Friday, October 27, 2006

Hewitt’s Lessons Learned

From time to time companies exhibit moments of organizational maturity not often enough seen in the market. This week’s moment comes to us courtesy of Hewitt Associates’ Mike Wright, global HRO sales co-leader, during his presentation last month at the Conference Board’s 2006 Human Resource Outsourcing Conference in Chicago.

Thank you (again) to Jessica Marquez at for bringing this to our attention with her fine and timely reporting in a piece entitled Hewitt Shifts Course After Recent Missteps. I write about it today not merely as a follow up to my previous articles here and here, but rather because Mike Wright’s comments are shocking in their clarity and instructive anyone looking at the HRO business today.

The article and Wright’s comments actually provide material for me to do a multi-part series over the next two months, but come to think of it, much of what is said I’ve already written about. In any case, it’s refreshing to see a service provider to recognize these lessons that Hewitt has seemingly learned (that’s learnt for those of you across The Pond):
  • Clients need to be intimately involved in the conversion process
  • Aligning goals and expectations (managing expectations) is also crucial to success
  • Clients need to take a close at the staffing and delivery model in the Retained Organization to maximize economic benefit
  • The “lift and shift” model doesn’t work!
  • Full customization is a rat hole; think “one to many” or “flexibility in a box”
  • HRO should be more about a two-way dialogue and less about “Yes, we can do that”
  • Service providers could do well with a dose of humility every now and again
I’d like, now, to take a closer look at each of these lessons.

Client involvement
Wright acknowledges that in the past, Hewitt has had a tendency to try to plow through problems encountered in an insular way. After all, as the leader in outsourcing they could figure out the solutions, right? Now, Wright stresses the importance of involving the client in the process more, including having customers visit its service centers and offer ideas on how to address problems.
For many of us, this is not a revolutionary idea. In fact, as a standard, I recommend that clients retain legacy staff long enough into the “post-implementation shake out” to have staff at the vendor service center for at least a month after go-live just to walk the floor. They should be listening in on phone calls, recommending improvements to process, reviewing help text, performing culture training, etc. This is true client involvement that can help ensure a successful relationship from the beginning.

Aligning Goals and Expectations
As I’ve written before, managing expectations is critical to success. After all, at its root success is defined as a function of the attainment of expectations, isn’t it? It’s about more than just hitting the SLAs that have been agreed to. It’s about determining the SLAs in a collaborative way. It’s about determining roles and responsibilities. It’s about defining the future state and being nimble enough to make adjustments to it.
Unfortunately, I don’t think it’s about putting language in the contract mandating staff reductions at the client in the post implementation world as Mike Wright suggests. This draconian measure will do nothing to foster collaboration, review, trust and understanding. Perhaps more helpful would be to agree to independent post implementation review to assure that an end to end structure that is “set up for success” has been created.
No client wants or should be expected to agree to staff reductions before the new environment has been entered in to. In fact, many times it is the second or third year when the environment is stabilized and staff reductions are fully realized.

Post Implementation Staffing
To elaborate further on the prior point, one of the primary ways in which clients fail to attain the financial goals set out in outsourcing is to make the necessary changes to the internal environment after outsourcing has been implemented. Too many times staff and functions are retained which create redundancies in process, add cost and increase risk.This basic concept has been noted and highlighted in the cost findings of TCO studies I have conducted. Collaboration and clear definition of roles and responsibilities are the way to address this, not mandated staff reductions.

The “lift and shift” model doesn’t work!
From the Marquez article: “Probably the biggest lesson learned for Hewitt is that the “lift and shift” model, whereby it would just take over a buyer’s HR processes and attempt to do them cheaper, doesn’t work, Wright said.”

Ummmmmmm……I’m shocked! Really? Can this be so? You mean you can’t do it better / faster / cheaper on day one for 20% less than it costs me now? Say it ain’t so!! You mean you won’t bring me additional cost savings / scale / leverage / best practices in year two?
OK, I am showing my bias here. This has been my belief for years. Ever since I saw PwC try to implement lift and shift years ago for an unnamed Atlanta based client (some of my readers are cringing as they remember the fiasco, I’m sure). The approach is rife with inherent weaknesses and problems. Also, as we are seeing throughout the market, it also dooms the service providers to deep financial losses. So what is the answer:

One to Many Processing
For providers to make money, and clients to get the best service and best practice that is promised, it is my belief that the “one-to-many” model is an absolute must. Flexible, scalable, and leverage-able systems and process that isn’t reinvented with every client can allow for true improvement in process and does not make every system enhancement or upgrade a one-off fire drill for every client. How can a service provider claim economies of scale if every implementation is a one off, unique environment?
As I said a few weeks ago, for Hewitt to turn the corner (if they aren’t on the auction block), I believe the answer is flexibility in the Cyborg box. It is a risky venture, but one I believe can be the best answer to ADPs as yet un-challenged Enterprise-based outsourcing model.

HRO is not about “Yes, we can do that”
Of course, when we begin talking about a one-to-many model, over-customization is just not possible. Trade offs will be made, and the vendor will have to say no. The Culture of Accommodation can begin to be broken!

Service providers could do well with a dose of humility every now and again
Again, from the Marquez article: “I come to you pretty humbly this morning,” Wright told attendees, noting the troubles the company has had.

Anyone who knows Hewitt realizes that this could not have been easy for Mike. In fact, it would not have been easy for representatives of most service organizations. I can only imagine that the commitment to speak at the conference was made before the very public “challenges” Hewitt has recently faced.

Humbled is one way to think of it. In her subtitle, Marquez says “older and wiser.” I actually like that. But whatever you call it, if Mike’s comments and position are shared by others in the organization, we will see Hewitt attain the next level of what I like to call organizational maturity. If so, let the competition beware!

About the authorDonald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

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