CHOOSING THE RIGHT HR OUTSOURCER

The following table presents a summary of the key characteristics a small to medium company would seek in a service provider.  It shows how the eight types of providers stack up against these criteria. 

Comprehensive Processing

Once an organization decides to outsource, they will first seek a vendor that serves smaller to medium sized organizations, due to the expense of the large-market outsourcing.  They may want to outsource only  a few processes, but the highest return will be comprehensive outsourcing of numerous processes; for much of the data and effort needed to drive a few processes, can fulfill the demands of many.  They could choose a variety of service providers to perform the administration, but this also becomes inefficient.  Each provider will need to receive much of the same data.  In addition, interfacing to multiple vendors is burdensome.

Assume HR Systems

Many companies will pay for and maintain a Human Resource Information System, but still rely on numerous outsourcers to do their processing, which is also inefficient and costly.  Why not have the HR Outsourcer assume all the functions associated with a HR Information System too, such as hosting, maintenance and administration.  Then all of the data truly resides on one database without periodic interfaces or being out of synch.  The organization can still tap into this data at any time for reporting, queries or other purposes.  After all, it is still their data.

Implementation Consulting

Many outsourcers will provide a system and hosting, but it is up to the client to read the documentation and figure out how to install and best utilize  the system.  As a result many of the capabilities of the system go unutilized particularly in small and medium sized organizations.  For this reason it is important that the vendor offer Implementation consulting for its product.

Administration Provided

Some providers will provide the systems, the hosting and even the implementation consulting, but then the client is responsible for performing the administration of the system.  The client makes on-going changes to the tables, enters the data and runs the processes and reports.  This is a huge amount of work that for many organization takes one full person's time for every 100 employees.  An outsourcer that provides skilled administration offers much more value.  This type of outsourcing can leverage technology through economies of scale and provides skilled administrators that only a few of the largest companies could afford to maintain.

Retain Control of Employees

Finally, a small or medium sized organization may be convinced of the benefits of outsourcing as much of the HR administration as possible, but they do not want to give up control of their employees, as the Professional Employer Organizations require.

In summary, a small or medium sized company would want a compressive service that automates most of its HR processes.  It would like the service to assume its Human Resource System functions and provide consulting to streamline the implementation.  It would also like the outsourcer to assume the administration roll and be designed for its  market size.  In addition, most organizations would like to retain control of its employees versus giving it up to a Professional Services Organization.

Designed for small to mid-sized organizations

There are over 100 Human Resource systems.  The large systems, which are designed for Fortune 500 companies offer exceptional capabilities such as managing diverse divisions, global operations and acquisitions.  But these systems cost millions of dollars to buy.  Due to the sophistication and corresponding complexity, the systems require experts for installation.  This typically costs two to three times the initial software outlay.  Therefore, it is important to find a system that will handle the requirements of a smaller organization, but is affordable.

Notes:

Payroll Service Bureaus --  Some of the larger Payroll Service Bureaus offer HR outsourcing, but typically of only a few non-integrated processes.

Boutiques -- Refers to the myriad of small HR Consulting firms that offer outsourcing of a few HR processes in addition to their bread-and-butter consulting activities.

PEO -- Professional Employer Organizations, that will in effect assume total control of your employees and then lease them back to you.  These will assume responsibility for HR administration.

Specialists -- Companies that specialize in a few outsourced processes such as 401(k) processing or claims administration.

Consulting Firms -- Refers to the big four HR consulting firms (Mercer, Hewitt, TPF&C, and Watson Wyatt) that provide a large array of HR consulting to large companies (1000 plus employees) and may also provide some forms of HR outsourcing as a byproduct of their consulting activities.

Self Service -- A handful of companies that provide several outsourced HR processes over the Web to large companies and recently started to offer these to medium sized companies.  These companies typically do not assume the HRIS or administrative responsibilities.

HRIS Vendors  -- There are over 100 HR Information System vendors.  Originally they offered to sell only their software, later offering implementation consulting.  Now, some HRIS vendors offer to host their applications providing the periodic maintenance.

HRSB -- The HR Service Bureau's sole purpose is to provide comprehensive HR outsourcing to small and medium sized companies over the Web.  It assumes all of the HR systems responsibilities and provides implementation consulting and ongoing administrative support.  The company retains responsibility for the employees, while the HRSB takes on the administrative burden.

For more information, a brochure or a demonstration please contact us at the HRSB.