It’s 6pm on the Friday before Christmas and I am sitting in the pub with some of my esteemed colleagues putting the world to rights about the important things in life such as ‘why don’t we eat pigs in blankets all year’ and ‘why cracker hats no longer fit over our heads’. Amidst the high-brow debate we segway into cracker production strategy, automation through robotics and whether to outsource cracker production or not - potentially giving us more flexibility in hat size but at a cost premium…it got to 11 pm, time at the bar is called and we went our separate ways leaving the debate inevitably unsolved.
With Christmas now over, I think back to that evening and also look down the 2016 runway knowing we will continue to have many similar but more fruitful conversations with our clients around HR sourcing strategy. It is clear that in 2016 automation is going to be a hot topic, advancing Software as a Service (SaaS) products and Robotic Process Automation are going to bring the next wave of HR Transformation. This, coupled with ‘HR’s Extreme Make Over’, that my colleagues Mark Bowden and Laurence Collins wrote about in 2015, makes for another disruptive year for the HR market.
Critically, technology will fundamentally change the role of HR Operations, automating transactional work, enabling Operations to deliver higher value service such as Learning, Recruitment and ER – which in turn has a knock on effect for Communities of Expertise (CoE) – but what effect will all this tech have on our sourcing strategies?
Throughout the naughties we have seen many of our clients outsource transactional services to vendors. Using vendors to deliver repeatable, scalable, rule-based activity, performed in low cost locations in established offshore hubs at a fraction of the onshore equivalent cost. However, with the majority of organisations investing in SaaS and automation in 2016, this puts a question mark over the need for outsourcing HR transactional services. The majority of transactional, rule based activity should be automated, so why pay a mark-up for offshore staff through third parties? More and more we are seeing transactional activity move in house, optimised and then automated.
As intelligent customers, we can leverage this technology to drive efficiency throughout BPO contracts too. As well as our clients, many of the BPO providers are looking to automation to drive process excellence. As we look forward to 2020, contract transparency and flexibility with our BPOs is essential, gone are the days of the 5/10 year fixed cost BPO contracts, technology is just moving too quickly to justify the contract length. RPA can deliver processing at 10% cost of an onshore FTE. The transactional challenge is whether we bring transactional activity in-house, automate and eliminate, or continue to outsource, leaning hard on our vendors to pass on the inevitable efficiency savings.
As HR Operations moves up the value chain (e.g. delivering recruitment & learning), it becomes clear that decisions made around sourcing and technology investment in transactional activities directly affect the ability to deliver higher value and strategic services. The reduction in the need for transactional FTE will release resources to focus on customer advisory and delivery services. Once success in delivery of recruitment and learning is proved, Global Mobility, Employee Relations and Performance often follow. Technology is changing the talent profile of HR; the classic pyramid model now takes on more of a diamond shape as we head into the back half of the teens.
Moving the big breasted chunks of recruitment and learning delivery onto the HR Operations plate, leaves our CoEs with pure strategy to get their teeth into. There is little opportunity for automation within HR Strategy. Nonetheless, the changes in technology will enable nearly all query management, advisory and transactional work to be removed from the CoEs – there is no place for the tubby waistlines of 90’s Ulrich CoEs. In 2016, lean and mean rules the roost.
From a sourcing perspective, we seldom see CoEs outsourced. Though when we consider the typical activities a CoE would perform – highly specialist and low volume - this would at first glance make our procurement departments start salivating for an outsourcing buffet. The need for proximity to the business and the market trend of moving from the traditional Centres of Excellence to more business focused Communities of Expertise, CoE sourcing tends to remain in house.
The ultra-lean, highly strategic CoE function of 2016 cannot deliver projects and strategy alone. CoEs and leadership will continue to form long term business partnerships with consultants, using them as strategy sounding boards, to advise market place perspectives and leading practice. This coupled with strategic contractors and SMEs from around the business make for a very strong strategic function. The HR Strategy 3 bird roast - The small CoE partridge, wrapped in the SME and contractor chicken, surrounded by the consulting turkey facing off to the outside world - Nigella would be proud.
So what have I gleaned from my musings over the festive period?
- The Gravy is changing – Like any great Christmas dinner; it’s the gravy that touches everything. That gravy is new technology and it’s here to stay, it is going to touch everything on the plate, fundamentally changing the flavour of HR operating models for years to come
- A plate of just Turkey doesn’t work – Our HR Delivery models cannot be designed in Silos; decisions made around sourcing and technology, even at a transactional level, will impact the whole dish. No one part of the operating model can be changed on its own, focus on changing the whole plate
*Deloitte Report: The Robots are Coming 2015