Article: HRO 2.0 - The new HR revolution in companies


HRO 2.0 - The new HR revolution in companies

Although Human Resource Outsourcing, or HRO 1.0 took a substantial time to gain stranglehold in the HR arena, HRO 2.0 is fast emerging as a preferred tool for HR managers to standardise and benchmark practices

As HRO 1.0 evolves to HRO 2.0, organisations will have new choices for delivery options that reflect the strengths of their prospective business partners


HR shared services has entered an era of increased relevance and value


Human resource management is a process of bringing people and organizations together so that the goals of each other are met. The role of HR manager is shifting from that of an administrator and screener to the role of a planner and change agent. Businesses are increasingly demanding high performance from all the ‘key stakeholders’ in business. On this demanding playing field, it requires non-stop innovation and a consistent drive to become more efficient. Technology and cost savings are not considered enough and increasingly, the biggest competitive edge for any global player is attributed to its people. It is no surprise then that the people and HR philosophy has become the cornerstone for delivering superlative performance for any business.

More than a decade after large U.S. companies began to adopt shared services in human resources (HR), this delivery model has proven its worth by cutting administrative costs, reducing transaction errors and generating greater employee satisfaction with basic HR processes. As Indian companies form their human resources vision and charter to give them a competitive edge in Talent Acquisition, Retention and Management; HR shared services has entered an era of increased relevance and value.

The structure which emerges for HR is a team consisting of high-level contributors, perhaps internal consultants, HR process designers and Change Champions — leaving all the transactional and administrative activities to vendors for which those processes are core.

HRO 1.0 to HRO 2.0!

A much less noticed, though growing, business has been that for human-resources business-process outsourcing, or HRO 1.0. Starting with payroll processing, outsourcers now offer to take over virtually any HR activity — or even the entire function.

HR Outsourcing is in transition from HRO 1.0 to HRO 2.0, as we have termed this movement. While traditionally, HRO meant payroll processing, HRO 2.0 has come to encompass virtually all the processes under the aegis of HR Shared Services (HRSS), catering to transactional activities while strategic HR remains in-house.

For decades, administrative matters related to compensation, benefits and personnel policies have consumed HR’s time. Now, most, if not all of these processes can be standardized, centralized and automated through a HRO. This frees HR to apply its energy to talent management, organizational development and other strategic endeavors that contribute directly to meeting business goals. In time, adopters will reap the double-barreled benefit of cutting costs and boosting HR’s strategic impact.

As HRO evolves to HRO 2.0, organizations have new choices for delivery options that reflect the strengths of their prospective business partners. Some of these investments will produce real benefits for the HR industry in general. It is up to HR heads to make critical decisions about how they will impact their organizations.

Outsourcing creates Focus

The new avatar of HRO, HRO 2.0 offers a mature all-inclusive paradigm which makes HR an equal partner in the business with Sales, Finance, Marketing and Operations. It is not just about HR but about business goals and about pragmatically soaking bottom-line pressures from direct revenue functions.

One of the pluses of going through the outsourcing procurement process is that you will learn much about your organization. The outsourcing process forces you to understand how your processes are being handled currently and how they compare to others in the industry. A detailed “As is understanding” of the process through scientific diagnostic tools helps to evaluate where you currently stand.

Hence, the end result is not some fancy consulting report but a set of expectations that will chart out deliverables for business. These decisions focus on thoughts about what you need or don’t need, since you will be immediately translating them into real money.

There is also an increased focus on measurements. HR heads have for long borne the brunt of CEOs for lacking the sophistication level of measurements that most other corporate functions are accustomed to today. However, during the past few years, HR has increasingly focused to deliver value with making the HR output completely objective for the business. These improved metrics and analytics are the result of not only increased sophistication from the mathematical perspective but also specific research on real-life HR problems. HRO has thrown a completely new paradigm to measure HR.

HR Shared Services (HRSS): The concept and its Impact

HRO empowers leaders to have real-time views of their organizations for their vision and charter. At the end of the day, the success or failure of HR will not be based upon how long it takes to answer a call in the contact center but around a much broader set of business metrics. You may call HRO as Business process outsourcing, Business Improvement HR transformation or maybe something else entirely. Whatever you may choose to call it, the name signifies a lot about mindset, objectives, and approach to implementing HRO.

Areas of HR that lend themselves to better standards via HRSS include the obvious services surrounding employee recruiting commonly known as Recruitment Process Outsourcing (RPO), payroll and other Retirals administration activities, as well as identification and administration of benefits plans. In addition, HROs develop capabilities that help organizations produce better results when it comes to managing workforce productivity, reducing liability exposure for employee relations issues, or being able to model global workforce changes to mirror changes in the business requirements.

None of the transformation is accomplished without some pain. Standardizing and then centralizing processes are the first two steps toward creating an HRO model, whether internal or outsourced. In highly decentralized companies, creating an HRO model may take several months. Some adopters choose to begin with only certain aspects and do the rest over time.

The journey of HRSS process would evolve in three stages to reap the actual benefits:

The biggest challenge here is Change Management. Employees must learn to use self-service and the Helpdesk center, not the HR representative which is available in person at their location, to solve problems. Line managers must be convinced that their dedicated HR specialists will provide more valuable service once they offload administration. HR team must adapt and retrain for new roles.

A few live case studies are showcased here to illustrate different HRSS scenarios across 3 different industries:

Read full story

Topics: Technology, C-Suite, #Innovation

Did you find this story helpful?



How do you envision AI transforming your work?