Upload
national-hrd-network
View
4.268
Download
4
Tags:
Embed Size (px)
DESCRIPTION
By Nadeem KazimDirector (HR & Personnel)Exide Industries Limited
Citation preview
1
Current Trend in HR-Outsourcing of Human ResourcesCurrent Trend in HR-Outsourcing of Human Resources
Nadeem KazimNadeem Kazim
Director (HR & Personnel)Director (HR & Personnel)
Exide Industries LimitedExide Industries Limited
2
What has changed in HR?What has changed in HR?
3
HR RenamedHR Renamed
1.1. Labour OfficerLabour Officer
2.2. Welfare OfficerWelfare Officer
3.3. Personnel OfficerPersonnel Officer
4.4. HR OfficerHR Officer
5.5. People officerPeople officer
6.6. Employee Relations Employee Relations officersofficers
4
HR Aligned HR Aligned
WelfareWelfare AssetAsset
ImpersonalImpersonal
PersonnelPersonnel
LiabilityLiabilityFarewellFarewell
HRHR
Is HR aligned ?
5
Has HR Paced With Has HR Paced With Time :Time :
Indian Indian Organisation are Organisation are becoming global:becoming global:
HR HR struggling struggling To catch To catch up:up:
Global Global Organisation :Organisation :
6
Business process OutsourcingBusiness process Outsourcing
A Business A Business ImperativeImperative
7
Good companies knows Good companies knows what what TO DOTO DO
AndAnd
Great companies knows Great companies knows what what NOT TO DONOT TO DO
8
Leading companies have benefited significantly from outsourcing and the Leading companies have benefited significantly from outsourcing and the overall BPO market is expected to grow rapidly in the future overall BPO market is expected to grow rapidly in the future
82
26
76
47
12
38
3920
100
24231
17
119
050
100150200250300350400450500550
600
2005 2012
206206
544544
$ Bn$ Bn
The BPO market is The BPO market is expected to grow to expected to grow to
$544 Bn at a $544 Bn at a 21% CAGR 21% CAGR
HR – 28% HR – 28%
F&A – 26% F&A – 26% S&M – 24% S&M – 24%
MftgMftg DistbnDistbn HRHR Payment Payment ServicesServices
F&AF&A S&MS&M AdminAdmin
Growth in BPO Market: 2005 - 2012Growth in BPO Market: 2005 - 2012
Source: Gartner Dataquest, December 2005, A.T. Kearney Research
9
Value Proposition for the company from BPOValue Proposition for the company from BPO
Top 10 Top 10 reasons to reasons to outsourceoutsource
Share risksShare risks
Cost Reduction & Cost Reduction & ControlControl
Accelerate Downsizing/Accelerate Downsizing/Restructuring benefitsRestructuring benefits
Cash Flow/Cash Flow/Capital AssetsCapital Assets
Focus on Core Mission and CapabilitiesFocus on Core Mission and Capabilities
Difficult to manageDifficult to manageResources not available Resources not available
internallyinternally
Increased FlexibilityIncreased Flexibility
Free internal resourcesFree internal resources
World class capabilitiesWorld class capabilities
99
55
44
33
101022
88
7766
11
Improve company focusImprove company focus
10
The reasons for outsourcing have matured beyond just seeking cost The reasons for outsourcing have matured beyond just seeking cost advantages to focusing on core competencies to deliver shareholder value advantages to focusing on core competencies to deliver shareholder value
Source: Forrester Research study – BPO Drives Internal Improvement
Traditional Drivers of Traditional Drivers of OutsourcingOutsourcing
Cost savings Increased flexibility Improved quality &
efficiency
3%
3%
8%
13%
18%
37%
79%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Poor customerperformance
Standard industrypractice
Scalability
Expertise of serviceprovider
Limited internalresources
Lower costs
Shed or avoid buildingnon-core processes
Current drivers for Business Process OutsourcingCurrent drivers for Business Process Outsourcing
11
Second Phase of Second Phase of Outsourcing: Outsourcing: 1970s - 1980s1970s - 1980s
First Phase of First Phase of Outsourcing: Up Outsourcing: Up
to the 1970sto the 1970s
Third Phase of Third Phase of Outsourcing: Outsourcing: 1980s – 1990s1980s – 1990s
Energy/UtilitiesEnergy/Utilities
Information TechnologyInformation Technology
Outbound Outbound LogisticsLogisticsProductionProduction Sales & Sales &
MarketingMarketingInbound Inbound LogisticsLogisticsProcurementProcurement
Administration & Facilities ManagementAdministration & Facilities Management
LegalLegal
Human ResourcesHuman ResourcesFinance & AccountingFinance & Accounting
Globally companies started by non-core staff functions and have gradually Globally companies started by non-core staff functions and have gradually progressed to line functionsprogressed to line functions
Value ChainValue ChainIllustrativeIllustrative
12
Not only has the scope increased with time but has also penetrated deeper Not only has the scope increased with time but has also penetrated deeper into traditional segmentsinto traditional segments
BPO Trends in the last Two DecadesBPO Trends in the last Two Decades
OutsourcedOutsourced
Energy/UtilitiesEnergy/Utilities
Information TechnologyInformation Technology
Administration & Facilities ManagementAdministration & Facilities Management
LegalLegal
Human ResourcesHuman Resources
Finance & AccountingFinance & Accounting
ProductionProduction Outbound Outbound LogisticsLogistics
Sales & Sales & MarketingMarketing
Inbound Inbound LogisticsLogisticsProcurementProcurement
Salary & BenefitsSalary & Benefits
Training and Training and Development Development
RecruitingRecruiting
Records Records managementmanagement
Performance Performance ManagementManagement
Compensation Compensation designdesign
Industrial RelationsIndustrial Relations
Career Career managementmanagement
In-houseIn-house
Billing servicesBilling services
Financial AnalysisFinancial Analysis
Accounts Accounts PayablePayable
General General AccountingAccounting
Accounts Accounts ReceivablesReceivables
Financial reportingFinancial reporting
Financial Financial ManagementManagement
Tax complianceTax compliance
ExampleExample
HR PlanningHR Planning
13
Determine optimum modelDetermine optimum model
Strategic ObjectivesStrategic Objectives Organisational ObjectivesOrganisational Objectives Financial ObjectivesFinancial Objectives
MakeMake BuyBuyControlControl
The outsourcing continuumThe outsourcing continuum
ServiceServicemanagementmanagementIn-houseIn-house OperationsOperations
ManagementManagementJoint Joint
VentureVenture100 %100 %Sell-offSell-off
OptionsOptions
In-sourceIn-source Co-sourceCo-source Out-sourceOut-source
14
Outsource processes that are non-core to the organization with adequate Outsource processes that are non-core to the organization with adequate checks and balances to identify such non-core areaschecks and balances to identify such non-core areas
Notes 1) Ravi Venkatesan, “Strategic Sourcing- To make or not to make”, HBR Nov-Dec 19922) C.K..Prahalad & Gary Hamel, “The Core Competence of the Corporation”, HBR May-June 1990
Source: AT Kearney Analysis
• Does the process / activity provided a competitive advantage?
• Are the internal capabilities and competence comparable to the “best in class” supplier?
• Are investment in time and resources to close any gaps with the “best in class” justified?
Core v/s Non-coreCore v/s Non-core
ChecksChecks QuestionsQuestions
Market Market AccessAccess
Does the activity provide potential access to a Does the activity provide potential access to a variety of product/market segmentsvariety of product/market segments
Customer Customer BenefitsBenefits
Does the activity make a significant Does the activity make a significant contribution to the perceived customer contribution to the perceived customer benefits of the end product/service?benefits of the end product/service?
Non-Non-replicablereplicable
Is the activity difficult for competitor to Is the activity difficult for competitor to imitate?imitate?
Management Management AttentionAttention
Should management devote significant time Should management devote significant time and energy to this process?and energy to this process?
TalentTalentIs the organization putting out best people, Is the organization putting out best people, with the appropriate skill set, into these with the appropriate skill set, into these processes?processes?
CapitalCapital Can the capital used in this function be better Can the capital used in this function be better applied elsewhere within the corporation?applied elsewhere within the corporation?
Track Track RecordRecord
Does the activity have a track record for Does the activity have a track record for meeting or beating its commitment?meeting or beating its commitment?
15
Outsourcing Process:Outsourcing Process:
16
‘‘Long list’ of Long list’ of outsourcing outsourcing
opportunitiesopportunities
The identified set of opportunities is screened to The identified set of opportunities is screened to Decide opportunity for Decide opportunity for outsourcing outsourcing using a six-step methodologyusing a six-step methodology
1
Filter I
Vendor Vendor AvailabilityAvailability
Annual SpendAnnual Spend
Shortlist of Shortlist of outsourcing outsourcing
opportunitiesopportunities
2
Filter II
Ease of Ease of ImplementationImplementation
Potential BenefitsPotential BenefitsShortlist of Shortlist of outsourcing outsourcing
opportunities opportunities for further for further
analysisanalysis
3
Is the supply market suitable Is the supply market suitable for outsourcingfor outsourcing
Detailed Supply Detailed Supply Market Market
AttractivenessAttractiveness
4
Decide Decide opportunity opportunity
for for outsourcingoutsourcing
What are the relative benefits What are the relative benefits & risks of outsourcing?& risks of outsourcing?
EVA PotentialEVA Potential
Detailed Risks & Detailed Risks & Challenges Challenges
5
6
17
‘‘Filter One’ evaluates Filter One’ evaluates significance of spendsignificance of spend and and vendor availabilityvendor availability to arrive at the first shortlist to arrive at the first shortlist
Less Less Attractive Attractive
LowLow
High High
Ann
ual S
pend
Ann
ual S
pend
• Annual rupee spend on each opportunity
• Number of established vendors in India
Annual SpendAnnual Spend
Vendor AvailabilityVendor Availability
MaintainMaintain
PurchasePurchaseImproveImprove
ExploitExploit
Highly Highly AttractiveAttractiveVendor AvailabilityVendor Availability
CollaCollate te
‘long ‘long list’ list’ of of
oppoopportunitrtunit
iesies
1
Yes
Filter I
SupplSupply Mkty Mkt
SizeSize 2ShortShort
list list 10-10-12 12
prioriprioritised tised oppoopportunitrtunit
iesies
Yes
Ease of Ease of ImplementatiImplementati
onon
BenefitsBenefits3
ShortShortlist 5-list 5-
6 6 oppoopportunitrtunities ies
Yes
• Ideal candidates: High spend and large number of vendors providing services
• High benefit is generally associated with high risk therefore,
•Take mix of small and large opportunities
•Focus on activities with large number of vendors to ensure progress and success
Selection ProcessSelection Process
18
‘‘Filter Two’ maps Filter Two’ maps Benefits of Outsourcing Benefits of Outsourcing vs vs Ease of Ease of Implementation Implementation to arrive at the top opportunity set to arrive at the top opportunity set
Outsource
High
HighLow
Low
Benefits of Outsourcing
Include in outsourcing
packageAdminister in-
house
Conditional Outsourcing
Ease of Implementation
Final SelectionFinal Selection
Yes
Filter I
Supply Supply MktMkt
SizeSize
Collate Collate ‘long ‘long list’ of list’ of
opportuopportunitiesnities
1 2
Shortlist Shortlist 10-12 10-12
prioritisprioritised ed
opportuopportunitiesnities
Yes
Ease of Ease of ImplementationImplementation
BenefitsBenefits3
Shortlist Shortlist 5-6 5-6
opportuopportunities nities
Yes
• Savings potential
• Quality improvement
potential
• Time to realize savings
Benefits PotentialBenefits Potential
• Risks • Transitional Challenges
Ease of ImplementationEase of Implementation
19
Validation of the supply market:Validation of the supply market:
Analysis
Analysis Framework
Framework
Outsourcing OpportunityOutsourcing Opportunity
1. 2. 3. 4. 5.
Ven
dors
V
endo
rs
SizeSize
• Indicates vendor's ability to ramp-up
• Indicates long-term viability of the vendor
Geographic CoverageGeographic Coverage
• Degree of national coverage• Ability to serve in location of
organisation interest
Maturity of BPOMaturity of BPO
Service CoverageService Coverage
• Ability to outsource the entire business process
Process ExpertiseProcess Expertise
• Business process improvement potential
• IT adaptability• Proprietary technology/ Other
resources
Customer ReferencesCustomer References
• Top customers served• Presence of large corporates -
confidence
• Level of maturity of Business Process Outsourcing in the area
Listing of top 4-5 vendors to be considered
Detailed supply market assessment frameworkDetailed supply market assessment framework
DetaDetailed iled
SuppSupply ly
MarMarketket
4
OOonone e OOpp pp
EVA EVA PotentiaPotentia
ll
DetaileDetailed Risksd Risks
5
6
20
Detailed Supply Market Assessment - SecurityDetailed Supply Market Assessment - Security
SecuritySecurity1. Group 4 2. TOPS3. Sentinel4. Colonel Security5. Premier SecurityV
endo
rs
Ven
dors
33
Size Size 33• Group 4 has over 41,000 people on its
roles• TOPS has over 10,000 people on its
roles• Other players are not significant in size
Geographic Coverage Geographic Coverage 55• National coverage including remote
locations
Maturity of BPO Maturity of BPO 44• Large industries have moved to
outsourced security services over the past five years, before which, the security BPO market remained small for a long time
Service Coverage Service Coverage 44• End-to-end services will be provided
by Group 4• Other vendors may not have direct
access and capabilities to provide the necessary technology solutions
Process Expertise Process Expertise 44• Significant technology usage will
reduce manpower requirements
Customer References Customer References 55• Bombay House• TELCO• Tata Power• Jindal Strips• ABB• BPL Group• Citibank
1 – 5Low – High
Source: A.T. Kearney analysis
Sample Analysis
Sample Analysis
21
Detailed Risks & Challenges - SecurityDetailed Risks & Challenges - Security
SecuritySecurity
Loss of Control Loss of Control 33• Ethical issues related to the
vendor and the vendor’s manpower
• Supervision of the vendor’s manpower
Process Specific Issues Process Specific Issues 33• Employee separation & potential
transfer to outsourcers• Co-ordination between the core
group of in-house officers and the outsourced officers
• Need to define standard operating procedures
• Need to retain control of critical installations
• Need to co-ordinate with police/ local authorities
Contractual/Legal issues Contractual/Legal issues 11• Potential legal roadblocks• Sub-contracting by the vendor
Service Debasement Service Debasement 33• Plant & material security and
business continuity risks can arise due to service debasement
• Safety implications of oversight in critical installations
Hidden Costs Hidden Costs 11• Service tax
1 – 5Low – High
Strategic/Organisational Strategic/Organisational Challenges Challenges 44
Source: A.T. Kearney analysis
Sample Analysis
Sample Analysis
22
Final Prioritisation is based on a long-term/strategic Risks and Final Prioritisation is based on a long-term/strategic Risks and Challenges assessment vs. potential to create EVA Challenges assessment vs. potential to create EVA
Illustrative
Illustrative
Strategic/Organisational Strategic/Organisational ChallengesChallengesLoss of ControlLoss of Control
• Direct linkage with core processes Outsource with a Human
Face• Union issues • Legacy issues/ commitments• Resistance to change• Ethical issues
Process Specific IssuesProcess Specific Issues• Interlinkages with other
processes ….
Service DebasementService Debasement• Inability to measure
• Statutory liability• Opportunistic re-pricing …
Contractual/Legal issuesContractual/Legal issues
DetaDetailed iled
SuppSupply ly
MarMarketket
4
OOonone e OOpp pp
EVA EVA PotentiaPotentia
ll
DetaileDetailed Risksd Risks
5
6
Hidden CostsHidden Costs• Transition cost • Service cost …
Framework for assessing the ‘Ease of implementation’Framework for assessing the ‘Ease of implementation’
Low Low LowLow
High High
EVA PotentialEVA PotentialE
ase
of
Eas
e of
Im
plem
enta
tion
Impl
emen
tatio
n High High
Candidate for Candidate for outsourcingoutsourcing
23
HR OutsourcingHR Outsourcing
24
A Broad HR Outsourcing Delivers Top and Bottom-line Value
Major value driver for HR BPO is freeing HR professionals to strategically Major value driver for HR BPO is freeing HR professionals to strategically influence human capitalinfluence human capital
Current HR focus is on managing the ‘Day to day’ transactional activities rather than focus on enriching human capital
Reasons for Reasons for OutsourcingOutsourcing Value from HR BPOValue from HR BPOImproving Improving ProcessesProcesses
Reduced costs (e.g., labor, overhead, distribution, systems, travel)
HR Time Spent on HR Time Spent on More Important More Important Strategic AreasStrategic Areas
Utility frees HR to focus on being a strategic partner and on core HR planning
HR strategic focus can improve employee productivity and market value
Utility’s statistical reporting provides insight to improve decision making (e.g., forecasting)
Providing Better Providing Better Customer ServiceCustomer Service
Improved employee satisfaction (e.g., better access to information and response time for payroll, benefits, training, recruitment, HRIS inquiries)
30
50
70
50Transactional
Strategic
% Time % Time spent spent
on activitieson activities
Pre BPOPre BPO Post BPOPost BPO
25
•Organization mgt.
•Budgeting•Diversity mgt •Salary/ Grade mgt
•Gov’t Relations•Temp labor mgt.• Job profile development
•Succession planning
• Interviewer coordination
• Screening/ testing
• Applicant Management and communication
• Analysis and reporting
• Offer/ Negotiations
• .Final Selection
• Payroll system mgt. (reconciliation, journalize, distribute)
• Calculate payments/ deductions
• Government reporting
• Tax administration
• Time and attendance tracking
• Statistical analysis and reporting
•Employee data capture incl:
- resumes - skills - training - development profiles - performance
evaluation.•Database mgmt incl. changes
•Statistical reporting
•Notifications•Link to payroll, benefits, training
•Employee file mgt.
•Comp System Mgt
•3rd Party Admin.•Benefits designation
•Benefits delivery (claims processing)
•Benefits tracking•Benefits communication
•Pension Admin.
•Outplacement•Alumni mgt. •Retirement Plan Mgt
Note: (1) Processes chosen are transaction-oriented (rather than strategic), and represent a significant portion of HR spend
Shading indicates processes for HR Outsourcing
•Course listings•Registration•Delivery•Pre and post testing
•Tracking•Customized training
• Career mgt.• Perf. Review• Perf. improvement
• Labor relations• Wellness mgt.• Training (non-web enabled)
• Internal Staffing
Retirement&
Outplacement
ExecutiveManagement& Planning
Recruiting &Hiring
PayrollServices
BenefitsAdministration
HRISManagement
Training(web delivery)
EmployeeManagement
Organisation Restructuring
• Organisational development
• Support Business process improvement
• HR Planning• Change management
Focus of the HR outsourcing has been on the transactional activities .Focus of the HR outsourcing has been on the transactional activities .
26
Note: (1) Listed processes are part of the utility’s service offering. The dollar value for recruiting and staffing processes has been adjusted to reflect the capabilities of the utility
Source: Dataquest: Demand Analysis of Integrated, Multiprocess HR Outsourcing
Benefits administration and payroll services constitute more than half of Benefits administration and payroll services constitute more than half of the total spending on human resources BPOthe total spending on human resources BPO
Human Resources Outsourcing Spending by Process(1) — 2005–2009($ Millions)
Benefits AdministrationPayroll ServicesEducation and TrainingRecruiting and StaffingHiring AdministrationRecords ManagementOther
20092008200720062005
12,000
10,000
8,000
6,000
4,000
2,000
0
27
Notes: (1) Transactional functions are functions that require processing of information. Example: employee address change, payroll processes
(2) Strategic functions are activities that directly influence corporate goals, planning, and employee productivity. Example: performance reviews, employee compensation planning
On average, companies have saved $49–98/employee per year in HR costs On average, companies have saved $49–98/employee per year in HR costs through HR outsourcingthrough HR outsourcing
Transactional(1) Strategic(2)Average Total HR Spend =$1,639/Employee(3)
Current Spend on HR Transactional Functions
Average = $492/Employee(4)
F500 Total = $5.8–11.6 Billion
OutsourcedHR Spend(5)
Average: $393–442/EmployeeF500 Total = $4.6–9.3 Billion
Savings Due to Outsourcing
Adjusted Savings Due to Outsourcing(7)
• Savings Range = $49–98/Employee(6)
• F500 Total Savings= $1.2–2.3 Billion
• F500 Total Savings = $0.93–1.8 Billion
28
Changing roles of HRChanging roles of HR
OutsourcedOutsourced
29
Administration outsourcing:Administration outsourcing:Outsourcing Opportunities Processes
Cafeteria Plant and office canteens, Tea/Coffee
Facilities Maintenance Electrical, Carpentry, Plumbing, Pest Control, Gardening, Maintenance of Lifts & ACs
Medical Asset Ownership & Management/Facility management, Food, Pharmacy, Diagnostic labs, IT, Ambulance, Security, Nursing
Fleet Management Procurement, Leasing, Maintenance & Service, Insurance other related services
Guest House Management Complete management/House keeping, Laundry, Building maintenance, Food, Security
Housekeeping Cleaning office and plant area, Garbage disposal
Security Security guards and security systems
Town Management Township Planning (cleaning, roads, street lights, gardens and parks, markets)
30
HR outsourcingHR outsourcing (cont’d)(cont’d)
Outsourcing Opportunities Processes
Payroll & Benefits Administration Time Office, Payroll and Benefits Admin, PF admin, T&E reimbursements
Recruitment Short listing candidates, verification check, Recruitment
T&D Training & Development
Development centre Assessment center, development plan
HR Due Diligence HR due Diligence
31
HR service provider for outsourced service:HR service provider for outsourced service:
HR Service HR Service ProvidersProviders
Source: Company websites, A.T. Kearney research
32
Conclude:Conclude:
Strategic outsourcing has come to stay in Human Resources:Strategic outsourcing has come to stay in Human Resources:
Low end and non core process in HR will get outsourcedLow end and non core process in HR will get outsourced
HR expertise area will be outsourced for some more time till org. HR expertise area will be outsourced for some more time till org. build capabilitybuild capability
Employee relation and strategic HR will remain in-houseEmployee relation and strategic HR will remain in-house
Challenge will be of matured long term business partner for Challenge will be of matured long term business partner for outsourcingoutsourcing
33
Thank YouThank You
34
WHY OUTSOURCEWHY OUTSOURCE
Business Process OutsourcingBusiness Process Outsourcing
Outsource to:
• Focus on core competencies• Increase efficiencies• Increase productivity• Bring in the best practiceBring in the best practice• Introduce business transformation • Reduce costs Reduce costs and, • Improve shareholder value
35Source: A.T. Kearney, International Data Corporation Shared Services Study
4
4
4
4
4
4
6
8
8
8
9
11
17
A/R
Statutory Reporting
Billing
Manual Data-Entry
Travel
Mail Services
Real Estate
Logistics
Help Desk/Call Center
Emp. Benefits
A/P
IT Support
Payroll
Most Frequently Outsourced Processes
At an activity level Payroll, IT Support and A/P are most frequently At an activity level Payroll, IT Support and A/P are most frequently outsourced outsourced
(in percentage of companies surveyed)(in percentage of companies surveyed)