While we know outsourcing can offer real business benefits, new research shows there is a feeling of discontent among many businesses when it comes to outsourcing payroll, says Roger Fullilove.
We recently undertook some research which revealed the key drivers of satisfaction and dissatisfaction among UK companies that outsource their payroll. The results highlighted the five key issues that outsourcing vendors could do and manage better:
- Properly scope service requirements
- Implement stronger account management practices
- Deliver better handling of change requests
- Establish superior customer communications
- Offer continuous improvement recommendations
The insight offered to us by those companies that outsource has enabled us to develop a series of best practice steps that organisations can use to ensure their outsourcing arrangements are – and perhaps more importantly stay – on track. Whether you’re about to embark on a new outsourcing contract or are an experienced HR and payroll outsourcer, the following questions will help you create and continue a stronger, more stable and more effective relationship with your outsourcing vendor.
Have your thoroughly scoped your outsourcing requirements?
It’s important to allow plenty of time to scope the services you wish to outsource. Investing sufficient time at the start of the project will significantly reduce the chance of you needing to refine and review your requirements during contracting which also means you’re less likely to incur additional costs. Good outsourcing practice also requires that you put regular slots in your business calendar to review the scope of services with your vendor.
Whilst you need to think about your current business requirements now you should also take time to consider what you’re likely to need in the future. You won’t necessarily need to include these requirements in the current project scope but you may want to ensure your preferred supplier can deliver on these needs and expectations in the future.
Are you open with your vendor about current and anticipated business needs and priorities?
A supplier can only work with the information they’re given by their client. In light of this you should recognise the importance of keeping your outsourcing vendor up-to-date about the specific needs, priorities and issues your business is facing or anticipates. Regular update meetings, defined feedback and established communication channels will enable you to do this.
Have you communicated your expected service standards?
Clear service standards for the entire length of your outsourcing contract should be established at the scoping and contracting stage of the outsourcing relationship. Managing your and your vendors’ expectations in this way will ensure everyone knows what to expect at each stage of the contract and the key personnel who will work on the account. Performance should be benchmarked against these standards at regular review meetings.
Do you know what you want from your account manager?
Account managers are essential to the effective running of any outsourcing contract and should be easily accessible to you and key members of your team. Often account managers do need to be changed but stay on top of this change to try and make the handover process as smooth as possible. Request that your new account manager has the same expertise and experience as their predecessor and make sure you put in a regular review, following the handover to ensure knowledge transfer is successful.
How ‘on the ball’ is your outsourcing vendor?
The ‘best’ vendors will inevitably be those who are most up to date with the improvements, changes and issues in your sector and the function you are outsourcing. A strong knowledge base will enable your vendor to build continuous improvement initiatives into your programme so don’t be afraid to quiz them or ask for their professional advice and opinion with regards current or future service provision.
What level of reporting do you really need?
The second most frequently mentioned cause of dissatisfaction with outsourcing providers is poor reporting. So it is important to agree the standard and frequency of reports required from your outsourcing supplier in the design stage.
Reporting will enable you to monitor and review how well the outsourcing relationship is going and how effective the outsourcing is for your business or department – so it is important to get it right.
How do you rate your communications?
Regular update meetings between you and your vendor will help to resolve any emerging issues and ensure they’re resolved in a timely and efficient way. Alongside the regular review meetings already mentioned here, why not take some time to brief your internal team about the service level agreements and key performance indicators of the outsourcing contract so everyone is aware of and fully understands the aims and objectives of the project.
How much does your vendor really know?
Find out if your vendor conducts regular training for their people to ensure they are in a position to manage your and your employees’ enquiries in an effective and efficient manner. You can help this by keeping vendors informed about changes within your business, as well as educating and informing your own people about the services you’re outsourcing to manage their expectations when it comes to getting a response to queries.
How much will change cost you?
It’s important to appreciate and understand how change requests will impact the service you’re outsourcing, as well as the costs that may be associated with them. Doing this will enable you to recognise the benefits of exercising greater control over change request and evaluating whether they are really required.
You could ask your vendor to provide examples of changes and their costs at the contracting stage, alongside putting clear change control processes in place. Also give some consideration to building a number of small changes to the standard contract charge to help you manage any associated costs in the future.
Can you measure the impact of your outsourcing?
If you have been encouraged to identify and discuss the desired business benefits of your outsourcing project and incorporated these into the contract you will easily be able to measure the value and positive business impact of the service. To ensure this happens, though, work in partnership with your vendor to create and regularly review a series of metrics – both quantitative and qualitative – to measure, monitor and benchmark performance.
There is a real opportunity now for outsourcing providers to gain new clients and businesses to cut costs, access expertise outside their own organisation and improve efficiency though outsourcing. But it will only really add real value to businesses in terms of cost efficiencies if time is invested upfront to appoint the ‘right’ supplier and a real partnership is formed, where both parties are working to the same objectives.
Roger Fullilove is senior global product manager at HR Access Solutions. Click here to download a copy of their latest payroll outsourcing research
