Survey Points to Growing Dissatisfaction Among HRO Buyers

By Staff Report

Mar. 22, 2007

There seems to be growing dissatisfaction among HR outsourcing buyers, according to a recent survey conducted by EquaTerra.

Thirty-one percent of buyers surveyed said they are uncertain of whether they will renew their current HRO contracts. Ten percent say they plan to terminate their contracts and bring the work back in-house.

Seventeen percent plan to send out a request for proposals to find a different HRO provider to handle the current processes they are outsourcing, while only 10 percent plan to send out an RFP for an expanded HRO contract that includes processes beyond what they currently outsource.

The latest research marks the highest percentage of buyers saying they are planning terminations and the lowest percentage of buyers planning to expand the scope of their HRO contracts that EquaTerra has found in its studies, says Stan Lepeak, managing director of research.

“Usually the number of firms planning to eliminate HRO has been less than 10 percent and the number of firms expanding is usually around 40 percent,” he says.

While the sampling of the survey is small, ranging from 40 to 60 HRO buyers, depending on the question, Lepeak believes the findings are somewhat telling.

“There is some dissatisfaction among HRO buyers, but it’s not so much dissatisfaction with the concept as it is dissatisfaction with the execution of their arrangements,” he says.

In their comments, a number of survey respondents said they wanted more flexibility in their HRO arrangements. “Flexibility could apply to a number of issues,” Lepeak says. “They may want more flexibility in the pricing, or in the business model.” EquaTerra plans to do more research to figure out what buyers want and will publish a white paper in late April on the topic.

Providers need to get in front of these issues and talk to buyers proactively, Lepeak says.

Buyers are out talking to one another about these issues, and HRO providers need to address that, he says.

“They are all comparing notes about what they are experiencing,” Lepeak says. “And while that kind of cocktail hour benchmarking might have pitfalls, it’s happening, and service providers need to address it.”

Jessica Marquez

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