Posted by: Ron Hanscome | October 12, 2010

HR Tech 2010 Recap: Unsexy, but Critical Part II – HR BPO

Way back in April of 2004 I was sitting on a panel at the IHRIM show and discussing comprehensive HR Business Process Outsourcing with a number of other analysts. While some (er, at least one female industry icon) predicted large scale usage (45%!) by 2008, I (along with Gartner’s Jim Holincheck) was skeptical about actual adoption; while many would evaluate, I believed that (at most) 15% of the Global 2000 would actually sign contracts. Well, we all know what happened to the HR BPO phenomenon; more than seven years later, actual adoption is even less than my forecast, as economic conditions, faulty business models, inefficient processes, and vendor management issues caused many organizations to back away from the concept. However, some firms have forged ahead with these types of engagements, and I felt it was important to see a real-time project in action in order to fully understand the current state of HR BPO. Fortunately, the conference delivered a first-class case study example with the session describing Kraft Foods’ partnership with IBM, led by Brenda Sural of Kraft Foods and Guy Heiser of IBM.

Brenda described the Kraft Foods organization ($50B revenue, sales in 160+ countries, operations in 70+ countries, ~140k employees), corporate strategies/goals (Build a high-performing org, Reframe categories, Exploit sales capabilities, Drive down costs without compromising quality), and the need to transform HR to deliver “breakthrough outcomes.” The answer was to develop and deploy over an eight year period a fresh approach for delivering HR services globally using modern, integrated technology. The goal of the transformation is to change the traditional “pyramid” HR model to a “diamond” shape, with the reduction in admin accomplished by used of outsourced processes and full utilization of employee and manager self service:

Kraft Foods has developed a new HR Service Delivery Model composed of an HR Business Lead function that defines business & HR priorities, Centers of Expertise that design the solutions, and HR Operations & Delivery that delivers effective, efficient HR services. But how is this being rolled out to the organization?

Central to Kraft Foods’ strategy is the division of HR administrative outsourcing support into two main categories:

  • Full Service countries (Canada, USA, UK, Germany, Austria, Switzerland, Belgium, France, Mexico, Brazil) receive a full complement of admin services (workforce admin [SAP], compensation [ADP Workscape], talent mgmt, payroll [SAP], recruiting [Taleo], learning [Saba], and time & attendance for North America) — delivered all of these countries are live except for Mexico & Brazil
  • Basic Service countries (the remaining 60+) will receive call center support for HR professionals in English, one global basic HR knowledgebase with policies in English, and Global Process Technology — this is scheduled to go live by Q4 2011.

MyHR Online is another critical component that is meant to enable employee and manager self service for data changes, access to policies and procedures, and reporting. Developed by IBM, the application is backed by an HR Service Center staffed by IBM customer service reps in Manila, Budapest, and Hortolandia; the goal is for 98% of inquiries to be handled by Tier 0 (online), Tier 1 and Tier 2 support (IBM HR Service center reps & SMEs), leaving 2% to be covered by Tier 3 (Kraft Foods staff).

The initial launch in Canada and the US took place October 2009, and was delivered on time and within budget. Users were satisfied with the performance of the HR Service Center and MyHR Online; however, issues with the complexity of SAP position management, usability of reporting/forms/notifications, and data challenges caused the project team to take a step back and deploy a number of “Improvement Levers” (Navigation guidance, Transaction technology support, Process support, increased Change management) in April 2010 to stabilize the initial rollout and prepare the way for the July 2010 launch of the next set of Full Service countries. This intervention was successful, and the schedule for complete Kraft Foods HR Transformation is back on track, with IBM delivered services performing well against defined service levels, and Kraft Foods delivered services achieving established performance goals.

A lot of negative publicity about HR BPO has surfaced in recent years, with reports of long-term deals being ended or renegotiated, providers getting out of the business, and some high profile implementation “horror stories.” Although the story told by Kraft Foods and IBM clearly indicated the complexity and the challenges of a large scale HR BPO project, early results are positive. I look forward to hearing more about this project once all of country deployments have been completed to see whether Kraft Foods is able to fully execute on its vision for HR Transformation. It will also be important to understand whether the complexity of the systems architecture (SAP plus numerous best of breed applications) will allow the organization to truly measure the impact of their HR program investments over time. We shall see…

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