A Workforce Capable to Grow With GE
Outsourced Team Members Want Careers, Too
Why Outsource the Human Resources Function?
There are many reasons companies choose to outsource work and the most frequent reason is the work is not or should not be in the company’s core competency.
Perhaps the work is better performed by an organization specializing in this service. Sometimes the decision is made to distance the company from the risk of the activity (think employee leasing from the 1980s).
This decade, outsourcing human resources activities has become increasingly popular. Potential provider partners have grown exponentially and companies have shown a heightened interest in shared services to trim costs and improve operational efficiencies.
While this seems like a clear win-win proposition, many of these outsourcing arrangements failed. Why is this the case? Again, the reasons are varied, but most often involve one or more of these critical failures from the company:
But wait a minute. Isn’t it the provider’s responsibility to manage his or her workforce? Doesn’t he or she determine the structure? Isn’t this one of the features that makes outsourcing attractive in the first place?
Well, yes and no.
Yes, the provider is responsible for recruiting and hiring. Yes, the provider is responsible for performance management. Yes, he or she is responsible for discipline and separation matters. However, the company primarily determines the structure of the operation. Sure, the vendor has some input, but at the end of the day the company is paying for the service.
It’s tempting for a company to design a flat structure within the outsourced operation—one with 15-20 processors and a team leader. This is attractive because, on the surface, it seems to make the roles interchangeable, leading to greater opportunity to cross-train and grow talent without regard for pay differentials.
A Closer Look at the Model
What is there to keeping outsourced workers motivated in this structure? They are effectively in a dead-end role. Regardless of how much additional knowledge or how much they improve their customer delivery, the employees realize nothing from a compensation or career progression standpoint. Inevitably, the best move on and the weakest hang around. This doesn’t sound like the kind of talent progression we want in our shared services roles.
When I was asked to build an human resources shared services delivery model for General Electric nearly six years ago, the outsourcing market was just starting to heat up. We were looking to take a small operation (three outsourced workers) and radically change the delivery model. Initially, the scope of the operation was to replace over 400 users who managed the data for GE’s Energy and Oil & Gas businesses.
We had an outsourced partner but weren’t confident this was the partner we wanted to move forward with, given the scope of the charge. When preparing the request for proposal (RFP), we had many of the normal criteria (cost, hours of operation, relevant experience, reputation), plus some criteria that threw prospective partners a bit of a curve.
We asked about benefit platforms, employee satisfaction rates, turnover, receptiveness to and examples of alternate structures and willingness to share in the financial risk of this startup operation.
Growing With GE
What we discovered was fascinating. Many potential partners wanted to force fit our fledgling operation into an existing structure to "maximize synergies." While this sounded good, it didn’t feel right. We began working closely with a few finalists in the search process and ultimately selected a partner who was able to recognize the likely build out of services and employee populations. The need to create a flexible model to develop a workforce capable to grow with us became critical.
The New Model
We ultimately implemented the new model in May of 2003, starting with one resource managing 3,000 employee records and a team leader. We analyzed the model for capacity and, in August of 2003, expanded to managing 30,000 employee records. During the following year, we developed a three-tier, non-exempt structure with six exempt leadership roles. The three-tier structure allowed our partner to source talent and offer career-pathing within the model.
During the first three years of the operation, the team of 25 workers experienced zero voluntary turnover despite the fact the team grew to servicing over 110,000 employee records in 94 countries, opened an operation in the UK and expanded from one service to 16.
This isn’t to say we anticipated every development at the outset of this operation when we started in 2003. We regularly met with the vendor to review performance metrics, operational design and service offerings. There were many cases where we needed to nudge the rudder to keep the ship sailing successfully. But we never had to jump in the lifeboat and paddle to shore, and the operation delivered over $3.5 million of savings, while improving data quality from 2.5 to 4.5 sigma (~12,000 percent!).
If you are thinking about developing or revamping your shared services model, I encourage you to take a close look at the structure. Employees will be more engaged, and ultimately reward you with longer service, minimal delivery disruptions and a more skilled extended workforce. As a manager of your organization’s shared services program, you’ll sleep a lot better at night.
First published on Human Resources IQ.