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Business Process Outsourcing: Myth or Reality?

ECM
Fortnightly Magazine - September 2004

important personnel changes. But the best companies take an additional step: They employ "enabling controls" that go beyond traditional constraints to cultivate trust between these companies and the providers, and expand the scope of their relationships.

In HR, for instance, executives are well aware that the industry "perfect storm"-deregulation, blackouts, high prices, and the post-Enron fallout-have made the recruitment and retention of talent a difficult challenge for many utility and energy companies. And as is true for all companies, the aging workforce as the Baby Boom generation moves toward retirement is placing even further stress on HR departments.

Handling the Utility Human Resources Crisis

Hiring new workers from outside the industry is essential. However, energy and utility companies must do more to train newcomers to the industry about highly technical engineering and regulatory matters while acclimating employees to the unique utility culture. To allow HR departments to focus on these strategic HR issues, they must be freed from handling routine, time and resource-consuming administrative tasks and benefits transactions.

In -a just released study by The Conference Board and sponsored by Accenture HR Services-interviews with CEOs and HR executives at utility and energy companies reveal that companies in this industry are leveraging HR outsourcing as well as intensifying their HR shared services and increasing their investments in HR technology. These three strategies continue to offer the HR function within the utility and energy companies the ability to rise above routine tasks and transactions to address the growing strategic issues.

The survey found that most companies deliver HR services via a blended solution using both internal and external capabilities with multiple providers. Among companies fully outsourcing services, more than half of those surveyed do so for 401(k) programs, and about 30 percent for pensions/benefits, stock options administration, and health benefits.

Furthermore, about half of the survey participants said they partially outsource health benefits, as well as training and development, and 40 percent partially outsource payroll. Our research has found that executives are highly satisfied with their outsourcing arrangements, and are more satisfied the more they outsource.

In another recently released study by The Conference Board, also sponsored by Accenture HR Services, it was found that 76 percent of executives surveyed outsource one or more major HR function, and 80 percent said they would outsource again based on their experience. None reported plans to take outsourced services back in-house.

And in Accenture's fourth annual , we found that the mean satisfaction rating with the HR and training functions is higher among respondents who outsource all of a particular training or HR activity, such as recruiting, payroll, training content development, or training delivery, than among those who outsource none of that activity.

The question today is less about whether or not to outsource than how to get better at it. HR outsourcing enables HR executives to focus on strategic human capital issues and become a more integral part of the decision-making and planning processes. In other words, outsourcing allows HR departments to focus on their core business-people-because a company's business strategy is nothing if it doesn't