Ultimate Performance: Measuring Human Resources at Work

What Is the Measure of Reward for Getting It Right?

If handled well, HRO has the proven capability to deliver three transformational benefits:

1. Cost reduction. The cost benefits fall into three categories—direct costs, future investment, and the hidden costs of existing service inefficiencies.

   • HRO reduces the direct costs of HR service provision, with an organization typically saving around 20 percent of its existing cost base when it outsources HR transactional services. This level of savings builds up over the first two years of the deal and is generally guaranteed by the supplier—which will also offer the customer the option of negotiating either a flat savings profile across the life of the deal or a front-loaded profile. Greater cost savings can be gained if the organization is prepared to extend the contract to 10 years, accept a highly automated ‘vanilla’ service suite, and/or allow some off-shoring to a low-cost geography.

   • HRO removes the burden of future investment in HR systems and infrastructure. This can save a large organization tens of millions of dollars—basically the cost of creating a professional HR services platform complete with telephone call center services and case management system, HR tools for training and for recruiting, a self-service portal and an HRIS such as ‘SAP.’ The vendor will usually supply an HR platform consisting of these elements automatically under the agreement.

   • HRO reduces the hidden costs of current HR service inefficiencies. This benefit ...