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Will Hutton

Will Hutton

Principal, Hertford College, Oxford University and chair of the Big Innovation Centre

Tuesday 29 May 2012
Paying people – proper process re-engineering, not just supplier management

Paying people – proper process re-engineering, not just supplier management

There is an on-going debate about whether payroll processes belong in the HR or finance function. In truth, organisational ownership is not as important as the application of administrative efficiency and robust compliance controls. What is not in doubt is that these core people-related processes have seen business value added through outsourcing infrastructure and/or a managed service approach to specialist payroll service providers.

Recruitment, learning management and, to a lesser extent, absence reporting and management are also processes that are increasingly being performed by third party specialists. If you look for the common denominator across these functions you will note that they all feature repeated, rule-based transactional services that are normally classified as non-core to the organisation's main purpose.

However, they are essential business "hygiene" factors that can cause major problems if not adequately addressed. Ceridian's clients emphasise that the skills to drive these processes were often in short supply in their businesses, posed a risk when it came to absence or significant changes in volumes of work, hence another compelling reason to outsource.

Specialist service providers are able to provide reliable access to those skills through economies of scale and focused competence development. After all, it is their core business purpose. The net result of establishing good partnerships with such service providers is that heads of HR can reduce business risk and focus their critical and constrained resources on "the day job" - strategic business partnering, workforce planning and supporting organisational change.

What HRO vendors still have not shown is that that they can consistently deliver repeatable and reliable value from core employee lifecycle events and advisory services. Why should this be? I suggest there are two main reasons:

HR has been notoriously poor at defining the business rules needed to document processes and knowledge management systems. One senior HR director brought a chuckle last week when referring to 'tendencies' rather than policies in the business! Such ambiguity or behaviour does not enable successful outsourcing.

Service providers assume all customers are basically the same and fail to take the time to understand the organisation they are going to support. Service delivery without context becomes disconnected from what the customer needs - the procedure may be followed but customer service goes missing.

Luckily, we can all learn from experience. The arrival of next-generation, web-based internet and mobile device employee/manager self-service built on knowledge-based business process management and social media techniques is enabling accessible delivery of intuitive lifecycle services.

The key to unlocking the value from outsourced services is to work hard to establish the case for change in terms of business benefits realisation. Fresh thinking from Ceridian is taking many of its clients and prospects outside the HR function for value. Yes, the labour arbitrage from off/near shore play is attractive but increasingly it is the step change in automating away the inefficiencies and waste in the processes that is key (one major Ceridian client has reduced manager people 'admin' time by 50 per cent).

Ceridian has identified through its process and technology 'know-how' that organisations can make major inroads into operational people costs via intelligent analytics and algorithms for rostering, scheduling and optimising NI and pension costs in distributed workforces. These are the areas where the head of HR can deliver significant value through and justify the one-off investment and disruption of transforming their own operations.

Stuart Stephen, service centre director at Ceridian UK