The last two decades has seen an enormous growth in business outsourcing. But what started as a tactical decision to cut costs has evolved into a broader strategic innovation designed to add value.
While cost cutting still tops the list of reasons for outsourcing, quoted by 59% of respondents according to the latest Deloitte research1, it’s closely followed by freeing time to focus on core business (57%), and solving capacity issues (47%) as key reasons for outsourcing.
Other reasons such as better service quality and access to intellectual capital also stood out.
As the reasons for outsourcing back-office functions such as HR have evolved, so have the ways they are delivered and, more importantly, the relationships that underpin their success.
These days a successful outsourcing relationship is a strategic partnership founded on trust, with shared responsibility for both risks and rewards.
But great relationships don’t just happen, they need to be created and nurtured, and there are a few golden rules for a successful strategic partnership that are a feature of every great outsourcing relationship.
According to the Deloitte research, almost half of the organisations surveyed complained that providers were reactive rather than proactive, and more than a third didn’t feel they were given enough information.
Sharing information builds trust, and both depend on regular communication. Without it, decisions take too long, mistakes are made, and there’s a risk that priorities don’t line up.
It’s easy to rely on emails and phone calls to check in, but it’s important not to skip face-to-face time. It allows for a more detailed exchange of information, and the chance to stumble on new ideas and solutions. Regular formal and informal catch ups drive the conversation and make sure both partners are working to the same goal.
The Harvard Business Review talks about generating ‘Creative Capital’, which they define as a product of interaction, so look for an outsourced HR partner who spends time at your office, and becomes part of the team. Just being there means they add value, helping solve urgent issues as they arise, as well as joining in any impromptu brainstorming sessions.
Time spent establishing a clear framework for service delivery and transitioning that service is critical to making sure the expectations of an outsourced partnership are met on both sides. Over a third of the Deloitte survey respondents agreed the need to spend more time in service transition was a key learning from their experience.
Documented service agreements are crucial for effective strategic partnerships. But it’s important to be flexible and let innovation flourish since that promotes a better quality of service, and the chance to discover new capabilities.
Make room for one-off requests, on both sides, and for the expansion in the scope of the original agreement. Revisit the relationship regularly to make sure the needs of the business are always being served.
At the same time avoid the temptation to micro-manage the relationship. Set expectations up front and then step back and let trust develop through experience and execution. Acknowledge that you are working together, not in opposition.
As the drive to outsource is determined more and more by the need for specialist skills and strategic support, so the type of services that are being outsourced needs to evolve.
Outsourcing is a way of accessing talent and experience that promotes best practice, so make the most of the partnership by outsourcing strategic elements of your service and not just stand alone projects.
Pick partners you trust to share your vision. They will be more efficient at serving day-to-day needs if they can see and contribute to the bigger picture.
Our HR Team works in partnership with clients. We become part of the fabric of your organisation by joining it. We get to know your business by sitting alongside your team, chatting with them and finding out what motivates them.
This approach helps us turn our best practice expertise into practical solutions that fit your business and your team. We offer innovative solutions that align with your strategic vision and suit your budget.
Working alongside your team gives Our HR Team insight into how they think and feel, and we turn that into a proactive approach that supports both your strategic and your day-to-day operational HR goals.
Early case study research2 into outsourced relationships based on trust identified a ‘trust dividend’, which they quantified as a 20 to 40 percent improvement in service, quality, and cost compared to traditional power-based relationships.
So creating a strategic partnership founded on trust isn’t just best practice, it has a tangible benefit to your bottom line.
Call Our HR Team today for an informal chat about how we can help you deliver a better HR service at a lower cost.