Human resource metrics involve matters of human capital development. Outsourcing typically does not include significant obligations relating to human resources. Rather, outsourcing enables the enterprise customer to avoid having to develop or maintain human resources to perform the in-scope services, except for backup, control, audit and management purposes. Accordingly, human resource metrics are rather skimpy, but nonetheless important.
Contract Provisions
At a minimum, most well-drafted outsourcing agreements include:
- some assurance that the processes managed by the service provider can later be transferred to the enterprise customer or its successor outsourcing service provider under limited conditions of use;
- special provisions for the transitioning to the service provider’s payroll of in-scope employees of the enterprise customer; and
- an obligation by the service provider to comply with applicable laws and rules relating to the employment relationship with its own employees.
Training
Training issues become significant where the services are not generic or where the enterprise customer fails to retain internal resources competent to perform the outsourced services.
Chief Human Resources Officer
Of all senior managers, the CHRO must understand and manage the challenges of a full 360-degree time horizon of past, present and future employees. The CHRO helps mold the enterprise’s future core competencies, its human capital, as well as deciding on what skills, tasks, functions and processes could be left to suppliers. As technology catches up, CHRO’s can elect to return their HR functions in house or outsource selectively. HR outsourcing can let the CHRO focus on these strategic requirements and delegate tactical initiatives.
When an outsourcing decision has been made, the CHRO is responsible for keeping the operations flowing despite attrition or non-performance. HR is a “people business.” The CHRO must follow the following normal good practices:
- Manage the planning and implementation of all human resource functions,
- Treating employees in a non-discriminatory fashion,
- Communicating clearly with employees once a decision has been made to evaluate or enter into an outsourcing opportunity,
- Understand and manage the impact of the proposed changes on each employee individually, and
- Acting quickly in response to any threats to ongoing continuity of business operations.
Properly managed outsourcing processes and drafted outsourcing contracts can address each of these concerns.
Employee Relations
Once upon a time, concealing the possibility of an outsourcing was a parlor sport for consultants and managers of enterprises that contemplated possible outsourcing. Today, executives and managers have communicated the possibility of outsourcing to employees by establishing internal departments skilled in supply chain management and business process management. Having experienced outsourcing already, or having seen outsourcing in competitors or other industries, employees know that outsourcing is here to stay. Even union negotiations for automobile makers allow some flexibility in outsourcing of certain parts and subassemblies.
Modern industrial relations involve the creation of a new framework of process management, owing principally to the excesses that inspired the Sarbanes-Oxley Act of 2002. Accountability and transparency of business functions, as well as more measurement, audit and control of individual and departmental functions, opens the door for considering process improvements at every desk and every job function.
Employee relations for service recipients now include threats and opportunities. Executives of leading global companies have taken up the mantle of change, warning all employees that their jobs are at risk of moving globally, entreating them to maintain high levels of efficiency, productivity and quality to preserve their jobs and the competitiveness of the enterprise globally.
What legal obligations do enterprise customers owe to their employees to avoid violating laws or rules on outsourcing? In some countries, it suffices merely to provide 60 days’ prior warning of an outsourcing-induced plant closing. In other countries, the warnings are not required, but the workers retain rights to emoluments and other privileges of employment acquired from one employer when they are transferred to an outsourcer.
As a result of this new fluidity in job mobility, planning for human capital management becomes a more difficult endeavor.