Honeymoon Is Over for Some HRO Buyers

The honeymoon is over for many companies that have signed human resources outsourcing contracts recently.

    A Towers Perrin study finds that although 92 percent of companies were very satisfied with their HRO providers upon signing the deals, only 56 percent still felt that way after one year and only 45 percent did after two.

    “What’s happening is that companies are seeing the cost savings they were promised within the first three years, but they aren’t seeing an improvement in service levels,” says David Rhodes, a principal at Towers Perrin.

    Sixty-four percent of client companies, however, say that they are currently satisfied with their HRO providers. But Rhodes warns that vendors shouldn’t jump for joy quite yet.

    “This is largely due to the fact that many buyers come to a point where they give their vendors some type of ultimatum if they don’t improve the level of service,” he says.

    Companies say that the biggest challenges they face when working with HRO providers is reshaping the behavior and managing the expectations of their managers and employees.

    Reshaping the human resource generalist role is also a challenge that companies say they are struggling with, the study reports.

    To address this, many companies are updating their competency development process and selecting and training people accordingly.

    “That means saying goodbye to some people,” Rhodes says. “Selectively replacing people is not a bad thing.”

Workforce Management, January 30, 2006, p. 16 — Subscribe Now!