Spotting Red Flags in HRO Deals

Mike Wright, senior vice president of HRO sales and marketing at Hewitt Associates, has learned a thing or two about what makes a good client. He also has learned more than he would have liked about what makes a bad one.

    As a result of some difficult years in HR outsourcing, he says he and his colleagues now have a keen eye for red flags that indicate a prospect isn’t going to work out.

    At the top of the list is making sure that the pros­pect’s management board buys into the idea of outsourcing the company’s HR processes, says Jim Konieczny, senior vice president of multiprocess HRO at Hewitt.

    Just a few years ago, it wasn’t unusual for the HR executive to start discussions with a provider without bringing in the CFO or other executives, he says.

    “Now, I will go to the board with what we are proposing,” Konieczny says. “This might not require board approval, but it’s a strategic move to make sure the buy-in is there.”

    Hewitt also is wary of prospects that have small numbers of employees scattered in different regions of the world, Wright says.

    “Large geographies with small populations never worked well,” he says. “There was no scale and leverage in that.”

    Similarly, Wright says Hewitt won’t take on a client with global locations and no willingness to standardize all of the processes.

    “We are implementing a hospital system that has 50 to 60 hospitals being done in waves,” he says, adding that Hewitt still works with decentralized clients. “But they bought in upfront to the need to standardize how these services are rolling out.”

    Specifically, the hospital system, Catholic Health Initiatives, which signed a 10-year HRO contract with Hewitt in 2006, has a person in charge of driving that standardization, he says. “If that didn’t exist, we would be concerned,” Wright says.

    Given the financial pressure that many companies are under today, Hewitt also is making sure that prospects understand the long-term nature of HRO implementations. While many companies may want a quick cost fix immediately, they need to understand that it can take time before they realize those cost savings, Wright says.

    “If an organization is trying to outsource to get a quick fix for the next two quarters, we wouldn’t look at this,” Wright says. “We understand why these are real needs at this time, but these are longer-term decisions.”

Workforce Management, March 16, 2009, p. 16 — Subscribe Now!