What’s HR’s biggest challenge today?

SSON News and Analysis
Posted: 07/09/2012

Interview with Paul Hutchison, Vice President Global Delivery Operations, NorthgateArinso


SSON: Paul, what do you think is the greatest challenge to an HR leader today?

PH: I think it is really a combination of things. The business proposition that the HR community buys into is that, as they plan to outsource more, they become greater business partners and greater influencers in the business. So they see a need to shed some of the day-to-day HR transactional responsibilities, and the upkeep of policies and procedures to really refocus themselves on the business at hand.

I’ll use an example. Take a very large retailer. They want their HR people to help them hire and retain better employees; and they want to be able to drive the cost of maintaining a high quality employee down; and they want to look at ways to shift the culture of the business to better service their own customers. But if you’re busy trying to figure out how to get a pay cheque out the door, or how to get someone’s compensation adjusted in the system, or how to get an SAP or PeopleSoft upgrade through the testing mode so that it can get into the system … you don’t have time to do that work. So what happens is they buy into this model that says, "We’re going to do the higher-end work; we’re going to take a reduction in our overall cost, because we’ll be able to leverage this third-party scale that we don’t have; and then we’ll be able to focus on these other items."

So this is where I think the greatest challenge lies for our customers, because the noise sometimes doesn’t go away for them just because you outsource. The nature of this business is that there are an awful lot of exceptions to be handled, so a good partner helps get rid of that noise, but it requires a lot of work to move that down the path.

The second piece of the answer is: How do you really transform your organisation and how do you manage that change? In other words: How do you manage the change that says, "Now my third party handles these day-to-day activities, and you as a customer need to go through self-service, or through the shared service centre, for this. Your contact is no longer HR person down the hall."

So if I had to put it into one sentence, I think change management is the biggest challenge our clients face today. It’s across a couple of different facets, but it’s all about, "How do you really transform how you’re viewed by the business? How do you engage the business? And how do you transform your employee population to become more comfortable with a self-service and a shared services model?" That’s probably the biggest challenge.

SSON: What about data? Many of the HR leaders I speak with mention "data" as a key challenge. Pulling disparate systems together, wanting to get onto one standardised platform. Surely in terms of time and talent management, that would be one of the crucial desirables for an in house HR manager? Would you agree, and how is NGA helping to fill this gap?

PH: That’s a great point. So I think for you to be effective at this change management and to be a good business partner, you need to have a lot of data at your fingertips and you need to be able to show or leverage that data in a consistent and reasonable way. So the promise of data analytics and knowledge analytics, if you will, has been a long time coming for the HR community. Think about marketing businesses and sales teams, for a moment. They’ve had all of this for a while. HR is the last place where investments occur, and they do need it! I think where NGA comes into play is that we’ve got a suite of tools that allow them to, firstly, consolidate all their employee data and all of the relevant information that they want to do analytics on into one system; and secondly, we can help them standardise their processes so that the relevance of that data is consistent from location to location — so you’re comparing apples to apples, if you will, and I think that’s something that we’re very strong at bringing to the table. I think what differentiates us from a lot of our competition in our ability to do that is how well we understand the local markets that are part of our customers’ bigger global footprints. A lot of people provide global services and a lot of people drive this data into one system. Everyone makes that promise. I think the big difference is that NGA has really developed a lot of capability at a local market level. And that really comes out when you start doing the analytics – tell me why this is different for Italy than it is for France? Or than it is for the US? A lot of people can look at the data. Very few can bring the level of expertise around the recruiting market place, the benefits market place, and the compensation market place in the local areas that we can.

SSON: Which specific tools are you referencing right now? I know you’ve got a whole suite of products, but can you give more details?

PH: Well, I think if you look at our Agora offering, which we’ve recently announced, this really pulls together our local knowledge and capability into our broader offering for companies that have a bunch of small locations around the world. Internally, we call it a Tier 2 platform. Tier 2 is really the wrong terminology, though. It’s our small country, small payroll and HR solution. So for smaller populations, that link into euHReka and the euHReka workspace, the self service tools allow a global enterprise to service not only its very large populations — populations of 10,000, 20,000, or 30,000 people — but also to get at the data that’s sitting in countries with only 10, 15, or 20 employees, so that you get a full picture. So from a product perspective, there’s euHReka; agoHRa … in the UK there is Resourcelink; in Asia there is Preceda … and it’s all under a common technology integration layer, which allows a company to see into this data, and access a consolidated version.

SSON: There’s a lot of talk about the disappointments that come with outsourcing, or with technology implementations generally. So what can clients do for themselves, to really make the best out of a new implementation or an outsourcing partnership? What things should they be setting in motion to really make sure they get the results they’re hoping to get? And conversely, what are some of the mistakes that you see time and again, that are costly?

PH: Great question. Here’s the thing … the reason clients opt to outsource is because they want to take cost out of the operation and they want to facilitate change. The clients that succeed and that have the best results are those that really embrace this change. We have a client right now, for example, who has really embraced this concept — namely, that they’re going to transform their company. Their HR group has absolutely embraced the need to standardise processes and to say, "Look, we’re going to offer a capability out of HR that is consistent, but there is a cost — we need to change what you’re used to." At the end of the day, the companies that fully embrace change seem to achieve the greatest successes.

On the opposite end of the spectrum, you have those who want to leave their processes the same, who don’t want to standardise. They won’t adopt best practices and they say, "Look, this is just the way it’s always been. You have to do it this way." It’s really a process of moving something that, over the years, has been developed — not intentionally of course — inefficiently. In this case, success or failure is based on what I call the "hero model" of working. If they have somebody with 20 years of experience, who really has everything up in their head and knows all the idiosyncrasies, then they’re pretty successful; but when they lose that person, they have a tendency to start failing. So what we try to do is help companies drive to a standard and drive to a process that is less dependent on this "hero model" and more dependent on process and standardisation — really leveraging the tools so that they can make the change.

When companies really embrace that and pursue it in partnership with us, you see success even beyond what’s initially expected. But when companies fight that, or they don’t have the wherewithal to drive that through their organisation, that’s when you start seeing things pop up and become negative. And what often happens is that they actually become driven by noise instead of by data; and so a small issue becomes a big one — and it would never have been an issue before, but it’s an issue now because it’s "different" in that it is being serviced by somebody else. The customer is annoyed that they are being expected to do things themselves. So, you take a single point of error, and instead of figuring out how to recover from that error, they focus on the fact that the error is caused because of this change; but in fact, it’s not. And so they become noise-driven versus data-driven. And because they don’t embrace change, the opportunity to root these things out becomes difficult, so it’s this self-fulfilling prophecy that you move a "mess" for "less."

Well, that is fool’s play. You don’t get anywhere with that. You really do have to transform your organisation and you have to be committed to it, otherwise you don’t really yield the value.

SSON: As you move towards standardisation, which is the way you are encouraging clients to go, what about "agility"? Clients today need to scale up or down according to external market factors. Do you not think, Paul, that this move towards standardisation lessens an organisation’s ability to be agile?

PH: I actually think just the opposite. If a company partners with an outsourcer, for example, who helps them discover best practices that work, and those best practices are shared across multiple clients — then these processes, in essence, become affordable; because, let’s face it, best practices are expensive to implement on your own. Generally, companies just don’t have the scale to do it in HR. They can do it in their core business, of course. So, for example, if they’re a retailer, they can figure out, "What are the retail best practices"? And they can do that because it’s their core business and they have scale in it. If they’re a manufacturer, there are best practices, there are quality programmes… things that you can implement. Let’s take CMMI, for example, which we have embraced pretty fully. A company could almost never afford to do CMMI on their HR processes. They just don’t have the scale to do it. A lot of people look at CMMI and say, hey, that’s a cost take out opportunity. Well, it is if you’re a manufacturing company, but if you’re an HR organisation, it takes more people to implement it than you get from savings, and so most companies never embrace it.

What happens with us, because we have scale, is that a client company can embrace the standardisation and the best practices we have developed, and can take advantage of all the other things that we’re putting into play … and so they become extremely agile. If there is a divestiture, for example, the change is instantaneous, because NGA will absorb that. If there is an acquisition, the ability to absorb an additional 10,000 people across 11 countries is equally instantaneous. You don’t have to go out and hire a bunch of people to do that, because the processes allow you flexibility with your resources. On top of that, we are able to apply Six Sigma programmes, CMMI programmes, audit, and controls around standards that a company would never be able to afford on their own, for their HR organisation. Again: They can apply these kinds of measures to their core business, but they’d never be able to afford to apply it internally. However, because this internal function is our core business, meaning NGA, we can afford to do this. Because of our scale, we can put all these things in place that actually make us agile.

SSON: So, NGA positions itself as an innovator in platform based BPO. I’ve heard about HR 3.0 on demand, or Hybrid HR. How can a company optimise the HR delivery model, using an outsourcer? In other words, what are the options?

PH: Well, that’s a great line of thought. Here’s the thing… what we’re doing is not necessarily magic. A company that had the ability to invest in it, could do it itself. The problem is, it’s quite expensive. It takes a fairly substantial investment, and a recurring, ongoing investment to maintain it. So what we do is we try to build this "on demand" model for customers, to allow them to embrace our products and embrace our capabilities, without having to make a substantial technology investment, and without having to upscale the organisation every time a change comes down the pipe. Our innovation is really the investment we’ve made in our products and the investment we’ve made in our "on demand" processes, which give a company easy access to that kind of leverage.

It’s innovation in that we’re investing in, and driving, those things that make it more efficient for client companies to use. Much like www.salesforce.com, which has taken a fairly difficult function and made it available through the SaaS model, for managing sales contacts — we’re doing the same thing for HR. We’re basically saying, "we have an "on demand" model that gives customers access to our software, but we’ve taken it one step further; so all of our processes in the operation that can’t be automated today, we provide via an "on demand" model. So when I think about HR 3.0, it is really about taking all of the innovations that we’ve come up with in this industry space, and the vision and direction that’s coming down the pipeline on how to really transform organisations, and make them available in an instant.

It’s like when you walk into a room and you flip the switch on the wall — your expectation is that the lights come on. Well, we’re doing that for HR! So you can walk into recruiting and you can "turn on" recruiting. You can "turn on" best practices and transform the way you do benefits. That’s really the innovation that we’re driving. It’s the promise of the SaaS model. Other people are looking at it as a cloud delivery mechanism, but we’ve taken it beyond software and we’ve applied it for services.

SSON: And is this an ongoing process?

PH: Well, it’s going to be ongoing, right? For the core parts of our business, it’s there. In fact, smaller clients can sometimes embrace standardisation much more quickly than a big client can, and so those clients literally have the ability to "turn it on" in a week. For bigger companies, it’s a month, two months, three months, and then for really, really large companies, you have to do a lot of standardisation work. It’s harder to turn an aircraft carrier around than it is to turn a rowboat around, but at the end of the day, that same concept applies. As you move forward, you’ve got to apply that to the whole fleet, and so the innovation is going to come as you take some of these processes outside of core HR administration and payroll and start applying the same methods and capabilities to them. So, if you look at our product road map and where we are today, you’ll see that we have a journey ahead of us that… it’s like that painting where the road disappears off on to the horizon. That’s where we see ourselves. We don’t see a limit to the innovation that we can come up with. We are on the road.

SSON: Paul, considering NGA has a consulting, a technology and an outsourcing division, how do you leverage all three areas to benefit clients?

PH: I think the balance of delivery does a couple of things for our clients. Number one is the fact that we have a product, which means that we have an ability to deliver something right out of our suite of tools, and so we don’t have to go and piece something together from other people’s offerings and worry about a different way to configure it every time. We’ve got a standard process that allows somebody to very quickly take advantage of best practices, and it’s configurable, so you don’t get locked into one way of doing things. The outsourcing piece allows you to take that next step around delivering value and say, okay, here are the things that are inside the product and that automate through your end user, but here are all the support activities that go around that, and they are not necessarily core business functions for our customers, but they are our core business function. The last piece – the consulting piece – is really how we glue this thing together. There is no question that it requires a lot of change management to move from the way you do your work today to the way you’re going to do your work tomorrow. You do part of that journey and then there’s change management that has to occur; then you take the next leg of that journey and there’s more change management that has to occur; and so, through us having people who are knowledgeable about our capabilities, but also have a business consulting mind and can help people go through the technology change, the process change, and, quite frankly, the emotional change of taking on these services … it allows us to round out the package for the client.

We’re extremely tight knit. People move in and out of consulting into the product organisation; in and out of product into operations; and vice versa on all those, and so our staff develops over the years. We’re able to offer the kind of career path, which would normally require you leaving a company to get to the next level of experience, and then maybe come back at a later time. Because we have these three business lines inside our company, we can offer tremendous variety. You can actually move laterally through the organisation and get your next phase of development, and so we can develop more senior and tenured individuals than a company could that only does one of those things.

SSON: Can you tell me about your global delivery network? As I understand it, you have 16 global service delivery centres. Can you talk to me a bit about the strength of the various locations and how you think this positions NGA for growth?

PH: First of all, if you look at our global centres, we’ve tried to build them around centres of excellence, and that includes language, knowledge of the geography that they are servicing, and the skills that they’re specifically delivering. So, for example, we have a Granada centre that is primarily an application management outsourcing centre for Europe, and what it does is it allows us to leverage people who are consolidating into a centre location, where you can build career paths, you can run training programmes for those individuals, and you can have a strong management in place to help develop them. And I’m able to consolidate them in a location where they are close to the customer base throughout Europe and they can deliver some very specific skills.

But because of the nature of our business, we need to be able to follow the sun, if you will. And so what we’ve done is for every place where we have a "core centre", we actually create a "sister centre" to that location, which allows us to move that work around the globe, because a lot of our customers are global in nature and we need to "follow the sun" with them. For example, the sister site to Granada is Hyderabad, India. Well, in India we can’t necessarily get all the European languages, but we can get the skills and capabilities, and so we operate on a common business language internally, but we link very closely to the geography and the language of our customers — so that we’re able follow the sun in our delivery capability.

We do the same thing with our HRO type capabilities, as well as our IT on demand service for our staff software. So each of our centres has a geography specialty, a set of languages specialty, and a skill specialty, and then they have a sister site that shares at least two of those things. Sometimes it’s not language, sometimes it is. It’s always process capability though. So we have a few more centres than some of our competitors, because of that philosophy. Now, if you look at our total global delivery network, beyond those basic service centres, there are a lot of other localised centres that are part of that global delivery network. We do that because we think that’s something that differentiates us.

For example, when I say, I can deliver services for Italy out of Budapest, Hungary, because that’s the centre of excellence for near-shore delivery in Europe, that’s absolutely a true statement! But I’m not dependent on resources solely there, because I’ve got operation centres and capabilities inside of Italy, and this is something a lot of our competitors don’t have. Again: we’ve done this specifically because we want to differentiate ourselves on our depth of knowledge around local capabilities, and we think that part of our delivery structure allows us to really build standards and global processes that companies can adopt and that will reduce the pain and the learning curve for each individual country. It also provides us with a mentorship programme for the centres themselves, and so I’ll use another example.

Manila is our strategic off-shore delivery centre for North America. However, I have a very, very large centre in Jacksonville, Florida, and a very, very large centre in Cincinnati, Ohio, and I don’t plan to ever remove those two organisations, because they are my centres of excellence for skills in the US. So I can do work in the Philippines for the US, and I can drive my customers to a price point they want to achieve, but I can do so without sacrificing local skills, capability and knowledge. So I’m building a delivery network that provides the best of both worlds, if you will — the experience and depth of local capability … combined with the global reach, follow the sun, and cost advantages of off-shore and near-shore centres.

That’s really our philosophy and direction. Will we continue to add big global centres? Probably not over the next couple of years. I think we’re very comfortable with the locations we’ve chosen, and those locations will continue to grow, but they won’t grow to the detriment of our local capability. Our local centres will continue to grow as well. So, as we bring new customers in, we will grow both locally and globally with those new customers.

Paul Hutchison, Vice President Global Delivery Operations, NorthgateArinso
Paul B. Hutchison III joined NorthgateArinso as Vice President Global Delivery Operations in July, 2010. In this role, Hutchison leads all delivery operations, application management, and information system management globally for NorthgateArinso.

Paul has extensive product/software development, IT and application operations, service center operations, process management, and client management experience in Business Process Outsourcing, particularly in the areas of multi-process Human Resources Outsourcing (HRO). He joins NorthgateArinso from IBM, where he held a number of roles, including, Global Delivery Leader, Americas HRO Operations Leader, and Critical Client Program Executive.

Prior to joining IBM, Paul held a number of senior executive BPO and HRO roles including Regional Vice President in ACS’s HRO business unit and SVP Development and Operations for Fidelity’s Employer Services (FESCo) business unit.

E-mail: paul.hutchison@ngahr.com

SSON News and Analysis
Posted: 07/09/2012

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