Professional Documents
Culture Documents
OUTSOURCING
Master Thesis
First reader: Herr Prof. Dr. Karlheinz SCHWUCHOW – HBSIB – Bremen, Germany
Second reader: Herr Prof. Dr. Werner VOIGT – UPAEP – Puebla, Mexico
First of all, if only one person could be warmly thanked for this particularly
enriching experience, it would definitely be Dominique Calmant, Director of
Human Resources Services and Staffing IBM EMEA, for having supervised this
master thesis, for the time she has spent with us, and for the confidence she
placed in our work. We hope we have fully satisfied her high expectations,
since that has clearly been our main goal throughout this project.
A CK N O W LE DG MEN TS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
G EN E RA L TAB L E OF CO N T ENT S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
F O RE WO RD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IN TR OD UCT I ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1 .2 . Ou t sou r c in g Si t ua t io n s A nd A pp r oac he s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4
1 .3 . Ou t sou r c in g T ren d s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9
2 . 3 . H um an R e so u rce s I s s ue s O f T he Mul t i na ti o na l C om pa ny I n
E u ro pe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0
3 .1 . H um an R e so u rce s O u t so u rc i ng De fi ni t io n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8
P A R T I I . S TR A TE GI C A P P R OA CH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0
4 .1 . On go in g C om pet i t io n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1
4 .2 . B o rd erl e s s O r gan i za t io n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3
4 .3 . K now le d ge w o rke r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3
5 .2 . S co pe Exp a n si on s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9
5 .3 . Ex p ansi o n s Ex p la n a ti on s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9
5 .4 . I s s ue s Fo r T he Ou t s ou r ci n g Co mp a ny . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2
5 .5 . H um an R e so u rce s N ew Ob j ec t ive s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3
6 .1 . Ou t sou r c in g Dec i s io n Th eo r y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7
6 .2 . Wh a t S ho u ld Be O u t so u rc ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3
6 .3 . A dv an t a ge s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5
6 .4 . D r aw ba ck s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6
P A R T I I I . I M P LE ME N TA TI ON . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7 .1 . P ro j ect Te am . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9
7 .2 . P ro j ect D ef in it ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7 .3 . I n te rna l I s s ue s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1
7 .4 . Ex te r na l I s s ue s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3
7 .5 . Fa ct o rs de te r mi ni n g t he s uc ce s s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 0
7 .6 . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 1
8 .1 . Ou t sou r c in g L ega l A c to r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 2
8 .2 . Le g al F r a mewo rk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 3
8 .3 . Ou t sou r c in g Con t r ac t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1
8 .4 . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 0
9 .2 . R eq u i re d Sk il l s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3
9 .3 . Ot he r S ol u ti on s To K ee p Con t r ol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 4
9 .4 . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 5
C H A P T E R 10. H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D C U S T O M E R S . . . . . . . 1 2 9
1 0 . 1 . Com p an ie s T h a t H av e O u t so u rc e d T h e i r T r a n s ac t io n al
A c t iv i ti e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 9
1 0 . 2 . A Co m p a ny Th a t H a s O u t so u rc e d S o m e O f I t s H um an
R e so u rce s P r oce s s e s: K e ll og g Fo od s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 6
C H A P T E R 11. H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D P R O V I D E R S . . . . . . . . 1 4 2
C H A P T E R 12. IBM (I N T E R N A T I O N A L B U S I N E S S M A C H I N E S ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 8
1 2 .1 . Comp a ny Ov e rv iew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 8
1 2 .2 . Ma j or O ut s ou r ci n g P r ovi de r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 0
1 2 .3 . Comp e ti t ive Hu m an Re so u rc e s O rg a n iz at io n . . . . . . . . . . . . . . . . . . . . . . . 1 5 2
1 2 .5 . Co nc l u si on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 5
C ON C LU SIO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 7
A FT ER WO RD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 8
R EF EREN CES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 9
T A B LE O F IL L U ST RAT IO N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 1
At the time Dominique Calmant agreed to supervise our work, our shared
idea was to explore the outsourcing concept, as far as Human Resources
activities are concerned. It quickly turned out that a conceptual approach
alone was not enough as such a practice was already clearly in the pipelines of
several multinational companies. Of course, concepts are always welcomed to
provide a better understanding of a trend or a practice, but the empirical
method is what finally differentiates between a strategy that is merely feasible
and one that can actually produce an efficient competitive advantage. As the
Vice President and Business Transformation Executive IBM Systems Group, Jamie
Hewitt, summed up: “What looks good on paper doesn’t necessarily work in the
real world.”1
Moreover, and on the other hand, the Human Resources field is all the
more concerned by the unpleasant connotation of the outsourcing strategy,
since it is precisely the people who feel victimized by this approach who
1 Reengineering the Corporation, Michael Hammer and James Champy, Harper Business 2001, p 201
Human Resources, because we found quite fascinating the fact that still
too many managers have at the same time a hard time defining the real
essence of the Human Resources department of their own company and
nevertheless blindly support the fact that Human Resources management is
absolutely necessary to their success.
We chose to start, in the first part, with taking stock of the situation, as far
as the outsourcing phenomenon and the Human Resources department
practices are concerned, to finally come to an overview of the Human
Resources activities outsourcing industry.
After extensively laying out the needed scope and definitions of our thesis,
we step back a little, in order to understand the underlying stakes of a Human
Resources outsourcing strategy. We then begin with key points of the business
environment that lead to such an approach, following with the
9
Next to fill in the theory with more pragmatic details, the third part present
the different practical key issues resulting from the implementation of such a
Human Resources outsourcing strategy; that is to say, we describe and analyze
the different steps involved in putting into practice such a solution, highlighting
the specificities of the European environment.
Finally, the fourth and last part supports our analysis with several topical
case studies, first of all describing Human Resources outsourcing strategies of
some multinational companies around the world, and then sharing experiences
of some of the first providers of such a service. In the end, our focus is on the
IBM Europe case, a case that we have been given the chance to follow quite
closely since July 2001.
10
In this first part of the work, our aim is to encompass the substance of the
thesis. It is important to define precisely what is understood by the terms we use.
Moreover, we would like to offer here a useful picture of the phenomenon
taking stock of the situation, as far as the outsourcing and Human Resources
department practices are concerned; in order, in the end, to provide an
overview of the Human Resources outsourcing industry.
11
We will take some time here to figure out what exactly hides behind
“outsourcing”, its definition and objectives, its situations and approaches, and
finally its trends.
12
Therefore, if only the quality improves, at least the net result for the
company has to improve as well; and if only the costs are reduced, the savings
are direct, but one should watch out for possible future harmful consequences.
One would obviously try to combine quality improvement with cost reduction,
but most of the time outsourcing requires balancing the pros and the cons of a
certain level of quality for a certain level of cost, and ideally finding the
optimum point.
2 Reengineering the Corporation, Michael Hammer and James Champy, Harper Business, 2001, p 35
13
By crossing these two criteria, one obtains a typology of the four main
possible outsourcing situations:
1 Inspired from the article “Strategic intent for IT outsourcing”, Anthony DiRomualdo and Vijay
Gurbaxani, Sloan Management Review, Summer 1998, Volume 97, Number 4, pp 67-80
14
a) Traditional outsourcing
15
d) Strategic outsourcing
The last main outsourcing situation occurs when the regular activity is
also close to the core business and when it is already outsourced, since a
provider-partner is offering an expected quality of services. The question of how
to renegotiate the partnership conditions is then asked.
1 “L’externalisation maîtrisée des systèmes d’information”, Leslie Willcocks, L’Art de l’entreprise globale,
Village Mondial, 1999
16
1 “India warns U.S. over outsourcing”, Habib Beary, BBC News Online, 12th June 2003
2 “Protectionism hits the outsourcing industry”, Gillian Law, John Blau, Per Sayer and Marc Ferranti, Info
World, 15th April 2003
17
i/ Selective BPO
With this solution, companies can focus their financial resources on the
most important parts of the targeted department; they can also keep their
strategic components internal to the company, and according to practical
experience so far, this solution seems to be the most successful.
c) Total outsourcing
Finally, total outsourcing, which is still rare, consists in outsourcing the entire
department, from the bottom line all the way to the management. The
objectives given to the provider are crucial to the overall strategic results. In this
case, the provider is considered more as a real partner than as a simple service
seller.
1 “The Value of Selective IT Outsourcing”, Mary C. Lacity, Leslie P. Willcocks and David F. Feeny, Sloan
Management Review, Volume 37, Number 3, Spring 1996, pp 13-25
18
• Underperformance;
• Dependency;
In the end, according to the last report from The Conference Board1, nine
out of ten companies surveyed said they would outsource again if given the
choice, but many said they would do things differently. Notably, companies
would do more to prepare employees for the change, particularly the greater
responsibility placed on workers to manage their benefits. The report
emphasizes the fact that outsourcing is becoming a critical competency for
most large companies. “HR departments are not yet good at this”, says David
Dell.
1 HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002
19
On the other hand, the outsourcing of activities that are critical to the
good functioning of the company are relatively innovative and is no longer
considered as a last resort for companies with financial difficulties. In fact, in the
hope of reducing costs, gaining efficiency, and improving the level of service,
companies are taking a hard look at their business processes to assess which
areas would best be performed by an outside provider. In parallel, these
providers are restructuring or expanding their service to accommodate the
growing demand for outsourcing services.3
1 “L’externalisation, un mouvement de fond”, Patrick J. Miliotis, Les Echos, 29th August 2001
2 Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry, James Brian Quinn, Free
Press Publishing, July 1992
3 “Business Process: Consider Outsourcing”, Thomas Kiely, Harvard Business Review, May-June 1997, pp
11-12
20
1 “L’irrésistible montée de l’externalisation”, Alain Perz, Les Echos, 21st October 1998
21
This increase would not have been so important without a certain number
of external and internal factors.
A] Internal factors
B] External factors
a) Supply pressure
Ever more qualified actors are appearing on the market and expanding
little by little the global opportunities for companies to outsource. Whereas
before they were limited to small contracts signed with different providers, they
are now complex ones dealing with a whole function assigned to a single
provider.
22
c) Benchmarking
d) Mimicry
This risky tendency can also be seen within a single company when one
department is outsourced and thereby others follow in turn.
There are no real exemplars yet, but three distinct groups of competitors:1
1 “Building a Case for BPO-Part 2, For Buyers’ Eyes Only”, Damon Rosenhan, Everest Group, September
2002
23
24
1 Human Resource Management, Dave Ulrich, Volume 36, Number 1, Spring 1997
25
Operational roles can be in turn divided into the two following categories:
Both roles are in fact involved in the HR process as far as they are
responsible for the day-to-day HR management.
26
• HR services center:
• HR functions experts:
• HR business partners:
27
• Corporate HR:
• Company managers:
28
• Payroll administration;
• Employee development;
• HR support to business;
• Compensation;
• Benefits;
• Employee relations;
• Industrial relations;
• People management;
All these activities represent both the whole employee life cycle and the HR
roles expressed through attracting, motivating, and retaining employees.
29
This table provides a clear vision of all the different types of activities
involved in the HR management of almost any medium or large-sized company
in Europe (See 4.2. for organizational vocabulary definitions).
A] Figures
The E.U. (European Union) contains today more than 370 million
1 “Y a-t-il un marché du travail européen?”, Maurice Thévenet, Les Echos, Summer 2002
30
For the moment, the E.U. countries sustain more than 150 million jobs. As
you can see in the following illustration, unemployment is not homogeneously
spread throughout Europe, but seems to reflect instead the remaining
differences in terms of social policies among the E.U. members. It is to hope or
even more to expect that the European integration, and especially the social
one, will guarantee fair competition inside the E.U. labor market.
1 Industrial relations developments in Europe 2002, EIRO & E.U. Commission, p 29,
http://www.eiro.eurofound.eu.int
31
B] Trends
1 Industrial relations developments in Europe 2002, EIRO & E.U. Commission, p 55,
http://www.eiro.eurofound.eu.int
* Population between 15 and 74, ** Population over 15, *** 2000 data
32
Illustration 7: Average collectively agreed pay increases, 2001 and 2002 (in %)2
Despite these developments, legal social systems are still very different
from one another and multinational companies are fully expected to apply the
local law. For instance, in Germany, the labor laws encourage collective
bargaining, thereby avoiding state intervention, whereas in France the state is a
major actor in the social life inside companies, and whereas in England
1 Comment évoluent les stratégies de rémunération en Europe, a Towers Perrin Study, January 1998
2 Industrial relations developments in Europe 2002, EIRO & E.U. Commission, p 34,
http://www.eiro.eurofound.eu.int
* Average of 18 countries, ** Average of 16 countries for 2001 and average of 15 countries for 2002, ***
Average of 12 countries for 2001 and average of 11 countries for 2002
33
C] Challenges
1 L’Europe des ressources humaines, D. Cazal and Jean-Marie Peretti, Editions Liaisons, 1992
2 Industrial relations developments in Europe 2002, EIRO & E.U. Commission, p 36,
http://www.eiro.eurofound.eu.int
34
35
A European legal frame is also rapidly appearing in various fields such as:
worker consultation and information, the ECS (European Cooperative Society),
working time, protection of employees in the event of insolvency of their
employers, temporary agency work, equal treatment for men and women,
health and safety, etc.
1 Dialogue dans l’entreprise: consultation des travailleurs et comité d’entreprise européen, Centre
d’Information sur l’Europe, 23rd April 2003,
http://www.info-europe.fr/europe.web/document.dir/QR000914.htm
36
37
A] Self-Service (e-HR)
38
39
a) Definition
1 Converting the Managers Makes Self-Service HR Work, Beth Ellyn Rosenthal, April 2003,
http://www.outsourcing.requests.com
40
b) Objectives
C] HR processes outsourcing
1 Transforming the Human Resource Function, Arthur H. Mazor and Meredith A. Paxton, Human
Resource Effectiveness Practice, Buck Consultants, Inc., 2002
41
In this case, the provider is totally responsible for the good running of these
activities, and often integrates its client’s employees (see 7.4.3.C]).
This kind of outsourcing is nowadays mainly used in the U.S. where can be
even found the premises of co-employment. Co-employment simply consists in
hiring people on the basis of a three parties contract: the employee, the
business partner, and the Human Resources professional. Signing this contract,
the employee accepts to be under the business authority of the business
partner, and agrees to depend on the Human Resources provider (also called
PEO (Professional Employer Organization) in the U.S.) as far as social problems
are concerned; and in the end, the three contractors assume distinct
responsibilities. Co-employment is finally a good way for companies to
outsource their social responsibilities to an accredited co-employment provider.
In the U.S., PEO are on a lobbying campaign to obtain federal and state
legislative recognition and to overcome existing laws that create barriers or
additional costs for third-party administration of HR operations. State legislators
have responded by appointing them as the front-line tax collector and
pension-administrator with legal liability for non-compliance.
In Europe, the E.U. Acquired Rights Directive and other local legislation
42
2 “Zeitarbeit als Brücke auf dem Weg zum neuen Job”, Elke Gundel, Weser Kurier Online, 6th June 2003
43
An article in HRO Today reported that the total volume of BPO (Business
Process Outsourcing) topped, worldwide, hundreds of billions of dollars with 40%
of them occurring in the United States, and with 60% concerning the Human
Resources department.1 Nevertheless, it is here very important to emphasize
that in the U.S., pension funds management are included in HR budgets, which
obviously implies huge amount of money that are not directly linked to HR
management processes, but to pension financing.
To illustrate the global trend, fourteen contracts that worth more $6 billion
have been concluded between 1998 and 2002.2
B] HR outsourcing trends
The Conference Board survey5 found that top managers were more likely
than line managers or HR executives to cite cost reduction as the impetus for
outsourcing, whereas HR executives mostly cited the need for service
improvements and the ability to free the in-house HR staff to concentrate on
3 HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002, p 4
4 HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002, p 5
5 HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002, p 6
44
D] HR outsourcing future
According to a survey carried out between march and may 20011 among
more than 100 companies located in big fields of work worldwide (North
America, Europe, Australia, Asia), the Human Resources actors will be in 2010
more involved in deciding the company strategies (for 89% of surveyed
professionals), and will be more required to show the value-added of their
department. The high technologies and the outsourcing of some activities will
be the solutions for HR departments to meet these requirements, by being able
to focus on their core business thanks to economies of scale: 92% of surveyed
companies think e-learning packages will be more used, and 81% of them
support that e-selection tools will be widespread and will shorten time and
marginal costs of the recruiting process. The new HR roles of the future are
predicted to be rethinking the performance and loyalty concepts, and
focusing on managing skills. They will no longer manage equality but equity.
B] HR outsourcing trends
1 Predicting the Workplace of 2010, Cubiks (a PA Group Company), between March and May 2001
2 http://www.dataquest.com
45
C] HR outsourcing future
For the U.S., the Gartner Group2 forecasts a future growth of 25% each year,
which represents in facts a tripling of revenue in five years.
A] HR outsourcing trends
A study4 carried out among companies with more than 200 employees in
15 countries all over Europe, shows that the most commonly outsourced
processes, are first of all “training and education” with almost 80%. Similarly, the
use of recruiting consultants is growing: 59% of European companies outsource
their “staffing and recruiting” processes, even if their assignments are still very
limited (recruitment of a professional for example). The last most commonly
outsourced process is “payroll administration” with 30%.
The content only is outsourced but not the container: all the “attention
management” and the function itself are for the moment kept internally.
1 “The Near Future (Part II)”, Peter Drucker, The Economist, 9th November 2001,
http://www.cfo.com/printarticle/0,5317,5642%7C,00.html
2 http://www.dataquest.com
3 European trends in HR Outsourcing, J. van Ommeren, C. Brewster, P. Vernon and J. Philips, Cranfield
School of Management and William M. Mercer Research Report, June 2000
46
B] HR outsourcing future
The shared services solution seems to have the most predictable potential
growth in the near future throughout Europe, because of particularly strong
regulations and because of the decisive importance of social links. But on the
other hand, as we will see later, social law complexity clearly leads to ever
more HR outsourcing.
A] HR outsourcing trends
2 “Externalisation: les solutions de BP Amoco et d’IBM”, Laurence Ritter, Les Echos, 28th November 2000
47
b) Large companies
B] HR outsourcing future
1 A Coopers & Lybrand Consultants and l’Association Nationale des Directeurs Financiers et de
Contrôle de Gestion (DFCG) Study, 1997
48
49
Now that we have demonstrated the real extent of the phenomenon, our
aim through this second part is to show why multinational companies in Europe
can simply not ignore outsourcing when the reengineering of their Human
Resources functions becomes necessary.
We would like to give readers a good idea of the reasons why outsourcing
is an unavoidable strategic solution for companies who want to lead the
business game in the following decades or even more so in the following years.
50
1 Transformational Outsourcing, Changing the course of business services, Cap Gemini, Ernst & Young,
2002, p 3, www.cgey.com
51
52
53
In all value chain, one can distinguish two different kinds of activities:
54
But this would mean that the support activities do not create value-added
and that they only support the creation of primary activities. Of course, this is
absolutely not the case. Support activities do create value. The problem is that
one often forgets that value is quite subjective, and that it can be differently
considered according to various points of view; it is also a problem of
reference. Whenever a value chain is set up, its aim is evidently to generate
value-added, but even more important is to identify the destination of this
value-added. As a result, one may claim that even support activities of a value
chain create value and probably as much as most primary activities, but in fact
the comparison is really not apt, as they do not share the same direct
stakeholders.
A] Clover leaf
• The first one represents the staff internal the company which is
composed of high-skilled collaborators essential to the good
functioning of the company;
B] Alliances 4
The alliance is not a new form of relations between companies, but the
new global competitive environment encourages ever more different kinds of
joint actions. Moreover one may observe that both small and large companies
are concerned, whether they are new or old, national or multinational, and
56
C] CRM
1 The Virtual Corporation: Structuring and Revitalizing the Corporation of the 21st Century, William H.
Davidow and Michael S. Malone, Harper Business Publishing, October 1993
57
At the bottom are transactions where sellers simply sell and the buyers
merely buy. Customization is the second level as it represents specific solutions.
At the business solutions level, the service itself becomes secondary: the client
has a business problem that needs the provider’s analysis and state-of-the-art
58
A] Definition
This previous concept comes actually from the elder concept of core
business activities as activities that differentiate the company from others, make
a vital contribution to its success, and offer to companies their largest ROI
(Return On Investment). In fact, it became prominent when Tom Peters and
Robert Waterman3 suggested that organizations should stick to their most
profitable activities in terms of value-added creation and avoid diversifying into
areas beyond their field of expertise.
2 “The Core Competence of the Corporation”, C. K. Prahalad and Gary Hamel, Harvard Business
Review, May 1990
3 In Search of Excellence: Lessons from America's Best-Run Companies, Thomas Peters, Robert H.
Waterman, Warner Books, Reissue edition, August 1988
59
B] Segmentation of activities
Value chain activities can be differentiated with the help of three different
dimensions: the inclusion within a function (sub-department) or sub-value chain,
the degree of proximity to the strategy, and finally the type of activity.
60
And finally, according to how high you locate the activity in the cone, you
define the activity as being part of one of the different generic types of
activities seen previously.
61
One can easily see that those precious core competencies are
symbolized also by a cone (the dark one), but obviously smaller and on the
upside down, with its top plunged in the base of the whole activity cone. This
actually clearly emphasizes the fact that a core competency may arise from a
support or a primary activity, with a noticeable higher frequency for the latter;
and that a core competency may concern any type of activity, from the
lowest rank to the top management, with of course a bigger advantage for the
latter.
Each value chain has its own cone, shaped in accordance with its own
particular environment. People who are responsible for the success of the value
chain have to ask themselves what their core competencies are made of, that
is to say the clear definition of their competitive advantage.
62
1 “They’re not Employees, They’re People”, Peter F. Drucker, Harvard Business Review, February 2002,
pp 70-77
63
Finally, Tom Peters supports the idea that workers tend to be given
irrevocably a lot more responsibilities and autonomy, contesting the
hierarchical power that is inefficient in facing the chaos. On the other hand,
Alfred Chandler has always been an adept of clear hierarchy, considering that
the reality of an official scale of authority encourages managers to be more
professional.
To try to remedy this lack of balance between the efficient hierarchy and
the creative chaos, some companies simply outsource some of their workers.2
Companies offer indeed the opportunity to build their own business to some of
their workers, by offering its first contract to the new start-up and sometimes
even by taking equities. The method allows the company to get rid of a non-
core but still perfectly strategic competency, which explains why the company
is motivated to secure the survival of the start-up. For the ex-employee, it is a
great opportunity to be its own boss, to develop a business in accordance to
the vision of its core activity; the only failure observed with this solution arises
when the start-up begins to compete on the same markets as its former
employer.
1 “They’re not Employees, They’re People”, Peter F. Drucker, Harvard Business Review, February 2002,
pp 70-77
2 “Ces entreprises qui externalisent leurs salariés”, Sabine Grandadam, Les Echos, 3rd October 1995, p
26
64
65
A] Figures 1
1 Rapport économique et social annuel 2002, SETT (Syndicat des Entreprises de Travail Temporaire),
http://www.sett.org/etudes_statistiques/Rapport_économiŠl_2002_SETT.pdf
66
B] Trend
C] Threatened flexibility
1 “Au-delà de l’interim, Adecco veut gérer les ressources humaines de ses clients”, Laure Belot, Le
Monde, 20th April 1999
67
PEO (see 3.1.2.D]), which manage their clients’ HR activities, were the
fastest-growing business service in the United States during the 1990s. Even
though they were virtually unknown only ten years ago, they had become, by
2000, the “co-employers” of 2.5 million to 3 million U.S. workers, and are by the
way already in the U.S. at least 1,800 such organizations.
Finally, both the temporary employment industry and HRO industry are
growing quickly. The HRO industry as a whole is growing at a rate of 30% a year,
and PEO expect to be collectively the co-employers of 10 million U.S. workers
by 2005.
1 “CBI launches new bid to block irreparable damage from E.U. temping law”, CBI Press, 30th May 2003
2 “Bosses war against rights for temps”, BBC News Online, 18th February 2002
3 “La CES prend l’accent britannique”, Isabelle Moreaux, Liaisons Sociales, June 2003, p 6
4 Inspired from “They’re not Employees, They’re People”, Peter F. Drucker, Harvard Business Review,
February 2002, pp 70-77
68
When the temporary employment industry first started nearly fifty years
ago, it supplied low-level workers to take the place of employees who were sick
or on vacation. Today, there are temporary agencies for every kind of job, from
bottom line to top management.1
5.3.1. Flexibility
To that extent, it seems interesting to briefly present the law case opposing
1 Interimsmanagement, für die Wirtschaft im Wandel, Management Angels GmbH, Business Village,
2002, http://www.managementangels.de
2 Inspired from “They’re not Employees, They’re People”, Peter F. Drucker, Harvard Business Review,
February 2002, pp 70-77
69
Temporary agencies and HRO providers favor costs reduction and time
gains for the client-company.
A] Costs reduction
B] Time gains
70
Beyond the desire to avoid the costs and complexity of regulations, there
is another major reason for both the rise of temporary workers and the
emergence of HRO providers: the nature of knowledge work and the fact that
knowledge-based organizations have lots of experts. Managing all of them
effectively is a big challenge, one that temporary agencies and HRO providers
can help to address.
Both the large temporary agencies’ clients and the HRO providers’ clients
lack the ability to effectively manage, place, and satisfy highly specialized
71
HR policies still assume that most, if not all, of the people who work for a
company are employees of that company. But as we have seen, that is not
true. Temporary agencies claim to be selling productivity, and to be doing the
company’s oversight job for them, but it’s hard to see how they deliver. The
productivity of the people they supply to a client depends not only on how and
where those workers are placed, but also on who manages and motivates
them. The temporary agency has no control over those last two areas and this
lack of oversight is a real problem. Every organization must take management
responsibility for all the people whose productivity and performance it relies on,
whether they’re temporary workers, part-timers, or employees of its outsourcers,
suppliers, and distributors. Who would dare say that interns are less productive
than formal unfixed term contract junior collaborators?
B] People development
72
This trend will require more than just same new programs and new
practices. It will require new measurements, new values, new goals, and new
policies. People are capital, people are opportunities. HR does not manage a
collection of fully-owned workers, but a network of partly-owned knowledge
workers.
73
2 Le tableau de bord prospectif, Robert S. Kaplan and David P. Norton, Les Editions d’Organisation,
1998, pp 137-155
74
Though reducing costs is clearly one motivator to transform HR, far more
compelling is the interest in generating value for the whole organization.
William Schiemann of Metrus Group suggests that there are seven main
questions HR leaders ought to ask themselves to know if they are on the good
way or not to challenge future HR issues2:
1 “Be seen and heard or face extinction”, Personnel Today, Lance Richards, 19th February 2002
75
76
6.1.1. Bases
This theory1 deals with two main important issues of the outsourcing
process: decision (is it worth outsourcing or not?) and management (how to
manage successfully an outsourcing operation?).
a) Principles
The best governance structure, as far as costs are concerned, is the one
1 “L’outsourcing : une approche par les coûts de transaction”, Bertrand Quélin, Réseaux, July-August
1997
77
b) Fundamental hypothesis
The limited rationality consists in an inability to forecast all events that may
occur during the outsourcing contract, and then all renegotiations that may be
necessary.
There are finally three environmental factors interacting with the two
behaviorist fundamentals: the uncertainty, the complexity, and the number of
providers.
c) Transaction attributes
78
The uncertainty is the fact that it is more or less difficult to forecast the
future evolutions of the environment and the provider’s behavior; one can
conclude the following: the bigger the level of uncertainty is, the bigger the
transaction costs are. These problems occur all the more as it is combined with
a strong specificity of assets.
Indeed, we saw in the hypothesis that the individuals’ rationality was very
limited, and it is thereby impossible to write a contract that includes all future
contingencies.
d) Governance structures 1
1 “L’outsourcing : une approche par les coûts de transaction”, Bertrand Quélin, Réseaux, July-August
1997
79
As seen previously, when the assets specificity, the uncertainty, and the
frequency are all particularly high, it is more careful to manage the activity
internally and not to outsource it.
This contract applies when both the assets specificity and the uncertainty
are high, and when the production costs are almost the same for the provider
as they are in the client-company itself.
80
This theory deals with important topics for managers such as “core
business” and factors activating outsourcing.
Resources and skills are strategic when they are the foundations of a
lasting competitive advantage, that is to say when they:
Resources and skills that present all these characteristics must absolutely
not be outsourced.
In conclusion, one can say that insourcing resulting from the risk of
individual opportunism tries to avoid this opportunism by keeping the targeted
activity inside the company.
81
Supposing the activities do not belong to the core business, there are two
possibilities: whether the internal performance is worse than the provider’s
performance and thereby it is recommended to outsource, or the internal
1 “Strategic Outsourcing”, James Brian Quinn and Frederick G. Hilmer, Sloan Management Review,
Summer 1994, pp 43-55
82
These costs can be very high, all the more as the outsourced activities are
based on specific assets, as there is a high uncertainty and as they are regularly
processed.
1 “The hidden costs of IT Outsourcing”, Jérôme Barthélemy, Sloan Management Review, Volume 42,
Number 3, Spring 2001, pp 60-69
83
Once the cone (see illustration 15) is clearly set up, the decision to
outsource some of these HR activities becomes a lot easier to take. Indeed,
each square of the matrix representing a particular activity can be chosen to
be outsourced or not, according to its location inside the cone. The closer to
the central core competencies cone the activity is located the less it should be
outsourced. The cone allows bringing about a global reflection on what is
strategically decisive and what is actually not in the process of creating value-
added, with the advantage not to limit systematically strategic activities to
managerial ones.
As far as we are concerned, we strongly support the idea that the dark
cone of HR core competencies is quite thin. In other words, we think that the
future will show that HR functions may be largely and successfully outsourced.
Traditionally, clients have parcelled up discrete areas such as recruitment,
benefits administration or training, and outsourced these to providers with
reputation as specialists in the niche service areas. But we are convinced that
the next generation of HR outsourcing will be characterized by clients taking a
more strategic, integrated approach and that there will be the advent of new
providers offering (helped by the technology) “life cycle” services, which
handle all employee issues, from recruitment to retirement and beyond. The
current main brake to this trend is the structuring of the offer; the market is not
mature enough, and it evidently is lacking large worldwide credible providers.
But as soon as some reliable multinational companies will be able to provide
the all range of HR outsourcing services, we bet the dominos will fall quicker
than so far expected.
In the end, outsourcing most HR activities aims to improve the four soft “S”
of the seven “S” approach developed by McKinsey, that is to say: Style, Shared
objectives, Skills and Staffing (whereas the hard ones are: Strategy, Structure
and System). These are the real challenge of HR outsourcing.
84
85
• Shareholders dividend.
6.4. Drawbacks
Outsourcing HR operations may sometimes pose some challenges and
problems.
1 “Le prix réel des nouvelles organisations d’entreprise”, Marie-Béatrice Baudet, Le Monde, 7th
September 1999
2 HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002, p 6
86
One must also not forget that mergers and acquisitions, plant closings,
major hiring activity and shifts to business strategy will happen while HR is
moving to a new model and is totally or partially outsourced. This implies the
development of change management skills on parallel to particularly
developed organization skills. The implementation of a new model in order to
gain value in the end will be, during the transition, in most of the cases a real
nightmare.
87
We would like along this third part to surround the outsourcing concept by
now determining the conditions of its successful practical implementation and
by laying the foundations of an efficient outsourcing operation management.
88
This project team may also include one or more members of the future
piloting committee, as this last cell will coordinate the relations between the
outsourcing company and the provider. It is essential that they are involved
89
The project plan defines the project requirements in more or less detailed.
The more detailed it is, the more the provider is hold to fixed pricing and time
tables. The major typical topics included are: project specifications, definition of
specific provider’s tasks with milestones and deliverable dates, implementation
schedules, installation and implementation requirements, testing and
acceptance requirements, training requirement, assets and environmental
requirements, reports and meetings (documentation), permits and
authorizations, quality plans, and finally the outsourcing company’s
responsibilities.
Generally, the project team develops two project plans, the first one
defining the outsourcing company’s initial requirements, and a second one (in
the final stage) specifying commitments and deadlines for the provider. As
already mentioned, one must remember that the more detailed the final
project plan is, the better the operation development will be.
The project team must identify and outline the risks HR outsourcing
operation could lead to, and assess the weight of benefits compared to risks.
90
One may also add the use of the transaction cost theory seen earlier in
6.1.1. A].
Moreover, the project team should not forget to tactfully inform all the
other and parallel areas managers which could be affected by the project, to
help them managing the organizational change.
91
As just mentioned, the impact will not only be apparent in the directly
affected department, but also on others, which will also maybe have to
reorganize their staff themselves.
7.3.4. Communication
1 “L’externalisation à toute vapeur”, Frank Niedercorn, Les Echos, 2nd May 2001
92
7.4.1. Communication
93
There are mainly three ways to identify one’s best choice, which
differentiate from one another, according to the number of providers on the
market:
94
In fact, in spite of its theoretical efficiency, one shall draw the attention on
two limits as far as the ordinary invitation to tender is concerned: the longest
process period and the low attractiveness for potential providers. As this
method implies that all providers of the market should be in demand, it takes a
long time to manage the perusal that brings to the decision. Moreover
providers investing themselves in such an invitation to tender consider this
method as being less interesting as the competition is the largest; as a
consequence, some providers simply ignore this kind of selection process to
concentrate on the two others, and this situation sometimes strongly weakens
its impetus need of competition.
In the end, to maximize the use of this technique2, the invitation to tender
must be as clear as possible, as precise as possible; it must let enough time for
candidates to return their proposition and assure direct contacts with decision-
makers.
1 “Common Problems, Legal and Otherwise With Outsourcing Deals and How to Avoid Them”,
Attorney at Shaw Pittman, 2003, http://www.chiefofficer.com/particle.php?t=25
95
Finally, one can underline the fact that this option is less expensive and
equally efficient to the previous one in surrounding its future partner. Moreover,
as this option involved fewer actors, it is all the more possible to make it more
complex in order to get the most obvious results.
The main advantage of such a method lies in its cost. On the other hand,
there are no guarantees concerning the reliability of such an option; the whole
success of that kind of approach entirely relies on the quality of the information
at the disposal of the outsourcing company. In fact, the outsourcing company
must have good reasons to focus on only one provider, such as former
partnership or any other strategic pressure. Sole sourcing approaches are
common in case of requirement of a very strong buyer-service provider
relationship due to a lack of competition.
First of all, the spontaneous criteria are economical and technical ones,
such as price, performance, flexibility, and capacity in helping transferred staff
to integrate their new structure. If these criteria are obviously particularly
decisive, one should not ignore more general criteria such as financial stability,
revenue, balance sheet and income statements, banking references or even
the notoriety of the providers as well as the professional references of the
particular persons representing the candidate.
96
• Good reputation;
• Financial stability;
The subjective suggested criteria above are all dealing with the suitability
between the client and the provider:
The transfer of activities to the provider typically includes some or all of the
following2:
2 Business Process Outsourcing, Process, Strategies and Contracts, John K. Halvey and Barbara Murphy
Melby, John Wiley & Sons, Inc., 2000, p 51
97
A] Assets leasing
B] Equipment transfer
The parties have to assess the most favorable means to transfer these
assets on a site-by-site basis (to minimize tax and regulations weight). They will
need to negotiate a purchase and sale agreement.
C] Staff transfer
98
a) Transfer perception
The only difficulty with transferring equipment is the evaluation of its value.
On the contrary, staff transfer is a lot more complex. Staff transfer is, during an
outsourcing operation, often felt by the concerned collaborators as being a
staff failure. Moreover, if on the one hand they surely feel betrayed by the
outsourcing company, they also feel insecure as far as their future business
environment is concerned, as well as their future carrier, salary, perks, etc. In
fact, most of them did not participate in choosing this particular provider or
they did not even know it existed. Collaborators were used to identify
themselves to a particular product, brand or culture, and they are now asked
to focus on their profession and to redefine their points of reference in this new
environment. Even while, in the long term, they will most of them benefit from
such a transfer, it is still often felt like a tangible traumatism that companies must
necessarily cope with.1
1 “Le délicat volet social de l’externalisation”, Anne Galez-Rovan and Catherine Lévi, Les Echos, 26th
October 1999, pp 47-48
99
100
1 Restructuring the Human Resource Department, objectives, methods, trends, Saratoga Institute,
American Management Association Special Reports, 1997
2 The Beat Goes On: Outsourcing Your Human Resource, Knowledge@Wharton in collaboration with
Aon Corporation, AON Human Capital Consulting, p 5
101
The legal professional in the team should not have a leading position but
has to be part of all operation stages, from the decision motivation to the
board, until at least the beginning of the HR functions outsourcing first effects,
as it will then be able to assess the legal risks following such an HR outsourcing
operation.
102
Because laws can be different from one country to another or even from
a state to another (like in the U.S. or within Europe), effects can be different
according to the chosen governing law, and it is always better to agree on one
before the conflict arise (national, federal, state or local).
103
The main issue is that if authorities are not cooperative, the entire
operation can be delayed or even cancelled.
1 Business Process Outsourcing, Process, Strategies and Contracts, John K. Halvey and Barbara Murphy
Melby, John Wiley & Sons, Inc., 2000, p 124
104
The legal procedures are very heavy and take quite a long time; many
brilliant elements will just leave the company even before the transfer is over. It
is all the more necessary to work on a fair plan, as the staff motivation is the key
to the success. One does not want transferred staff that feels it has been sold
with furniture.1
105
No matter if one outsource outside or inside the E.U., if the depart point is
in the E.U., and if there is any staff transfer planned in the HR outsourcing deal,
the E.U. regulation will be effective (knowing that the deal can exclude any
staff transfer).
A] European context
In Europe, staff transfer within the E.U. is regulated by the Acquired Rights
Directive (2001/23/EC1) Council Directive, of the 12th March 2001. This Directive,
coming in effect the 12th april 2001, abrogates all the disposals of the 1977
(77/187/EC2) and 1998 (98/50/EC3) Directives and codifies the reconciliation of
E.U. members regulations concerning the preservation of the employees’ rights
in case of company transfer.
1 http://europa.eu.int/eur-lex/pri/en/oj/dat/2001/l_082/l_08220010322en00160020.pdf
2 http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc
=31977L0187&model=guichett
3 http://europa.eu.int/eur-lex/pri/en/oj/dat/1998/l_201/l_20119980717en00880092.pdf
106
B] French context
a) Individual transfer
In this case, each transferred collaborator agrees to break off his work
contract to sign a new one with the providing company.
b) Collective transfer 1
The social legislation (Art L 122.12) implies for the outsourcing company2:
• Continuous information;
1 Droit du Travail, Droit Vivant, Jean-Emmanuel Ray, Edition Liaisons, 2001, pp 208-213
2 “7 conseils pour… réussir une demarche d’externalisation”, Dominique Genelot, INSEP CONSULTING,
November 2002
107
C] English context
1 The Challenge of Outsourcing Human Resources, Sally Vanson, Chandos Publishing, 2001, pp 181-188
108
It is for the moment still the case. E.U. members have different processing
of medical data, different drug and genetic testings legislations, etc. The
practice regarding this issue is diverse and can be incredibly complex.
Even while there are already two E.U. Directives, they are too general, and
E.U. Commission works on it at the European level, suggesting a new European
framework of principles and rules, building on those already existing, developed
later.
1 http://www.eiro.eurofound.eu.int/2002/11/feature/EU0211206F.html
109
B] Data security
As the E.U. Commission states2, most E.U. members do not have specific
legislation concerning the protection of employees’ data.
C] E.U. Directives
The E.U. Commission states3 that there are two Directives regulating the
processing of personal data:
1 http://www.eiro.eurofound.eu.int/2002/11/feature/EU0211206F.html
2 http://www.eiro.eurofound.eu.int/2002/11/feature/EU0211206F.html
3 http://www.eiro.eurofound.eu.int/2002/11/feature/EU0211206F.html
4 http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc
=31995L0046&model=guichett
110
These Directives are very general and without enough precisions on their
application to the workplace. That is the reason why the E.U. Commission is
working on data protection, to protect both employers and employees, in the
form of a statutory instrument or a social partner’s agreement.2
Most of the time, providers propose their standard and prepared contract,
and are unwilling to change it. But the outsourcing company must refuse this
contract, as each outsourcing process and conditions are different, and make
its project team negotiate and work closely with the provider to elaborate a
new and singular contract. It is particularly the case with HR outsourcing
contracts, as earlier seen in this thesis HR services are necessary tailor-made.
Indeed, even if the tools are quite universal, and economies of scales made
unquestionably possible, any company would expect its HR services to be
1 http://europa.eu.int/eur-lex/pri/en/oj/dat/1998/l_024/l_02419980130en00010008.pdf
2 http://www.eiro.eurofound.eu.int/2002/11/feature/EU0211206F.html
111
8.3.1. Overview
The most common form of outsourcing contract involves the transfer of control
and ownership of all or part of HR functions to the provider. In return, the
outsourcing company agrees to compensate the provider according to a
negotiated fee schedule. The contract will accurately record each party’s
rights and responsibilities at any given time during its term.
Given the wide variety of business issues and the many different legal
disciplines involved in even the easiest form of outsourcing transaction, it should
come as no surprise that one of the most difficult stages of an outsourcing
transaction is drafting and negotiating the contract, which can be simply
distilled in five basic issues that must be considered and addressed by the
parties1: “What is it?”, “Who does it?”, “Who owns it?”, “How much is paid for
it?”, and “What happens if it is not done?”.
If, at the end of the contract negotiation process, the parties are
confident that these five issues have been fairly and comprehensively
addressed, it is likely that the relationship between the parties will survive the
inevitable day-to-day disputes that arise in complex contractual relationships,
and hopefully, flourish as methodologies and technology advance.
It is important to note at this point that a fair contract is not one that is
necessarily ideal from either party’s perspective. A negotiation with respect to
an outsourcing arrangement is not one that either party should be willing to
win. A fair contract may well be one that requires both parties to perform in a
1 Business Process Outsourcing, Process, Strategies and Contracts, John K. Halvey and Barbara Murphy
Melby, John Wiley & Sons, Inc., 2000, p 52
112
B] Scope of services
To avoid future problems, the contract must include the most exhaustive
detailed list of HR services to be provided.
1 Inspired from Business Process Outsourcing, Process, Strategies and Contracts, John K. Halvey and
Barbara Murphy Melby, John Wiley & Sons, Inc., 2000, pp 53-66
113
Concerning the users satisfaction all aspects must be described, from the
number of persons to be surveyed to the content of the survey.
D] Term/Effective date
E] Transition
As explained in the legal framework part, transfers are regulated and must
be operated very carefully.
114
The contract could specify any obligation for the provider concerning the
business process staff, knowing that, as it has been developed in the legal
framework part, regulations are very restrictive and the subject is very sensitive
in Europe.
Moreover, parties can decide whether the provider must hire the former
team or not, and the contract must for this reason mention the nature of the
provider’s obligation in respect to these employees.
G] Assets transfer
This second kind of transfer is also critical, as it can allow the outsourcing
company to get cash rapidly. For this transfer, a purchase or sale agreement
must be established, but it should be mentioned in the contract by security.
H] Integration of methodologies/technologies
Both the outsourcing company and the provider must specify if there is
any IT-failure to be solved for them to be compatible as far as technologies are
concerned.
115
K] Intellectual property 2
L] Confidential information
2 Business Process Outsourcing, Process, Strategies and Contracts, John K. Halvey and Barbara Murphy
Melby, John Wiley & Sons, Inc., 2000, p 59
116
For this reason, the contract should protect and secure the confidentiality
of each party’s data and information.
M] Data flow
The legal framework of transborder data flow has already been described
in 8.2.5., but the outsourcing company should re-mention it in the contract to
minimize risks. Too many details seem to be always better than too few.
N] Data security
To the same extent, the legal framework of data security has been
developed in 8.2.5., but it is more secure to re-mention this issue in the contract
as well.
The way the fees (fixed and/or rate-based for example) are determined
and will be paid must also be defined and made clear in the contract.
Q] Currency risk
The contract must also include the definition of the currency or currencies
that will be used for the payments just evoked. Indeed, except if both the
117
R] Taxes
S] Audit
T] Business variability
U] Governing law
1 “Common Problems, Legal and Otherwise With Outsourcing Deals and How to Avoid Them”,
Attorney at Shaw Pittman, 2003, http://www.chiefofficer.com/particle.php?t=25
118
V] Dispute resolution
On the other hand, parties should also add a formal dispute resolution:
mediation or arbitration procedures if applicable for example. As just
mentioned, these kinds of resolution will only be possible for businesses disputes,
but not on problems regulated by the social law, such as staff transfer
regulations.
W] Indemnities
X] Termination
The contract should finally include all cases by which each party may
terminate the agreement according to certain events (termination for
convenience, for change of control, for cause, for failing to meet service levels,
etc.). It is also useful to define the way dispute will be resolved (applicable fees,
currency chosen, etc.).
These key contract issues list is a non-exhaustive one, but all the main
topics concerning HR outsourcing in Europe are covered.
1 http://www.dataquest.com
119
120
The managerial function may stay the same; in fact, the only difference is
that it does not own the resources it manages anymore. It does not manage
throughout direct authority but throughout contractual relations. On the one
hand, one can say that it may seem harder to do so, but on the other hand it is
easier for the management to lead on effective results without having to take
care of the day-to-day issues. In the end, the management team has three
main activities to fulfill in order to assume their complete responsibility of the
function:
121
The piloting committee, one person or more (according to the size and
the ambition of the project), is directly reporting to the management team
described above. Its role consists in controlling the relation between the client-
company and the provider. It regularly checks whether the contract fits to the
needs or not, whether both parties respect the deal or not and constantly
evaluates the performance of the outsourcing solution.
Dave Ulrich2, HRM editor, defines nine decisive actions, which the piloting
committee should, according to us, make sure the provider performs:
1 “Common Problems, Legal and Otherwise With Outsourcing Deals and How to Avoid Them”,
Attorney at Shaw Pittman, 2003, http://www.chiefofficer.com/particle.php?t=25
2 Dave Ulrich, Human Resource Management, Volume 36, Number 1, Spring 1997
122
These skills allow defining which outsourcing strategy would best serve the
competitive advantage of the company.
These skills allow making sure that the provider does its job the way it
announced it would do it.
These skills are very important as well, as they imply developing flexibility
and credibility.
These skills make it possible to manage the relation with the different
providers. The aim is to reach a win-win situation, even more than an
123
1 “How to invest in social capital”, Laurence Prusak (Executive Director IBM Institute for Knowledge
Management) and Don Cohen, Harvard Business Review, June 2001, pp 86-93
124
In 10% of the cases, during the six months before the forecasted starting
date, it may happen that the transition period during which the two companies
proceed to the transfer of assets from one to another is not enough well
managed. Most of the time, they suffer from the loss of key-collaborators on the
one hand and from the difficulty for the provider to build new efficient teams
on the other hand.
1 “IT outsourcing: finding from an empirical survey in France and Germany”, Jérôme Barthélemy and
Dominique Geyer, European Management Journal, 2001
125
In 30% of the cases, during the first year of outsourcing, it may happen
that the provider did not succeed in meeting contracted expectations. Most of
the time, the client-company has to do the job simultaneously, which is really
not a satisfying situation.
In 20% of the cases, during the first year of outsourcing, pricing sometimes
goes drifting off. When the provider has previously underestimated the prices of
services, it does not take too much time to do pressure on the client-company
in order to obtain a better deal; this has for sure a negative impact on financial
forecasts.
In 50% of the cases, during the first three months, whereas the whole
outsourcing operation seems to be a success, it appears that the possibilities of
service evolution are very weak. In fact, the provider in this type of cases has a
valuable know-how in a certain kind of service, but unfortunately it has hardly
any possibility or will to focus on change management skills. In other words, it
has a too stable or rigid service offer, whatever the price its clients would be
ready to pay.
126
1 “Common Problems, Legal and Otherwise With Outsourcing Deals and How to Avoid Them”,
Attorney at Shaw Pittman, 2003, http://www.chiefofficer.com/particle.php?t=25
127
In the end, we focused a little more on IBM’s case in Europe. A case that is
quite indicative of the origin, the current evolution, and the promising future of
the whole Human Resources outsourcing industry.
128
a) Company overview
Credit Suisse First Boston is the investment bank of Credit Suisse Group,
which is a leading global financial services company headquartered in Zurich.
It serves global institutional, corporate, government and individual clients in its
role as a financial intermediary. Its around 73,000 employees operate in more
than 69 locations across more than 34 countries on five continents.1
b) HR outsourcing deal
c) Results
1 http://www.csfb.com/about_csfb/company_information/about_csg/index.shtml
2 The Beat Goes On: Outsourcing Your Human Resource, Knowledge@Wharton in collaboration with
Aon Corporation, AON Human Capital Consulting, 2002,p 5
129
a) Company overview
The Boeing Company is the world's leading aerospace company, with its
heritage mirroring the history of flight. It is the largest manufacturer of satellites,
commercial jetliners and military aircraft. The company is also a global market
leader in missile defense, human space flight and launch services. In terms of
sales, Boeing is the largest U.S. exporter.3
http://www.accenture.com/xd/xd.asp?it=enweb&xd=services%5Chp%5Chrservices%5Ccase%5Chrs_bt.xml
2 http://www.accenture.com/xd/xd.asp?it=enweb&xd=_dyn%5Cdynamicpressrelease_560.xml
3 http://www.boeing.com/companyoffices/aboutus/brief.html
130
• Hiring;
• Training;
• Employee programs:
~ Part-time opportunities;
~ Educational opportunities;
~ Recreation clubs;
1 http://www.boeing.com
131
c) Results
a) Company overview
1 “The evolving Role of Managers and Leaders”, Laurette Koellner (Shared Services President), National
Management Association Boeing Space Coast Chapter, The Boeing Company, February 2002
132
b) Implementation overview
DuPont Europe, for example, aligned and consolidated its HR services in-
house before outsourcing. 2
• Business Services;
• Legal Services;
http://eu.dupont.com/NASApp/dupontglobal/eu/index.jsp?page=/content/EU/en_US/overview/glance.html
2 The Beat Goes On: Outsourcing Your Human Resource, Knowledge@Wharton in collaboration with
Aon Corporation, AON Human Capital Consulting, p 4
3 http://eu.dupont.com
133
a) Company overview
b) Implementation overview
Its goal was to decrease its HR staff-to-employee ratio. This one was in
2001 of 2.4%, as there are 2,900 HR employees for a total amount of 120,000
employees. The next step is to reduce it to 1.9%, without dismissing but by
dividing up HR tasks between HRSC (HR Services centers and managers, and of
course with the help of new technologies, as some HR processes are indeed
directly provided on line).
c) Results
134
In the early 20003, oil giant Shell has rejected the option of externally
outsourcing its HR function and set up an HR shared services center in Europe,
which includes HR expertise, diversity specialists, and transactional processes
such as payroll services. “Shell People Services”, as it is called, employs 550
people globally, including 300 workers in Europe.
Thomson also implemented one different shared services center for each
geographical area (Europe, Asia, America, etc.).
1 “Oil giant flies the flag for keeping HR skills in-house”, Catriona Marchant, Personnel Today, 26th
September 2000
2 “Oil giant flies the flag for keeping HR skills in-house”, Catriona Marchant, Personnel Today, 26th
September 2000
3 “Oil giant flies the flag for keeping HR skills in-house”, Catriona Marchant, Personnel Today, 26th
September 2000
4 http://www.accenture.com/xd/xd.asp?it=enweb&xd=_dyn/dynamicpressrelease_563.xml
135
1 http://www.kelloggs.com/company/
2 “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”, HRFOCUS, September
2002
136
RES advertises open exempt jobs, handles all related recruiting work
except for relocation, and uses Kellogg designs and standards for recruiting.
• The provider filled 52% of available jobs in 2000, and 96% in 2001;
• Outside agency fees were $1,946,163 in 2000 and 202 jobs were
filled. In 2001, agency fees were just $294,375 and 389 jobs were
filled;
• The cost per hire was cut in half, from $7,905 in 2000 to $ 3,784 in
2 “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”, HRFOCUS, September
2002
137
A] Company overview
B] HR outsourcing deal
Exult support BP through its own services centers and will act as a service
integrator, managing any contracts with other third party suppliers on behalf of
BP. The programs’ center of operations is located in Glasgow.
1 http://www.bp.com/company_overview/profile/index.asp
2 http://www.exult.net/clients/contract_bp.html
138
• Cost reduction;
C] Comments
This deal has been done through the introduction of redesigned global
HR process. Under the title of “The Atlas Programme”1, the outsourcing deal
would see the creation of “myHR.net”, a personalized web-based portal
through which every employee could access HR information and services
(career service, information for foreign placements, etc.).
a) Positive ones
A step-by-step implementation rather than the full Big Bang treatment has
helped the program to be accepted by employees, even if there have been
139
During the first year, the HR staff-to-employee ratio fell from 1/60 to about
1/50. The myHR website became the first year already the company’s second
most visited Internet site after the BP homepage.
b) Negative ones
An AON study6 reports that some companies like BP Amoco, but also
AT&T, BASF Cable & Wireless and Bank of America decided to outsource all
their Human Resources functions, keeping only strategic activities internally.
AT&T signed in May 2002 with the HR outsourcing provider AON a 7-year
1 “The odd couple produces model for HR outsourcing”, Personnel Today, 26th June 2001
3 The Beat Goes On: Outsourcing Your Human Resource, Knowledge@Wharton in collaboration with
Aon Corporation, AON Human Capital Consulting, p 5
4 http://www.exult.net/clients/contract_bp.html
6 The Beat Goes On: Outsourcing Your Human Resource, Knowledge@Wharton in collaboration with
Aon Corporation, AON Human Capital Consulting, 2002
140
3 http://www.exult.net/clients/contract_boa.html
5 http://www.exult.net/clients/contract_boa.html
6 http://www.exult.net/clients/contract_ip.html
7 http://www.exult.net/clients/contract_pru.html
141
In the U.S. primarily, but the trend is also noticeable in Europe, HRO
providers are increasingly forming partnerships and acquiring resources in a bid
to get contracts from big business. They work on filling gaps in their array of
services so they can better compete for big-volume and big-money
outsourcing contracts.
142
The main providers are: AFLAC, Definity Health and VSP/Vision Service
Plan.
A] Company overview
1 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a
bid to get contracts from big business (Outsourcing)”, Steve Bates, HR Magazine, April 2002
3 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a
bid to get contracts from big business (Outsourcing)”, Steve Bates, HR Magazine, April 2002
5 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a
bid to get contracts from big business (Outsourcing)”, Steve Bates, HR Magazine, April 2002
143
B] Activities
• Reward;
• Ceridian;
• Deploy Solutions;
• Docent;
• Hire Right;
• IQ Navigator.
2 http://www.exult.net
144
C] Key facts
D] Strategy
So far, in 2003, Exult is the most meaningful provider, since it signed the
deal with BP developed earlier.
145
2 http://www.accenture.com/xd/xd.asp?it=enweb&xd=_dyn\dynamicpressrelease_560.xml
3 http://www.acs-inc.com/about/index.html
4 http://www.aon.com/about/aon_corporation/history_facts.jsp
146
• EDS (Electronic Data Systems) BPO. EDS is also one of the leading
global IT services company. It employs approximately 137,000 in
60 countries. It has more than 35,000 business and government
clients around the world. Its revenue: $21.5 billion in 2002; 45
percent non-U.S.2;
1 http://www.convergys.com/company_overview.html
2 http://www.eds.com/about_eds/en_about_eds.shtml
3 http://was4.hewitt.com/hewitt/about/overview/index.htm
4 http://www.mellon.com/hrsolutions/aboutus/
147
Is there any valuable business book that does not mention at least once
IBM as an example to follow? As we have to confess, we did not read all
valuable business books available, we of course cannot be absolutely sure of
the previous affirmation, but it seems that the answer is close to “no” anyway.
Finally, the purpose of this last chapter is to discuss IBM’s role as an actor in
the field of HR outsourcing throughout Europe and determine what are its
contributions and positioning.
IBM EMEA operates in more than 124 countries, with 149 different
languages spoken, and 293 dialects. To have a clear idea, nearly 60% of
revenue is generated outside the U.S., where IBM works with homogeneous
strategies, values, skills, and processes; it also has global standards and levels of
services.
1 http://www.ibm.com
2 Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround, Louis V. Gerstner Jr., Harper
Business, 2002
148
In July 2003, BusinessWeek and Interbrand Corp., ranked IBM the third best
global brand after Coca-Cola and Microsoft.1
12.1.2. Activities
A] IBM
• 1st in hardware;
• 1st in IT Services;
• 5th in PC;
• 2nd in software.
IBM Global Services is the largest business and IT services company in the
world, helping customers managing IT operations and resources and
capitalizing on IT to improve performance. It hires almost 175,000 professionals,
consultants, project managers, architects, and specialists.
1 http://famulus.msnbc.com/FamulusCom/reuters07-24-140033.asp?sym=msft#body
149
• Learning Services.
For the 10th consecutive year, IBM received the most U.S. patents with
almost 3,000 in 2002.
12.1.3. Strategy
To serve its strategy, IBM also made the computing model evolve to an
“On Demand Operating Environment”, because the increasing complexity of
systems is making them extremely costly to manage and maintain.
1 “2000 Outsourcing Services: Market Share and Forecast”, Gartner, March 2001
150
Indeed, one can say IBM is a major outsourcing provider, but also an
industry pioneer thanks to its experienced methods and tools that are:
• Its very large size and its wide range of clients around the world;
Most of the time, IBM outsourcing deals are at the EMEA or global level,
and are coordinated by an HR outsourcing specialist in the country where the
1 http://www-1.ibm.com/services/stratout/
151
Finally, the IBM EMEA strategic outsourcing team looks after human and
social aspects of the outsourcing operation thanks to:
But IBM decided to go to the next level, keeping its quality programs and
becoming more efficient. As Peter J. Smail, President of FESCo, said: “Their
choice were clear: either make a significant investment over the next three
years or more to upgrade systems, or find a partner who could provide
152
As developed later, the decision has been taken to sign a partnership with
Fidelity Employer Services Company, which provides the technology and
people required by IBM. Moreover, FESCo can leverage its investments,
because it serves many large companies, and has experience and capabilities
to offer a wide range of services and products.
a) Company overview
1 “Substantial Benefits, Inside the IBM-Fidelity outsourcing partnership”, Fidelity Investments, 20th
December 2002, http://www.fidelity.com
2 http://www.fidelity.com
3 http://www.fidelity.com
153
b) HR outsourcing deal
IBM outsources to Fidelity Employer Services Company (2nd July 2002) the
administration of its benefits1: pension and health & welfare plans, along with a
broad range of HR services.
IBM’s pension plan is the 12th largest in the U.S., with assets of $56.5 billion
last year.2
c) Tangible transfers
i/ Staff transfer
FESCo leases a call center in Raleigh, North Carolina, that IBM opened in
1994 (see 12.3.1.A]) to handle questions from its 140,000 workers in the U.S. and
120,000 retirees about retirement, health, charitable giving, and other benefits.
FESCo said that it plans to expand the Raleigh, N.C., service center to
1 “Fidelity to oversee IBM’s pension plan”, Boston Business Journal, 2nd July 2002
2 “Fidelity to oversee IBM’s pension plan”, Boston Business Journal, 2nd July 2002
3 “Substantial Benefits, Inside the IBM-Fidelity outsourcing partnership”, Fidelity Investments, 20th
December 2002, http://www.fidelity.com, “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”,
David Cay Johnston, The New York Times, 3rd July 2002
4 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”, David Cay Johnston, The New York
Times, 3rd July 2002
154
FESCo will also use IBM’s former facilities in Endicott and White Plains, New
York.
d) Business opportunity
At the same time1, Fidelity Investments and IBM announced that they form
venture to market HR payroll and benefits outsourcing services to other
companies. Executives of both companies said indeed they saw “a promising
business in selling payroll and benefits services to large employers, including
government agencies and major non-profit organizations”.2 Fidelity Investments
provides benefits expertise, experience and capabilities and IBM provides
computers and databases.
The two parties said, according to the New York Times that they expected
in 2005 “benefits to grow into an industry with $43 billion to $45 billion of annual
revenue. The industry takes in about $12 billion today”.3
i/ IBM
1 “Fidelity to run IBM pension and health plans”, Reuters Company News, 2nd July 2002
2 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”, David Cay Johnston, The New York
Times, 3rd July 2002
4 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”, Fidelity
Employer Services, 2nd July 2002, http://www.fidelity.com
155
Moreover, FESCo integrates 450 of the “best Human Resources and payroll
people in the business”2, as “IBM-trained Human Resources staff with a high
level of expertise and professionalism”.3 Not only FESCo gains the best practices
and professionals, but also IBM’s former facilities. As Peter J. Smail claimed: “[…]
we’ll now have locations in Raleigh, North Carolina, as well as in Endicott and
White Plains, New York. Including Raleigh, Fidelity will have phone centers in 6
regional locations altogether. With this expansion, we can serve even more
large corporate clients efficiently.”4
A] Self-Service
1 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”, Fidelity
Employer Services, 2nd July 2002, http://www.fidelity.com
2 “Substantial Benefits, Inside the IBM-Fidelity outsourcing partnership”, “Substantial Benefits, Inside the
IBM-Fidelity outsourcing partnership”, Fidelity Investments, 20th December 2002, http://www.fidelity.com
3 “Substantial Benefits, Inside the IBM-Fidelity outsourcing partnership”, “Substantial Benefits, Inside the
IBM-Fidelity outsourcing partnership”, Fidelity Investments, 20th December 2002, http://www.fidelity.com
4 “Substantial Benefits, Inside the IBM-Fidelity outsourcing partnership”, “Substantial Benefits, Inside the
IBM-Fidelity outsourcing partnership”, Fidelity Investments, 20th December 2002, http://www.fidelity.com
5 “Web HR frees up time for strategy”, Personnel Today, 31st October 2000
156
a) Presentation
b) Objective
1 “Web HR frees up time for strategy”, Personnel Today, 31st October 2000
3 “IBM HR caters for over 40 countries”, Letter of the week, Personnel Today, 10th July 2001
4 Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Israel, Italy,
Netherlands, Norway, Portugal, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey, U.K.
157
Moreover, as Tim Stevens, IBM EMEA Employee Relations and IBM France
HR Leader said: “its creation followed a major reorganization by a new Chief
Executive who also believed that HR had a leading role to play in IBM’s
success”.1 He also claimed: “the aim of the service centre at Portsmouth is to
ensure HR professionals in each country are not burdened with routine
administrative functions”. Indeed, EMEA employees and managers can now
get help directly by accessing the intranet, sending e-mail or calling the EHRSC.
c) Organization
2 “IBM takes a more general view of global HR delivery”, Personnel Today, 6th March 2001
158
C] Results
Even while the Employee Service Center experience had already been
applied in the U.S. (see 12.3.1.A]), IBM was not sure this would be so feasible
and successful (efficiency and service quality improvements) with a group of so
many different countries.
Finally, the implementation of this service center combined with the e-HR
solution allowed IBM to save in 2000 over 57%1 of its previous HR costs, and
allowed HR managers not to answer all calls or e-mails now handled by the
EHRSC (in 2000, it fielded 190,000 calls and 46,000 e-mails2).
1 “IBM takes a more general view of global HR delivery”, Personnel Today, 6th March 2001
2 “IBM takes a more general view of global HR delivery”, Personnel Today, 6th March 2001
3 “IBM takes a more general view of global HR delivery”, Personnel Today, 6th March 2001
159
To find the optimum point, HCS defined its key drivers as following:
160
• Downsizing painlessly;
• Procurement;
• Human Resources.
BTO helps its clients to build a strategic transformation agenda, to set new
directions and reduce risks by identifying and delivering future market positions
and providing capabilities to capitalize on them (win in existing markets and
enter new ones); its aim is also to make its clients’ processes run more efficiently.
IBM Global Services offers new IT solutions to help the Human Resources
department to be integrated in the whole company politics in a more efficient
way, at lower costs, and no longer to be reduced only to Personnel
Management (that is administrative and transactional activities, etc.). These
services help clients to construct efficient HR strategies and to focus on new HR
priorities.
161
• Products advice;
1 http://www-5.ibm.com/services/de/pdf/erp_hr-practice.pdf
162
B] Services description
IBM HR technological services allows decreasing the time and the money
spent in dealing with employees’ data, and on the other hand increasing the
level of employee services.
• Knowledge Management;
163
~ Outsourcing;
~ Processes automation;
• HR Access;
• Peoplesoft;
• SAP HR.
• Learning Services;
• Outsourcing;
• Global Financing.
12.5. Conclusion
IBM is worldwide famous for being a major actor of the computer industry.
Through this chapter we have been able to demonstrate that IBM could not be
reduced to this computer industry. IBM is now evidently focusing on “e-business
on demand” in general, and not on the only technology industry.
IBM in Europe, as we saw, counts more than 100, 000 brains organized in a
dense network. It has chosen to manage its Human Resources with the help of
the most modern tools ever imagined so far, accumulating one of the greatest
experience as far as a successful Human Resources management is
concerned. In the end, we all know that IBM is still unquestionably one of the
global leader as far as technological services are concerned and has
pioneered in this area the best outsourcing practices.
1 “IBM recrute et forme pour le compte de son réseau”, Les Echos, 1st February 2000
165
Finally, in the long term, we believe that IBM will offer an even wider range
of business services with a slogan that could say something like: “you focus on
your core competencies and we perform the rest on demand”.
166
167
We are now more than motivated to apply our knowledge at the service
of our future employers in exchange for ambitious, exciting, practical, and
enriching new experiences.
168
BOOKS
• Gerstner Louis V. Jr., Who Says Elephants Can’t Dance? Inside IBM’s
Historic Turnaround, Harper Business, 2002.
• Kaplan Robert S. and Norton David P., Le tableau de bord prospectif, Les
Editions d’Organisation, 1998.
169
PROFESSIONAL PUBLICATIONS
170
171
ARTICLES
172
• Bates Steve, “ Bigg fishing for business: HR outsourcing firms are forming
partnerships and acquiring resources in a bid to get contracts from big
business (Outsourcing)”, HR Magazine, April 2002.
• BBC News Online, “Bosses war against rights for temps”, 18th February
2002.
• Beary Habib, “India warns U.S. over outsourcing”, BBC News Online, 12th
June 2003.
• Boston Business Journal, “Fidelity to oversee IBM’s pension plan”, 2nd July
2002.
• CBI Press, “CBI launches new bid to block irreparable damage from E.U.
temping law”, 30th May 2003.
173
• Cohen Don and Prusak Laurence (Executive Director IBM Institute for
Knowledge Management), “How to invest in social capital”, Harvard
Business Review, June 2001.
• Drucker Peter F., “The Near Future (Part II)”, The Economist, 9th November
2001, http://www.cfo.com/printarticle/0,5317,5642%7C,00.html
• Feeny David F., Lacity Mary C., and Willcocks Leslie P., “The Value of
Selective IT Outsourcing”, Sloan Management Review, Volume 37,
Number 3, Spring 1996.
• Ferranti John Blau Marc, Law Gillian, and Sayer Per, “Protectionism hits
the outsourcing industry”, Info World, 15th April 2003.
174
• Gundel Elke,“Zeitarbeit als Brücke auf dem Weg zum neuen Job”, Weser
Kurier Online, 6th June 2003.
175
• Les Echos, “IBM recrute et forme pour le compte de son réseau”, 1st
February 2000.
• Marchant Catriona, “Oil giant flies the flag for keeping HR skills in-house”,
Personnel Today, 26th September 2000.
176
• Personnel Today, “Web HR frees up time for strategy”, 31st October 2000.
• Reuters Company News, “Fidelity to run IBM pension and health plans”,
2nd July 2002.
177
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• http://eu.dupont.com/
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• http://europa.eu.int/eur-
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EXnumdoc&lg=EN&numdoc =31977L0187&model=guichett
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ssrelease_560.xml
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• http://www.accenture.com/xd/xd.asp?it=enweb&xd=_dyn/dynamicpre
ssrelease_563.xml
• http://www.accenture.com/xd/xd.asp?it=enweb&xd=services%5Chp%5
Chrservices%5Ccase%5Chrs_bt.xml
• http://www.acs-inc.com/about/index.html
• http://www.aon.com/about/aon_corporation/history_facts.jsp
• http://www.boeing.com
• http://www.boeing.com/companyoffices/aboutus/brief.html
• http://www.bp.com/company_overview/profile/index.asp
• http://www.convergys.com/company_overview.html
• http://www.csfb.com/about_csfb/company_information/about_csg/ind
ex.shtml
• http://www.dataquest.com
• http://www.eds.com/about_eds/en_about_eds.shtml
• http://www.eiro.eurofound.eu.int/2002/11/feature/EU0211206F.html
• http://eu.dupont.com/NASApp/dupontglobal/eu/index.jsp?page=/cont
ent/EU/en_US/overview/glance.html
• http://www.exult.net
• http://www.exult.net/clients/contract_boa.html
• http://www.exult.net/clients/contract_bp.html
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• http://www.exult.net/clients/contract_pru.html
• http://www.fidelity.com
• http://www.kelloggs.com/company/
• http://www.mellon.com/hrsolutions/aboutus/
• http://www.ibm.com
• http://www-1.ibm.com/services/stratout/
• http://www-5.ibm.com/services/de/pdf/erp_hr-practice.pdf
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A CK N O W LE DG MEN TS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
G EN E RA L TAB L E OF CO N T ENT S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
F O RE WO RD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IN TR OD UCT I ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1 .2 . Ou t sou r c in g Si t ua t io n s A nd A pp r oac he s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4
b ) T r a d i t i o n a l o u t s o u r c i n g wi t h d i s i n t e g r a t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5
c ) S t r a t e g i c o u t s o u r c i n g wi t h d i s i n t e g r a t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5
e ) O u t s o u r c i n g wi t h a s s e t s l e a s i n g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6
b ) B P O (B u s i n e s s P r o c e s s O u t s o u r c i n g ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8
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1 .3 . Ou t sou r c in g T ren d s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9
c) Benchmarking......................................................................... 23
d) Mimicry .................................................................................. 23
1 .3 .3 . Ma in B PO p r ov ide rs ........................................................... 23
2 . 3 . H um an R e so u rce s I s s ue s O f T he Mul t i na ti o na l C om pa ny I n
E u ro pe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0
A] Figures ..................................................................................... 30
B] Trends ...................................................................................... 32
C] Challenges .............................................................................. 34
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3 .1 . H um an R e so u rce s O u t so u rc i ng De fi ni t io n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8
a ) D e f i n i ti o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 0
b) Objectives .............................................................................. 41
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P A R T I I . S TR A TE GI C A P P R OA CH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0
4 .1 . On go in g C om pet i t io n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1
4 .2 . B o rd erl e s s O r gan i za t io n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3
B] Alliances .................................................................................. 56
C] CRM......................................................................................... 57
A] Definition ................................................................................. 59
B] Segmentation of activities......................................................... 60
4 .3 . K now le d ge w o rke r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3
A] Figures ..................................................................................... 66
B] Trend ....................................................................................... 67
C] Threatened flexibility................................................................ 67
5 .2 . S co pe Exp a n si on s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9
185
5 .3 . Ex p ansi o n s Ex p la n a ti on s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9
5 .3 .1 . Flex ib il it y ........................................................................... 69
5 .4 . I s s ue s Fo r T he Ou t s ou r ci n g Co mp a ny . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2
5 .5 . H um an R e so u rce s N ew Ob j ec t ive s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3
6 .1 . Ou t sou r c in g Dec i s io n Th eo r y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7
6 .1 .1 . Ba ses................................................................................. 77
a) Principles ................................................................................ 77
i/ Insourcing .................................................................................. 80
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6 .2 . Wh a t S ho u ld Be O u t so u rc ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3
6 .3 . A dv an t a ge s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5
6 .4 . D r aw ba ck s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6
P A R T I I I . I M P LE ME N TA TI ON . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7 .1 . P ro j ect Te am . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9
7 .2 . P ro j ect D ef in it ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7 .3 . I n te rna l I s s ue s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1
187
7 .4 . Ex te r na l I s s ue s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3
b ) T h e i n v i t a t i o n t o t e n d e r wi t h p r e s e l e c t i o n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5
7 .5 . Fa ct o rs de te r mi ni n g t he s uc ce s s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 0
7 .6 . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 1
8 .1 . Ou t sou r c in g L ega l A c to r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 2
8 .2 . Le g al F r a mewo rk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 3
8 .2 .3 . St a ff t ra ns fe r ................................................................... 104
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8 .3 . Ou t sou r c in g Con t r ac t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1
189
8 .4 . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 0
9 .1 . E le men t s T o K e ep I n te r na l ly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 1
9 .2 . R eq u i re d Sk il l s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3
9 .3 . Ot he r S ol u ti on s To K ee p Con t r ol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 4
9 .4 . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 5
9 .4 .1 . Ba d st a rt ......................................................................... 125
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C H A P T E R 10. H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D C U S T O M E R S . . . . . . . 1 2 9
1 0 . 1 . Com p an ie s T h a t H av e O u t so u rc e d T h e i r T r a n s ac t io n al
A c t iv i ti e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 9
1 0 . 2 . A Co m p a ny Th a t H a s O u t so u rc e d S o m e O f I t s H um an
R e so u rce s P r oce s s e s: K e ll og g Fo od s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 6
191
a ) P o s i ti v e o n e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 9
C H A P T E R 11. H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D P R O V I D E R S . . . . . . . . 1 4 2
1 2 .1 . Comp a ny Ov e rv iew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 8
1 2 .2 . Ma j or O ut s ou r ci n g P r ovi de r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 0
1 2 .3 . Comp e ti t ive Hu m an Re so u rc e s O rg a n iz at io n . . . . . . . . . . . . . . . . . . . . . . . 1 5 2
193
c) Organization......................................................................... 158
b ) E R P (E n t e r p r i s e R e s o u r c e P l a n n i n g ) s e r v i c e s . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4
1 2 .5 . Co nc l u si on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 5
C ON C LU SIO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 7
A FT ER WO RD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 8
R EF EREN CES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 9
T A B LE O F IL L U ST RAT IO N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 1
D EC LA RA TIO N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 5
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Mathilde RENAUX
Eloi MALTA-BEY
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