Second Edition
OUTSOURCING
HUMAN
RESOURCES
FUNCTIONS
HOW, WHY, WHEN, AND WHEN NOT TO
CONTRACT FOR HR SERVICES
MARY F. COOK and SCOTT B. GILDNER
Society for Human Resource Management Alexandria, VirginiaUSA
Contents
Preface Acknowledgments Introduction IX XI XIIIPART I Identifying Critical Outsourcing Issues, Making the Decision, and Establishing a Plan
Chapter 1 What Is HR Outsourcing?
Why Outsource? - 3 Advantages and Disadvantages of HR Outsourcing 7 Alternatives for Outsourcing 8 What HR Functions Should or Should Not
Be Outsourced? 10 The Outsourcing Life Cycle 13
Chapter 2 Making an Outsourcing Decision
Understanding the Nature of the Decision 15 Visioning 16 Defining the Scope of Services for Consideration 17 Calculating Baseline Costs 18 Identifying Strategic Alternatives 21 Modeling the Alternatives . 23 Considering Nonfinancial Justifications for Outsourcing 25 Building Your Presentation to Management 26 Managing Expectations 27
Chapter 3 Establishing an Outsourcing Plan
Setting Organizational Goals and Reaching Consensus 29 Establishing a Timeline 30 Selecting the Vendor 32 Negotiating a Good Contract 36 Communicating the Decision 37 Building a Rollout Schedule 37 Managing the Ongoing Relationship 38
PART II Defining Your Requirements, Selecting a Provider, and
Communicating the Decision
Chapter 4 Defining Your Requirements
The Service Delivery Model
Performance Penalties and Incentives Service Level Agreement Framework Sample Service Level Agreement
Chapter 5 Identifying and Prequalifying Vendors
Identifying Types of Outsourcing Vendors Probing Vendor Solutions
Identifying Potential Providers
Researching Providers on the Internet Prequalifying Potential Providers Using a Request for Information
Chapter 6 Preparing and Analyzing a Request for Proposals
Establishing Your Selection Criteria Handling Fees in the Selection Criteria Structuring the Request for Proposals
Integrating Your Vendor Selection and Contracting Processes Probing for Vendor Capabilities
Requesting Fee Proposals
Satisfying Internal Sourcing Requirements Distributing the Request for Proposals
Supporting the Vendors as They Develop Their Reponses Using Technology to Simplify the Process
Chapter 7 Analyzing the Request for Proposals, Selecting Finalists, and Making a Decision
Summarizing and Analyzing the Vendor Proposals Analyzing Fee Proposals
Selecting Finalists
Refining Your Selection Criteria Performing Due Diligence
Identifying Your Preferred Provider
Negotiating the Best Deal for Your Organization
Chapter 8 Communicating the Decision
Taking a Strategic Approach to Outsourcing Communications 77 Communicating the Positives and the Negatives 78 Using a "Five Ws" Approach to Communications 80 Identifying the Methods of Communication 80 Considering Three Communications Scenario 81 Planning for Communications 82
PART III Outsourcing Specific Functions and Processes Chapter 9 Outsourcing Workforce Administration
Definition of Workforce Administration 88 Prevalence of Outsourcing 88 Marketplace Alternatives 88 The Right Strategy for Your Organization 90 Key Considerations 90 Services to Outsource in Conjunction with
Workforce Administration 92 The Future of Human Resource Information Systems 92
Chapter 10 Outsourcing Benefits Administration
Definition of Benefits Administration 96
; Prevalence of Outsourcing 97
Marketplace Alternatives 97 The Right Strategy for Your Organization 98 Key Considerations 99 - Services to Outsource in Conjunction with
Benefits Administration 99 The Future of Outsourced Benefits Administration 101
Chapter 11 Outsourcing Payroll Administration
Definition of Payroll Administration 104 Prevalence of Payroll Outsourcing 104 Marketplace Alternatives 105
i The Right Strategy for Your Organization 106
Key Considerations , 107 ;-. Services to Outsource in Conjunction with
Payroll Administration 107 The Future of Outsourced Payroll Administration 108
Chapter 12 Outsourcing Recruiting and Staffing
Prevalence of Outsourcing ' 112 Marketplace Alternatives 112 The Right Strategy for Your Organization 113 Key Considerations 115 Services to Outsource in Conjunction with Recruiting and
Staffing Administration 115 The Future of Outsourced Recruiting and Staffing
Administration 115
Chapter 13 Outsourcing Compensation Administration
Prevalence of Outsourcing 118 Marketplace Alternatives 118 The Right Strategy for Your Organization 119 Key Considerations 120 Services to Outsource in Conjunction with Compensation
Administration 120 The Future of Outsourced Compensation Administration 121
Chapter 14 Outsourcing Talent Development Administration
Definition of Talent Development 124 Prevalence of Outsourcing 124 Marketplace Alternatives 125 The Right Strategy for Your Organization 126 Key Considerations 126 Services to Outsource in Conjunction with Talent Development 127 The Future of Outsourced Talent Development Administration 128
Chapter 15 Outsourcing Subprocesses
Candidates for Outsourcing 130 Strategic Considerations 131 Domestic Relocation or Global Mobility 131 Expatriate Administration 132 COBRA Administration 133 Flexible Spending Account Administration 134 Pension Payroll Administration 135 The Future of Subprocess Outsourcing 136
PART IV Managing Human Resources Outsourcing Chapter 16 Managing the Outsourcing Relationship
Defining Success 139 Avoiding Common Mistakes 141 Establishing a Measurement Framework 143 Identifying Appropriate Metrics 145 Designing Performance Reports 147
Chapter 17 Writing an Administrative Services Agreement
Deciding Which Form to Use 149 Organizing Attachments 150 Examining the Overview of Common Agreement Provisions 150 Negotiating Process and Strategy 153 Designing Termination for'Convenience, Expiration,
and Renewal Considerations 155
Chapter 18 Managing a Proactive Governance Function
Establishing a Governance Structure 157 Establishing the Role of the Steering Committee 158 Building a Vendor Management Team 160 Monitoring Vendor Performance 162 Managing Change Order Activity 164 Benchmarking Services and Fees 167 Reviewing and Renewing Providers 168
Chapter 19 Resolving Disputes and Terminating Vendor Contracts
Handling Escalated Case Management 171 Fixing Problems 172 Using the Seven Steps Model 173 Terminating an Outsourcing Contract , 1 7 4 Bringing Services Back in House 176
PART V Considering Global Issues
i
Chapter 20 Incorporating Global Requirements
Understanding Legislative Challenges
Looking at Variations by Geographic Regions Knowing Vendor Capabilities
Developing a Global Delivery Strategy Seeing What Lies Ahead
Chapter 21 Offshoring and Near-Shoring
Labor Arbitrage Other Factors
Offshoring in Human Resources Future of OfFshoring
Effect of Outsourcing on Vendor Management
PART VI Hiring an Outsourcing Consultant and Monitoring
Services and Trends
Chapter 22 Hiring a Consultant
Learning Why and When You May Need Help Finding Outsourcing Consultants
Hiring the Right Consultant for Your Needs Examining a Sample Consulting Contract
Chapter 23 Seeing Trends and the Future of Outsourcing
Learning What Lies Ahead Anticipating Trends
Appendix: Abbreviations and Acronyms Index
About the Authors
CD-ROM Contents 182 183 185 186 188 192 192 194 194 196 203 204 208 210 211 212 215 221 231
Abbreviations and Acronyms Used in HR Outsourcing Glossary of Human Resource and Outsourcing Terms Sample Request for Information (RIF)
Sample Overview to a Request for Proposals (RFP) Sample Administrative Services Agreement
Sample Consulting Services Agreement
