Vendor management and business acumen are new core competencies for HR
Some years AGO, during a meeting with some of her HR staff, Rose Patten discovered to her surprise that a few in the audience didn’t know that EPS stood for “earnings per share.”
This kind of disregard for business basics is, “in today’s world, not quite acceptable,” said Patten, senior executive vice-president of HR and strategic management at BMO.
Now, another HR skills overhaul is under way. At BMO, a brand new human resource curriculum is being developed to reflect the changing times. Designed to meet the needs of a new era of HR outsourcing, the curriculum stresses business acumen and financial competencies on top of the technical HR skills.
“People don’t have to be MBAs or accountants, but they have to be able to understand the financial framework of the organization.”
Beneath the swirl of debate around HR outsourcing and its impact on business, there’s a quiet thread of concern about outsourcing’s long-term impact on the HR profession itself. If carried out to its full potential, HR outsourcing may indeed leave HR departments pared down and with altogether different roles: that of making strategic decisions and ensuring those decisions are carried out by the stable of vendors, consultants and service providers. The day-to-day job, in all probability, would bear little resemblance to the work HR professionals currently engage in.
At BMO, a special team assembled to handle vendors offers a hint as to what the HR department of the future may look like. Last April, BMO’s HR department was cut down by half as the bank signed a 10-year, $750-million deal with outsource provider Exult to take over payroll and benefits administration, HR call-centre management, employee records and other technology-driven administrative functions. To manage this outsourcing relationship, a team of seven or eight people was assembled under the name, “operational management and governance.” Of this team, some came from HR; others came from the bank’s risk management and finance departments.
The mix, said Patten, was intended to bring together four important sets of skills. The first is project management. The second is risk management, which pertains to such things as compliance and audits. The third set of skills is financial management, which concerns metrics to measure service delivered. The fourth is process management, which becomes crucial when things go wrong.
“These four competencies show a set of capabilities which is different from what HR traditionally has,” said Patten. “We’re moving into a different model of HR management. In this new model, people are much more into problem solving. They really have to be partners to the business.”
HR professionals still need to retain a firm grasp on HR processes, said Graham Kemp, managing director of business process outsourcing at the Jericho, N.Y.-based Outsourcing Institute.
Organizations that outsource a considerable part of the HR department run the risk of excising themselves of an intimate knowledge of HR processes, he said. If that happens, they become dependent on vendors for their education on what needs to be done and how. That dependence, said Kemp, “leaves the client in a very weak position.”
HR practitioners still need to address issues germane to an outsourcing relationship that are just emerging, said Chris Klus, an Ottawa-area organizational effectiveness consultant.
“These are issues such as who owns the records, what do you do about privacy, what do you do when standards aren’t met, what are the legal remedies? There are a whole bunch of issues that have to be worked out and there’s no jurisprudence to guide you through them.”
Klus noted that the majority of outsourcing agreements have been opportune arrangements built around a pre-existing relationship. “For example, a head of HR would run into somebody who’s interested in providing the service, and they get together and say, ‘Let’s try it.’”
As a result, the experience is as new for the vendor as it is for the client organizations. And businesses that have formed such relationships have the advantage of being able to iron out the wrinkles as they develop, said Klus.
At CIBC, vice-president of operations and knowledge management Hugh MacDonald downplays the challenge, saying that HR is already good at partnering up with other business divisions. HR professionals involved in vendor management should use their talents to partner with people in purchasing, in legal, as well as peers in the industry.
“HR people have a long history working with vendors,” said MacDonald, citing contractual relationships with payroll services, insurers and staffing agencies. “The only thing different about HR outsourcing is the scale, and the result of that there’s a need for more oversight.”
CIBC has developed six rigorous governance processes to make sure that potential problems with vendors are met head-on. “The technology governance process would cover such things as making sure the vendor’s technology interfaces with yours, or that privacy issues are dealt with, or architecture issues are dealt with. It covers service agreements, response times, service levels for downtimes, and all these things,” said MacDonald.
“And the most important process of all is the relationship management process. A relationship doesn’t just happen. It has to be managed,” he added. “So at the bottom of the governance process, you have low-level people meeting to discuss issues or incidents or problems. Then on the top of the governance process, you have very senior executives meeting on a regular basis to discuss service levels and achievements and future directions.”
What’s crucial is regular communication so that problems don’t come as a surprise to any party, said MacDonald.
Asked to identify the skill sets most important to an HR department that engages in substantial outsourcing, MacDonald said project management and negotiation skills. Good project management, he said, begins with an ability to identify and analyze an organization’s needs using discipline, planning and a consistent approach, as well as an ability to anticipate the needs as they evolve through the life cycle of a project. Encapsulating these needs in a request for proposal is a required skill, as is the abilities to source the appropriate people to submit proposals and then to analyze those proposals.
This kind of disregard for business basics is, “in today’s world, not quite acceptable,” said Patten, senior executive vice-president of HR and strategic management at BMO.
Now, another HR skills overhaul is under way. At BMO, a brand new human resource curriculum is being developed to reflect the changing times. Designed to meet the needs of a new era of HR outsourcing, the curriculum stresses business acumen and financial competencies on top of the technical HR skills.
“People don’t have to be MBAs or accountants, but they have to be able to understand the financial framework of the organization.”
Beneath the swirl of debate around HR outsourcing and its impact on business, there’s a quiet thread of concern about outsourcing’s long-term impact on the HR profession itself. If carried out to its full potential, HR outsourcing may indeed leave HR departments pared down and with altogether different roles: that of making strategic decisions and ensuring those decisions are carried out by the stable of vendors, consultants and service providers. The day-to-day job, in all probability, would bear little resemblance to the work HR professionals currently engage in.
At BMO, a special team assembled to handle vendors offers a hint as to what the HR department of the future may look like. Last April, BMO’s HR department was cut down by half as the bank signed a 10-year, $750-million deal with outsource provider Exult to take over payroll and benefits administration, HR call-centre management, employee records and other technology-driven administrative functions. To manage this outsourcing relationship, a team of seven or eight people was assembled under the name, “operational management and governance.” Of this team, some came from HR; others came from the bank’s risk management and finance departments.
The mix, said Patten, was intended to bring together four important sets of skills. The first is project management. The second is risk management, which pertains to such things as compliance and audits. The third set of skills is financial management, which concerns metrics to measure service delivered. The fourth is process management, which becomes crucial when things go wrong.
“These four competencies show a set of capabilities which is different from what HR traditionally has,” said Patten. “We’re moving into a different model of HR management. In this new model, people are much more into problem solving. They really have to be partners to the business.”
HR professionals still need to retain a firm grasp on HR processes, said Graham Kemp, managing director of business process outsourcing at the Jericho, N.Y.-based Outsourcing Institute.
Organizations that outsource a considerable part of the HR department run the risk of excising themselves of an intimate knowledge of HR processes, he said. If that happens, they become dependent on vendors for their education on what needs to be done and how. That dependence, said Kemp, “leaves the client in a very weak position.”
HR practitioners still need to address issues germane to an outsourcing relationship that are just emerging, said Chris Klus, an Ottawa-area organizational effectiveness consultant.
“These are issues such as who owns the records, what do you do about privacy, what do you do when standards aren’t met, what are the legal remedies? There are a whole bunch of issues that have to be worked out and there’s no jurisprudence to guide you through them.”
Klus noted that the majority of outsourcing agreements have been opportune arrangements built around a pre-existing relationship. “For example, a head of HR would run into somebody who’s interested in providing the service, and they get together and say, ‘Let’s try it.’”
As a result, the experience is as new for the vendor as it is for the client organizations. And businesses that have formed such relationships have the advantage of being able to iron out the wrinkles as they develop, said Klus.
At CIBC, vice-president of operations and knowledge management Hugh MacDonald downplays the challenge, saying that HR is already good at partnering up with other business divisions. HR professionals involved in vendor management should use their talents to partner with people in purchasing, in legal, as well as peers in the industry.
“HR people have a long history working with vendors,” said MacDonald, citing contractual relationships with payroll services, insurers and staffing agencies. “The only thing different about HR outsourcing is the scale, and the result of that there’s a need for more oversight.”
CIBC has developed six rigorous governance processes to make sure that potential problems with vendors are met head-on. “The technology governance process would cover such things as making sure the vendor’s technology interfaces with yours, or that privacy issues are dealt with, or architecture issues are dealt with. It covers service agreements, response times, service levels for downtimes, and all these things,” said MacDonald.
“And the most important process of all is the relationship management process. A relationship doesn’t just happen. It has to be managed,” he added. “So at the bottom of the governance process, you have low-level people meeting to discuss issues or incidents or problems. Then on the top of the governance process, you have very senior executives meeting on a regular basis to discuss service levels and achievements and future directions.”
What’s crucial is regular communication so that problems don’t come as a surprise to any party, said MacDonald.
Asked to identify the skill sets most important to an HR department that engages in substantial outsourcing, MacDonald said project management and negotiation skills. Good project management, he said, begins with an ability to identify and analyze an organization’s needs using discipline, planning and a consistent approach, as well as an ability to anticipate the needs as they evolve through the life cycle of a project. Encapsulating these needs in a request for proposal is a required skill, as is the abilities to source the appropriate people to submit proposals and then to analyze those proposals.
