Future of Outsourced Payroll Administration	108	(4)
Outsourcing Recruiting and Staffing
Prevalence of Outsourcing	112	(1)
Marketplace Alternatives	112	(1)
The Right Strategy for Your Organization	113	(2)
Key Considerations	115	(1)
Services to Outsource in Conjunction with Recruiting and Staffing Administration	115	(1)
The Future of Outsourced Recruiting and Staffing Administration	115	(3)
Outsourcing Compensation Administration
Prevalence of Outsourcing	118	(1)
Marketplace Alternatives	118	(1)
The Right Strategy for Your Organization	119	(1)
Key Considerations	120	(1)
Services to Outsource in Conjunction with Compensation Administration	120	(1)
The Future of Outsourced Compensation Administration	121	(3)
Outsourcing Talent Development Administration
Definition of Talent Development	124	(1)
Prevalence of Outsourcing	124	(1)
Marketplace Alternatives	125	(1)
The Right Strategy for Your Organization	126	(1)
Key Considerations	126	(1)
Services to Outsource in Conjunction with Talent Development	127	(1)
The Future of Outsourced Talent Development Administration	128	(2)
Outsourcing Subprocesses
Candidates for Outsourcing	130	(1)
Strategic Considerations	131	(1)
Domestic Relocation or Global Mobility	131	(1)
Expatriate Administration	132	(1)
COBRA Administration	133	(1)
Flexible Spending Account Administration	134	(1)
Pension Payroll Administration	135	(1)
The Future of Subprocess Outsourcing	136	(3)
PART IV Managing Human Resources Outsourcing
Managing the Outsourcing Relationship
Defining Success	139	(2)
Avoiding Common Mistakes	141	(2)
Establishing a Measurement Framework	143	(2)
Identifying Appropriate Metrics	145	(2)
Designing Performance Reports	147	(2)
Writing an Administrative Services Agreement
Deciding Which Form to Use	149	(1)
Organizing Attachments	150	(1)
Examining the Overview of Common Agreement Provisions	150	(3)
Negotiating Process and Strategy	153	(2)
Designing Termination for Convenience, Expiration, and Renewal Considerations	155	(2)
Managing a Proactive Governance Function
Establishing a Governance Structure	157	(1)
Establishing the Role of the Steering Committee	158	(2)
Building a Vendor Management Team	160	(2)
Monitoring Vendor Performance	162	(2)
Managing Change Order Activity	164	(3)
Benchmarking Services and Fees	167	(1)
Reviewing and Renewing Providers	168	(3)
Resolving Disputes and Terminating Vendor Contracts
Handling Escalated Case Management	171	(1)
Fixing Problems	172	(1)
Using the Seven Steps Model	173	(1)
Terminating an Outsourcing Contract	174	(2)
Bringing Services Back in House	176	(5)
PART V Considering Global Issues
Incorporating Global Requirements
Examining Human Resources as a Multilocal Phenomenon	181	(1)
Understanding Legislative Challenges	182	(1)
Looking at Variations by Geographic Regions	183	(2)
Knowing Vendor Capabilities	185	(1)
Developing a Global Delivery Strategy	186	(2)
Seeing What Lies Ahead	188	(4)
Offshoring and Near-Shoring
Labor Arbitrage	192	(1)
Other Factors	192	(2)
Offshoring in Human Resources	194	(1)
Future of Offshoring	194	(2)
Effect of Outsourcing on Vendor Management	196	(7)
PART VI Hiring an Outsourcing Consultant and Monitoring Services and Trends
Hiring a Consultant
Learning Why and When You May Need Help	203	(1)
Finding Outsourcing Consultants	204	(4)
Hiring the Right Consultant for Your Needs	208	(2)
Examining a Sample Consulting Contract	210	(1)
Seeing Trends and the Future of Outsourcing
Learning What Lies Ahead	211	(1)
Anticipating Trends	212	(3)
Appendix: Abbreviations and Acronyms	215	(6)
Index	221	(10)
About the Authors	231