Jonathan Juan “JJ” Moreno Chief Strategy and Governance Officer

Metro Retail Stores Group Inc.  

Evolution and Revolution in Outsourcing HR Services  

Three Parts §  Context    

§  Conference  Objec,ves  §  Strategy-­‐focused  HR  

§  Outsourcing  HR  Services    §  History  §  Trends    §  Mo,va,ons  

§  Concluding  thoughts  and  Way  Forward  §  Strategy  Execu,on  Framework  

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Presentation Context

Value  in  Partnerships  

§  Need  to  leverage  on  partnerships  §  People  are  at  the  heart  of  partnerships  §  Global  challenges  require  agility  in  talent  management    

§  Value  of  partnerships    ü  Inova,on  ü  Transforma,on    ü  Key  role  in  business  growth,  transforma,on  and  development  

§  My  Take  ü  Conceptually  I  agree  ü  Discussion  should  go  beyond  recognizing  the  “value  of  partnerships”  

but  on  how  these  “partnerships  create  value”  

Strategy-­‐focused  HR  §  Architecture  

ü  HR  FuncEon-­‐  Professionals  with  strategic  competencies  ü  HR  System  -­‐  High  performance,  strategically  aligned  policies  &  prac,ces  ü  Employee  behaviours  -­‐strategically  focused,  mo,vated  

§  Evolving  Role  of  HR  ü  From  administra,ve/professional  to  strategic  partner  ü  A    compelling  need  to  measure  HR’s  influence  on  firm’s  performance  ü  Importance  of  aligning    HR  architecture  with  the  company’s  strategy  and  

strategy  execu,on  effort  

§  High  Performance  HR  ü  HR  is  a  core  component  of  the  company’s  strategy    ü  Measurement  system  that  convincingly  showcases  HR’s  impact  on  firm’s  

performance  

Strategy-­‐focused  HR  

§  Comparison  of  High-­‐Low  HR  Management  Quality*    ü  Devote  considerably  more  resources  to  recrui,ng  and  selec,on  ü  Train  with  much  greater  vigor  ü  Do  a  lot  more  performance  management  and  ,e  compensa,on  to  it  ü  Use  teams  to  a  much  greater  extent  ü  Roughly  double  the  number  of  HR  profesionals  per  employee  ü  Much  less  likely  to  be  unionized      

§  “HR  Professionals  are  now  in  the  posi3on  to  become  numerator  managers   (contribu3ng   to   top-­‐line   growth)   rather   than   just  denominator  managers  (cu>ng  costs  and  reducing  overhead)”  -­‐  C.K.  Prahalad  and  Gary  Hamel  

*Becker, B. et al, “The HR Scorecard”, Harvard Business Review Press, 2001

ProposiEon  

“To  have  an  impact  on  the  firm’s  performance,  the  HR  system  has  to  be  fully  intergrated  into  the  company’s  strategy  

management  framework.  This  requires  HR  professionals  to  fully  understand  how  they  can  develop  and  enhance  the  strategic  

capabili?es  that  drive  successful  strategy  execu3on”  

Outsourcing HR Services

Definition §  A practice of having certain job function done by a external provider service instead of

having an in house department..

History  of  Outsourcing  

In  -­‐  sourcing   Off  -­‐  Shoring  

Co  -­‐  Sourcing  

Geo  -­‐  Sourcing  

OTHER DEFINITIONS of HRO

§ 19th to Early 20th Century – Industrial Revolution ü  company owners started to outsource some services, as opposed to

keeping them in house.

§ 1970’s– Outsourcing Manufacturing ü  Discovered that they could outsource the production of consumer

goods, such as clothing items, shoes, and toys.

§ 1980’s– Outsourcing Payroll Services ü  Computer companies started to outsource payroll services including

billing, accounting, and word processing.

§ Outsourcing Today ü  Call Center, BPO and Human Resource Outsourcing (HRO).

EvoluEon  of  Outsourcing  

SOURCE:  hXp://www.crediXoday.net/public/Brief_History_of_Outsourcing.cfm  

HR  Outsourcing  Trends  

Switching to Cloud Process Automation Social Media Recruiting

Top Six (6) Reasons for Outsourcing HR Functions

Reasons  to  Outsource    HR  Services  

Save money

26%

Focus on Strategy

23%

Improve Compliance

22%

Lack of In house experience

18%

Improve Accuracy

18%

Technological Advances

18% Source: Society of Human Resource Management (SHRM.org)

Most HR Functions to Outsource

Reasons  to  Outsource    HR  Services  

84%

84%

74%

73%

72%

401(K) Administration

Employee Assistance/ Counselling

Retirement Planning

Pension Administration

Temporary Staffing

72% Background Checks

57% Training/ Development Program

54%

53%

Executive/ Development Coaching

Employee Benefits Administration

49% Payroll

Source: Society of Human Resource Management (SHRM.org)

Pros  and  Cons  of  Outsourcing  HR  Services  

Cost Saving

Efficiency/Quality Improvement

Risk Management

Strategy Delivery

In-house Expertise

Morale

Loss of Human Factor

Change Company Culture

Source  :  hXp://content.wisestep.com/top-­‐pros-­‐cons-­‐outsourcing-­‐hr-­‐services/  

§  Recognizing the need §  Work before Outsource §  Choosing the Outsourcing Partner §  Service Level Agreement §  Open Communication §  Commencing the Outsourcing Arrangement §  Timely Review of On-going Services

Best  PracEces  in  Outsourcing    HR  Services    

Source: rishabhbpo.com

§  Experience ü  Time in Business – How long have they been doing business? ü  Track Record - How successful have they been with other companies? ü  Pricing - What do they charge – and how do they charge it?

§  Hiring Process ü  Interview the Company - Put them through a rigorous interview process ü  Management - Be sure that you are managing the process as its

happening

§  Expertise Offered ü  Risk Management ü  Benefits Planning ü  Recruitment

Choosing  the  Right  Partner  

SOURCE:  hRp://blog.peocompare.com/blog/bid/58980/Choosing-­‐the-­‐Right-­‐HR-­‐Outsourcing-­‐Provider  

Concluding Thoughts and Way Forward

Concluding  thoughts    

§  HR   is   essen,al   part   of   any   business,   but   when   the   HR  func,on   cannot   cope   with   the   demand,   the   business   can  suffer  

§  BPO   companies   provide   services   to   assist   companies’   HR  func,ons.   It   is   seen  as  a   cost  effec,ve  way  of  naviga,ng  an  increasingly  complex  HR  environment.  

§  Outsourcing  the  HR  func,on  must  be  viewed  as  a  stratgic  op,on  and  so  the  approaches  and  applica,ons  must  be  tailored  to  fit  perfectly.      

   

§  HR Department’s skills are best devoted to “value creating”

activities. It should have an effect on the “bottom line”

§  Process of outsourcing should not be taken lightly (A balance between cost efectiveness and level of control). The stakes are high and so are the rewards

§  The decision to outsouce and what to outsource should be largely influenced by the company’ strategy (not expedience)

§  The HR Department, therefore, should develop its own strategy and – EXECUTE IT!

Concluding  Thoughts  (2)    

Strategy Management Framework

The  Strategy  ExecuEon  Pyramid*  

CLARITY

PEOPLE

ALIGNMENT GOVERNANCE

*Jonathan Juan DC Moreno developed the Strategy Execution Pyramid with the objective of simplifying and adapting to regional (ASEAN) context leading strategy-execution systems. Intellectual debt is owed to the authors of such systems for providing the fundamental analytical base of this framework.

Clarity  

•  Estimate “plausible futures”: Scenario Planning •  Validate/reaffirm the HR Department’s “Strategy Anchors” (i.e.

company aspirations & purpose; Mission, Vision, Values) •  “Refresh”, articulate and build consensus on the HR strategy •  Framing questions to help achieve clarity:

o  What is our collective aspiration for the HR Function? o  In the context of the aspiration, what will be our distinguishing

characteristic as a department? o  How will we know if we have succeeded? o  What do we need to do to deliver on the aspiration? To succeed? o  How do we take this forward? Where should we focus our attention first?

Alignment  

•  Effective communication of HR strategy creates a significant impact on department’s performance.

•  Cascade the strategy and performance scorecards to ensure “line of sight” from the vision to action.

•  Ensure alignment between operating and support units as well as with Board and external stakeholders

•  Forge alignment between the HR strategy and HR department staff behavior by understanding performance drivers and the means of measuring them

•  Budgets, incentives, and operational plans must be linked to the HR strategy

•  Resource portfolios should be organised to ensure that adequate human and financial capital are in place to fund the HR strategy without compromising operational performance

Source: rishabhbpo.com

Governance  •  Establishing a governance system for the strategy implementation (i.e

Strategy Review Meetings, Office of Strategy Management)

•  Monitoring and Evaluating are critical tools which an organization uses to know when its strategy or elements of it are not working and when circumstances – in its internal environment and/or its external environment – have changed. They give management the information it needs to make decisions about changes that are necessary in its strategy.

•  Specifically, monitoring and evaluating - ü  identify problems and their causes; ü  suggest possible solutions to problems; ü  raise questions about assumptions and strategy; ü  challenge strategic destination and underlying strategic objectives; ü  provide information and insight; ü  encourage information-driven decision-making and act based on insight; and ü  increase the likelihood of a positive development difference.

People   •  Many organization’s source of competitive advantage lie on their intangible assets such

as research & development, customer relationships, brand image, etc., all of which are naturally harnessed by their human capital. To fully capitalize on the value that these intangible assets create, these organizations invest on having a strong human capital management system.

•  As companies experience rapid growth, it will need to have a strong Human Capital Management function that enables the efficient and effective management of the recruitment, retention and development of competent staff in its various businesses.

•  In this regard, companies should prioritize and emphasize the important role of human capital development in the organization. As such, to help facilitate and sustain effective strategy execution, companies should, as much as practicable, adopt best practices in human capital management, and incorporate them in the in its HR policies and procedures.

•  Specific emphasis should be on the following areas: ü  Compensation and benefits; ü  organizational structure and job design, ü  personnel administration and systems; ü  talent acquisition, selection and

utilization;

ü  organizational culture development; ü  employee communications and

engagement; and ü  performance management

§  First Era ü  Based on physical attributes (erect a pyramid, dig a canal, fight a war,

harvest crops, etc)

§  Second Era (20th Century) ü  Emphasized intelligence, experience, and past performance (IQ,

analytical, mathematical, logical)

§  Third Era (1970s) ü  Competency more than intelligence (specific characteristics and skills

that helped predict outstanding performance

§  Fourth Era ü  Potential to learn new skills – Volatile, complex and ambiguous

envrionment effectively makes skills and competencies insufficient.

EvoluEon  of  “Talent  Spo]ng”*  

*Fernandez-Araos, C. et al, “21st Century Talent Spotting”, Harvard Business Review, 2014

Final  Thoughts  §  Clarity: “You cannot manage something you cannot measure, but also, you cannot

manage something you cannot describe”

§  Alignment: “If you want to change the results, change the behavior; if you want to change the behavior, change the way you measure behavior.”

§  Governance: “People react to what is inspected not what is expected”

§  People: “Strategy execution is not about metrics, it is about change, its about people”

§  Make sure executives have a sense of ownership ; if they do not own the system, no one will;

§  It will never be perfectly aligned; its a continuous improvement process

§  Building an Strategy Focused Organization is a journey… It does not happen overnight; at least for Strategy Management, do not believe in miracles

§  Make sure executive meetings are not spontaneous; prioritise subjects that really matter. Be executives: execute!

Thank You

Jonathan Juan “JJ” Moreno Chief Strategy and Governance Officer

Metro Retail Stores Group Inc. jjdcmoreno@gmail.com