Service, Level, Agreements, HR, Outsourcing, Metrics, Success

Service Level Agreements for HRO – Measuring Success

One of the key elements to successful HR Outsourcing is the development and maintenance of metrics to manage service performance. But developing and agreeing appropriate metrics seems to be difficult for HR services. Why might this be?

Traditional HR metrics (such as turnover, sickness absence and training hours) are not a good means over which to measure service. This does not mean that they should not be reported and used by the organization as a measure of overall effectiveness, but they do not necessarily provide an appropriate framework within which to measure the HR Outsourcing.

Development of appropriate metrics can prove difficult, as outputs within HR may be less easy to identify than for other transactional services. Not only can they be labor intensive to capture; but also, perhaps more importantly, the role of HR within the organization may not be clearly defined or understood. HR more often acts a prop to the organization rather than being seen as having a strong mandate to drive business strategy. And of course there is the ‘human touch’ which is as difficult to articulate as a service.

So what is an appropriate service measure? Cost to hire? Employment contract accuracy and timeliness? Enquiries handled satisfactorily at first point of contact? If none of these seem that important, how do you define what will be effective?

Firstly, the same service agreement rules apply to HR as for F&A or IT:

• Determine what is important to your organization
• Focus on the output and not the process
• Be ‘specific’, loose wording can be misinterpreted and lead to dissatisfaction
• Focus on measures over which the provider has total control. Time to hire may be a valid HR metric, but it will be diluted by line managers and candidates responsiveness which detracts from the providers performance
• Determine measures that will invoke appropriate behaviors, e.g. do you want to use HR Outsourcing as the catalyst to change your line managers’ behaviors?

HR Outsourcing does have further considerations over other services given the perceived, and occasionally real, impact service delivery failure can have and therefore clients are rightly concerned with how they can determine the quality and accuracy of the services.

Consequences of inappropriate HR interactions can be an increase in informal and formal grievances or in extreme cases industrial action, both of which have been used as service measures by some clients.

Common points to be addressed with HR stakeholders include:

• How do I know you are doing it right?
• How do I know what advice you are giving?
• How do I support my managers with fewer staff?
• Plus there may be an expectation of service improvement just through the definition of the metrics. 100% achievement of a metric is not an uncommon demand.

These points can be addressed by the use of qualitative measures as well as quantitative. Reputational metrics should also be considered (e.g., acknowledgement of job applications, quality of training interventions, and timeliness and accuracy of statutory returns). Employees may not always agree with the information provided but that does not mean that the service provider has failed, a very useful measure is the number of cases ‘handled professionally’, which could hold no matter what the outcome.

In order to satisfy the need to control the face of HR, some clients have expected to be involved in the recruitment of HR Outsourcing staff, be involved in their induction and viewed the HR Outsourcing as their virtual team and not a service. Development of trust and robust service delivery will change this view, but in the interim the service measures selected must support the partnership journey, which will benefit both HR Outsourcing provider and client.

By Meryl Grainger, Associate Partner
Alsbridge, Europe

Meryl Grainger is an Associate Partner with Alsbridge focusing on the migration of services into Finance and Human Resources Shared Services Centers. Meryl is a Chartered Management Accountant with over 10 years operational experience in blue-chip multi-national companies where her key achievements included post acquisition pan-European integrations, finance function restructuring and systems selection and implementation.