Hochschule Bremen School of International Business - HBSIB

University of Applied Sciences Herr Prof. Dr. Ulrich ROHR

MBA in Global Management

OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE

Master Thesis 31st July 2003

Ms. Mathilde RENAUX & Mr. Eloi MALTA-BEY

First reader: Herr Prof. Dr. Karlheinz SCHWUCHOW – HBSIB – Bremen, Germany Second reader: Herr Prof. Dr. Werner VOIGT – UPAEP – Puebla, Mexico

Directed by Mrs. Dominique CALMANT Director of Human Resources Services and Staffing IBM EMEA

…the company without borders has its heart beating in the hands of its partners…

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

ACKNOWLEDGMENTS
First of all, if only one person could be warmly thanked for this particularly enriching experience, it would definitely be Dominique Calmant, Director of Human Resources Services and Staffing IBM EMEA, for having supervised this master thesis, for the time she has spent with us, and for the confidence she placed in our work. We hope we have fully satisfied her high expectations, since that has clearly been our main goal throughout this project. Similarly, we would like to express our grateful thanks to Eloïse VerdéDelisle, Director of Employee Relations IBM France, whose discernment is quite unquestionably high, and who actively participated in making this partnership with IBM EMEA possible. We would also like to thank Alexandra Dudouet, Human Resources Operations Officer IBM France, for her support and her help in the whole process, as well as Mathilde Malta-Bey, for her precious literature research in the Lille III University Library, and Christopher Minnich, for his advice despite his heavy work as a student at the George Washington University Law School. Finally we surely do not want to forget our professors, tutors, and correctors, who have been involved in the whole process of our education, from kindergarten to the MBA. Thanks to them.

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

.. ..... . . . . ... . . . . . . . . . . . . . . . . . . . . . . .3 .4 . . . . . .. . .. . . 2 5 2. .. . . . . . . . ... . . .. . . . . H um an R e so u rce s O u t so u rc i ng De fi ni t io n . . . . . . . . . . . . .. . .. . . . . ... . . ... .. .. .. .. . . . . . . . . ... . . . . . .. . . . . . . . . . . .. . . . . . . . . . . . . . . 25 2 ... . . . . . . . . . . . . . . . . . .. .. ...GENERAL TABLE OF CONTENTS A CK N O W LE DG MEN TS .. .. . . . . . . . . .1 .. .. . .. . . .. . . . . . . . . . .. . . .. . . . . . . . .. .. . . 1 9 CHAPTER 2. . . .. . . . . S TR A TE GI C A P P R OA CH . . . . . . .. . . . . . . . .. . . . . . . .. . . . . . . . .. . K now le d ge w o rke r s . . . . . . . . .. . . . . . . N TIC (New T e c hn ol o gi e s of I nfo rma t io n an d C om mu n ic a ti on ) . ... . .. . H um an R e so u rce s O u t so u rc i ng S pec if ic i tie s A nd T re nd s . .. . .. . . . .. . . .. . . . . . . . . . . . . .. . .. . . . . .. . . . . .. . . . . . . . . . Ou t sou r c in g T ren d s . . ... . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . . . . . . . . . . . . . . .. . . . . . . .1 . . .. . .... . . .. . . . . . . . . . ... . . . . . . .. .. . . Ou t sou r c in g Defi n i ti on A nd Ob j ec tive s . ... . . 5 0 CHAPTER 4. . . . .. . Ou t sou r c in g Si t ua t io n s A nd A pp r oac he s . . . 6 3 4. . . . . .. . . .. .. . . 3 . . . . . . . . . . . . . ... ... 9 P A R T I. . . . . .. . . . . . . . .. . .. . . . .. .. . .... . . . . . . . . . . . . .. ... . . . . .. OUTSOURCING OVERVIEW . . . . . ... . . . . . . . HUMAN RESOURCES OUTSOURCING OVERVIEW . . . . . .. .. . . . . . .. . .2 . . . . . . HUMAN RESOURCES DEPARTMENT OVERVIEW .. . ... . . .. . . .. . . .. HUMAN RESOURCES OUTSOURCING AND THE NEW COMPETITIVE ENVIRONMENT . . . . . . . . . .. . . .. . . . . .. . . 12 1 . . . . . . . ... . . . . . .. . . . . . . . . . . . .. . . . . .. . . .. . . . . . . . . . . . . . . . 2 G EN E RA L TAB L E OF CO N T ENT S . . . .. . . . . . .. . . . . . . . .. . ... .. . .. . . . . . .. . .. . 12 1 .. . . . . .. .. . . . . . . . .. . .. . .. . . . . . .. ..2 . . . . . . . . .. . . .. . . ... . . .. . ... . .. . . .. .. . . . . . . .. . . 3 8 3 . . . . .. .. . . . .. . . . . . . . . . . . . . . . . . . . . . 3 0 CHAPTER 3.. . . . .2 . . . . . . . .. 4 3 P A R T I I .. . .. ... . . . . . 1 4 1 . . . . . . . . . . . . . . .. .. . . . . . . . .. . .. . . . . . . . . . . . ..3 . H um an R e so u rce s De p a rtm en t Ro les . . . . . .. . . . . . . . 51 4 . . . . . . . . . . 28 2 . . . . . .. . . .. . . . . 1 1 CHAPTER 1. . . . . . . . H um an R e so u rce s I s s ue s O f T he Mul t i na ti o na l C om pa ny I n E u ro pe .. . . . .2 .. .. . . . . . . . . 6 4 3 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . .. . . . . . 38 3 .. . . . . . . . .. . . . . . . . . . . .. . . .. . . . . .. . . . . . . . . .. . . . . . . . . . . . . . . S t ructure Of Hum a n R e source s Organiz a ti onal Ac tiv i ti e s . . .. . . . . . . . . . . 5 1 4 . .. . . . . . . . . . .. . . . . . . . . . ... 3 F O RE WO RD . . . . On go in g C om pet i t io n . . . . .. B o rd erl e s s O r gan i za t io n s . . . . . . . .. 7 IN TR OD UCT I ON . . . . . . .. .1 . . . . . . . ... . . . . .. . . . . . . . . .. . . . . . . . . 5 3 4 . . . . . .. . . . . . .. . . . . . . . . S CO P E & DE FIN I TI ONS . . . . ... . . . . . . . .1 . . .. . . . . . . . . . . . .. .. . . . . . . ... . . . . . . . . . . . . .. .. .

... . . . . . . . . . . . . MANAGING THE HUMAN RESOURCES FUNCTIONS OUTSOURCING PROJECT . . . .. . . . . . . . . . .. . .. . . . . . . . . . MANAGING OUTSOURCED HUMAN RESOURCES ACTIVITIES . . . . . . .. 6 9 5 . . . .. .. ... . . . . .. . . . . .Mov ing T re nd s .. . . 7 7 6 . Ex te r na l I s s ue s . . ....4 . 7 3 CHAPTER 6. . .2 . . . . .. . . . . . . .. . . . . .. 89 7 . . 6 6 5 . . . . . .. . . . .. . . .. 8 5 6 . . . . . . . . . . ... . . . . . . . . . . . .. . . . . . .. . . .. . . HUMAN RESOURCES OUTSOURCING STRATEGIC APPROACH . . . . . . . . . . . . . .. . . . . . .. . . . . . .. . . .. . . . . . .. . . . . . . . . .. .. . . . ..3 . . .1 . . . . . .. . . . . .. . . . 1 1 1 8 . . . . . . . . . . . . . . 1 0 3 8 . . A dv an t a ge s . . . . . . . .3 . S co pe Exp a n si on s . . . . 9 1 7 . . . . . . .. . . . . . . .6 . . . .CHAPTER 5. . . . . . . .. . .4 . .. . . . . .. . . . . . . . . . . . .. . . . . . . .. . . . . LEGAL ASPECTS OF A HUMAN RESOURCES OUTSOURCING OPERATION . . . . .. . . . . . . . . . . .. . .. . . . 90 7 . . . . . .. . . P ro b lem s Li ke ly T o Oc cu r . . . Wh a t S ho u ld Be O u t so u rc ed . . . . .. . ... . . .. . . 1 2 0 CHAPTER 9. .. . . . . . . . . . . . .. .1 . . ..3 . .. ... .5 . .4 . . . . . . . Ou t sou r c in g Dec i s io n Th eo r y . .. . . . . . . . . . . . .. .. . . .. . . .. . . . . . . Fa ct o rs de te r mi ni n g t he s uc ce s s . . . . . . . . . . . . . . . . . .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3 6 . . .. .. . . . . .. .. . I M P LE ME N TA TI ON . . . . ..... . . . . . 121 4 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . . . . .. .. .. . . . . . . . ... ... . . .. . . . . . . . . . . . . . . . . .. . .... . . . . 1 0 1 CHAPTER 8. .3 . . . . . . . . . . . . . . . . 8 9 7 . . . . ... .. . . . .. .. . . . . . . . . . . . . . . I n te rna l I s s ue s . . . 6 9 5 .. . .. . . . . 77 6 . . . . . . .. . .. . . . . . P ro j ect Te am . . . . . .. . . . . . . . . . . . . . . . . . .. .4 . . . ... . . .. . . 1 0 2 8 . P ro b lem s Li ke ly T o Oc cu r . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . 7 2 5 . . . ... . . .. . . . .. . . . . . . .. . .. . . . .. . . . . . . . . . . . .. . . . . . . .... . .. . . . . .. . 1 0 0 7 . . . . . . .1 . . . ..2 . . . . . . . .. . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . . .. Ex p ansi o n s Ex p la n a ti on s . . . . . . . . . . . . . . . . . .. . . . Two Fa s t . . . . . .. . . . . .. . . . . . . . . . ... . .2 . .. . . .. .. . . . .. .. .. . . . .. . . . .. . .. . . I s s ue s Fo r T he Ou t s ou r ci n g Co mp a ny . .. . . .. . . . . . . . .5 . .. .. . . . . .. . 8 6 P A R T I I I . . . . . .. .. .. . . . . . . . .. . . . . . . . . . . . Le g al F r a mewo rk . 88 CHAPTER 7. . ... .. . . . . .. .. . . .. . . . . . . .. . . . . .. .. . .. . . . . . . . . . . . . HUMAN RESOURCES OUTSOURCING AND THE NEW CHALLENGES . . . . . . . . . . . . .. . . 102 8 . . . . . . ... . . . 9 3 7 . . . . . . . .. . . . . . . . .... . 66 5 .. . .. . . .. . . . . . . . . . . .. Ou t sou r c in g L ega l A c to r s . ... . .. . . . .. . . . . . . . . .. . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. . ..1 . . . . . . . . . . . . . . . . ... . . . . . . . . . . . .. . . . . . P ro j ect D ef in it ion . . . . . . . . . . .. . . .. Ou t sou r c in g Con t r ac t s ..2 . . . .. . . . . ... .. .. . . . . .. ... . . . . . . . .. . . . . . . .. . . . . . . . . . . . . . . . .. . . . . . . H um an R e so u rce s N ew Ob j ec t ive s . . . . . . . .. . . . . . .. . . .. . . .. . . .. .. .. . . . .. . . . ... . . . D r aw ba ck s . . .. . . . . . . . . . . . . . . .. . . . . . . . .. .. . . . . .. . . . . . . . . . . . . . . . . . . . . . . .. .. . . . . .. . . . . . . . ... ... . . . . . .. . .

. . . . . . . . . . . . . . . . . . . . . . . CAS E S TU DIES . . . . . . . . . . . . . . . . 1 2 8 C H A P T E R 10. .3 . . . . . Com p an ie s T h a t H av e O u t so u rc e d T h e i r T r a n s ac t io n al A c t iv i ti e s . . . . . . . . . . . . . . . . . . . E le men t s T o K e ep I n te r na l ly . . . . . . . . . 1 4 3 C H A P T E R 12. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . R eq u i re d Sk il l s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 9 T A B LE O F IL L U ST RAT IO N S . . . . . . . . . .3 . . . . . . . . . . . . . . 1 4 8 1 2 . . . . . . . .1 . . . . . H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D C U S T O M E R S . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . 1 3 8 C H A P T E R 11. . . . . . . . . . . . H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D P R O V I D E R S . . . . . . . . . . . HR O P rovi de rs S p ec ial ize d In Som e H um an R e so urce s F u nc t io n s O u t so u rc in g Se rv ic es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 2 1 2 . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . . . . . . . . . . . . . . . . . 1 2 9 1 0 . . . . . . . . . . . . . . . . . . . . . . . . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 4 9 . . . . . . . . . . . . . . . . .1 . . . . . . . . . . . . . . . . . . . . .4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ot he r S ol u ti on s To K ee p Con t r ol . . . . . . . . . . 1 8 2 5 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . . 1 5 9 1 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 6 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 7 A FT ER WO RD . . . . . . . . . 1 6 5 C ON C LU SIO N . . . . . . 1 2 3 9 . . . . . . . . . . . . 1 2 5 P A R T IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Co m p a ny Th a t H a s O u t so u rc e d S o m e O f I t s H um an R e so u rce s P r oce s s e s: K e ll og g Fo od s . . . . . . . . . . Companies That H ave Outsourced A ll Of Their H uman R e so u rce s Bu s i ne s s P ro ce s se s Ex ce pt M an a ge r i al On e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comp a ny Ov e rv iew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Co nc l u si on . . . .2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . . 1 6 8 R EF EREN CES . . . . . . . . .4 . . . . . . . . . . . . . . . . . . . 1 2 9 1 0 . . . . . . . . . . . . . Comp e ti t ive Hu m an Re so u rc e s O rg a n iz at io n . . . . . . . . . . . . . . . . . . . IBM (I N T E R N A T I O N A L B U S I N E S S M A C H I N E S ) . 1 5 0 1 2 . . . . . . . . . . . . . . . H R O P rov i de r s P ro po s i ng A n I n te g ra t ed So l uti o n I nc l udi n g T h e Wh ol e Ra n ge Of H um an Res o u rc e s P ro ce s se s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 8 1 2 . . . Ma j or O ut s ou r ci n g P r ovi de r . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . .2 . . . . . . . . . 1 4 2 11. . . . . . . 1 8 1 D ETA I LED TAB L E OF CO N T ENT S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H uma n Re s ou rc e s S e rvi ce s P rov id er . . . . . . . . . . . . . . . . . . . . . . .9 . . . . . . . . . . . . . . . . . . . . 1 4 2 1 1 . . . . 1 2 1 9 . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 5 6 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . . . . . . . . .D EC LA RA TIO N S . . . . . . . . . . . . . . .

if indeed it was not already so challenged at the outset. concepts are always welcomed to provide a better understanding of a trend or a practice. and on the other hand. our shared idea was to explore the outsourcing concept. We quickly found out that the outsourcing world is refreshingly far removed from that instinctively dark view of the practice. since it is precisely the people who feel victimized by this approach who 1 Reengineering the Corporation. summed up: “What looks good on paper doesn’t necessarily work in the real world. Outsourcing. starts from an ideal way of imagining the community: collective interdependence and individual recognition.”1 It is always hard to deal with the outsourcing approach. p 201 7 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Harper Business 2001. As the Vice President and Business Transformation Executive IBM Systems Group.FOREWORD When we chose the topic of our master thesis in December 2002. as far as Human Resources activities are concerned. outsourcing an activity is always primarily understood as getting rid of the fellow employees of the concerned activity. Of course. the Human Resources field is all the more concerned by the unpleasant connotation of the outsourcing strategy. It quickly turned out that a conceptual approach alone was not enough as such a practice was already clearly in the pipelines of several multinational companies. in fact. on an individual basis (the employee). Michael Hammer and James Champy. as it suffers most of the time from an extremely bad reputation. Moreover. In other words. Jamie Hewitt. but the empirical method is what finally differentiates between a strategy that is merely feasible and one that can actually produce an efficient competitive advantage. At the time Dominique Calmant agreed to supervise our work. outsourcing brings closer together identity and action: one identifies with what one does. we could not imagine how fast our theoretical work would be severely challenged by the reality of facts. Indeed.

an organization that uses them. once and for all fulfilling the vision of the modern company that has its “brain” performing in the “brains” of its partners. it must surely realize more than ever that it may of course secure its success in this way. People are the kinds of resources that not only need to be managed to achieve their best results. In other words. one identifies with both what one does for the others and what one has done by the others. as a business strategy includes processes. one can say that outsourcing Human Resources activities of a multinational company is all about assigning those activities to the people that understand them best and implement them most effectively. an information technology system that supports them. and a culture that shares them. Finally. if it outsources its Human Resources activities. on a collective basis (the company). but also need to be convinced that these results are optimized. As the modern organization is made of the “brains” of the people who compose it.constitute the essential “raw material” of Human Resources. 8 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . but in exchange for a relative loss of control of its identity.

we step back a little.INTRODUCTION Outsourcing Human Resources Activities of a Multinational Company in Europe. as far as the outsourcing phenomenon and the Human Resources department practices are concerned. We chose to start. following with the 9 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . because a company set up throughout Europe is still on the one hand necessarily a multinational company. allowing it to take advantage of the market to a much greater extent than the market dictates to it. because we have been rapidly convinced that it is one of the best way to understand and drive businesses of the future. After extensively laying out the needed scope and definitions of our thesis. because it specifies to whom and where our thesis applies in particular. in order to understand the underlying stakes of a Human Resources outsourcing strategy. in the first part. with taking stock of the situation. The Multinational Company in Europe finally. We then begin with key points of the business environment that lead to such an approach. In order to clarify and encompass as much as possible the meanderings of our topic. That is indeed exactly what this whole master thesis is about. to finally come to an overview of the Human Resources activities outsourcing industry. we thought four main parts would be necessary. The outsourcing strategy stands somewhere between customer relationship management and strategic alliances. Outsourcing. but is inevitably facing on the other hand the tangible and remarkable European integration process that impacts its business more and more as a whole. Human Resources. because we found quite fascinating the fact that still too many managers have at the same time a hard time defining the real essence of the Human Resources department of their own company and nevertheless blindly support the fact that Human Resources management is absolutely necessary to their success.

and finally ending with a clear vision of what is really meant by a Human Resources outsourcing strategy.description of the new challenges faced by Human Resources departments. a case that we have been given the chance to follow quite closely since July 2001. that is to say. first of all describing Human Resources outsourcing strategies of some multinational companies around the world. 10 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the fourth and last part supports our analysis with several topical case studies. the third part present the different practical key issues resulting from the implementation of such a Human Resources outsourcing strategy. In the end. Finally. Next to fill in the theory with more pragmatic details. highlighting the specificities of the European environment. and then sharing experiences of some of the first providers of such a service. we describe and analyze the different steps involved in putting into practice such a solution. our focus is on the IBM Europe case.

This introductory section is designed to serve as an icebreaker and is intended to demonstrate that the outsourcing trend is not just a short-lived fashion sustained by trendy consulting firms. in the end. 11 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . but an important consideration for Human Resources departments that has nothing at all to do with minor operations. Moreover. SCOPE & DEFINITIONS In this first part of the work.PART I. as far as the outsourcing and Human Resources department practices are concerned. our aim is to encompass the substance of the thesis. It is important to define precisely what is understood by the terms we use. in order. we would like to offer here a useful picture of the phenomenon taking stock of the situation. to provide an overview of the Human Resources outsourcing industry.

4. whereas the outsourcing strategy follows from a strong will to refocus on its core business. The downsizing strategy is a consequence of the redefinition of a company’s core business. or finally to resorting to a specialist.Chapter 1. It must also not be confused with downsizing. and competitiveness by reducing the size of a company. We will take some time here to figure out what exactly hides behind “outsourcing”. Outsourcing Overview The term “outsourcing” is currently frequently used in the business world. It is nevertheless 1 “Organizational downsizing: a convergence and reorientation framework”. a group of activities is totally abandoned.1.1 In this case. to core business recentering. It is different from subcontracting. 1993 12 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . instead of doing it internally. whereas outsourcing is based on an obligation of results.1.1. Outsourcing definition Outsourcing is. Freeman and Kim S. which implies an obligation of means. Marcia S. its definition and objectives. but very few managers know in fact exactly what is hiding behind this concept. giving the responsibility and the management of an activity to an external supplier (manufacturing activities) or provider (service activities). Most of them would reduce outsourcing to subcontracting. its situations and approaches. in simple words. and finally its trends. efficiency. which cannot be amalgamated to an outsourcing strategy. 1. Outsourcing Definition And Objectives 1. Cameron. To the contrary. Organization Science. which consists in increasing productivity. an outsourcing strategy consists in a real transfer of activities from the clientoutsourcing company to the providing outsourcing company (also called provider or outsourcer). to having externally done what could be internally done.

finance. even if it sometimes leads to it. and speed. at least the net result for the company has to improve as well.1 Another confusing practice is reengineering. Main objectives of an outsourcing strategy The main objectives for a company when it outsources some of its activities are. The complexity of the issues that arise in connection with outsourcing projects varies depending upon many different factors requiring numerous areas of expertise to be tapped into. project management. and a perfect and essential knowledge of the environment involved. Michael Hammer and James Champy. p 35 2 13 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2. insurance. information technology. to improve the quality of the (outsourced) activity thanks to a new expertise that was not internally available. but one should watch out for possible future harmful consequences. which consists in the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical. and on the other hand to reduce at the same time (directly or indirectly) the costs of this activity. Harper Business. on the one hand. One would obviously try to combine quality improvement with cost reduction. and if only the costs are reduced. service. 1 American Management Association.2 Reengineering must certainly not be assimilated to outsourcing. the savings are direct.1. but most of the time outsourcing requires balancing the pros and the cons of a certain level of quality for a certain level of cost. Even while all these related practices might be part of a whole outsourcing operation. such as tax. change management. if only the quality improves. such as cost. 2001. quality.interesting to notice that 23% of downsizing operations result from outsourcing operations. 1. and ideally finding the optimum point. risk management. Therefore. 1997 Reengineering the Corporation. contemporary measures of performance. they cannot be assimilated to outsourcing strategies.

2.1. Number 4. whatever the type of outsourcing approach or situation one has. if the venture is successful. Finally. Anthony DiRomualdo and Vijay Gurbaxani. • Increasing the outsourced activity’s contribution to the global performance of the company. Volume 97. maximizing both its outsourcing strategy and its investment. 1. Different kinds of outsourcing operations A] Different outsourcing situations Two fundamental characteristics distinguish the different situations involving outsourcing: • The prior existence of the activity inside the company. • Exploiting business advantages of the outsourced activity. three kinds of strategic intents usually drive the decision to outsource: 1 • Improving the outsourced activity’s operations.2. Sloan Management Review. thus generating new revenue and services that will be sold to others and. • The proximity of the activity to the core business. By crossing these two criteria. pp 67-80 14 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . one obtains a typology of the four main possible outsourcing situations: 1 Inspired from the article “Strategic intent for IT outsourcing”.Companies sometimes want to take advantage of this new outsourced activity to create the new business opportunity themselves. Outsourcing Situations And Approaches 1. Summer 1998.

this one consists in outsourcing activities close to the core business. In this case. 2001. Here arises the problem of initiating an outsourcing strategy or not. Dunod. c) Strategic outsourcing with disintegration In contrast to the two first situations. one deals as well with non-sensitive activities. Jérôme Barthélemy. “Disintegration” stands for the transfer of the concerned activities from the client-company to the provider-partner. b) Traditional outsourcing with disintegration In this situation. p 10 15 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . but is on the other hand far removed from the core business. but activities that were nonetheless formerly internally managed. the outsourcing strategy can 1 Stratégies d’Externalisation. The client-company outsources and has actually always outsourced this activity as it is permanently needed for the business.Illustration 1: The four types of outsourcing situations1 a) Traditional outsourcing This kind of outsourcing situation applies when a non-sensitive regular activity is concerned.

in which a company willing to outsource an activity but unwilling to transfer its assets to the provider simply leases these assets. or India. Leslie Willcocks distinguished recent approaches to IT outsourcing1: • Offshore outsourcing. L’Art de l’entreprise globale. consisting in outsourcing to a provider located in countries such as Ireland. Hungary. In other words. It is nevertheless unlikely that a company would lease assets of an activity that was not inside the company before. Philippines. in this case. Mexico. d) Strategic outsourcing The last main outsourcing situation occurs when the regular activity is also close to the core business and when it is already outsourced. Leslie Willcocks. Village Mondial. but it can also freeze the company. and other developed countries that if they limit the extent to which information technology is outsourced. The question of how to renegotiate the partnership conditions is then asked. e) Outsourcing with assets leasing We may also add this fifth situation. it will damage their domestic industry as outsourcing is a huge international 1 “L’externalisation maîtrisée des systèmes d’information”. Israel. 1999 16 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . B] Different outsourcing approaches As an example. and there is no real need to transfer anything. It is interesting to know that India recently warned the U. since a provider-partner is offering an expected quality of services. too expensive. or too strategic. Leasing is in fact the alternative to disintegration. assets remain the property of the outsourcing company. This option usually occurs when assets are too specific.create a competitive position. Malaysia.S. Egypt.

C] Different uses of outsourcing a) Automotive outsourcing These constitute the first layer of activities addressed by outsourcing.1 Nevertheless. in the end. • Outsourcing with equity. Info 2 World. Because they are characterized with repetitive tasks. or other such organizations in Germany and in the rest of the developed world. Gillian Law. Habib Beary.movement resulting from globalization. John Blau. • Diverse outsourcing operations. 12th June 2003 “Protectionism hits the outsourcing industry”. consisting in reducing one’s dependency on a unique provider by contracting with several of them. Per Sayer and Marc Ferranti.2 • Value-added outsourcing. 15th April 2003 17 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • Co-outsourcing. governments are considering proposals to curb growth of offshore outsourcing in order to. it is very easy to determine the objectives that the provider should reach. BBC News Online. under the pressure of lobbying groups such as the MUNCI (Mouvement pour une Union Nationale des Consultants en Informatique) in France. • Subsidiary outsourcing. consisting in the creation of a spin-off. over outsourcing”.. the PCG (Professional Contractors Group) in the U. consisting in fixing the provider’s revenue to a percentage of the revenue the provider generates.K. consisting in fixing the revenue of the provider according to the value it really creates. according to certain conditions. These activities often and administrative/operative 1 “India warns U.S. consisting in giving the client-company the possibility to acquire shares of the providing company. avoid the transfer of jobs outside their borders.

Willcocks and David F. Lacity. Outsourcing advantages A lot of institutes and authors. total outsourcing. ii/ Total BPO This solution consists in outsourcing all processes of a given function or department. but are not really the value-added generating vector. The objectives given to the provider are crucial to the overall strategic results. Number 3. and according to practical experience so far. Among all these. thereby guaranteeing a fully integrated management of the different processes. which is still rare. 1. Spring 1996. list its numerous benefits. b) BPO (Business Process Outsourcing) i/ Selective BPO This solution consists in outsourcing only those parts of a department that are the most distant from the core business. pp 13-25 18 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . they can also keep their strategic components internal to the company. Volume 37. Mary C. companies can focus their financial resources on the most important parts of the targeted department. c) Total outsourcing Finally. from the bottom line all the way to the management. the provider is considered more as a real partner than as a simple service seller. consists in outsourcing the entire department. Sloan Management Review.2. In this case. this solution seems to be the most successful. Feeny. we can distinguish four main advantages of outsourcing: 1 “The Value of Selective IT Outsourcing”.2. Leslie P.1 With this solution.represent a non-negligible part of a business function. specialized in outsourcing.

says David Dell. Lisa Gelman and David Dell. • Improvement of the company overall performance. Serge Tchuruk.3. The report emphasizes the fact that outsourcing is becoming a critical competency for most large companies. • Losing know-how and skills. • Improvement of the outsourced activities’ performance. The Conference Board. but many said they would do things differently. • Refocus on core business activities. publicly announced what all the specialists had 1 HR Outsourcing Trends. In the end. • Dependency.• Cost reductions on the outsourced activities. the French CEO of Alcatel. according to the last report from The Conference Board1. nine out of ten companies surveyed said they would outsource again if given the choice. companies would do more to prepare employees for the change. “HR departments are not yet good at this”. 1.3. which have to be considered and balanced before taking the decision to outsource.2. Notably. Outsourcing risks The same commentators assess numerous risks of such an operation. 2002 19 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 1. The most important factors are: • Underperformance. • Social risk. particularly the greater responsibility placed on workers to manage their benefits. as such an operation is often felt as a betrayal of the employees. Outsourcing Trends While discussing his project of a “company without factories”.

The outsourcing trend is of course not completely new as applied to service activities2. One can already see that a successful outsourcing strategy consists in a profitable sharing of the different companies’ 1 “L’externalisation. in the hope of reducing costs. In fact. whereas the original aim of an outsourcing strategy was to reduce costs. Thomas Kiely. gardening. July 1992 3 “Business Process: Consider Outsourcing”. the outsourcing of activities that are critical to the good functioning of the company are relatively innovative and is no longer considered as a last resort for companies with financial difficulties. but it is mainly used in that sphere to deal with peripheral activities such as restoration. This necessity encourages companies to transfer some of their business resources (equipment and employees) to an external provider in order to lighten their balance sheet and increase their profitability. in other words on their core business resulting from their core competencies. companies are taking a hard look at their business processes to assess which areas would best be performed by an outside provider. and therefore systematizes outsourcing practices. Harvard Business Review. cleaning. On the other hand. Les Echos. with their own name products or services that were entirely made by external providers. and improving the level of service. In the end. gaining efficiency. It is no more unusual to see well-known brands labeling. Miliotis. In parallel. Free 2 Press Publishing. Patrick J. un mouvement de fond”.1 Outsourcing is a classic phenomenon since the 1950s as far as production activities are concerned. pp 11-12 20 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . it also allows companies to concentrate more of their financial and managerial resources on valuable activities.3 Finally. or care-taking. companies are nowadays more interested in gaining direct value for shareholders.been claiming: globalization forces companies to refocus on their core business. these providers are restructuring or expanding their service to accommodate the growing demand for outsourcing services. 29th August 2001 Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry. James Brian Quinn. May-June 1997.

the European market will reach $52 billion in 2003 and will concern ever more different kinds of activities.2 billion in 1998. 21st October 1998 21 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . according to forecasts. which gives in the end a maximum value-added to companies that are part of the network. 1. 1 “L’irrésistible montée de l’externalisation”. Moreover. the European market reached $40.core competencies. the outsourcing phenomenon developed rapidly during the last few years. Les Echos. after-sales services. and other similar activities that are closer to the core competency. It is also increasingly implemented (but is not very developed yet) for logistics. at a time when the American market reached more than $160 billion. and office maintenance. payroll.1. In comparison. security. Illustration 2: European outsourcing practices in 19981 Outsourcing is nowadays very well developed and accepted for activities such as office management.3. Global evolution of outsourcing According to a study by Dun & Bradstreet and The Outsourcing Institute. IT. Alain Perz.

1997 22 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . A] Internal factors A company performance is nowadays measured by the value that it creates and delivers.3.In the U.S. Moreover..) are those that are the most commonly outsourced. administrative services and Human Resources activities (see 3. and almost no longer by its revenue or by the increase of its market share. b) Development of information technology Another main enabler for such an increase is the development of new 1 American Management Association. it is important to emphasize that. Factors favoring these booming outsourcing trends This increase would not have been so important without a certain number of external and internal factors.2. a 1997 study1 dealing with outsourcing practices involving 619 companies showed that 94% of American companies outsource at least one activity.2.2. pension fund management costs are included in HR budgets. 1. which obviously implies huge amounts of money that are not directly linked to HR management processes.S. Nevertheless. B] External factors a) Supply pressure Ever more qualified actors are appearing on the market and expanding little by little the global opportunities for companies to outsource. in the U.. but rather to pension financing. they are now complex ones dealing with a whole function assigned to a single provider. Whereas before they were limited to small contracts signed with different providers.

Moreover. September 2002 23 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . more and more complex operations can be processed thanks to the circulation of large amounts of information at a very low cost.3.4. it can consider a possible outsourcing of the concerned activity.3. Main BPO providers There are no real exemplars yet. and if a company selects a “company-yardstick” that is a specialized provider. mimicry plays a very important role as far as outsourcing behaviors are concerned. Damon Rosenhan. Indeed. c) Benchmarking By benchmarking. If a company selects a “company-yardstick” that is its competitor. d) Mimicry Finally. it will try to “play the same game”. productivity. companies compare their performance (internal costs. The “company-yardstick” is usually a model company in its area.). technologies) to one or several “company-yardsticks” for each part of their organization. which allow a decrease in the costs of coordination between companies. Everest Group. This risky tendency can also be seen within a single company when one department is outsourced and thereby others follow in turn. For Buyers’ Eyes Only”. and the costs of communication with providers (see 4.technologies and particularly of information technologies. but three distinct groups of competitors:1 1 “Building a Case for BPO-Part 2. A good example of this occurred in 1989 when Kodak outsourced its IT department to IBM. Big competitors followed this example based on the assumption that such a big company must have conducted an in-depth analysis before taking such a decision. 1. it is no longer necessary to use specific production assets.

and CSC. which used capital infusions and technologies to specialize themselves in a single area for which they have strong value-added but limited delivery capacity: Exult. ACS. • Venture capital funded niche players. 24 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . OPI/PMG spin-off. • Traditional Outsourcers. Creditek. Cap Gemini-Ernst & Young. Equitant. EDS. which took advantage of market opportunities to acquire BPO organizations and supplement their IT consulting expertise with business process consulting expertise: IBM (which acquired PwC Consulting).• Big 5 players or their spin-offs. Deloitte Consulting. which built upon their traditional consulting strengths to enter the BPO market: Accenture. SourceNet.

Number 1. on the one hand. 2. 60% of the costs generated by the HR department concern traditional administrative activities of the job while representing only 10% of the department value-added. His solution: reengineering and outsourcing. that employees bring as much value-added as possible during their stay in the company. It makes sure. Volume 36. that the company acts in the interests of employees by giving them opportunities to advance their careers. conversely.1.Chapter 2. It finally prevents one part from playing its own game to the detriment of the other. Indeed. We can distinguish two different roles within the HR department: the organizational ones and the operational ones.1. Human Resources Department Roles The Human Resources department supports interactions between managers and employees. Spring 1997 25 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . according to Spencer. Organizational roles Organizational roles can be classified in the two following categories: • Human Resources management. It insures overall consistency in decisions taking. including HR support to business 1 Human Resource Management.1. and on the other hand. 60% of the department value-added results from strategic activities that only represent 10% of the costs generated by the department. Human Resources Department Overview After having polished the outsourcing phenomenon. Dave Ulrich. It determines the rules of the game in situations where employees and companies accept not to spend their whole professional path together but just a part of it.1 2. we found it useful to make in parallel a point on the actual state-of-the-art Human Resources department organization in most multinational companies in Europe.

Human Resources organization If a “shared services center” also called a “HR services center” is included in the HR organization.and HR design & delivery. locally and operationally speaking. 2. including industrial relations managers (HR local specialists).1. on the other hand. 2. it is nevertheless completely part of the HR department.2. the public face of the HR department.1. and if personnel management is as operational as people management is. Even though it does not and cannot belong to the HR department. the HR organization could be drawn as following: 26 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . people management is absolutely essential to HR management as a whole. • Personnel management. • Legal obligations including employee relations and well-being programs. Personnel management is. Both roles are in fact involved in the HR process as far as they are responsible for the day-to-day HR management. and according to the two organizational and operational role distinctions above.3. including company managers. All employee relations’ issues occurring in any company are nowadays mostly organized by country regulations. Operational roles Operational roles can be in turn divided into the two following categories: • People management. even if large companies try to homogenize them globally.

described as following: • HR services center: ~ ~ ~ ~ Administers corporation-wide programs. Resolves customer administrative issues. ~ Provide responses to specialized issues. at a more detailed level. • HR business partners: ~ ~ Define and meet the unique needs of the customer. Develop global HR programs and adapt them to business unit specifications. • HR functions experts: ~ ~ Exhibit functional expertise. HR roles could be. Processes transactions. Implement HR programs using knowledge specific to individual business units.Illustration 3: HR Organization This organization model illustration underlines the distinction between the main HR actors. 27 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Creates HR efficiencies across the organization. as needed.

• Corporate HR: ~ Guides the development and implementation of HR strategy. and to consider employees’ desires without losing sight the business unit organization. needs. 1964 28 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Structure Of Human Resources Organizational Activities 2. there are two important dimensions for managers1: ~ ~ Manufacturing interest dimension. People interest dimension.2. we enumerate the main organizational HR functions 1 The managerial grid.~ Define HR strategy at the business unit level.1. Key Human Resources functions To explain our idea. • Company managers: According to the managerial grid of Blake and Mouton. The people interest should conduct managers to observe good day-to-day HR management practices.2. and economic imperatives. • Industrial relations managers (HR local specialists): ~ Manage and administer local specific programs with input from corporate HR and from HR functions experts. Black and Mouton. 2. ~ ~ Ensures customer satisfaction of entire HR functions. Manages executive facilitation and coaching.

• Industrial relations. • Employee services administration.as follows: • Payroll administration. • Talent management (recruitment and staffing). • HR policy and planning. • Compensation. 2. • IT systems and HR data management tools. • People management. • HR support to business. • Employee relations. motivating. • Employee development. Activity types crossing HR functions 29 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2.2. and retaining employees. • Well-being programs (health and safety). All these activities represent both the whole employee life cycle and the HR roles expressed through attracting. • Benefits.

Illustration 4: Activities crossing HR functions Illustration 4 above demonstrates how each HR function is composed of different activities.1. from automotive ones to managerial ones.3. This table provides a clear vision of all the different types of activities involved in the HR management of almost any medium or large-sized company in Europe (See 4. The European labor market and intercultural management issues 1 A] Figures The E. (European Union) contains today more than 370 million 1 “Y a-t-il un marché du travail européen?”. Summer 2002 30 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .U. for organizational vocabulary definitions). 2. Les Echos. Human Resources Issues Of The Multinational Company In Europe 2.2.3. Maurice Thévenet.

inhabitants from 15 different countries, all sharing the same labor market. In January 2004, 10 other countries will join the union, raising its total population to more than 450 million. For the moment, the E.U. countries sustain more than 150 million jobs. As you can see in the following illustration, unemployment is not homogeneously spread throughout Europe, but seems to reflect instead the remaining differences in terms of social policies among the E.U. members. It is to hope or even more to expect that the European integration, and especially the social one, will guarantee fair competition inside the E.U. labor market.

Illustration 5: Unemployment in the EU, % of workforce in December 2002 and December 2001, seasonally adjusted1

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

Illustration 6: Fixed-term work in E.U. member States1

B] Trends
While many differences still characterize the different European countries’ legal systems and cultures, multinational companies tend to adopt a homogenized approach as far as workforce management is concerned. It is interesting to note that national education authorities throughout Europe have been working hard these last ten years to harmonize the European diploma system in order to allow easier comparisons across European borders. Students, as well as employees, are now organized in Europe-wide unions in order to efficiently face Europe-wide issues. Even while mobility inside Europe is not yet very significant (it stands currently at less than 1.5%), multinational companies clearly use one single recruitment and career management strategy for the whole of Europe. As confirmed by 303 multinational companies in Europe, European integration is one of their most

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challenging missions in terms of HR management.1 Integration on a European scale means that multinational companies apply the same answer to the same problem wherever it arises in Europe. As an example, remuneration is also based on performance across Europe and 360° manager assessments are systematically implemented. Thus, optimists would attribute this result to European integration whereas others would simply cite the globalization process.

Illustration 7: Average collectively agreed pay increases, 2001 and 2002 (in %)2

Despite these developments, legal social systems are still very different from one another and multinational companies are fully expected to apply the local law. For instance, in Germany, the labor laws encourage collective bargaining, thereby avoiding state intervention, whereas in France the state is a major actor in the social life inside companies, and whereas in England

1

Comment évoluent les stratégies de rémunération en Europe, a Towers Perrin Study, January 1998 Industrial relations developments in Europe 2002, EIRO & E.U. Commission, p 34,

2

http://www.eiro.eurofound.eu.int * Average of 18 countries, ** Average of 16 countries for 2001 and average of 15 countries for 2002, *** Average of 12 countries for 2001 and average of 11 countries for 2002

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

1 Another example is the working time negotiations: while this debate is taking place almost everywhere in Europe.eu. ** 2001 figure.U. each country has a different way to cope with it. Illustration 8: Average collectively agreed normal weekly hours. *** Average of 18 countries 34 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . which is also faced by universities. stereotypes are still too stubborn.eurofound. 20022 Some of the most complex problems faced by HR departments are intercultural issues. Commission. D. C] Challenges The European labor market is confronting four main challenges that HR departments must imperatively cope with: • Skills: this particular challenge. p 36.eiro.int * 2000 figure. 1992 Industrial relations developments in Europe 2002. 1 L’Europe des ressources humaines. 2 http://www. a different cultural approach. EIRO & E. Editions Liaisons. Cazal and Jean-Marie Peretti.employer-employee bilateralism (excluding the state) is the rule. Despite significant efforts to educate and inform workers.

the first step towards creating a “European bargaining area”. three stages can be distinguished as far as concerns the evolution of social dialogue across European industries. in other words.U.refers to the development of system of reference for evaluating skills on a Europe-wide basis in order to gain time and efficiency in domains such as recruitment and career development. the Social Policy Protocol and Agreement attached to the Maastricht Treaty (which came into force in 1993) and 1 Industrial relations developments in Europe 2002.eiro. the social partners embarked upon a dialogue. 2.1 First in 1985 when. probably the key challenge.eurofound. • Social capital: legal and geographical unity is not enough to guarantee a shared culture. the one that leads to great success in the end if mastered.2. Commission. • Diversity: too much importance is given to national cultural differences. as they are very easy to notice. defending common interests resulting from a complex common association. the challenge is here to imagine innovative ways to manage this new type of diversity. and as the key to their success.eu. Then. Jacques Delors. EIRO & E.int 35 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .3. at the initiative of the President of the European Commission. multinational companies need to participate in the European social integration as European social actors. http://www. • HR organization: more efficient in a more complex environment and more flexible in a more demanding environment. An ever more organized social dialogue in Europe A] The European social integration process Since 1985. More and more groups of workers will be clearly transnational.

disability. ageing workforce. temporary agency work. lifelong learning.info-europe.000 employees Europe-wide. with at least 150 employees in each of them. racism. opening up a third stage of independent European-level dialogue. health and safety. gender equality. social dialogue. the social partners’ joint contribution to the Laeken European Council was a crucial step for the social dialogue. Since 1994. part-time work. mobility. http://www. reaching an overall headcount of more than 1. Finally. and fixed-term contracts. young people. in December 2001. undeclared work. Centre d’Information sur l’Europe. E.subsequently incorporated into the Amsterdam Treaty gave rise to the second stage.dir/QR000914. 600 companies have so far implemented their European Works Council. with a clear objective to harmonize national laws. Companies concerned are at least set up in two or more European countries. etc. B] European Works Council 1 The setup of a European Works Council aims to improve the social dialogue between the employer and its employees throughout Europe. protection of employees in the event of insolvency of their employers. 23rd April 2003. stress at work. A European legal frame is also rapidly appearing in various fields such as: worker consultation and information. industrial relations. 1 Dialogue dans l’entreprise: consultation des travailleurs et comité d’entreprise européen. etc. restructuring.U.fr/europe. equal treatment for men and women. enlargement. working time. in which the social partners reached and implemented agreements by means of Council Directives on the following issues: parental leave. European social partners intervene on various subjects such as employment.web/document. a European Directive obliges multinational companies in Europe to inform and consult employee on certain management decisions. the ECS (European Cooperative Society). harassment. telework.htm 36 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

mergers and acquisitions. 37 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . restructuring. outsourcing. etc.The European Works Council is dedicated to employee consultation and information as far as concerns Europe-wide issues such as employment. business health.

and the Human Resources department organization on the other hand.1.2. Human Resources Outsourcing Definition 3.1. Self-Service strategy is mainly applied in Europe for the four following processes: 38 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Human Resources outsourcing levels A] Self-Service (e-HR) This first step in HR outsourcing is increasingly developed in Europe. Human Resources Outsourcing Overview Now that we have seen what is to be understood by outsourcing on the one hand.1. 3. Human Resources activities 3.). we may now enter this chapter trying to get a better overview of the Human Resources Outsourcing phenomenon itself. It consists in managing some HR processes directly on the Internet. Managers and employees can access tools and information at any time from any intranet access point.Chapter 3.2.1. Defining outsourcing Outsourcing Human Resources activities is giving a provider the management of part or all HR functions we listed earlier (see 2.1.

as it is represented in the illustration here below. November 2000. p 5 2 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. PricewaterHouseCoopers. Illustration 10: HR Self-Service: resource reallocation on higher added-value activities2 1 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. p 5 39 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . November 2000.Illustration 9: The four processes that are mostly managed by Self-Service in Europe1 This use of new technologies indeed allows the HR department to spend less time on administrative tasks and more on value-added services. PricewaterHouseCoopers.

The outsourcer will provide all standard transactional and administrative activities. Bloomsbury Publishing. The challenge is to enroll managers in the use of that tool. Business The Ultimate Resource. http://www. all transactional activities are given to this HR services center.As an example. or HR services center a) Definition Shared services imply that services (transactional activities) are handed over to a provider.com 2 “Dictionary”. managers are instinctively resistant and skeptical.1 B] Transactional HR outsourcing. supported by HR experts for each function and with all strategic activities done by HR business partners. shared services centers. This kind of outsourcing is principally composed among of an HR services center.requests. giving advice to employees on HR processes. p 1259 40 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . which implies “a centralized office that handles routine administration and answers enquiries from managers and staff throughout an organization on Human Resources related matters.”2 As shown earlier in the part dealing with HR organization. Beth Ellyn Rosenthal. 1 Converting the Managers Makes Self-Service HR Work. U. 2002. The only way one can succeed is to spend a lot of time bringing managers into the fold by demonstrating the value of the tool with transparent statistical results.S. April 2003. Most of the time.outsourcing. BASF employees may already print their pay stubs directly from the HR intranet. as well as local and corporate Human Resources specialists in-house. and the outsourcing company keeps all management responsibilities.

1. this strategy does not move control to corporate or to a central entity but rather creates a centrally managed organization that serves employees and businessbased HR professionals as clients. an improvement in service. It allows an increase in quality. Paxton. through the shared services function. Inc. Contrary to the totally HR department outsourcing (see 3. procedures and employee history. Human Resource Effectiveness Practice.Illustration 11: Shared services model1 b) Objectives The goal is that employees and managers have access to HR information.2.D]). Mazor and Meredith A.. Buck Consultants. Arthur H. C] HR processes outsourcing 1 Transforming the Human Resource Function. and a reduction of processing cycle time as well as expenses. which is technologically equipped and has an immediate and accurate knowledge of local policies. 2002 41 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

Companies can decide to outsource some of their HR activities, which they do not consider as part of their competency scope, and for which they consider that it can be better and cheaper if a HR outsourcing provider manages them. They outsource all administrative and most of their HR activities to outside firms, leaving very few other activities, such as strategy and salary decisions, in-house. In this case, the provider is totally responsible for the good running of these activities, and often integrates its client’s employees (see 7.4.3.C]).

D] Totally HR department outsourcing
Another particularly integrated outsourcing solution consists in giving the management of all the HR activities with no exception to a Human Resources outsourcing provider. The provider is responsible for keeping the HR activities in accordance to and in service of the overall activity and strategy of the company, and the company is no longer responsible for any HR decision. This kind of outsourcing is nowadays mainly used in the U.S. where can be even found the premises of co-employment. Co-employment simply consists in hiring people on the basis of a three parties contract: the employee, the business partner, and the Human Resources professional. Signing this contract, the employee accepts to be under the business authority of the business partner, and agrees to depend on the Human Resources provider (also called PEO (Professional Employer Organization) in the U.S.) as far as social problems are concerned; and in the end, the three contractors assume distinct responsibilities. Co-employment is finally a good way for companies to outsource their social responsibilities to an accredited co-employment provider. In the U.S., PEO are on a lobbying campaign to obtain federal and state legislative recognition and to overcome existing laws that create barriers or additional costs for third-party administration of HR operations. State legislators have responded by appointing them as the front-line tax collector and pension-administrator with legal liability for non-compliance. In Europe, the E.U. Acquired Rights Directive and other local legislation
42
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

make effectively HR outsourcing a costly solution by leaving the outsourcing company with the ultimate burden of managing its workforce and taking financial responsibility for employee restructuring.1 It clearly prevents, for the moment, co-employment to develop in the Europe. Nevertheless, since June 2003, Bremen’s (Germany) job center PSA (Personal Service Agentur), for instance, offers co-employment contracts to local companies for a duration of nine months in order to facilitate the reinsertion of unemployed workers, as the workers are leased to the company during the nine months period. Of course, this is a social and short-term initiative, but it really looks like the start of co-employment habits in European countries.2 Moreover, in the U.K., Adecco, for instance, provides permanent employment contracts to workers that are in fact working for a third-party client-company. Adecco has the main “Admin Contract” with its clientcompany and supplies a complimentary workforce to the same clientcompany. The employee is then considered to be a contractor working for Adecco within Adecco’s client-company. The employee has an Adecco consultant responsible for all HR issues it faces (holiday, sickness, appraisals etc.) and a manager from Adecco’s client-company that is solely responsible for it for day-to-day activities in its job role. These kinds of employees are on a threemonth probationary period. Finally, as the employment contract is permanent ongoing, there is no end date. This is again some evident kind of coemployment in the E.U.

3.2. Human And Trends

Resources

Outsourcing

Specificities

3.2.1. Global overview

1

“Legal Eagles of HR Outsourcing”, William Bierce, HR Outsourcing Today, December 2002 “Zeitarbeit als Brücke auf dem Weg zum neuen Job”, Elke Gundel, Weser Kurier Online, 6th June 2003

2

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

A] HR outsourcing expenses trends
An article in HRO Today reported that the total volume of BPO (Business Process Outsourcing) topped, worldwide, hundreds of billions of dollars with 40% of them occurring in the United States, and with 60% concerning the Human Resources department.1 Nevertheless, it is here very important to emphasize that in the U.S., pension funds management are included in HR budgets, which obviously implies huge amount of money that are not directly linked to HR management processes, but to pension financing. To illustrate the global trend, fourteen contracts that worth more $6 billion have been concluded between 1998 and 2002.2

B] HR outsourcing trends
More than three-quarters of surveyed companies (165 companies surveyed, primarily from the U.S. and Europe), responding to a recent survey by The Conference Board3, reported that they are currently outsourcing a major Human Resources function or at least are planning to do so in the near future. Among U.S. companies that have already outsourced HR functions, two-thirds say that they fully or partially outsourced five or more functions.4

C] Reasons to outsource trends
The Conference Board survey5 found that top managers were more likely than line managers or HR executives to cite cost reduction as the impetus for outsourcing, whereas HR executives mostly cited the need for service improvements and the ability to free the in-house HR staff to concentrate on

1

“The 100 Superstars of HR Outsourcing”, Human Resources Outsourcing Today, www.hrotoday.com,

November 2002, p 51
2

Creating value through HR Outsourcing, Strategies, Opportunities, Pitfalls, Dave Connaughton

(Director Business Development Asia Pacific Region Exult), Sourcing Interests Group, Melbourne, February 2002
3

HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002, p 4 HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002, p 5 HR Outsourcing Trends, Lisa Gelman and David Dell, The Conference Board, 2002, p 6

4

5

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

Europe. overview A] HR outsourcing expenses trends The U. D] HR outsourcing future According to a survey carried out between march and may 20011 among more than 100 companies located in big fields of work worldwide (North America. Australia. U.value-added services. The high technologies and the outsourcing of some activities will be the solutions for HR departments to meet these requirements.S.7 billion industry in 2000 to a $58. between March and May 2001 http://www.2.dataquest.com American Management Association. 3. Asia). Cubiks (a PA Group Company). the Human Resources actors will be in 2010 more involved in deciding the company strategies (for 89% of surveyed professionals). The new HR roles of the future are predicted to be rethinking the performance and loyalty concepts. and will be more required to show the value-added of their department. They will no longer manage equality but equity. and 81% of them support that e-selection tools will be widespread and will shorten time and marginal costs of the recruiting process.5 billion industry in 2005.S. and focusing on managing skills. Human Resources outsourcing market is expected to grow from a $21. by being able to focus on their core business thanks to economies of scale: 92% of surveyed companies think e-learning packages will be more used. according to Dataquest Incorporation. 1 Predicting the Workplace of 2010.2 B] HR outsourcing trends A study carried out by the American Management Association3 showed that 77% of the surveyed companies already outsourced some Human Resources activities.2. 1997 2 3 45 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

like perks management for instance. C.com/printarticle/0.In 2001. C] HR outsourcing future For the U.2. J. Peter Drucker. when he wrote: “Outsourcing the entire Human Resources administrative function which ten years ago barely existed. June 2000 4 Ressources Humaines : l’externalisation en Europe. shows that the most commonly outsourced processes. A study4 carried out among companies with more than 200 employees in 15 countries all over Europe. p 12-17 46 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .00.3 The diversification of HR activities outsourced is more and more important and go over traditional outsourced activities. Mercer Research Report. Europe overview A] HR outsourcing trends In Europe.html 2 http://www. 40% of employers have increased their use of external HR services providers in the last three years. is now growing at a rate of 30% a year”. 9th November 2001. are first of all “training and education” with almost 80%. Cranfield 3 School of Management and William M.3. Philips. the use of recruiting consultants is growing: 59% of European companies outsource their “staffing and recruiting” processes.. even if their assignments are still very limited (recruitment of a professional for example). The last most commonly outsourced process is “payroll administration” with 30%.5642%7C. Agence ARCA publishing.dataquest. Vernon and J.com European trends in HR Outsourcing. van Ommeren. February 2002.5317. ADP. The Economist. Similarly. Jean-Pierre Poinas.S. which represents in facts a tripling of revenue in five years.cfo. http://www. The content only is outsourced but not the container: all the “attention management” and the function itself are for the moment kept internally. Peter Drucker in The Economist1 strengthens this trend. 3. Brewster. 1 “The Near Future (Part II)”. P. the Gartner Group2 forecasts a future growth of 25% each year.

whereas only few companies apply the “American model”. France overview A] HR outsourcing trends Illustration 12: French HR outsourcing market shares in 20002 a) Small and medium-sized companies 1 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. But on the other hand. PricewaterHouseCoopers. Les Echos. p 4 2 “Externalisation: les solutions de BP Amoco et d’IBM”. as we will see later. 28th November 2000 47 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . because of particularly strong regulations and because of the decisive importance of social links. social law complexity clearly leads to ever more HR outsourcing. the shared services center model is more and more implemented in Europe. November 2000.000 employees have implemented a shared services center. 3.As a result. In 2000.1 B] HR outsourcing future The shared services solution seems to have the most predictable potential growth in the near future throughout Europe.2.4. 58% of European companies with more than 5. which consists in outsourcing complete HR functions and not only some activities. Laurence Ritter.

Ernst&Young en collaboration avec Taylor Nelson Sofres. only 9% of small and medium-sized companies have already outsourced their Human Resources functions. www. 2002. p 17 3 Baromètre Outsourcing 2002.com. 51% for finance and administration.1 b) Large companies Concerning HR outsourcing in large companies. as 24% of these kinds of companies have. this study shows that only 17% of all large companies prospect to outsource HR.ey. figures are on the one hand on a growing trend since 1999. whereas they are 56% for IT. when there were only 17% in 1999. p 17 48 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 41% for distribution. Ernst&Young en collaboration avec Taylor Nelson Sofres. Pratiques et tendances du marché de l’externalisation en France. and 38% of them plan to do so in the next two years.ey. Pratiques et tendances du marché de l’externalisation en France.ey. but it decreased compared to 2001 (56%). www. and 20% in 2001.3 c) New market companies Concerning HR outsourcing in the new market companies4. 40% of them outsource their HR functions. only a very few number of companies are enough structured internally and have solid and trustful information systems to be able to outsource HR activities. This trend is higher than for large companies.com. www. 1997 2 Baromètre Outsourcing 2002.com. p 21 4 Baromètre Outsourcing 2002. 2002. B] HR outsourcing future In France. 2002. 19% in 2000.2 But on the other hand. which consists in fact mainly in payroll outsourcing (for 88% of them). in 2002. the number of providers is very small and 1 A Coopers & Lybrand Consultants and l’Association Nationale des Directeurs Financiers et de Contrôle de Gestion (DFCG) Study. Moreover. logistics and transportation and 32% for facilities management. Ernst&Young en collaboration avec Taylor Nelson Sofres. Pratiques et tendances du marché de l’externalisation en France.In France. already outsourced parts of their HR activities (recruitment activities for 47% of them).

2002. and as they are afraid that outsourcing would lead to a loss of control (49%). only specific activities are outsourced in a same department.1 1 Baromètre Outsourcing 2002. the shared services model allows minimizing all the outsourcing risks (see 1.). but almost never a whole function. payroll and selection processes for example. and finally to a loss of know-how (17%). www.3.2. For these reasons. to a costs increase (32%).ey. as for Europe. The chosen option in France is mostly the implementation of shared services centers. training. Finally. Ernst&Young en collaboration avec Taylor Nelson Sofres.com 49 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .companies are afraid to lose control on strategy and corporate vision. to a loss of quality (36%). Companies outsource almost only. as companies find this solution more flexible. to social problems (for 38% of them). Pratiques et tendances du marché de l’externalisation en France.

We would like to give readers a good idea of the reasons why outsourcing is an unavoidable strategic solution for companies who want to lead the business game in the following decades or even more so in the following years. 50 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .PART II. STRATEGIC APPROACH Now that we have demonstrated the real extent of the phenomenon. our aim through this second part is to show why multinational companies in Europe can simply not ignore outsourcing when the reengineering of their Human Resources functions becomes necessary.

com 51 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . www. But this experience cannot in any way apply to companies since business success does not consist in fulfilling a unique. It is also true that the business competition never ends. Adaptability is vital. clear. except that this race is an ongoing contest.Chapter 4. Cap Gemini. companies move about in the same kind of environment as do the sail boats competing in the Jules Verne race. or if it will blow at all.cgey. moving forward. 4. one that companies aim to win again and again. Ernst & Young. it is not one-dimensional but multi-dimensional. Ongoing Competition A sailing crew battles high seas. and to ensure that it is sailing in the right direction. p 3. its state as well as its trends and revolutions. We will try to understand in parallel which business environment should give rise to HR outsourcing.1. The route takes them around the world. 2002. it has no clear starting point and it has no end. They are never sure which way the wind will blow. As soon as 1 Transformational Outsourcing. requiring survival skills and careful planning to deal with the traps and dangers that abound. This is the most challenging and complete sailing race in the world. Sport competitors can taste what it means to be the best in their chosen endeavor. dead calm. crossing seventeen different weather systems along the way.1 Indeed. and ice during its quest to win the Jules Verne trophy. The Jules Verne sailing competition is similar to the race in which companies compete every day. The challenge is to keep the company upright. Human Resources Outsourcing And The New Competitive Environment We will start to analyze in this chapter the new competitive environment in which companies move about. Changing the course of business services. violent storms. and lucid objective. because they define their success by unambiguous and instantaneous victories.

that today’s employees will be tomorrow’s competitors. In the end. The race example does not emphasize the fact that business competition is an arena where actors are themselves largely shaping their environment. where everything is linked to something else.companies collectively understand that the rules are not as easy as they seem. companies are commonly defined by the process of generating value or. It only aims to focus on the very important fact that business competition is characterized by actors that are ever more aware of how to take advantage of such a competitive environment. This example does not underline either the extremely decisive fact that a company’s workforce is not exclusive anymore. they are likely to be successful. something is missing in the Jules Verne trophy comparison. this description of the business competition is not quite original nor is it particularly new. And all this occurs during the same race. The value-added is a concept developed by Michael Porter that has the particular quality of not focusing only 52 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . if any. In fact. that competitors strongly participate in designing rules. Actually. without catching it. Business is more an endless chess game with millions of participants . and that they are sometimes even partners. and offers on the other hand the technological tools to cope with this relative instantaneousness of information broadcast. if we claimed that the success of a company was hard to define. The only really new aspect of this environment is the everquicker innovation process. and unfortunately. and where you need to know how to know. of taking the advantage more than just winning. since each stakeholder of the company is a potential distinctive reference for the definition of its success. way before the arrival line. companies would be completely blind. partners or even clients. On the other hand.temporary winners and temporary losers. which imposes on the one hand the shrinkage of the distance between cause and effect. more than anything else. value-added. even better. it is just a question of point of view. that they are not just a problem of short-term profits but a problem of positioning.

it seems useful to specify here the definition of the vocabulary we used to describe the organization of the company. that is either by management. and in the end the “activity” is a subfunction characterized by its type.1. but on the whole valuecreating process model shared by most companies. Michael Porter identified a set of interrelated generic activities common to a wide range of companies that he named the “value chain”. or by self-services. etc. 4. departments have been considered to be composed themselves of “functions” (or sub-departments such as payroll. production. Borderless Organizations Before starting and in order to clarify our demonstration. by administration. HR.on short-term financial key performance indicators. by processing. 53 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . every observed value creation process may be represented by a value chain as designed by Porter. for the HR department). it is useful to model the company as a chain creating value through its activities. In fact. we considered the company to be composed of “departments” (such as finance. (See Illustration 4) 4. similarly.). The value chain is a chain of activities that generates the value and hopefully most of the time value-added. to make it perfectly clear and simple. etc. Indeed. The value chain To analyze the specific activities through which companies can create a competitive advantage.2. benefits.2. marketing.

Dunod. 1 L’Avantage concurrentiel. They directly participate in the results of the process. In parallel to these primary value chain activities.Illustration 13: Porter’s Value Chain1 In all value chain. as they literally shape the final characteristics of the resulting value. even if this person is an HR professional for instance. one can distinguish two different kinds of activities: • The primary value chain activities. but that do not. Michael Porter. Porter identifies the support activities. You can tangibly feel their effect in the resulting value produced by the whole system. Moreover. if one knows someone working for IBM. which include all activities that are. It is at this point interesting to notice that company workers usually identify strongly with these activities. of course. on the one hand. • The support activities. absolutely necessary to obtain the final expected value. one will spontaneously associate this person with computers. 1999 54 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . we would never even expect to achieve value-added. Without them. The primary value chain activities are fundamental generators of valueadded at the end of the whole process.

Support activities do create value. but in fact the comparison is really not apt. a value chain as described above is made of distinct activities that all together build the whole value chain. permanently in contact with other value chains. But they also individually constitute sub-value chains that can be themselves in turn organized like perfectly regular value chains. its aim is evidently to generate value-added. The problem is that one often forgets that value is quite subjective. which is actually not the case of any corporate support activity that generates valueadded for the good functioning of other internal support and primary activities. But this would mean that the support activities do not create value-added and that they only support the creation of primary activities. one may claim that even support activities of a value chain create value and probably as much as most primary activities. This means that each support activity is a value chain itself with its own support activities but also its own primary activities. The virtual organization Now we introduce the concept of borderless companies or virtual organizations. The company as a whole generates value-added that benefits external clients in total respect of market laws.2. As a result. but even more important is to identify the destination of this value-added. and that it can be differently considered according to various points of view. which makes the company part of a complex value 55 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . this is absolutely not the case. In fact. Of course. It is. They are only there to support the primary value chain activities. 4. it is also a problem of reference. Interactions between companies’ value chains make it difficult to see the real borders between companies. The main difference with the company’s overall value chain lies in the fact that it does not exactly share the same clients. The value chain of any business organization cannot indeed be isolated from the whole context it is involved in. in fact. upstream as well as downstream.on the other hand. Whenever a value chain is set up.2. as they do not share the same direct stakeholders. Indeed. a good know-how of these activities is almost never a reason why a value chain is built up. directly influence the final value’s identity.

1997. B] Alliances 4 It is therefore more than ever necessary for companies to build efficient alliances and cooperative relationships all the way to the core of their business. broken down into three leaves: • The first one represents the staff internal the company which is composed of high-skilled collaborators essential to the good functioning of the company.chains system. able to generate more value than the sum of its individual components”. Dunod. The alliance is not a new form of relations between companies. • The third leaf represents the whole temporary workers that participate in the reaching of the company’s targets. and 1 STRATEGOR. Fréry. but bringing each their resources and skills in order to make up a specialized network. p 50 Benetton ou l’entreprise virtuelle. national or multinational. entre concurrence et coopération Dominique Jolly. 3rd edition. whether they are new or old. 2001 2 3 4 56 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . A] Clover leaf The virtual corporation is also called the ”clover leaf” organization3. F. Collectif HEC. its specialization allows it to be more efficient and less expensive than internal services. but the new global competitive environment encourages ever more different kinds of joint actions. 1999 L’Age de la déraison. 1996 Alliances interentreprises. Vuibert. Village Mondial.1 The virtual corporation can be defined as being “composed of several companies interdependent to another. Charles Handy. Dunod.2 The virtual corporation keeps indeed internally a hard core of strategic activities and outsources all the others. Moreover one may observe that both small and large companies are concerned. legally separated. • The second one represents the specialized provider that takes charge of the resting activities.

Its success relies on: bilateralism. Most of the concepts. Thus. a theory that sticks to reality.by the Harvard Business School. for instance . we are currently clearly witnessing a certain erosion of the competitive systematic behavior. Igor Ansoff. outsourcing stands somewhere in between cooperation and CRM (Customer Relationship Management). Companies with a largely outsourced value chain are also called “virtual corporations”. remaining absolutely independent outside the context of the alliance. Outsourcing may now concern any stage of the value chain.rely on rivalry between companies. An alliance is defined as a link between several companies that direct an operation. pooling their resources in order to benefit from the resulting advantages of the cooperation. This rivalry is even guaranteed by governmental organizations such as the “Conseil de la Concurrence” in France. the construction of a competitive advantage should rely on a more efficient coordination between direct partners. Malone. In fact. or Michael Porter. October 1993 57 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1 Their heart beats in the hands of their partners and their brain performs in the brains of their partners. the “Bundeskartellamt” in Germany and the “Monopolies and Mergers Commission” in the UK. It seems that cooperation between companies represents according to its growing practice a serious alternative to mergers or acquisitions. the Boston Consulting Group. and a clear view of the independence or dependence of the companies in the fulfillment of their tasks. William H. Davidow and Michael S. and strategic decision tools developed since the 1950s . Harper Business Publishing. C] CRM 1 The Virtual Corporation: Structuring and Revitalizing the Corporation of the 21st Century. an alliance in which both parties benefit from its success but not from the same part of that success. task-sharing or duplication).finally wherever they are located around the globe. the choice of the best organizational approach (that is centralization. models. Nevertheless.

The great challenge of HR outsourcing is to reach the last stage of a business relationship degree of maturity. and customer3 capitals (on both side of the relationship). Illustration 14: Customer Relationship Management evolution4 At the bottom are transactions where sellers simply sell and the buyers merely buy. and with time and experience. Customization is the second level as it represents specific solutions. The available knowledge a company has on its clients. According to him. Intellectual Capital. Stewart.CBIC’s (Canada Imperial Bank of Commerce) Hubert Saint-Onge depicts the stages of client-provider intimacy and the growth in human1. The fully-owned knowledge a company has accumulated through its operations. the service itself becomes secondary: the client has a business problem that needs the provider’s analysis and state-of-the-art 1 The part-owned knowledge a company disposes of through its employees. Doubleday Publishing 1999. Thomas A. the client-provider’s relationship will pass several stages from the simple transactions relation to the complex partnering. as fast as possible. customer capital is resulting from the accumulation of both human capital and structural capital. At the business solutions level. p 158 2 3 4 58 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . structural2.

but also immensely rewarding to both parties. Finally. Prahalad and Gary Hamel2 used the term core competencies to define the collective learning and coordination skills behind the company’s product lines. Waterman. a French high-tech online newspaper. ranked IBM France as the number one high-tech company in which people most like to work.journaldunet. it became prominent when Tom Peters and Robert Waterman3 suggested that organizations should stick to their most profitable activities in terms of value-added creation and avoid diversifying into areas beyond their field of expertise. make a vital contribution to its success.1 4. This previous concept comes actually from the elder concept of core business activities as activities that differentiate the company from others.2. K. 11th February 2002. “Le Journal du Net”. Warner Books. August 1988 4 Le Journal du Net.4 She probably had simultaneously in mind what Samuel 1 Intellectual Capital. Prahalad and Gary Hamel. and offer to companies their largest ROI (Return On Investment). C. In fact. C. in a full-fledged partnership. Fabien Claire. Thomas A.3.expertise. In 2002. then IBM France HR Leader. http://www. the provider actually takes over the management of the business extension: this last level is the kind of intense. Doubleday Publishing 1999. Core competencies and core business A] Definition In 1990. she said that IBM’s best asset consists in the variety of its professions. Harvard Business 2 Review. May 1990 3 In Search of Excellence: Lessons from America's Best-Run Companies. Stewart. K. p 159 “The Core Competence of the Corporation”. demanding relationship. commented on this classification. When Dominique Calmant. Reissue edition. They support the idea that core competencies are the source of competitive advantage and enable the company to generate the largest value-added.com 59 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Thomas Peters. Robert H.

the one each value chain’s leader has to define precisely in order 1 IBM 2002 Annual Report. one has to identify and segment the different activities that compose the whole chain. stressed as IBM’s core business1: “All of this is what we mean by e-business on demand […]”. At minimum. they also need on the other hand to build. IBM CEO. the activity must be classified as a support or a primary activity. if it seems clear that companies need to be on the one hand quite obsessively specialized in order to be the best. Value chain activities can be differentiated with the help of three different dimensions: the inclusion within a function (sub-department) or sub-value chain. In fact. or of any system that aims to generate value-added. but it can be delineated even more precisely to the point of actually defining its specific role in the whole process. and finally the type of activity. in other words.J. The value chain described above helps to understand the mechanism that is hidden behind the creation of value. p 14 60 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . which activities are part of the core competencies field. people like to work for them. the degree of proximity to the strategy. The degree of proximity to the strategy dimension corresponds to the degree of closeness that the activity has with strategic activities. but it does not help to identify which parts are absolutely decisive to achieve the competitive advantage. in other words IBM is specialized in and one of the world leaders in e-business on demand. a wide variety of career opportunities in order to attract the best workers and to be the best in the end. within this great focus. of a function. Palmisano. The inclusion within a function or sub-value chain dimension corresponds. This is indeed the most important dimension. as we saw before. B] Segmentation of activities In the process of determining the core competencies of a business. Indeed. to the activity theme. these strategic activities become more strategic as their impact on the previously fixed corporate objectives increases. but as it is one of the best and as it offers a great variety of professions inside its core business.

automotive activities. which are activities that are systematic and repetitive. first. which are related to strategic planning and controlling activities. sales functions are not always more important than HR. which are activities that are mainly automatically done without too much need of human presence. As we are here interested in the identification of the core competencies. administrative or operative activities. then. In the following illustration are represented by a regular cone all activities included in a value chain. We symbolized the proximity of the activity to the core competencies in accordance with its distance to the center of the disc: the more centered the activity is on the disc. 61 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . for example. you define the activity as being part of one of the different generic types of activities seen previously. which are activities that deal with the elaboration and the management of processes. Each activity can be placed in the cone according to the three dimensions described above. and in the end management activities. the activity type dimension consists in the segmentation of activities according to the four types described above. processing activities.to maximize the resulting value-added. The function of the activity is placed on the disc. according to how high you locate the activity in the cone. Finally. the more strategic it is. we darkened the virtual position of what are in fact the strategic activities of the value chain. next. And finally. One should notice that we deliberately choose to differentiate strategic activities from core competencies to the extent that the former are absolutely necessary but not decisive (from an identity point of view) whereas the latter really are decisive not only for the success of the company but also for the “raison d’être” of a company’s positioning: its core identity. because it is important to avoid a function hierarchy. a priori. That is. related in a way to the level of competency (see Illustration 4).

with of course a bigger advantage for the latter. Once these core competencies have been identified. from the lowest rank to the top management. In fact.Illustration 15: The Cone of Core Competencies One can easily see that those precious core competencies are symbolized also by a cone (the dark one). Each value chain has its own cone. Moreover. but obviously smaller and on the upside down. This actually clearly emphasizes the fact that a core competency may arise from a support or a primary activity. shaped in accordance with its own particular environment. and that a core competency may concern any type of activity. according to a single dimension. People who are responsible for the success of the value chain have to ask themselves what their core competencies are made of. the strategic decisions can be taken with no possibility of missing their targets. with a noticeable higher frequency for the latter. that is to say the clear definition of their competitive advantage. core competencies are 62 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the most important point here is to focus on the complexity of core competencies. but these are just basic management rules. with its top plunged in the base of the whole activity cone. and especially not to define them too simply.

key employees know probably less than 20% of what they need to know. as the system is more than ever inside the brains of the workers. In a knowledge-based organization. a key element to the success of a company. what made the traditional workforce productive was the system.3. it has nothing to do with prestige. the system must serve the worker in the knowledge workforce. a core competency is defined in reference to a particular purpose also called a value chain. In the knowledge-based economy that characterizes nowadays’ competitive environment. it only aims for maximum value-added. Drucker. Whereas. as a consequence. Again. in the traditional workforce.not always fixed over time and strategic planning should strongly be taken into account when core competencies are defined. and also that what is decisive in the 1 “They’re not Employees. Harvard Business Review. Peter F. The challenge is actually to help them catch the 80% left. of course. It is. The critical feature of a knowledge workforce is that workers are not labor but capital. which embodied the knowledge and which was productive because it enabled individual workers to perform without much knowledge or skills. It would be difficult to overstate the importance of focusing on knowledge workers’ productivity. the worker served the system. February 2002. 4. more important today for organizations to pay close attention to the health and well-being of all their workers than it was 50 years ago. They’re People”. pp 70-77 63 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Knowledge workers 1 Collaborators also represent. Finally. and the only way that organization can succeed in a knowledge-based economy and society is by managing its knowledge workers for greater productivity. on the contrary. The success of every business will increasingly depend on the performance of its knowledge workforce. the individual worker’s productivity makes the entire system successful.

pp 70-77 2 “Ces entreprises qui externalisent leurs salariés”.2 Companies offer indeed the opportunity to build their own business to some of their workers. They’re People”. On the other hand. considering that the reality of an official scale of authority encourages managers to be more professional. Harvard Business Review. Tom Peters supports the idea that workers tend to be given irrevocably a lot more responsibilities and autonomy. February 2002. 4.performance of capital is not what it costs but how much it is being invested. contesting the hierarchical power that is inefficient in facing the chaos. NTIC (New Technologies of Information and Communication) The change brought about the technological innovations of the 1990s and early 2000s have affected all business aspects. Today.1 Finally. by offering its first contract to the new start-up and sometimes even by taking equities. Technological change accelerates overall environmental change. which explains why the company is motivated to secure the survival of the start-up. it is absolutely expected. Alfred Chandler has always been an adept of clear hierarchy. Sabine Grandadam. The method allows the company to get rid of a noncore but still perfectly strategic competency. Peter F. some companies simply outsource some of their workers. There was a time when people had the choice to be linked electronically or not. Drucker. Les Echos. For the ex-employee. p 26 64 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the only failure observed with this solution arises when the start-up begins to compete on the same markets as its former employer. To try to remedy this lack of balance between the efficient hierarchy and the creative chaos. Rapid 1 “They’re not Employees. it is a great opportunity to be its own boss. to develop a business in accordance to the vision of its core activity.4. 3rd October 1995.

p 60 65 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . little by little.technological change. it is a source of differentiation and competitive advantage. and as Albert Einstein is said to have claimed: “Not everything that can be counted counts. as soon as all the actors of the business area master it. and the inlet of NTIC. Dominique Jolly.1 Facing the globalization of the economy. the speeding up of innovation in all areas. Technology is by the way really one of the most important dimensions considering the outsourcing solution: if technology is an old industrial catalyzer. Each shift changes the rules of the game and one of the most pressing challenges for companies is to manage employees in virtual organizations. a simple technique. companies can definitely not remain isolated (in autarky). Technologies have for objectives to improve performance. the information age. 1 Alliances interentreprises. entre concurrence et coopération. combined with drastically changed market forces. reduce costs. technology has an economical goal. Vuibert. and may give access to a practice. their application domains and their purpose. Contrary to science. and not everything that counts can be counted. 2001. its power is indeed newly applied to organizational and administrative management. A technology will become.” That is the real NTIC challenge. have driven massive shifts trough the competitive environment. as it is the exclusive belonging of a company or a group of companies. NTIC bring the chaos and the tools to manage it. They are definable by their sources. Moreover.

but it is quite another not to forget. 5.Chapter 5. The Human Resources are moreover drastically changing. They are expected to demonstrate their value-added and to reduce their costs always more.1. • A growing number of businesses have outsourced their Human Resources functions. that developing talents is companies’ most important task to compete in a knowledge economy.sett. the resource itself is no more valuable.org/etudes_statistiques/Rapport_économiŠl_2002_SETT. Two Fast-Moving Trends Two fast-moving trends are changing the way companies have to manage talents: • A huge number of people who work for companies are no longer traditional employees. It is one thing for a company to take advantage of long-term freelance talent or to outsource its Human Resources management. in the process. http://www. 5. SETT (Syndicat des Entreprises de Travail Temporaire).pdf 66 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1. Human Resources Outsourcing And The New Challenges Human Resources are facing the ever more demanding evolution of companies. as knowledge replaces strength: intangible beats tangible. Temporary development A] Figures 1 employment industry Europe is the geographical area where the temporary employment 1 Rapport économique et social annuel 2002. and the value comes for now on from the mastering management of its flows.1.

and this service sector expects more project approaches.K. that is to say group temporary solution to a given problem. The European temporary employment market increases by 10% every year. business leaders in the U. just after the U. generates the highest revenue with €36 billion in 2002. Finally.. and it concerns 4. The second one.eurofound. 20th April 1999 2 “Commission proposes directive on temporary agency workers”. Moreover. Laure Belot. very close to the HR outsourcing concept. more complex. Belgium.7% of its working population (still the first rank in Europe).html 67 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The first one consists in matching offer with demand. and Portugal). but much more those who will satisfy the client-company in the end.eu.eiro..S. including pay. and holidays.industry makes its highest revenue with €73 billion in 2002. http://www. the temporary employment industry is shifting from the industrial sector to the service sector. Spain. especially with the great help of the Internet.K. April 2002. Digby Jones.2 This proposal is actually already applied in France (just as well as in Austria. Vice President Adecco1. The proposal aims to ensure equal treatment between temporary workers and comparable workers in the user company. B] Trend Thanks to Klaus Jacobs. C] Threatened flexibility The European Commission issued a proposal for a new Directive regulating the working conditions of temporary workers in March 2002. EIRONLINE. the Netherlands. on a range of basic working conditions. Luxemburg. Conversely. the temporary employment industry may be divided into two main activities. working time. powerful tool. Le Monde.int/2002/04/feature/EU0204205F. consists in assessing applicants in order to identify those who not only have a real potential. breaks. have warned that it could be very damaging for companies. the U. CBI (Confederation of British Industry) Director- 1 “Au-delà de l’interim. Adecco veut gérer les ressources humaines de ses clients”.

30th May 2003 “Bosses war against rights for temps”. not just to business but to employees as well. PEO (see 3. They’re People”. Peter F. The HRO industry as a whole is growing at a rate of 30% a year. which manage their clients’ HR activities. 2 3 4 February 2002.U. after the outsourcing of manufacturing operations in the 1980s and the following wave of outsourcing by the early 1990s of information technology and software development. at least 1. HRO (Human Resources Outsourcing) industry development 4 In a related but distinct development. and are by the way already in the U. BBC News Online. John Monks. last May 2003. temping law”. and PEO expect to be collectively the co-employers of 10 million U. Harvard Business Review.S.2. including HR activities.1 On the other hand. the global economy is now about to live its third big business revolution: outsourcing of business services. they had become. claimed that without improvements. 1 “CBI launches new bid to block irreparable damage from E. p 6 Inspired from “They’re not Employees. pp 70-77 68 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the TUC (Trade Union Congress) General Secretary. workers by 2005.2. Liaisons Sociales. the “co-employers” of 2. this debate will all the more be on the European agenda. CBI Press.3 5. Isabelle Moreaux.800 such organizations. June 2003.1.1.S. Finally.General. were the fastest-growing business service in the United States during the 1990s. Even though they were virtually unknown only ten years ago.2 Finally. Drucker.S. by 2000.D]). taking on temporary employment would do irreparable damage. both the temporary employment industry and HRO industry are growing quickly.5 million to 3 million U. welcomed the draft proposal arguing that lower rates of pay for temporary workers undermine workforce motivation and act as a brake on productivity. workers. as John Monks has just been elected at the head of the ETUC (European Trade Union Confederation). 18th February 2002 “La CES prend l’accent britannique”.

The first HRO provider in the late 1980s offered to do bookkeeping. like temporary agencies. They’re People”. have expanded their scope in recent years. February 2002. Moreover. 5.1 5. für die Wirtschaft im Wandel. HRO providers scope expansion HRO providers. Today. Peter F. from bottom line to top management. Expansions Explanations 2 5. especially payroll. but may now be designed from the start to be the co-employer for the largest multinational companies. Harvard Business Review. Temporary work scope expansion When the temporary employment industry first started nearly fifty years ago. but now they can take care of almost all Human Resources activities. Drucker.2.2. many temporary workers are full-time workers for long periods of time in the same company. there are temporary agencies for every kind of job. http://www. flexibility has no account on the emergence of HRO providers. Business Village.2. for their clients. Scope Expansions 5. but in fact.de 2 Inspired from “They’re not Employees.managementangels. it seems interesting to briefly present the law case opposing 1 Interimsmanagement. Management Angels GmbH. pp 70-77 69 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .3.5.1.3. HRO providers originally confined themselves to taking care of small businesses. To that extent.2.1. 2002. it supplied low-level workers to take the place of employees who were sick or on vacation. Flexibility The popularity of temporary workers is usually justified by the need of always more flexibility. It is finally more likely the growing burden of rules and regulations for employers that encouraged both developments.

tend to stress the need of at least an external counsel.S. having its Human Resources functions managed by an outside company. and they all threaten punishment for noncompliance.000 temporary workers that were in fact entitled (as employee-considered for this matter) to receive its employees stock purchase plan (a liability that could easily reach $20 million). The growing complexity of overlapping legal references that face ever more HR departments in the U..3. the costs they impose on businesses are high everywhere in the developed world.Vizcaino to Microsoft in the U. 173F. They require managers to file multiple reports. 5.S. This case clearly demonstrates that the litigation probably could have been avoided if the company’s benefit plans had been drafted differently. Costs reduction and time gains Temporary agencies and HRO providers favor costs reduction and time gains for the client-company. Even more onerous than the costs of complying with employment laws are the enormous demands that the regulations place on management’s time and attention. A] Costs reduction A 1997 McKinsey study concluded that a multinational company could cut its labor costs by 25% to 33%. Microsoft Corp.2.. and actually even more in Europe.3d713 (9th Cir 1999) 70 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as although employment laws and regulations vary widely from country to country. The outsourcing of employees and Human Resources activities is an international trend. that is expert in (has for core competencies) the management of this kind of complexity as a whole. B] Time gains No wonder that employers complain that they have no time to work on 1 Vizcaino v.1 Microsoft has indeed been charged in 1999 for having misclassified 15. and at best of an external provider.

If this corporate culture is not a reliable reflect of the parties (the workers). even in large organizations. Managing knowledge workers Beyond the desire to avoid the costs and complexity of regulations. 5. as knowledge is effective only if it is specialized. Both the large temporary agencies’ clients and the HRO providers’ clients lack the ability to effectively manage. The success of temporary agencies and HRO providers is thereby evidently due to the fact that they both enable management to focus on the business. As a consequence. specialized workers are better managed in specialized companies (with the same specialization). Culture builds identity. but identity allows recognition. Knowledge workers are not homogeneous. Moreover. Managing all of them effectively is a big challenge. etc. thereby it is not optimized to be considered as a strategic asset for the whole (the company). one that temporary agencies and HRO providers can help to address. In conclusion. This is particularly true among the fastest-growing group of knowledge workers that are innovative industry specialists. as they work.results. but various identities lead to a unique corporate culture.3. on problems (employee regulations). place. instead.3. and satisfy highly specialized 71 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as their corporate culture better reflects individual identities. A direct negative consequence of this specialization is indeed that knowledge workers have most of the time fewer career opportunities within the organization. it is a deeply splintered work. one must share the same corporate culture without sharing individual identities. it is then evident that the identity they have is often too distant from the collective company identity. Because knowledge work is specialized. and there is not the slightest reason to believe that the costs or demands of employment rules and regulations will decrease in any developed country. there is another major reason for both the rise of temporary workers and the emergence of HRO providers: the nature of knowledge work and the fact that knowledge-based organizations have lots of experts. and thereby motivation.

but it’s hard to see how they deliver. in contradiction to what Human Resources theory says. This explains why HRO providers can claim. it is expressly provided that the HRO provider has the duty and the right to place people in the jobs and companies where they best fit. In a total HR outsourcing contract. that the people they coemploy are high job satisfaction. and apparently document. Temporary agencies claim to be selling productivity. Balancing its dual responsibilities. But as all industries are now obliged to cope with the information age. is probably HRO providers’ most important challenging job. and to be doing the company’s oversight job for them. In the end. of the people who work for a company are employees of that company. whether they’re temporary workers. The temporary agency has no control over those last two areas and this lack of oversight is a real problem. part-timers.knowledge workers. Temporary agencies and HRO providers perform this vital function for employees as well as for their clients. The productivity of the people they supply to a client depends not only on how and where those workers are placed. and distributors. or employees of its outsourcers. that is not true. Issues For The Outsourcing Company A] Temporary workers motivation and management HR policies still assume that most. suppliers. Every organization must take management responsibility for all the people whose productivity and performance it relies on. HR management is all the more expected to perform well as it is applied in brain-based industries such as consulting or services. Who would dare say that interns are less productive than formal unfixed term contract junior collaborators? B] People development 72 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . to the corporate client and to employees. 5. but also on who manages and motivates them.4. But as we have seen. if not all. brain resources management or human capital management concerns for now on absolutely all industries.

The functions that are involved with employee relations should be systematized. but then.1 HR must enable companies to meet the expectations of their stakeholders. and paperwork. This trend will require more than just same new programs and new practices. 5. and new policies. pp 79-106 73 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Indeed. regulations. Companies have thereby ample reason to try to do away with the routine issues of employee relations. people are opportunities. but a network of partly-owned knowledge workers. People are capital. mentor them and listen to them. Leaders in knowledge-based businesses must spend time with promising professionals: get to know them and be known by them. Doubleday Publishing 1999. Stewart. But they need to be careful that they do not damage or destroy their relationships with people in the process. and productivity of the knowledge workers on whose performance their own results depend. new goals. HR does not manage a collection of fully-owned workers. executives thereby need to work closely with their HRO provider counterparts on the professional development.5. Human Resources New Objectives The HR function faces a growing challenge from business leaders: it has indeed to enable the organization to achieve excellence by developing strategies to attract. new values. the main benefit of decreasing administrative work may be to gain more time for people relations. If employee relations are being outsourced. while increasing 1 Intellectual Capital. develop and retain human capital. and the key to greatness is to look for people’s potential and spend time developing it. whether by systematizing employee management in-house or by outsourcing it to temporary agencies or to HRO providers. challenge them and encourage them. they may become impersonal.Temporary agencies and especially HRO providers free up managers to focus on the business rather than on employment-related rules. satisfaction. motivation. Even while those people are not traditional employees. Thomas A. they are still a capital resource for the organization and critical to its business performance. It will require new measurements.

but the most recurrent and relevant one is the number of HR employees divided by the global number of employees. and of 2% in France. In the U. Chief Executives now expect the HR department to decrease its own operational costs on the one hand. a lot of tasks are outsourced and companies are equipped with very advanced information systems. 1998. In other words. p 3 2 Le tableau de bord prospectif. recruiting. Thus to that extent. and the average is of only 0. Robert S. A common ratio is the number of HR employees divided by the annual revenue. Meet stockholders expectations through costs reduction After requiring HR functions to reduce their expenses and more generally all their external costs.. PricewaterHouseCoopers. it has to work better. the American average is very different from the European. such as outsourcing strategies. when J. To this purpose. but also companies’ operational costs in general on the other hand. benchmark is realized.4%. also called HR staff-to-employee ratio.4% in Scandinavian countries. Kaplan and David P. Randall MacDonald (now Vice President Human Resources IBM Corp. indeed. absenteeism costs). HR leaders use lots of tools to evaluate their performance. faster and cheaper.) was head of HR at telecoms giant GTE. the average is of 1. November 2000. such as balanced scorecards2 and decisional analysis tools (turnover. and ratios are implemented. 5. In Europe1. to implement new strategies to reduce costs and to improve efficiency.1. he 1 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. pp 137-155 74 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .75% with of only 1. Norton. without of course creating any social problem.5.S. Les Editions d’Organisation. As far as this ratio is concerned.employees’ service quality.

introduced one of the most robust Human Resources scorecards. He took clear measures from every corner of Human Resources functions and rolled them into a four-pages report, which was distributed around the company. As a positive consequence, when discussions took place on which areas of the business were adding value, there was almost never a question about what the Human Resources department did, what its value was, and how it was improving.1

5.5.2. Generating value for the company
Though reducing costs is clearly one motivator to transform HR, far more compelling is the interest in generating value for the whole organization. Indeed, HR ROI is now calculated and expected to be so. New HR performance leverages are also implemented: they consist in being more aligned with the business thanks to HR Business partners working with operational collaborators, or in no longer being just a provider but a pro-active actor by forecasting future issues. HR Business partners are thereby empowered to grow business partnering, change management, workforce development and organizational effectiveness capabilities, and to truly support organizational excellence.

5.5.3. Seven questions to challenge objectives
William Schiemann of Metrus Group suggests that there are seven main questions HR leaders ought to ask themselves to know if they are on the good way or not to challenge future HR issues2: • Is HR present at mergers and acquisitions planning meetings, strategy reviews, and restructuring discussions? • Does HR provide an annual report on its ROI? • Does HR lead the people strategy? Has it developed key

1

“Be seen and heard or face extinction”, Personnel Today, Lance Richards, 19th February 2002 “Trends to Watch in HR’s Future”, HRFOCUS, December 2002, p 7

2

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performance indicators for the success of that strategy? • Do its customers rate HR? • Does the organization conduct strategic vs. entitlement employee surveys? • Are HR employee and other survey initiatives linked to customer and financial metrics? • Does HR have an ROI process to evaluate its initiatives connected to the business strategy?

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Chapter 6. Human Resources Outsourcing Strategic Approach
Whatever you might think, outsourcing Human Resources activities will be human-focused or condemned to fail.

6.1. Outsourcing Decision Theory
Now that one knows how to define the HR activities that may be outsourced (activities outside the dark cone of the illustration 15), one is now invited to enter the mechanism that leads to the outsourcing decision.

6.1.1. Bases
A] The transaction costs theory
This theory1 deals with two main important issues of the outsourcing process: decision (is it worth outsourcing or not?) and management (how to manage successfully an outsourcing operation?).

a) Principles
According to this theory, there are three ways to organize an activity: • Managing the activity by oneself (called “firm” governance); • Delegating the activity to the market (called “market”

governance); • Make it managed by a provider with whom one has solid relationships (called “hybrid” governance). The best governance structure, as far as costs are concerned, is the one

1

“L’outsourcing : une approche par les coûts de transaction”, Bertrand Quélin, Réseaux, July-August

1997

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

The limited rationality consists in an inability to forecast all events that may occur during the outsourcing contract. the complexity. and the difficulty to measure the provider’s performance. specific human assets (when the provider developed special skills just for the client needs). specific physical assets (when the provider developed or adapted equipments for the client). c) Transaction attributes The transaction costs theory allows the determination of the optimal governance structure. There are specific locations (when a provider established equipments close to the clients to reduce storage and transportation costs). 78 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Opportunism occurs when there is a small number of providers and an atmosphere that may encourage the provider to take advantage of this context and to be unfaithful with its clients. the frequency. b) Fundamental hypothesis The transaction costs result from the interaction between a limited rationality and a similarly limited opportunism (hypothesis on which the theory is based) of individuals with environmental factors. and the number of providers.that minimizes the most the sum of production costs and transaction costs. There are finally three environmental factors interacting with the two behaviorist fundamentals: the uncertainty. but also temporal specificities (when the provider developed specific assets to respect time of delivery to its client). and then all renegotiations that may be necessary. i/ The assets specificity Specific assets are assets that have been specifically developed or adapted to a special usage. thanks to four criteria: the assets specificity. the uncertainty.

the more it is recommended to outsource it. Bertrand Quélin. 1 “L’outsourcing : une approche par les coûts de transaction”.The less the assets are specific. July-August 1997 79 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . but it suggests three types of outsourcing: outsourcing with classical contract law. outsourcing with neoclassical contract law. iii/ The frequency Transactions can be unique. and it is thereby impossible to write a contract that includes all future contingencies. d) Governance structures 1 The transaction costs theory not only distinguishes insourcing and outsourcing. the bigger the transaction costs are. or recurrent. one can conclude the following: the bigger the level of uncertainty is. These problems occur all the more as it is combined with a strong specificity of assets. we saw in the hypothesis that the individuals’ rationality was very limited. Indeed. Réseaux. the easiest it is to make the activity managed by an external provider. ii/ The uncertainty The uncertainty is the fact that it is more or less difficult to forecast the future evolutions of the environment and the provider’s behavior. The less frequent a transaction is. and outsourcing with relational contract law. the less it is recommended to outsource it. iv/ The difficulty to measure the provider’s performance The more difficult it is to measure the performance of an activity. casual.

when the assets specificity. it is recommended to keep them internally in these conditions.i/ Insourcing As seen previously.). Concerning repetitive activities. It is. Risks are more tolerable when the uncertainty is low.1. ii/ Outsourcing with classical contract law This kind of outsourcing strategy must be implemented when the activity to be outsourced is slightly specific and allows economies of scale. and this kind of contract is used to manage simple and welldefined relations. the uncertainty. in this case. These contracts are detailed and used for long-term inter-enterprises relationships. Formal documents are emphasized. and flexibility clauses are added because all eventualities cannot be anticipated. It is short-written and plans all eventualities: formal documents are emphasized. A high uncertainty would make the contract difficult because of the necessity to renegotiate it permanently. Moreover. and the relational aspect is very slight. and when the production costs are almost the same for the provider as they are in the client-company itself. 80 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . it is possible to ask a third part to be referee in case of future conflict (see 8. iii/ Outsourcing with neoclassical contract law This contractual outsourcing is recommended when the assets specificity is high. it is more careful to manage the activity internally and not to outsource it. and when production costs are almost the same for the provider as it is for the client internally. and the frequency are all particularly high. not necessary to implement complex contractual mechanisms. iv/ Outsourcing with relational contract law This contract applies when both the assets specificity and the uncertainty are high.

• Have almost no substitutes possible. In parallel. • Have almost no competitor able to imitate them. 6. The goal is to determine factors that underpin competitive advantages of companies. insourcing has for goal to benefit from coordination abilities and from the flexibility that are more important inside the company. where opportunism has only an obvious secondary role.2.2.1.) and 81 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Resources and skills that present all these characteristics must absolutely not be outsourced. • Are very rare and almost unknown by other competitors.B] The resource-based theory This theory deals with important topics for managers such as “core business” and factors activating outsourcing.2. and thereby give a product value from clients’ points of view. that is to say when they: • Open access to a large number of markets. outsourcing has advantages (see 1. This theory is based on an easy idea: performance differences between companies of a same industry can be explained by differences in resources and skills. one can say that insourcing resulting from the risk of individual opportunism tries to avoid this opportunism by keeping the targeted activity inside the company. Resources and skills are strategic when they are the foundations of a lasting competitive advantage. The mission of the management board is to create a high level of resources and skills by making them adapted to the environment. C] Conclusion of the two theories In conclusion. The decision itself As seen before.

) at the same time.1.disadvantages (see 1. According to James B.1. Summer 1994. • An indirect one. as costs decrease and performance increases. the level of performance and the level of transaction costs. Quinn1. in order in the end to create always more value. B] The level of performance Supposing the activities do not belong to the core business. Hilmer. But one must be aware of the definition of a “core business”. there are two possibilities: whether the internal performance is worse than the provider’s performance and thereby it is recommended to outsource. James Brian Quinn and Frederick G. which make the competitive advantage of the company. and this approach is very limited. which is actually the basic logic of the labor division and specialization emphasized by Adam Smith at the end of 18th century. We shall then distinguish several decision criteria: the belonging of the activity to the core business. Outsourcing presents two main interests: • A direct one. as economies can be done and reinvested in the “core business” activities.2. Sloan Management Review. One must have objective approaches by using the four criteria we developed before (see 6. A] The belonging of the activity to the core business All activities. pp 43-55 82 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . companies waste their financial resources when they do not outsource all their activities that are not part of their “core business”. The question is to know how to decide the outsourcing of this or this activity. or the internal 1 “Strategic Outsourcing”. which do not belong to the “core business” can be outsourced.B]). because general managers often subjectively decide it.3.

provided it is not critical to the “raison d’être” of the company. As a consequence. the HR department constitutes a real value chain itself.2. and finally the type of activity. Number 3. and the difference of performance and costs that are necessary to set about an outsourcing operation is all the more important as amounts involved are low. C] The level of transaction costs 1 These costs can be very high. and in this case the activity must whether be kept internally but there is no focusing reinvestment in the core business. or (better solution) be managed by a subsidiary created to this purpose and which can propose its services to the holding but also to other companies (spin-off strategy). all the more as the outsourced activities are based on specific assets. In fact. Volume 42. 6. the degree of proximity to the HR department global strategy. inside the whole company. What Should Be Outsourced Any activity can be a candidate for outsourcing.performance is better than the provider’s. There are non-negligible fixed-costs. one can use the cone of (HR) competencies previously described (see 4. 1 “The hidden costs of IT Outsourcing”. Sloan Management Review.B]). This question is all the more crucial as it strongly determines in the end the HR department competitive advantage.3.2. Jérôme Barthélemy. arises then the problem of defining which of these activities are part of the HR core competencies and which are not. in order to clearly situate each HR activity according to the three defined dimensions: the HR function belonging. Spring 2001. as there is a high uncertainty and as they are regularly processed. As far as HR activities are concerned and as HR core competencies obviously differ from one company to another. pp 60-69 83 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

But as soon as some reliable multinational companies will be able to provide the all range of HR outsourcing services. The cone allows bringing about a global reflection on what is strategically decisive and what is actually not in the process of creating valueadded. the decision to outsource some of these HR activities becomes a lot easier to take. according to its location inside the cone. The closer to the central core competencies cone the activity is located the less it should be outsourced. Once the cone (see illustration 15) is clearly set up. only remains thereby the evaluation of each activity’s distance to the HR strategic activities. which handle all employee issues. clients have parcelled up discrete areas such as recruitment. with the advantage not to limit systematically strategic activities to managerial ones. The current main brake to this trend is the structuring of the offer. But we are convinced that the next generation of HR outsourcing will be characterized by clients taking a more strategic. we bet the dominos will fall quicker than so far expected. and outsourced these to providers with reputation as specialists in the niche service areas. Traditionally. from recruitment to retirement and beyond. Shared objectives. each square of the matrix representing a particular activity can be chosen to be outsourced or not. outsourcing most HR activities aims to improve the four soft “S” of the seven “S” approach developed by McKinsey. integrated approach and that there will be the advent of new providers offering (helped by the technology) “life cycle” services. In the end. and it evidently is lacking large worldwide credible providers. Structure and System). In other words. Indeed. Skills and Staffing (whereas the hard ones are: Strategy. that is to say: Style. As far as we are concerned. we strongly support the idea that the dark cone of HR core competencies is quite thin. benefits administration or training.Two dimensions are indeed already given by the illustration 4 (HR function belonging and type of activity). 84 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . These are the real challenge of HR outsourcing. we think that the future will show that HR functions may be largely and successfully outsourced. the market is not mature enough.

Pitfalls. If it is true that Human Resources activities must be tailor-made for each different company. • Efficient management of third party.3 The real competitive advantage relies thereby on your network. It is in fact the complete opposite: a business relation would have the advantage of largely stressing the crucial customer knowledge strategy. pp 114-122 Creating value through HR Outsourcing. • Lower unit cost for any given level of service. Stewart. Outsourcing Human Resources activities to a third specialized company allows benefiting from communities of practice1 that accumulate experience and know-how of excellence. Doubleday Publishing 1999.2 And as it is so. Opportunities. Stewart. Thomas A.6. the company does not own the human capital assets. Strategies. the main advantages of HR Outsourcing are the following: • Ability to focus on aligning HR Strategy to business strategy. • Access to meaningful Management Information System and measures. • Supports devolution of people management to managers. February 2002 85 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . p 100 Intellectual Capital. • E-enabling the workforce. Stewart. Dave Connaughton 2 3 4 (Director Business Development Asia Pacific Region Exult). Advantages Outsourcing provider capabilities enable Human Resource’s shift of attention and skills to more strategic roles. Doubleday Publishing 1999. companies should favor connection more than collection. • Rapid scalability (a solution to solve a problem has to be rapidly efficient as the size of the problem increases). Melbourne. Sourcing Interests Group. p 104 Intellectual Capital.3. Doubleday Publishing 1999. it is only one of its part-owners. Thomas A. Thomas A. it is according to us not an argument to justify its insourcing. Outsourcing implies understanding that in the intellectual capital era. According to Exult4. 1 Intellectual Capital.

most of the current management tools still do not allow an accurate measure of the hidden-costs generated by these advantages and by flexible corporate organization in general. It seems indeed necessary to rethink systematically HR indicators (or scorecards) in the direction of a better assessment of the HR contribution to global value-added. as it is an effective mean of harmonizing a number of different regulated HR systems. Moreover. it enables the outsourcing company to shift risks to a third party with expertise and to get a single neck to strangle when problems occur and shareholders complaint.• Reciprocal services. 7th September 1999 2 HR Outsourcing Trends.4. Another 42% had partially achieved them. outsourcing is a good way to manage their HR functions. • Shareholders dividend. 2002. Le Monde. and on the corporate long-term benefits. Quality decrease and loss of control In The Conference Board Survey2. Drawbacks Outsourcing HR operations may sometimes pose some challenges and problems. in the European regulations patchwork. Nevertheless. its impacts on the company’s level of competency as a whole. Those who expressed dissatisfaction cited lower-than- 1 “Le prix réel des nouvelles organisations d’entreprise”. Marie-Béatrice Baudet. 51% of respondents reported that they had fully achieved their outsourcing objectives.1 6.1. p 6 86 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 6. Lisa Gelman and David Dell. Finally.4. It may also be seen as alternative to making a capital investment in the new technology necessary to support the HR function. even better in financial terms. for American companies that have subsidiaries in Europe. The Conference Board.

as far as each new process implementation by the outsourcing company after the contract is signed. It is a necessity for the company that outsources. major hiring activity and shifts to business strategy will happen while HR is moving to a new model and is totally or partially outsourced. 6. which has now the possibility to increase its prices. but difficult to control. The implementation of a new model in order to gain value in the end will be. during the transition. that the provider will adhere to the security policy. is likely to be discussed and charge negotiated by the outsourcer. It is all the more crucial as HR activities deal with a lot of confidential and personal data. plant closings.expected service levels and loss of control as problem areas.4. as it leverages the activity. and that all work done adheres to proper security procedures. High commitment required during outsourcing implementation One must also not forget that mergers and acquisitions. 87 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . in most of the cases a real nightmare. 6. This implies the development of change management skills on parallel to particularly developed organization skills.4.4.4. High unexpected costs The costs can be difficult to control.3. 6. Human Resources outsourcing creates indeed an increased security risk. Security issues Another preoccupation is the security concern.2.

First is presented how we suggest one should manage an HR outsourcing operation. Finally the essential aspects of the management of outsourced HR activities are analyzed.PART III. 88 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . IMPLEMENTATION We would like along this third part to surround the outsourcing concept by now determining the conditions of its successful practical implementation and by laying the foundations of an efficient outsourcing operation management. Thereafter we describe the legal environment in which such a project takes place.

as this last cell will coordinate the relations between the outsourcing company and the provider. It is essential that they are involved 89 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and to anticipate problems. the outsourcing company has to focus on the project phase not to forget any aspect of the process. They may be directed by an external project manager (consultant or interim manager) specialized and experienced in HR outsourcing. financial. and communication to the provider’s selection process. These issues must be directed and resolved by a dedicated team. Project Team Managing an HR outsourcing project consists for the outsourcing company in considering both internal and external issues. composed of internal employees and/or external consultants specialized in project management. technical. This project team may also include one or more members of the future piloting committee. from project definition to staffing reorganization. environmental. 7. and that has the necessary skills to consider all specific issues of this sensitive kind of outsourcing.Chapter 7. the outsourcing solution does not prevent from keeping internally some decisive resources that also participate in making the difference and coordinating the interaction between the two structures. It is indeed very important that it is balanced and that it makes both parties winning the deal. Nevertheless. as will strongly emphasized later on. The team may also include experts in legal (see chapter 8). and of course in business areas. Moreover. a good contract is absolutely essential to the success of any outsourcing operation. Managing The Human Resources Functions Outsourcing Project For HR outsourcing to be optimized and successful.1. as they have the needed experience in managing a project.

Project plan The project plan defines the project requirements in more or less detailed. the first one defining the outsourcing company’s initial requirements.2. As already mentioned. (documentation). and assess the weight of benefits compared to risks. 90 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Risk assessment The project team must identify and outline the risks HR outsourcing operation could lead to. by defining parallel running environment or pilot phases. The more detailed it is. the finally outsourcing company’s 7. Identify these risks due to new methodologies implementation will allow the project team considering the way these risks can be reduced. training requirement. definition of specific provider’s tasks with milestones and deliverable dates. one or more members of the managerial activities.1. may also be members of this project team. the project team develops two project plans.and take part in the project from the beginning. the more the provider is hold to fixed pricing and time tables.2.2. 7. implementation meetings and requirements. assets and environmental requirements. Finally. the better the operation development will be. Generally. once the outsourcing deal is effective. according to the size and the ambition of the project. one must remember that the more detailed the final project plan is. for example. installation reports quality and and plans. implementation schedules. responsibilities. and a second one (in the final stage) specifying commitments and deadlines for the provider. testing permits and and acceptance requirements.2. Project Definition 7. authorizations. The major typical topics included are: project specifications. in order to manage it the best way.

project team has to convince the outsourcing company’s management team. Internal Issues 7. running costs. transition costs.). Moreover.3. implementation costs. but also to actively 7. While using the NPV tool.1. it is important to stress that the NPV ignores intangibles (decisive as far as HR outsourcing is concerned) that may make an outsourcing operation worth pursuing despite a negative NPV. In order to obtain a reliable statement of the quality of the investment. Moreover. 91 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . some other internal businesses will be affected and obliged to change. One may also add the use of the transaction cost theory seen earlier in 6. Cost analysis The costs of the project phase itself have to be assessed (external consultants costs. travel costs. the project team should not forget to tactfully inform all the other and parallel areas managers which could be affected by the project. not only to be aware of the project.3. it is possible to use the calculation of the NPV (Net Present Value). as it will evaluate the profitability of the investment based on anticipated cash flows and discounted at a state rate of interest. Management commitment The support it. but the costs of HR function outsourcing must also be assessed (separation costs. taxes. etc.2. Organization’s ability to absorb change Whatever the kinds of HR functions outsourcing procedures adopted.2.7.1.3.1. 7. A]. legal advise costs or travel costs for example). mismanaged employee transition. one must be aware of the degree of accuracy of its assumptions.3. to help them managing the organizational change.

C]. Communication The project team should include in the project guidelines procedures related to confidentiality and internal communication. Staffing reorganization As developed in 7. others will be disadvantaged. outsourcing support activities such as HR functions consists in fact in a collective empowerment of the people involved. the impact will not only be apparent in the directly affected department. but also other departments will have to absorb some changes in the organization. which will also maybe have to reorganize their staff themselves. Frank Niedercorn. in order to communicate the vision and the strategy of the outsourcing company and to avoid any confidentiality issue.1 As just mentioned.3. as they will work with outsourced employees. HR outsourcing often includes staff transfer.200 former employees of the Anglo Swedish company. which implies for the project team an assessment of the ability to absorb change. But IBM was also committed to integrate in its own staff the 1. If some departments will be positively affected. as some functions will be reduced internally. Les Echos. 7.3.4. 7.Not only the leaving HR staff will have a completely different job. 1 “L’externalisation à toute vapeur”.7 billion contract with IBM. or even totally transferred. AstraZeneca signed a $1.3. but also on others.3.4. according to the sensitivity of the project. 2nd May 2001 92 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . when at the beginning of the year 2001. IBM was committed to run and support the information system of the pharmaceutical company for duration of seven years. and such an operation surely leads to staffing reorganization. A communication strategy must be set up from the beginning of the project. Finally. On the other hand. the outsourcing company will maybe need new staff with other profiles. and leaders would gain remember it. As an example.

4. and the outsourcing company’s clients. External Issues 7.4. during the provider’s selection.We can distinguish three main communication strategies. 93 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as we already mentioned it. Moreover. or at the limit simultaneously. as the reversibility of this particular choice will be very difficult to consider in the future. Communication The outsourcing company. Announcement and information to some other stakeholders has to be carefully managed: government. has to plan an external communication strategy. implementing an HR outsourcing project.1. or hiding everything to employees until the deal is done and the contract signed. 7. a particularly critical issue is the selected period when to make the announcement: is it during the project phase and before the provider is selected. in order to remedy in the end to the often very sensitive dimension of such an operation. with pros and cons for each approach: being transparent with employees from the beginning and along all the different phases.4. 7. the decision to outsource and the name of the selected provider should be announced to the press after announced internally to employees. Provider’s selection issues The decision to deal with one or another provider is absolutely crucial.2. stockholders. Indeed. or once the deal is done and the contract is signed. Each approach has its reasons for being according to its specific environment. just informing employees that there will be an outsourcing operation but waiting until the negotiations are well under way.

which implies concretely an RFP (Request For Proposal) process. In the case of logistics outsourcing. should be 1 The maturing of outsourcing. 1997 Chaîne logistique globale: l’externalisation en marche? Etude sur l’externalisation de la chaîne 2 logistique globale dans les entreprises industrielles en France. is actually being largely applied. revealed that two thirds of the surveyed companies used it to make up their mind. according to the number of providers on the market: • The ordinary invitation to tender (all potential providers of the market are in demand). the proportion is even greater2. any assumptions that it wants the provider to make. To do a good competitive procurement. which are obtaining the lowest prices on the market. It seems indeed that this approach combines two main advantages. the outsourcing company will need to understand the scope of what it want to outsource and document its requirements as part of the RFP. • The invitation to tender with preselections (a small number only of providers are in demand). and give a clear timeline.A] Three different selection processes There are mainly three ways to identify one’s best choice. as three quarters of the outsourced companies used this method. The RFP should clearly describe what it wants the provider to do. The RFP should be structured in such a way that it will be relatively easy for the outsourcing company to compare the proposals from each provider. 1996 94 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Indeed. which differentiate from one another. It is also called a competitive procurement process. a study1 dealing with IT outsourcing in the U.K. KPMG Research Report. and reaching at the same time propositions of a good quality. • The direct selection (only one single provider is in demand). a) The ordinary invitation to tender This approach. Logistique et Management. in particular. The pricing proposed by the provider.

In the end. 1 “Common Problems. some providers simply ignore this kind of selection process to concentrate on the two others. as a consequence. 2003.broken down to a level that makes "apples to apples" comparisons possible. if it is quite easy to evaluate prices according to the market.chiefofficer. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”. Moreover providers investing themselves in such an invitation to tender consider this method as being less interesting as the competition is the largest. http://www. In other words. b) The invitation to tender with preselections This approach is intermediate between the ordinary invitation to tender described above and the direct selection described later on. December 1998 95 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . As this method implies that all providers of the market should be in demand. a more attractive process to provider’s point of view (as competition is more acceptable) and a low influence information broadcast as far as the outsourcing project is concerned. Advantages for companies willing to outsource are: less applications to assess. as precise as possible. Greaver.1 However. Amacom. Maurice F. the quality is a lot harder to define in strict terms.php?t=25 2 Strategic Outsourcing. Attorney at Shaw Pittman. both processes are exactly the same. in spite of its theoretical efficiency. and this situation sometimes strongly weakens its impetus need of competition. but in this case. to maximize the use of this technique2. one will have to deal with fewer candidates. one shall draw the attention on two limits as far as the ordinary invitation to tender is concerned: the longest process period and the low attractiveness for potential providers. The only actual difference with the first approach is the suggested preselection. In fact. it takes a long time to manage the perusal that brings to the decision. the invitation to tender must be as clear as possible. it must let enough time for candidates to return their proposition and assure direct contacts with decisionmakers.com/particle.

as this option involved fewer actors. performance. it is all the more possible to make it more complex in order to get the most obvious results. flexibility. Finally. such as former partnership or any other strategic pressure. and capacity in helping transferred staff to integrate their new structure. the outsourcing company must have good reasons to focus on only one provider. two non-exhaustive lists of objective and subjective criteria 96 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . On the other hand. balance sheet and income statements. B] The selection criteria First of all. one can underline the fact that this option is less expensive and equally efficient to the previous one in surrounding its future partner.The main advantage for candidates is that they consider the challenge valuable. Moreover. Sole sourcing approaches are common in case of requirement of a very strong buyer-service provider relationship due to a lack of competition. one should not ignore more general criteria such as financial stability. such as price. They may not win the business. the whole success of that kind of approach entirely relies on the quality of the information at the disposal of the outsourcing company. In fact. as they were already selected by the client-company. c) The direct provider’s selection This last approach consists in selecting one single provider to be in demand for the invitation to tender. revenue. If these criteria are obviously particularly decisive. but their investment returning the invitation to tender is optimized anyway. there are no guarantees concerning the reliability of such an option. The main advantage of such a method lies in its cost. Following. banking references or even the notoriety of the providers as well as the professional references of the particular persons representing the candidate. the spontaneous criteria are economical and technical ones.

• Flexibility and ability to change. 2000.4. John K. • Suitability between interacting corporate cultures. p 51 97 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • Good managerial competencies. • Commitment to invest in specific assets for its client-partner. • Willingness to share expertise. Strategies and Contracts. • Clear vision of the market. • Problem-solving method implying the client-partner. Process. John Wiley & Sons. • Financial stability. Greaver. • Constructive general behavior. Greaver1: • Good reputation. 7. such as facilities and business 1 Strategic Outsourcing. The subjective suggested criteria above are all dealing with the suitability between the client and the provider: • Trustful and respectful of confidentiality. • Permanent wish of improvement.thanks to Maurice F.3. Amacom. Inc.. Halvey and Barbara Murphy 2 Melby. • Satisfaction of current clients. December 1998 Business Process Outsourcing. Maurice F. • Strong experience as far as staff and equipment transfer are concerned. Assets transfer The transfer of activities to the provider typically includes some or all of the following2: • The transfer to the provider of client’s assets used to manage and facilitate the business function.

98 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and other related tangible assets.2. • The transfer to the provider of all or a significant portion of the client’s employees previously involved in the internally managed business function operations to the customer’s organization. As we will further develop in 8. it can choose to simply lease them. the contract should include a clause for intellectual property protection.A].3. The parties have to assess the most favorable means to transfer these assets on a site-by-site basis (to minimize tax and regulations weight).2. B] Equipment transfer Many outsourcing deals lead to equipment sale from the outsourcing company to the provider. A] Assets leasing As we saw in 1. C] Staff transfer Three different possibilities are possible for the outsourcing company concerning its staff when it outsources its HR activities: • Find other opportunities inside the company for displaced employees.K].equipment.1. when the outsourcing company does not want to transfer its assets to the provider. They will need to negotiate a purchase and sale agreement. • The assignment or license to the provider of proprietary methodologies or technologies used by the client in connection with its business function operations. • The assignment or sublicense to the provider of any third-party methodologies previously used by the client in connection with its business function operations. in exchange for payment or reduction in annual fees. what could be critical in the case of assets transfers in general and equipment transfers in particular.

Director of BNB (Barkers Norman Broadbent) Outsourcing says: “Nor need HR staff being transferred to another company necessarily feel they are being dumped”. salary. it is still often felt like a tangible traumatism that companies must necessarily cope with. as Alison Humphries. as well as their future carrier.” Finally. Personnel Services Director Rebus HR Services. 1 “Le délicat volet social de l’externalisation”. brand or culture. during an outsourcing operation. Staff transfer is. they also feel insecure as far as their future business environment is concerned. a) Transfer perception The only difficulty with transferring equipment is the evaluation of its value. they will most of them benefit from such a transfer. if on the one hand they surely feel betrayed by the outsourcing company. most of them did not participate in choosing this particular provider or they did not even know it existed. and one cannot. And when they choose to progress. on no account. which gives them the chance to become much mire rounded in their skills. people make the difference. In fact. and they are now asked to focus on their profession and to redefine their points of reference in this new environment. their CVs will be much more broader as a result. Les Echos. Anne Galez-Rovan and Catherine Lévi. just as in any other business operation. In her experience. On the contrary. 26th October 1999.1 Moreover. • Find opportunities outside the company (outplacement). in the long term. underlines: “My staff act more as consultants. perks. Even while. often felt by the concerned collaborators as being a staff failure.• Try to transfer the greatest number possible to the provider. Indeed. in any outsourcing operation. as Michelle Walker. Moreover. staff transfer is a lot more complex. employers putting out to tender are usually keen to ensure that the provider can offer outgoing staff with good career development opportunities. Collaborators were used to identify themselves to a particular product. pp 47-48 99 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . etc.

the outsourcer management team has for prior mission to improve the productivity of its capital that is to say of its staff. handling a range of different accounts. the role of HR professionals becomes central rather than peripheral. b) Staff transfer: a good bargain For the staff. Outsourcers offer in most cases better career opportunities. The whole success of an outsourcing operation largely depends on the staff transfer successful outcome.5. As it is part of its core business. Instead of being regarded as being of doubtful value they will find themselves an essential fee-earning part of their business. With an outsourcing partner. the provider will be much more armed to take the biggest advantage of its staff’s skills and to develop them. as expected. HR professionals will be less likely to follow careers in companies operating in other sectors. As emphasized by Alison Humphries: “It provides much greater opportunities. 7. Factors determining the success 100 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . it can give them the opportunity to work with several different clients on projects that are up to their skills and it also allows them more geographical flexibility. it is most of the time a great opportunity to be transferred in a company that have for core business the profession it is specialized in. national as international wide.leave aside the particularly touchy staff transfer problematic.” It is easier for transferred employees to change job inside the core business or to be promoted inside the profession. In other words. they will be employed by HR outsourcing providers. We are convinced that if HR outsourcing keeps growing.

6. the provider might postpone this starting date. there are six leading indicators for successful HR restructuring that have been identified by twenty-six Top Companies. 1 Restructuring the Human Resource Department. Indeed. teamwork. effective communications. as we saw previously. and agreement between the employer and provider regarding performance levels and roles”. Problems Likely To Occur In less than 5% of the cases. communication. 7. objectives. these factors are determining the success or failure of an outsourcing operation. p 5 101 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . This situation results from a lack of attention of both parties considering abilities to face the real ambition of the project and the needed level of excellence. methods. commitment. during the quarter before the forecasted starting date of its services. Saratoga Institute. trends. AON Human Capital Consulting. According to Mark Lifter2. 1997 2 The Beat Goes On: Outsourcing Your Human Resource. either because it is unable to meet contracted quality expectations or because it cannot respects contracted tariffs.According to the Saratoga Institute1. predictors of success are “adequate diligence. and benchmarking. business focus. Knowledge@Wharton in collaboration with Aon Corporation. American Management Association Special Reports. which had recently undergone significant restructuring: planning.

implementing an HR outsourcing solution is managed like any other project. It is indeed crucial to gather appropriate profiles to be part of the leading team. as it will then be able to assess the legal risks following such an HR outsourcing operation. This legal support has in fact two very important roles to fulfill: • Actively participating to the whole outsourcing implementation process. That is mainly the reason why companies have to appeal to legal professionals. as many large companies expect that internal legal professionals must stamp all contracts involving transactions from a certain amount. • Negotiating as the company’s spokesman all the contractual details and framework of the deal. 102 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1. and if possible especially with HR functions outsourcing contracts. Legal professional As we saw before.1. until at least the beginning of the HR functions outsourcing first effects.1. The legal professional in the team should not have a leading position but has to be part of all operation stages. 8.Chapter 8. They can just be the internal legal staff. Moreover. One of the profiles must correspond to a legal professional. with experience in outsourcing contracts. and of course especially when the contractual aspects arise. from the decision motivation to the board. Outsourcing Legal Actors 8. the legal support may also consist in a law-firm or any independent attorney specialized in outsourcing cases. Legal Aspects Of A Human Resources Outsourcing Operation Outsourcing operations have a lot to do with complex legal issues.

1.2. or within Europe).) that will anticipate as much as possible the likely occurrence over the term and anticipate with a process to resolve disputes.S. effects can be different according to the chosen governing law. In fact. and it is always better to agree on one before the conflict arise (national.2. It is very important that conflicts with future partners do not get personal. conflict is part of the game. federal.2. but one should not let it have too much useless impact.1. It will also lead the whole negotiation process. Outsourcing negotiator In all kinds of negotiation situations.3. It can be a businessperson or most of the time a legal professional team. 8. The outsourcing company must not forget that the deal must be built on business value and desired outcomes. legal professionals who are moreover quite used to it will exclusively share all negative feelings that could be given off conflicts during negotiations. that is to say a “give and take” process.8. but the negotiator can help obtaining a fair contract (see 8. a partner absolutely necessary to the good functioning of the company’s business. All the future outsourcing relationship management will depend on this choice.1. That is mainly the reason why companies will have made the negotiations by a third-party. conflicts must arise whatever precautions were taken. state or local). as they surely best fit to the job. In the particular case of HR outsourcing. 103 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Legal Framework 8. Governing law Because laws can be different from one country to another or even from a state to another (like in the U. the negotiation opponent is likely to be soon one of the most important business partners.

Staff transfer The provider might be required to make offers of employment to parts or all the outsourcing company’s staff. Relocation of service locations Some countries expect the outsourcing company to get a government consent and approval (or sometimes just to notify it). Inc. • Countries where notice – either formal or informal – is necessary: this category can be further divided into two subcategories in order to reflect whether notice is required prior to the provider taking over business process operations or whether notice can be given afterwards.3. • The fourth category is for those countries where no action is necessary. Process. John K. the entire operation can be delayed or even cancelled..2.2. The main issue is that if authorities are not cooperative. Halvey and Barbara Murphy Melby. John Wiley & Sons. p 124 104 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The terms and conditions of employment (employee transitioning. 1 Business Process Outsourcing. 2000. before to relocate any service outside its borders. and that certainly determines the success of the outsourcing company’s decision to outsource. the government can even impose to keep a service location in its country. Strategies and Contracts.8. 8. In some cases. • Countries where approval from a regulatory agency is necessary prior to migrating business process operations to a provider site. We can divide the countries into four categories1: • Countries where approval from a regulatory agency is necessary prior to the provider taking over business process operations.2.

many brilliant elements will just leave the company even before the transfer is over. concerning especially pension plans. termination notice requirements. 2000 105 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . there is nothing more armful 1 Dictionnaire de l’infogérance. if companies want to be successful. and union rights for example. one of the most important aspects in managing such a transfer is the communication policy. as the staff motivation is the key to the success. Finally. Managing the issues associated with staff transfers will be a key issue. Whatever your ambitions are. Pierre Laigle. severance payments. Hermès Science Publication. etc. the faster solutions or answers are found.) for the client’s employees is often one of the most heavily negotiated and regulated provisions of the contract. contract-related issues. As a general way. In this case. it is nevertheless very important not to go too far. They must accompany the staff with waving their former company goodbye and with their integration in their new professional environment. and slow down the integration process of the staff into the outsourcer’s organization. It is all the more necessary to work on a fair plan. whatever the legal environment is. administrative and financial responsibilities. As a consequence. The legal procedures are very heavy and take quite a long time. by expecting from the outsourcer regular quantitative as well as qualitative information. the more constructive will be the debates. particularly given the HR expertise of the employees involved.1 Both companies have to organize the transfer in a transition period. the legal framework of such a transfer represents only a minimum protection for collaborators. when you manage a project. they must absolutely go way beyond the strict minimum legal expectations. One does not want transferred staff that feels it has been sold with furniture.schedule for employee communications. in order to help the concerned staff to evacuate worries linked to this situation. The more transparent and clear the management communication will be. The faster problems or doubt arise. The outsourcing company may even follow the transferred staff situation a long period after the deal.

A] European context In Europe. staff transfer within the E. tends to protect employees against the hidden restructuring operations by selling an economically independent activity of a company and by avoiding this way all negative publicity and heavy procedure related to such an operation.than a misunderstanding purpose.U. No matter if one outsource outside or inside the E. if the depart point is in the E.. and consent requirements.int/eur-lex/pri/en/oj/dat/2001/l_082/l_08220010322en00160020.U.U. 1 http://europa.U. As far as the transfer of employees is concerned. E. abrogates all the disposals of the 1977 (77/187/EC2) and 1998 (98/50/EC3) Directives and codifies the reconciliation of E.eu.U. members regulations concerning the preservation of the employees’ rights in case of company transfer. This Directive.pdf http://europa. as national regulations in general. regulation will be effective (knowing that the deal can exclude any staff transfer). its local implementing legislation and Work Council regulations will dictate whether the customer’s existing HR staff will transfer to the service provider and oblige the new service provider to continue the employment of the concerned employees. authorization. Whatever the true reality is. is regulated by the Acquired Rights Directive (2001/23/EC1) Council Directive.U. Although people transfer in an outsourcing context do not particularly aim social restructuring.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc 2 =31977L0187&model=guichett 3 http://europa.eu. It includes specific notice.. the E. most European national and supranational regulations tend to assimilate however those transfers to a new kind of restructuring operation. imagination is always more dangerous in such a case.pdf 106 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and if there is any staff transfer planned in the HR outsourcing deal.eu.. of the 12th March 2001. This Directive.int/eur-lex/pri/en/oj/dat/1998/l_201/l_20119980717en00880092. coming in effect the 12th april 2001.

If this one does not want to integrate all associates. 1 Droit du Travail. the providing company will automatically make them redundant. • Continuous information. it will have to entirely assume and take care of the dismissal procedures and severance pays. the outsourcing company and the providing company negotiate the staff transfer according to the French Labor Code. Jean-Emmanuel Ray. this protection (apart from information and consultation before the transfer) does not apply.. to detect reluctant aspects and establish guarantees. 122. pp 208-213 “7 conseils pour… réussir une demarche d’externalisation”. 2 November 2002 107 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Dominique Genelot. If some collaborators do not want to be transferred. training. B] French context a) Individual transfer In this case. Droit Vivant. • Give value to professional advantages for the employees: career opportunities.If the outsourcing deal is done from E.12 and following. • Transfer preparation. Article L.U. INSEP CONSULTING. Edition Liaisons. The social legislation (Art L 122. to outside of the E. and employment security. and collective conventions alignment.12) implies for the outsourcing company2: • Prior information and consultation. b) Collective transfer 1 In this case. in India for example. If a compromise is found between the two parties. 2001. each transferred collaborator agrees to break off his work contract to sign a new one with the providing company. working contracts transfer. the whole staff has to be transferred to the providing company.U.

practical organization. • The transfer of the whole entity. identity transformation. that is to say everything related to status.4.2. pp 181-188 108 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as an outsourcing operation often give rise to 1 The Challenge of Outsourcing Human Resources. as far as the transfer of their work contract is concerned. seniority and position. as it is subject to three necessary conditions that are: • The existence of an autonomous economical entity. Sally Vanson.• Change management help: cultural adaptation. This law seems nevertheless not always applicable to outsourcing operation. The consequences for collaborators. Chandos Publishing. and to reintegrate it if it finally insources the activity back. The purpose is to protect the rights of employees where there is a transfer of undertakings of their work to a new employer. C] English context The TUPE (Transfer of Undertakings Protection of Employment) regulates the employees’ transfers in the U. • The possibility to be transferred again if the outsourcing company changes its provider. • On a collective scale. 2001. etc. remuneration. since 1981. are: • The standing by of individual advantages. • The standing by of the entity after the transfer. the contract includes a provision on informal dispute resolution methodologies. Dispute resolution A] Informal dispute resolution Most of the time. the standing by of the former industry-wide collective labor agreements during fifteen months.1 8.K.

the outsourcing company must ensure that its organization is in position to comply with its obligations under the relevant data protection legislation. Finally. but not for problems regulated by the law. on a formal dispute resolution: mediation or arbitration procedures if applicable for example. Commission works on it at the European level. it is important (and the E. 8. and of more and more outsourcing of HR activities of large businesses in Europe. developed later. The practice regarding this issue is diverse and can be incredibly complex.eu.html 109 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Even while there are already two E. of always more globalization.U. parties should agree before to conclude the outsourcing deal. building on those already existing.U. they are too general. Commission stated it1) that data protection laws do not differ anymore from one jurisdiction to another. these kind of resolution will only be possible for businesses disputes. Data issues In the context of technological advances in the communication and data savings area. and E. A] International data flow 1 http://www.int/2002/11/feature/EU0211206F. As just mentioned. such as staff transfer for example.U.2. etc. members have different processing of medical data. suggesting a new European framework of principles and rules. E. different drug and genetic testings legislations.U. It is for the moment still the case. including its rights to monitor the provider’s compliance with these obligations. Directives.5.operational disputes.eurofound. and the contract need to contain detailed provisions relating to the provider’s handling of data. B] Formal dispute resolution This informal methodology can sometimes not be sufficient. To prevent this to occur.eiro.

eiro.U.eurofound.int/2002/11/feature/EU0211206F.eu.U. Most of the E. • Require or prohibit encryption.U. Indeed. Directives The E. as HR outsourcing implies new and different data flows.Countries generally impose restrictions on transborder data flow. Commission states3 that there are two Directives regulating the processing of personal data: • The Directive concerning the protection of individuals with regard to the processing of personal data and the free movement of such data (95/46/EC4) of the European Parliament and of the Council (24 October 1995). countries ensure the protection through more or less strong regulations. and in particular their right to 1 http://www.eu.1 B] Data security Concerning the outsourcing company’s data security.html http://www. requires Member States to ensure the rights and freedoms of natural persons with regard to the processing of personal data. • Prohibit all third-party access to certain types of data.eurofound.U.eiro. several countries: • Impose minimal security measures (access code for example).U.int/2002/11/feature/EU0211206F. As the E. which needs to be taken into account. members do not have specific legislation concerning the protection of employees’ data. C] E.eu.eiro. Commission states2.int/2002/11/feature/EU0211206F. countries have general legislation on the processing of personal data and the free movement of data.eurofound. most E.html http://europa.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc 2 3 4 =31995L0046&model=guichett 110 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .html http://www. and maybe new governmental permissions.eu.

This Directive provides for the harmonization of the provisions of the Member States required to ensure an equivalent level of protection of fundamental rights and freedoms. Most of the time. Outsourcing Contracts A particular attention must be given to the structure of the outsourcing contract for the viability of the deal. as earlier seen in this thesis HR services are necessary tailor-made. providers propose their standard and prepared contract. as it will be used in the event of a dispute between the parties.eu.int/2002/11/feature/EU0211206F. and economies of scales made unquestionably possible. as each outsourcing process and conditions are different. and in particular the right to privacy. any company would expect its HR services to be 1 http://europa.eu.eiro. It is particularly the case with HR outsourcing contracts. That is the reason why the E. These Directives are very general and without enough precisions on their application to the workplace.U. • The Directive concerning the processing of personal data and the protection of privacy in the telecommunications sector (97/66/EC1). with respect to the processing of personal data in the telecommunications sector and to ensure the free movement of such data and of telecommunications equipment and services in the Community.3.2 8.int/eur-lex/pri/en/oj/dat/1998/l_024/l_02419980130en00010008. and make its project team negotiate and work closely with the provider to elaborate a new and singular contract. in order to ensure the free flow of personal data in the Community. Commission is working on data protection. Indeed.pdf http://www.eurofound. even if the tools are quite universal.html 2 111 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . to protect both employers and employees. But the outsourcing company must refuse this contract. in the form of a statutory instrument or a social partner’s agreement.privacy. and are unwilling to change it.

p 52 112 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . “How much is paid for it?”. Process. Inc. As a consequence. most of the time. Halvey and Barbara Murphy Melby.1.. 8. Overview Numerous outsourcing contracts are set up from an insourcing situation. it should come as no surprise that one of the most difficult stages of an outsourcing transaction is drafting and negotiating the contract. “Who owns it?”. Given the wide variety of business issues and the many different legal disciplines involved in even the easiest form of outsourcing transaction. it is likely that the relationship between the parties will survive the inevitable day-to-day disputes that arise in complex contractual relationships. It is important to note at this point that a fair contract is not one that is necessarily ideal from either party’s perspective. In other words. A negotiation with respect to an outsourcing arrangement is not one that either party should be willing to win. Strategies and Contracts. and “What happens if it is not done?”. the parties are confident that these five issues have been fairly and comprehensively addressed. a very important aspect of the contract deals with staff and equipment transfer. John K. the outsourcing company agrees to compensate the provider according to a negotiated fee schedule. In return. “Who does it?”. A fair contract may well be one that requires both parties to perform in a 1 Business Process Outsourcing. at the end of the contract negotiation process. 2000. If.performed in accordance with its own and singular corporate strategy.3. The contract will accurately record each party’s rights and responsibilities at any given time during its term. John Wiley & Sons. and hopefully. flourish as methodologies and technology advance. which can be simply distilled in five basic issues that must be considered and addressed by the parties1: “What is it?”. The most common form of outsourcing contract involves the transfer of control and ownership of all or part of HR functions to the provider. companies are outsourcing activities that they used to manage internally.

John Wiley & Sons. Similarly. The structure of the contract is crucial to motivate service providers to deliver and create value-added. Inc. These agreements describe the level of HR services expected. Halvey and Barbara Murphy Melby. 2000.2. for example.3. Key contract issues 1 A] Structure of the agreement The requirements of a contract for the outsourcing of a company’s global HR will have a different order of complexity to a contract for a limited number of HR processes in a single jurisdiction. Process. and to check the contract compliance or non-compliance. there is no bright line for determining when is a contract too is sufficiently A contract comprehensive. as it will allow the outsourcing company to monitor the provider performance. John K. Depending on the complexity and variety of services and countries involved. but more likely in an optimal balanced economic performance. in the eyes of another organization. seem comprehensive for one organization could be. 8. as far as. considered insufficiently detailed. that might as comprehensiveness subjective. B] Scope of services To avoid future problems. the contract must include the most exhaustive detailed list of HR services to be provided.. response time. delivery 1 Inspired from Business Process Outsourcing. C] Service level agreements It is necessary to mention the level of HR service expected. pp 53-66 113 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Strategies and Contracts.way that will not result in optimal economic performance. it may be necessary and clearer that the contract contains a multiple-agreement including different contract structures (one contract for each process or each country for example).

the existing service levels achieved by the HR activity prior to the outsourcing operation. it is preferable to measure. if the function was insourced before. transfers are regulated and must be operated very carefully. reporting requirements. assets and staff to the provider. 114 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . users satisfaction. and the contract should include renewal options and conditions. Concerning the users satisfaction all aspects must be described. to avoid any misunderstanding from the beginning. D] Term/Effective date The duration of the contract term. in case of underperforming. It is also very useful to include in the contract some benchmarking provisions in order to compare the provider’s performance and the costs associated with the services on a periodic basis against an appropriate external benchmark. of parallel operating environments (duplication) and planned testing for example. some details concerning the transition plan. a provision that will force changes in the service levels. As explained in the legal framework part.requirements. Some provisions must absolutely be taken in the contract mentioning damages applicable if any service level failure occurs. To establish these levels. if any. are concerned. E] Transition Parties should include in the contract. in comparison with the service level and performance agreed. that is to say of deadlines and methods planned to transfer operations. as much as the effective date reference (beginning of the provider’s control on outsourcing company’s operations) are also very important. from the number of persons to be surveyed to the content of the survey. and even cost reductions.

and the contract must for this reason mention the nature of the provider’s obligation in respect to these employees. H] Integration of methodologies/technologies Both the outsourcing company and the provider must specify if there is any IT-failure to be solved for them to be compatible as far as technologies are concerned. G] Assets transfer This second kind of transfer is also critical. It can also be required the writing of a management procedure manual for example.F] Staff transfer The contract could specify any obligation for the provider concerning the business process staff. It is essential to define the different roles and responsibilities in the contract. and on the other hand may be obligated to provide certain assets or services. but it should be mentioned in the contract by security. For this transfer. parties can decide whether the provider must hire the former team or not. a purchase or sale agreement must be established. Moreover. as it can allow the outsourcing company to get cash rapidly. 115 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as it has been developed in the legal framework part. knowing that. the outsourcing company should notify whether it wants the provider to apply its own standards and methodologies. I] Roles and responsibilities The outsourcing company may wish to retain certain critical responsibilities. Concerning the methodology. regulations are very restrictive and the subject is very sensitive in Europe.

L] Confidential information 1 Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships. strategically plan for the future and continuously improve the value they wish to achieve through their relationships. patents. software. inventions. instability. preventing misaligned attitudes from governing the relationship.. and to any other intellectual property assigned or licensed to the provider or used by the provider in order to provide the ordered HR services to the client (methodologies. when challenges occur. tools. K] Intellectual property 2 As a general matter. trademarks. Inc. May 2002 2 Business Process Outsourcing. • Establishes how the parties will work together on an ongoing basis at the level beyond day-to-day operations and metrics. handle changing business requirements and new objectives. Outsourcing Center. John Wiley & Sons. etc.J] Governing agreement 1 As seen earlier. Halvey and Barbara Murphy Melby. Strategies and Contracts. It is for this reason more than advisable to include in the outsourcing contract a governance agreement that will state how the parties desire to manage their relationships over the long term and design responsibilities as it: • Reflects the components of how parties will interact and communicate at various levels of the organization. It should indeed be clearly specified the respective proprietary rights of the provider and its client. 2000. • Governs the parties’ attitudes and reactions. Process. to the right to use of each parties. the contract should include provisions with respect to the ownership of HR processes for instance. Kathleen Goolsby. John K.). inequity or mistrust are dangerous to an outsourcing agreement. p 59 116 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

5. know-how. but the outsourcing company should re-mention it in the contract to minimize risks.In this particular case of HR outsourcing. will also but to also the data on know-how. and a lot more. the contract should protect and secure the confidentiality of each party’s data and information. P] Pricing / Method of payment The way the fees (fixed and/or rate-based for example) are determined and will be paid must also be defined and made clear in the contract. the access provider’s methodologies.2. the provider will necessarily access to very confidential information. but it is more secure to re-mention this issue in the contract as well. Too many details seem to be always better than too few. Q] Currency risk The contract must also include the definition of the currency or currencies that will be used for the payments just evoked. Indeed..5. specifying their delivery times. N] Data security To the same extent. For this reason. except if both the 117 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2. methodologies and technologies. O] Reports and documentation All reports expected by the outsourcing company must be defined in the contract. Similarly. and technologies. strategic plans. M] Data flow The legal framework of transborder data flow has already been described in 8. such as personal data on the outsourcing outsourcing company’s company employees. the legal framework of data security has been developed in 8. A provision that will force changes in the service charges in case of overcharging should be included..

1 U] Governing law As explained in 8. http://www. 1 “Common Problems. service. R] Taxes Because the tax liability imposed on an HR outsourcing operation can be very heavy. the price will change.. or in the provider’s business. 2003. Attorney at Shaw Pittman. it is necessary to mention the governing law chosen in the contract. it must be considered possible variabilities in the outsourcing company’s business..1.chiefofficer.2. This leads to possible discussions.php?t=25 118 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . T] Business variability If the term of the contract is long." Any assumption should be discussed in detail and the impact to the price or services of variations in that assumption should be clearly documented. both parties should assess the tax exposure. such as termination clause as it will be developed later. this selected currency is subject to exchange rates fluctuations. In the contract.com/particle. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”. in order to manage any future potential problems. sales) on a country-by-country basis for example. To limit the damages.provider and the outsourcing company stay in the same economical area such as E. S] Audit An eventual wish of internal or external audit to audit the services or the fees charged will be addressed and assessed in the contract. parties should include in the contract flexibility and clauses (agreements) to allow this potential variability. they can decide the allocation of responsibility for taxes (VAT. There should be no "Assumptions" in the final agreement. as only one party will support the risk. "Assumptions" are providers’ codes for "If this doesn't turn out to be true. or renegotiation right for example.U.

etc.dataquest. these kinds of resolution will only be possible for businesses disputes. for change of control. 25% of outsourcing contracts will have to be renegotiated or cancelled within 3 years. parties should also add a formal dispute resolution: mediation or arbitration procedures if applicable for example. As just mentioned. These key contract issues list is a non-exhaustive one..Moreover. but all the main topics concerning HR outsourcing in Europe are covered. such as staff transfer regulations. which party pays. It is also useful to define the way dispute will be resolved (applicable fees. currency chosen. for failing to meet service levels. 1 http://www. etc. it is advisable to include in the contract an informal dispute resolution process. but not on problems regulated by the social law. V] Dispute resolution As seen in 8. the contract should include a clause mentioning how changes in laws and regulations will be handled (which party is responsible for it. for cause. W] Indemnities It is also advisable to add an indemnification clause to prevent potential property damage. security violations.). intellectual property infringement. According to a Gartner Group Outsourcing Study & Report 19971. personal injuries.2. etc. X] Termination The contract should finally include all cases by which each party may terminate the agreement according to certain events (termination for convenience.).4. On the other hand.com 119 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . or environmental claims that might occur. what will happen if the change prohibits some processes of the outsourced operation.).

and a too long contracting process can endanger the good running of the whole project. deadlines and costs previsions might not be completely respected. during the year before the signature of the outsourcing contract.4. Moreover. or of fast fluctuations of prices and performances on the market. lot of hidden costs can appear once the contract is signed. Problems Likely To Occur In 75% of the cases. traditional contracts are too rigid (fixed-prices for instance) and cannot be changed in consideration of the technological or activities changes. As a result. it may happen that the time negotiating the contract goes beyond what was initially expected. Most of the time. It is indeed important to notice that contracting processes can reach almost 20% of the total annual costs of any outsourcing service. 120 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . if the contract is not complete and not totally clear.8.

The managerial function may stay the same. activities that have for essence the strategic coordination with the whole company. and to some extent could even be outsourced to a third-party. The most important is that the HR overall responsibility stays inside the outsourcing company. It does not manage throughout direct authority but throughout contractual relations.Chapter 9. HR activities that are mandatory in certain European countries and.1. As explained further. on the other hand. companies of the future will outsource their whole HR department. but on the other hand it is easier for the management to lead on effective results without having to take care of the day-to-day issues. Managerial activities The outsourcing company should necessarily keep in-house the strategic coordination of the outsourced activities and their control. as they are core to the outsourcing company’s business. one can say that it may seem harder to do so. except for both. On the one hand.1. • Taking strategic decision for the business. Elements To Keep Internally 9. the only difference is that it does not own the resources it manages anymore. on the one hand. the management team has three main activities to fulfill in order to assume their complete responsibility of the function: • Defining big orientation needs and priorities of the business. Piloting committee 121 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2. the piloting committee is a new organ that will take in charge the control of the outsourcing relation. 9. in fact.1. Managing Outsourced Human Resources Activities 9. In the end. • Assuring the coordination with the business.1. In our opinion.

whether both parties respect the deal or not and constantly evaluates the performance of the outsourcing solution. but also assemble skills in legal. defines nine decisive actions. • Emphasizing transparency as far as practices and their results are concerned.chiefofficer. • Measuring the accurate HR impact on the whole business. It regularly checks whether the contract fits to the needs or not. environmental. which the piloting committee should. good legal skills and excellent know-how in the field of Human Resources Management. Volume 36. Spring 1997 122 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Number 1. Its role consists in controlling the relation between the clientcompany and the provider. HRM editor. As just said.com/particle.php?t=25 2 Dave Ulrich. finance. it is the client's job to make sure that the contract is done properly in order to increase the likelihood that the relationship will be a happy one. http://www. according to us. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”. Dave Ulrich2. one person or more (according to the size and the ambition of the project). technical. It must be composed of people combining good knowledge of the company. • Increasing the knowledge it masters concerning its client.1 The piloting committee.When activities are going to be outsourced. is directly reporting to the management team described above. make sure the provider performs: • Focusing on the service. 1 “Common Problems. • Encouraging HR business-partner approaches. Attorney at Shaw Pittman. and of course business areas to be able to check and evaluate the performance in all these important matters. 2003. Human Resource Management. • Developing global HR tools and interfaces. • Managing various and flexible careers inside a single core competency. it could even be outsourced itself to a third-party specialist company.

4. The aim is to reach a win-win situation.2.2.1. 9. 18th April 2000 123 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the company has to make absolutely sure that it has the following competencies at its disposal. Required Skills In the end. said: “You are establishing a partnership with the organization. Strategic vision skills These skills allow defining which outsourcing strategy would best serve the competitive advantage of the company. even more than an 1 “Change Management”. 9. 9.3. It doesn’t take a lot of those sorts of people but it needs someone with clout.2. Alliances management skills These skills make it possible to manage the relation with the different providers. Outsourcing implementation skills These skills allow making sure that the provider does its job the way it announced it would do it.2. As David Koch. European leader for HR outsourcing at PricewaterhouseCoopers.2. Personnel Today.”1 9.• Mastering the knowledge of the company’s business and its environment. someone who is focused on managing relationships rather than handling transactions. • Investing in always more human capital management asset. to maximize its chances to build a successful outsourcing operation.2. Influencing and conflict management skills These skills are very important as well. so you will need a different kind of person. as they imply developing flexibility and credibility. 9. not a service.

1. In fact. Developing social capital consists in fact in favoring people connections. and when possible mixing both employees of the provider and the outsourcing company.6. and if those specific assets are being hard to standardize for the need of other deals with other client-companies.2. Laurence Prusak (Executive Director IBM Institute for Knowledge Management) and Don Cohen.2. 9. Harvard Business Review. Change management skills Outsourcing implies strong operational changes for companies. 9. Other Solutions To Keep Control Aside the contract. and that is mainly the reason why it is important and surely decisive to have internal excellent change management skills. it seems that social capital development would be very useful. 9. other structural mechanisms allow a certain control on the outsourced operation. But it is always 1 “How to invest in social capital”.unbalanced particularly winning situation. the provider accepts only assets that can often be standardized. thereby the exclusive client-company gain a big influence on the provider.3. As an example both companies should think of incentives that workers could enjoy together (and not alone and outside the company). especially in order to help collaborators facing their new environment. pp 86-93 124 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .5. most of the time. Social capital development skills 1 It order to make a HR outsourcing operation work on a long-term basis. enabling trust and fostering cooperation. 9. June 2001.3. Transfer of specific assets If the client-company transfers particularly specific assets to the provider as part of the deal.

4. it may happen that the transition period during which the two companies proceed to the transfer of assets from one to another is not enough well managed. 9. as the same stakeholder will privilege the performance of its core competencies. it seems that the spin-off solution does not offer the best performance results (unless the activity becomes a core business). the solution of creating a spin-off allows the company to keep quite an entire control on the service. European Management Journal. in the activities that have the best ROI. 2001 2 Dictionnaire de l’infogérance. Interest acquisition The acquisition of equity by the client-company in the company providing the outsourcing services is a good solution to have a control on it without being its main stakeholder.1. 2000 125 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 1 “IT outsourcing: finding from an empirical survey in France and Germany”. they suffer from the loss of key-collaborators on the one hand and from the difficulty for the provider to build new efficient teams on the other hand. Pierre Laigle. in other words.4.3. Jérôme Barthélemy and Dominique Geyer. Hermès Science Publication. it gains influence but it is limited enough not to interfere with core business focusing investments. There might indeed be a contract between the two organizations. that is to say. Problems Likely To Occur 2 9. Spin-off structure 1 Of course.useful to know the exact implicit power one has on the provider in order to have done what exactly needs to be done. as already seen.2. during the six months before the forecasted starting date. On the other hand.3. Bad start In 10% of the cases.3. 9. 9. Most of the time. but it is nevertheless not of decisive value comparing to a strong common stakeholder.

9. No respect of pricing In 20% of the cases. whatever the price its clients would be ready to pay. When the provider has previously underestimated the prices of services. it probably has destroyed that essential dividing line between the provider’s employees and them becoming its agents and employees in the 126 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .. it has a too stable or rigid service offer. Most of the time. it appears that the possibilities of service evolution are very weak. etc. 9. the client-company has to do the job simultaneously.2.4. Overlapping legal framework An additional critical aspect is that while the former outsourcing company's employees would frequently go above and beyond the call of duty to make sure that problems are resolved and impact minimized. during the first three months.4. whereas the whole outsourcing operation seems to be a success.4. this has for sure a negative impact on financial forecasts.4.5. No evolution perspectives In 50% of the cases.3. 9. 9. it may happen that the provider did not succeed in meeting contracted expectations. during the first year of outsourcing. pricing sometimes goes drifting off. but unfortunately it has hardly any possibility or will to focus on change management skills. Maladapted services In 30% of the cases. In fact. it does not take too much time to do pressure on the client-company in order to obtain a better deal. In other words. the provider’s employees do not necessarily have the incentive to do that. Thereby. and so perceived client service degrades.4. the provider in this type of cases has a valuable know-how in a certain kind of service. if the outsourcing company tries to get them to work harder by offering them some extra incentives such as stock-options. which is really not a satisfying situation. during the first year of outsourcing.

and which it had hoped to not pay by outsourcing in the first place. to add further security. http://www. can therefore be purchased in certain countries. illustrated by the law case opposing Vizcaino to Microsoft in the U. Microsoft Corp. written. and implemented properly.. but still.chiefofficer.1 As seen before in 5. Insurance like the EPLI (Employer Practices Liability Insurances) for example. 1 “Common Problems.. of course the outsourcing company had better get ready to pay them the full package of fringe-benefits its regular employees get . not all legal HR issues can be easily anticipated.3d713 (9th Cir 1999) 127 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Attorney at Shaw Pittman.2.php?t=25 2 Vizcaino v.3. 2003.eyes of the law. legal framework can sometimes overlap and even while the outsourcing contract is drafted.S. At that point. This means allocating the risk to other parties. 173F. the key is a proper management.1.com/particle. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”.

PART IV. and the promising future of the whole Human Resources outsourcing industry. we focused a little more on IBM’s case in Europe. A case that is quite indicative of the origin. position and implement HR outsourcing. In the end. we found it very useful to give a little overview of today’s best practices. We describe in the last part several business partnerships between HRO providers and HR outsourcing companies. CASE STUDIES After having understood how to define. 128 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the current evolution.

Externally outsourced A] Credit Suisse First Boston Group a) Company overview Credit Suisse First Boston is the investment bank of Credit Suisse Group. Its around 73. c) Results According to an AON’s report2. investment advisory work and pensions to its former benefits group. corporate.000 employees operate in more than 69 locations across more than 34 countries on five continents. Companies That Resources Outsourcing Have Outsourced Their Transactional Activities 10. AON Human Capital Consulting.1 b) HR outsourcing deal Credit Suisse Boston decided to outsource most of its transactional HR functions. Credit Suisse First Boston estimates its savings at $115 million since 1994. including employee record keeping.1.p 5 129 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Knowledge@Wharton in collaboration with 2 Aon Corporation. 2002. which spun off to form Black Mountain Management. Human Experienced Customers 10.shtml The Beat Goes On: Outsourcing Your Human Resource. which is a leading global financial services company headquartered in Zurich. It serves global institutional.com/about_csfb/company_information/about_csg/index. government and individual clients in its role as a financial intermediary.Chapter 10. 1 http://www.csfb.1.1.

B] Other model

outsourcing

companies

that

applied

this

British Telecom signed an outsourcing contract with Accenture HR Services. In 10 years, BT transformed its in-house HR capability from 14,500 people to under 650 HR Business Partners with HR transactional needs now provided by Accenture HR Services. “Our in-house Business Partners provide strategic HR input and facilitate the delivery of the world's-best people management consistently across the company," said Denis Reay, BT Wholesale's HR Director. “As a result, we have been able to achieve rapid organizational change and demonstrate that this commercial focus helps HR deliver real value to the bottom line. It is a fundamental part of our reputation as the employer of choice in our industry.”1 Telecom Italia signed with Accenture HR Services, a 7-years ($200 million) business process outsourcing agreement, under which Accenture will provide outsourced payroll processing and administration services to Telecom Italia.2

10.1.2. Internally outsourced through the shared services center model
A] Global shared services Center example: Boeing a) Company overview
The Boeing Company is the world's leading aerospace company, with its heritage mirroring the history of flight. It is the largest manufacturer of satellites, commercial jetliners and military aircraft. The company is also a global market leader in missile defense, human space flight and launch services. In terms of sales, Boeing is the largest U.S. exporter.3

1

http://www.accenture.com/xd/xd.asp?it=enweb&xd=services%5Chp%5Chrservices%5Ccase%5Chrs_bt.xml
2

http://www.accenture.com/xd/xd.asp?it=enweb&xd=_dyn%5Cdynamicpressrelease_560.xml http://www.boeing.com/companyoffices/aboutus/brief.html

3

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b) Implementation overview
The Boeing Company1 implemented a new business unit called “The Shared Services Group”, providing the company’s other business units and World Headquarters with innovative and effective common services, which are: • Information Services (Computing resources, Telecommunications, E-commerce, Information-management security); • Facilities and Logistics Services (Transportation, Facilities); • Supplier Management and Procurement; • Safety, Health and Environmental Affairs; • Security and Fire Services; • Boeing Travel Management Company (Comprehensive Travel Services). And as far as HR functions are concerned: • Hiring; • Training; • Compensation and Benefits, Health and Retirement Benefits (1 million retires, dependents, inactive employees, and employees); • Employee programs: ~ ~ Part-time opportunities; Virtual offices (work from home or from other locations); ~ ~ ~ ~ Educational opportunities; Child and elder care referral programs; On-site child-care and fitness centers; Recreation clubs;

1

http://www.boeing.com

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OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

~ ~

Employee discount; Community involvement opportunities.

The Shared Services Group employs 18,600 employees worldwide. It is based in Bellevue, Washington, and has employees in forty-five U.S. cities, and six international cities. Concerning the HR Services provided, • On an average day, 16,129 hours of training is delivered to employees; • More than 35,000 employees, retirees and family members in the company’s 300-plus recreational clubs.

c) Results
According to the Shared Services President1, the Boeing Company has successfully removed more than $1 billion from the infrastructure over the three years 1999, 2000 and 2001. They plan to make some more economies of scale, working on another $500 million in 2002, and at least $250 million more in 2003. If the Shared Services Group were a stand-alone company, it would rank in the top 300 on the 2001 Fortune 500 listing.

B] European shared services center example: DuPont Europe a) Company overview
DuPont delivers science-based solutions that make real differences in people's lives around the world in areas such as food and nutrition, health care, apparel, safety and security, construction, electronics and transportation. It employs 79,000 workers, of which approximately half work outside the U.S., and

1

“The evolving Role of Managers and Leaders”, Laurette Koellner (Shared Services President), National

Management Association Boeing Space Coast Chapter, The Boeing Company, February 2002

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for example. • Legal Services. are available by phone and are organized into six divisions. “People Managing Processes” offers: • Compensation and Benefits Consulting and Delivery. p 4 3 http://eu. • People Managing Processes.1 b) Implementation overview DuPont Europe.jsp?page=/content/EU/en_US/overview/glance. • DuPont Consulting Solution. The last division. Knowledge@Wharton in collaboration with Aon Corporation. Work/life. • Staffing and Relocation Services.dupont.operates in 70 countries worldwide. These shared services centers.html 2 The Beat Goes On: Outsourcing Your Human Resource. AON Human Capital Consulting.dupont. each one focused on an expertise domain: • Asset Productivity Processes. aligned and consolidated its HR services inhouse before outsourcing. • Business Services. • Value Chain Processes. • Work environment Services (Diversity. Health and Personnel Relations). 1 http://eu. • People and Organizational Development Consulting. 2 It created indeed a new business unit called “DuPont Global Services”3 that provides to internal businesses and external selected clients all over Europe from a single solution to integrated programs.com/NASApp/dupontglobal/eu/index.com 133 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . generating $24 billion revenue in 2002.

This one was in 2001 of 2. According to them. through a project called “DRH demain”. Its goal was to decrease its HR staff-to-employee ratio. Finally.900 HR employees for a total amount of 120.9%.000 employees. the quality of service is worse than before and the employees’ population is too “special” to operate the same ratio than in the private sector. C] French shared services center: France Telecom a) Company overview France Telecom is the French national telephone company. as employees’ representatives argue that there is overwork. without dismissing but by dividing up HR tasks between HRSC (HR Services centers and managers. and of course with the help of new technologies. as some HR processes are indeed directly provided on line). D] Other model outsourcing companies that applied this 134 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . with a worldwide headcount of 240. hot lines dedicated to all questions connected with personnel management.4%. b) Implementation overview France Telecom.145 employees.The People Managing Processes team is committed to creating unique HR offerings that will help clients’ employees to reach higher levels of productivity. and a lack of HR employees. indeed. decided in October 1999. It provides services to about 100 million customers within more than 20 different countries. as there are 2. especially in Europe. 41% of its revenue is generated outside the French borders. The next step is to reduce it to 1. to set up 10 HR platforms in France. 80% of them are civil servants. c) Results This new organization led to strikes and discrepancies between direction and trade unions.

Catriona Marchant. which includes HR expertise. It will also provide Borden Chemical employees with access to a call center for payroll. Borden Chemical signed in 2003 a five-years HR outsourcing contract with Accenture HR Services will help Borden Chemical accelerate and improve the accuracy of the processing of its benefits eligibility and qualified life event management. America.xml 135 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . including 300 workers in Europe. 26th September 2000 2 “Oil giant flies the flag for keeping HR skills in-house”. “After twelve months the cost base was reduced by 30 percent with no loss of services or control”2 reports Leo Bartie. Warner Lambert.and benefit-related questions and will administer Borden Chemical’s payroll processing activities. Catriona Marchant. 1 “Oil giant flies the flag for keeping HR skills in-house”. Catriona Marchant. etc.com/xd/xd. Personnel Today. and benefits payroll interface services.City Group Business1 Services set up three shared services centers in Europe.). and call center support. Other large companies also applied this model. annual benefits enrollment.accenture. Usinor. “Shell People Services”. Asia. check processing and distribution.S. European Head of the company. Personnel Today. tax-filing services. with HR as a key component. Personnel Today. year-end processing. in 1997 to manage HR in the 92 countries in which it operates.4 Thomson also implemented one different shared services center for each geographical area (Europe. as Lockheed Martin.asp?it=enweb&xd=_dyn/dynamicpressrelease_563. the Philippines and in the U. and transactional processes such as payroll services. 26th September 2000 3 “Oil giant flies the flag for keeping HR skills in-house”. etc. Sears. In the early 20003. 26th September 2000 4 http://www. Hewlett-Packard. including administration and reporting. diversity specialists. as it is called. oil giant Shell has rejected the option of externally outsourcing its HR function and set up an HR shared services center in Europe. employs 550 people globally.

2. Company overview Kellogg Foods is the world's leading producer of cereal and a leading producer of convenience foods. including cookies. cereal bars.2. A Company That Has Outsourced Some Of Its Human Resources Processes: Kellogg Foods 10. It decided to outsource the department (keeping the strategic aspects internally) to RES (Recruitment Enhancement Services. HR outsourcing deal Kellogg Foods decided to outsource all its recruitment functions in 1999.1 10. September 2 2002 136 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 10.2.1. shared services centers are a good first step for companies that are looking to externally outsource. Its goal was: • To reduce headhunter fees and improve efficiencies for the company. • To guarantee a flexible recruiting resources in order to answer the uncertain changing environment and hiring needs of the company. frozen waffles. a division of Bernard Hodes Group. Its products are manufactured in 19 countries and marketed in more than 160 countries around the world. pie crusts and cones based in Battle Creek. Michigan. toaster pastries. HRFOCUS. Houston).kelloggs. some of them are based in RES’ Houston Headquarters and some others are based in 1 http://www.com/company/ “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”. • To reduce the headcount and obtain better candidates. crackers.2 A team of RES recruiters works only for Kellogg.As noticed before.2. meat alternatives.

In 2001. September 2 2002 137 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Director of recruiting and staffing at Kellogg “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”. The program also included an efficient maximization of recruiting and hiring program. There are indeed savings in costs and time. Outsourcing had in the end positive results for Kellogg: • The provider filled 52% of available jobs in 2000. but Kellogg encountered resistance from hiring managers who preferred their outside agencies.Kellogg’s HR department in Battle Creek.163 in 2000 and 202 jobs were filled.784 in 1 Cydney Kilduff. Outsourcing implementation results The outsourcing arrangement succeeds thanks to the strong partnership between Kellogg and RES. from $7. • Outside agency fees were $1. including online internal job posting and employee referral programs.2. HRFOCUS. agency fees were just $294.375 and 389 jobs were filled. handles all related recruiting work except for relocation. and 96% in 2001. and uses Kellogg designs and standards for recruiting.3. thanks to the use of technologies. 10.946. and there were many calls for customizing features in the technology program that caused problems in implementation. Kellogg implemented a Webbased recruitment management system. • The cost per hire was cut in half. The Director of Recruiting and Staffing at Kellogg1 announced at the 2002’s annual conference of the Society for HR Management in Philadelphia2 some of her outsourcing results.905 in 2000 to $ 3. RES advertises open exempt jobs. Kellogg’s efforts to establish a more efficiency system with an outsourcing provider and with internal technologies are paying off.

the BP-Exult agreement was the largest HR outsourcing contract in history. were: 1 http://www.html 2 138 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2001.asp http://www. according to Exult Inc. North and South America.1 B] HR outsourcing deal BP Amoco outsourced in December 1999 a major part of its global HR functions to one exclusive HR outsourcing provider: Exult Inc. The programs’ center of operations is located in Glasgow. In 2001. BP has well-established operations in Europe.net/clients/contract_bp. • In 2000. supply and transportation. that has dropped to 39 days.3.com/company_overview/profile/index.1.K.S. Companies That Have Outsourced All Of Their Human Resources Business Processes Except Managerial Ones 10. BP Amoco (British Petroleum Amoco) A] Company overview BP is the holding company of one of the world's largest petroleum and petrochemicals groups.000 U. 10. Exult support BP through its own services centers and will act as a service integrator.exult.bp. They agreed2 on a 7-year relationship for HR Services to over 50. marketing. BP’s goals. and U. At the time. Its main activities are exploration and production of crude oil and natural gas.. it took an average of 67 days to fill jobs.3. and manufacturing and marketing of petrochemicals. refining. managing any contracts with other third party suppliers on behalf of BP. employees. Australasia and Africa.

enabling a closer alignment of company strategy and organizational capability. “The Atlas Project Team”. Under the title of “The Atlas Programme”1.• Access to further economies of scale. • Speed of deployment of new services. composed by subject matter and functional experts from BP and Exult (50 members). • Build a collaborative partnership to deliver services.). was in charge to drive the programme.net. even if there have been 1 “BP”. • A desire to improve workforce satisfaction with BP as an employer.net”. • Cost reduction. D] Outsourcing implementation observed results a) Positive ones A step-by-step implementation rather than the full Big Bang treatment has helped the program to be accepted by employees. • International consolidation efficiencies. The team was organized by region with functional team responsible for their specialties in all areas (myHR. C] Comments This deal has been done through the introduction of redesigned global HR process. etc. • Need to free up its own HR function to focus at a more strategic level on people management. 17th October 2000 139 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . information for foreign placements. • Ability to deliver HR innovation to all employees. a personalized web-based portal through which every employee could access HR information and services (career service. Personnel Today. etc.). the outsourcing deal would see the creation of “myHR.

b) Negative ones Some ambitions have not been achieved. keeping only strategic activities internally.2. AT&T signed in May 2002 with the HR outsourcing provider AON a 7-year 1 “The odd couple produces model for HR outsourcing”. p 5 4 http://www. Other main companies which applied this model An AON study6 reports that some companies like BP Amoco.3. Knowledge@Wharton in collaboration with 2 3 Aon Corporation. as it is reported in Personnel Today1.html “The cautious approach”. delivery of information and web-enabled HR services. as the company has not achieved everything it set out to5. as to extend the system beyond the U. the HR staff-to-employee ratio fell from 1/60 to about 1/50. avoided capital. and the U. 26th June 2001 Vice President of HR for US operations: Don Packham The Beat Goes On: Outsourcing Your Human Resource. Moreover. Personnel Today.K. provision of data and metrics to drive strategic change.S. Knowledge@Wharton in collaboration with 5 6 Aon Corporation.exult. BP Amoco’s Vice President of HR for U. 10.pockets of resistance. The myHR website became the first year already the company’s second most visited Internet site after the BP homepage. 2002 140 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . operations2 reports in the Aon’s study3 savings of $50 million in the first two and half years of BP’s outsourcing contract. BASF Cable & Wireless and Bank of America decided to outsource all their Human Resources functions. Personnel Today. AON Human Capital Consulting.net/clients/contract_bp.S. but also AT&T. During the first year. AON Human Capital Consulting. 23rd April 2002 The Beat Goes On: Outsourcing Your Human Resource. the results4 have included cost reduction in excess of 20%..

S. General Electric. employees. ($600 million) for its almost 70. a successful annual benefits enrollment. in 2001. Unisys (with Exult. as Colgate-Palmolive. Following the success of this first agreement.000 employees8).html “The cautious approach”.html http://www. etc. International Paper signed.net/clients/contract_pru. and other administrative services) for 70. 1 “How to succeed at HR outsourcing – by really trying”.net/clients/contract_boa.html “The cautious approach”. It chose AON. because of its willingness to offer jobs to all of its HR employees1.000 U. Personnel Today. Bank of America signed with Exult Inc. 23rd April 2002 http://www. 23rd April 2002 http://www. a 10-year contract3 ($1billion4).000 U. Personnel Today. 14th February 2003 2 “The cautious approach”. a ten-years contract with Exult Inc. Personnel Today. in 2002. Linda Rosencrance.html http://www. the contract has been extended to include regional staffing and recruiting functions. Cable & Wireless signed with Accenture HR Services in 2001.S. employees.exult.exult.7 Some other companies also chose this model.exult. covering the predominance of the bank’s back-office HR and affiliated financial processes that support the needs of over 130. Key accomplishments5 to date have included a complex payroll conversion.net/clients/contract_boa. a ten-years HR outsourcing agreement with Exult Inc. Computerworld. in part.000 employees. including 36.000 of its employees.agreement to provide “end-to-end” HR services (and payroll.exult. $200 million contract over seven years.net/clients/contract_ip. To outsource HR processes for approximately 47. BAE Systems (with Xchanging). a 5-years outsourcing contract (£80 million2) including all the HR transactional functions as well as the non-transactional ones.6 Prudential Financial signed. and an achievement of target cost reductions. 23rd April 2002 3 4 5 6 7 8 141 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

Spencer Stuart.com. KornFerry Futurestep Americas. the main HR outsourcing providers have also been quoted. Spherion. clients are in a recession period interested in access to technologies without the large implementation costs. HRO providers are increasingly forming partnerships and acquiring resources in a bid to get contracts from big business. and Monster.2. HRO Providers Specialized In Some Human Resources Functions Outsourcing Services 11. They work on filling gaps in their array of services so they can better compete for big-volume and big-money outsourcing contracts. 11.1. Careerbuilder. primarily. Payroll and Benefits 3 142 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 11.1.com. As main HR outsourcing deals have just been described. but the trend is also noticeable in Europe.1. Bernard Hodes/RES.S. Human Experienced Providers Resources Outsourcing In the U. Staffing and Recruiting 2 The main providers are: Manpower. As it is underlined in HR Magazine1. Adecco. Robert Half. Dice.Chapter 11. and then the author concludes that any company that would want to get into HR Outsourcing successfully needs to make some sort of alliance with a technology outsourcer. example an overview of this industry. This part will give through the Exult Inc.1.

hrotoday.1. Unisys. HR Magazine. www. Bank of America. www. Exult Inc. in social security contributions.The main providers are: ProBusiness. pp 53-54 3 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a bid to get contracts from big business (Outsourcing)”. 11. It promises clients a “comprehensive solution” of HR outsourcing services. it has signed with BP Amoco. April 2002 4 “ The 100 Superstars of HR Outsourcing”. April 2002 143 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 1 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a bid to get contracts from big business (Outsourcing)”.4. and employee relations.com. November 2002. Paychex. 11.hrotoday.com. Steve Bates. some providers are specialized in HR transactional activities. Definity Health and VSP/Vision Service Plan. Steve Bates. April 2002 2 “ The 100 Superstars of HR Outsourcing”. International Paper and Prudential Financial contracts over $100 million.2. Specific providers in specific countries In Belgium (with “Secrétariat social”) and in Italy (with “Consulenti di lavoro”).1. To date. p 58 5 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a bid to get contracts from big business (Outsourcing)”.1.2. November 2002. HR Magazine.3. Steve Bates. Human Resources Outsourcing Today. A] Company overview This Irvine (California) HRO provider is pursuing aggressively this market5. HR Magazine. 11. Employee health and Pension benefits 4 The main providers are: AFLAC. TALX UC Express and ADP. Human Resources Outsourcing Today. HRO Providers Proposing An Integrated Solution Including The Whole Range Of Human Resources Processes 11.

promotions and pay changes. proceeds to: • Over 11 million employee payments. • Docent.exult. Each year. • Over 21 million employee transfers. processes. Strategies. B] Activities Exult Inc.000 professionals. • Acquire and Staff. February 2002 2 http://www. Pitfalls. • Hire Right. • Reward. technologies and third-party providers and being designed to deliver these services in a more efficient and productive manner. even if it stays the only point of contact for outsourcing companies: • Ceridian. concluded partnerships with thirdparty HR service providers. including a broad spectrum of process management services grouped into four major categories: • Record and Support. Melbourne.2 proposes a Service Delivery Model. Dave Connaughton (Director Business Development Asia Pacific Region Exult). Opportunities. • Deploy Solutions.net 144 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 1 Creating value through HR Outsourcing. To provide such services. • IQ Navigator. Exult Inc. • Recruitment of over 21. • Retain and Grow.This provider describes itself1 as assuming broad responsibility for the management of its clients’ HR people. Exult Inc. Sourcing Interests Group.

500 expatriate assignees. with $50 million.• Relocation of 2. Its value proposition is to provide broadly integrated process management services and improve its efficiencies by sharing resources over a broad client base and standardizing practices. D] Strategy Exult Inc.000 employees. Other main providers proposing an integrated solution So far. • Exult concluded 2001 with 7 clients.000 learning enrolments. • Exult reached $270 million in revenue and cash flow. since it signed the deal with BP developed earlier.2.2. • Exult completed in June 2000 an IPO (Initial Public Offering) reaching $300 million. General Atlantic Partners founded Exult Inc. Its strategy is to use its e-HR solution set of applications to enhance HR performance. representing 400. targets global Fortune 500 corporations as clients and to establish with them long-term relationships. • Exult closed BP Amoco HR outsourcing in December 1999. C] Key facts • In 1998. for $600 million. Exult is the most meaningful provider. As seen. • Administration of 250. in 2003. 11. most of the HRO providers increasingly tend to offer integrated 145 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

6 billion for the fiscal year ended August 31. It is a Fortune 500 company comprised of more than 40. the Middle East. the company generated a net revenue of $11. It operates in more than 125 countries with over 55. and systems and integration services to hundreds of clients worldwide3. www. IT outsourcing. Latin America. 20022. • Convergys. specialty services.com/xd/xd.jsp 3 4 146 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . employee care and other industries in more than 40 countries. as for the main other ones on the market1: • Accenture HR Services.aon.com. November 2002. financial services.000 people in 47 countries.html http://www.000 people in multiple locations around the world.000 employees in more than 600 offices4.000 people in their contact centers. Inc. claims management.xml http://www. retail.accenture. Canada. and human capital consulting services. and 1 “ The 100 Superstars of HR Outsourcing”. Accenture is one of the world's leading management consulting and technology services company. and it delivers today BPO. • ACS (Affiliated Computer Services). data centers and offices in the United States. AON is a Fortune 500 company that is a world leader in risk management.com/about/aon_corporation/history_facts. Human Resources Outsourcing Today.asp?it=enweb&xd=_dyn\dynamicpressrelease_560.acs-inc. reinsurance and wholesale brokerage.com/about/index.hrotoday. Convergys serves top companies in communications. It employs more than 44. Europe. ACS is a premier provider of diversified business process and information technology outsourcing solutions to commercial and government clients worldwide. pp 56-57 2 http://www. With more than 75. technology. • AON Consulting HR Outsourcing Group.solutions.

com/hrsolutions/aboutus/ 2 3 4 147 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . It employs more than 310. EDS is also one of the leading global IT services company.com/about_eds/en_about_eds. outsourcing.com/company_overview.5 billion in 2002.000 people worldwide.mellon. HR consulting & technology. It employs 2900 professionals in nine operating locations and administers over $150 billion in retirement plan assets.html http://www. 45 percent non-U. • EDS (Electronic Data Systems) BPO.000 business and government clients around the world.000 on assignment daily.shtml http://was4.3 billion1. It provides service over 4 million participants4.htm http://www.com/hewitt/about/overview/index. It has more than 35. including 85% of the Fortune 100. it handles more than 53 million HRrelated customer interactions a year from more than 13 million participants3.Asia.2. • Spherion. • Hewitt Associates. with an average of 59.000 companies.eds.S. As the largest multi-service HR delivery provider in the world. Hewitt Associates’ client roster includes more than half of Fortune 500 companies and more than a third of Fortune Global 500 companies. 1 http://www.1 billion in 2002.hewitt. It reaches 9 countries with its more than 800 locations. Spherion provides staffing. recruiting. It provides services to more than 33. It employs approximately 137. Its revenue in 2002 was $2. Mellon HR Solutions is the fourth largest HR services provider and one of the largest financial services companies in the world.000 in 60 countries. Its revenue: $21.convergys. Its annual revenue was $2. • Mellon HR Solutions.

. To have a clear idea. Company Overview 12. with more than 325. the purpose of this last chapter is to discuss IBM’s role as an actor in the field of HR outsourcing throughout Europe and determine what are its contributions and positioning. Gerstner Jr. it also has global standards and levels of services. Harper 2 Business. But on the other hand.S. IBM (International Business Machines) 1 Is there any valuable business book that does not mention at least once IBM as an example to follow? As we have to confess. skills. with 149 different languages spoken.1. Louis V. where IBM works with homogeneous strategies. values. p 12 148 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1. Gerstner Jr. one may be totally fascinated by the idea of making that huge elephant dance2.. and processes. Finally. but it seems that the answer is close to “no” anyway. one may (wrongly) think it is a multinational elephant. seems to have done. HRFOCUS. where everything is being slowed down.Chapter 12. nearly 60% of revenue is generated outside the U. 2002 3 “ Crisis Survival Tactics for HR”.000 locations. When one considers IBM. Facts and figures IBM is responsible worldwide for operations in 160 countries. in fact completely the opposite of the reactivity we generally attribute to start-ups. we of course cannot be absolutely sure of the previous affirmation.1. 1 http://www.3 IBM EMEA operates in more than 124 countries.ibm. we did not read all valuable business books available. as Louis V. 12. April 2002.com Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround.000 people working in about 1. and 293 dialects.

profits. consultants.msnbc.com/FamulusCom/reuters07-24-140033. project managers. as it is: • 1st in hardware.. assets. Activities A] IBM IBM is the world’s largest IT company. and specialists. it is ranked 8th among all companies ranked and 1st among IT companies in Fortune Magazine “Fortune 500” (fiscal-year revenue). There are four main lines of business: • Business Consulting Services. • 1st in research and development.asp?sym=msft#body 149 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . BusinessWeek and Interbrand Corp. market value). 1 http://famulus. • 5th in PC.2.000 professionals. helping customers managing IT operations and resources and capitalizing on IT to improve performance. B] IGS (IBM Global Services) IBM Global Services is the largest business and IT services company in the world. In July 2003.IBM is ranked 9th among all companies ranked and 1st among IT companies in the Forbes Magazine annual “Super 100” (ranking of sales. • Integrated Technology Services. • 1st in IT Services. architects.1.1 12. • 2nd in software. It hires almost 175. ranked IBM the third best global brand after Coca-Cola and Microsoft. • 1st in IT rental and financing. Moreover.

• Strategic Outsourcing Services. March 2001 150 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2. That means that the strategy focuses on providing e-business “on demand” for clients. • Learning Services. an extreme responsiveness to the needs of clients.000 in 2002. Palmisano. Gartner. IBM also made the computing model evolve to an “On Demand Operating Environment”. which implies “sense-and-respond” or “real-time”. IBM allows its clients to convert fixed costs into variable costs. 12. The last work IBM did to make “e-business on demand” a reality is “establishing utility computing – computing on demand – as a viable and attractive alternative for accessing and paying for IT” so that clients acquire computing and applications and pay only for what they use. and to reduce inventories. To this purpose.1. 12. IBM received the most U. because the increasing complexity of systems is making them extremely costly to manage and maintain. applications and the underlying IT systems.S. IBM helped its customers to become “on demand businesses” by integrating business processes and operations. For the 10th consecutive year. Strategy As Samuel J. To serve its strategy.3. explains it in the “Chairman’s letter” of the IBM 2002 annual report. patents with almost 3. IBM CEO. and by helping them to focus on their core competencies and to outsource or to tightly integrate with strategic partners to supply their non-core competencies.1 1 “2000 Outsourcing Services: Market Share and Forecast”. Major Outsourcing Provider IBM Global Services has been pointed out as the 1st “Worldwide Professional Management Services Provider”. IBM’s core business is “e-business on demand”.

12.000 servers worldwide for maintenance or development. Finally. IBM EMEA 2 Strategic Outsourcing Team IBM EMEA implemented a strategic outsourcing team widespread across Europe. L 122-12 in France for example) developed in part three.12. as being completely part of its core competencies. or Art. because of the different employments laws and variation of the Acquired Rights Directive (TUPE in the UK. but also an industry pioneer thanks to its experienced methods and tools that are: • Its very large size and its wide range of clients around the world. • Knowledge capitalization (Knowledge Management database available by 138. and are coordinated by an HR outsourcing specialist in the country where the 1 http://www-1. It helps its client to assess its operational objectives. • A wide range of solutions on different trademarked products. Most of the time. as will be developed in the next point. IBM Strategic Outsourcing manages human and social dimensions of an outsourcing operation.2. determines which IT processes and activities should be outsourced for a better competitiveness. systems. one can say IBM is a major outsourcing provider.2. IBM outsourcing deals are at the EMEA or global level. and offers human and technical means without equal in the market.com/services/stratout/ IBM EMEA (IBM Europe Middle-East Africa) 2 151 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .000 IBMers). and softwares (90% of IBM’s outsourcing deals). even if a majority is based in the UK.ibm. • 133 Data Centers and 73. Indeed.2. Strategic Outsourcing Services 1 IBM Strategic Outsourcing Services is the management of companies’ applications and IT Systems.1.

3. 12.1. These specialists are responsible for proposals on how the staff can be transferred and treated to increase their comfort level with the transfer operation. These Specialists are advised by an outsourcing engagement and alliances manager who ensures that the HR solutions for the staff transfer are appropriate and can be managed by IBM. or find a partner who could provide 152 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .S. the IBM EMEA strategic outsourcing team looks after human and social aspects of the outsourcing operation thanks to: • Corporate example). Competitive Human Resources Organization 12.S. But IBM decided to go to the next level.3. and will also guide the outsourced employees towards a better integration. • Strict transfer and integration processes realized by HR culture and internal experience concerning outsourcing operations (more than 80 operations in France for professionals. said: “Their choice were clear: either make a significant investment over the next three years or more to upgrade systems. • Skills development and career opportunities management. Smail.deal is pursued. HR Service Center IBM created an Employee Service Center in 1994 to consolidate the delivery of all its HR processes across the U.S. already outsourced some of its Human Resources activities.S. As Peter J. President of FESCo. keeping its quality programs and becoming more efficient. Finally. A] U. Example IBM U. IBM U.

. because it serves many large companies. retirement planning. ii/ Fidelity Investments Institutional Services Company. Fidelity Investments. as well as through 5. 20th December 2002.com 2 http://www. and 1 “Substantial Benefits. The company is the largest mutual fund company in the U. Inc.500 financial intermediaries. one of the largest mutual fund arrays. Fidelity Investments3. and has experience and capabilities to offer a wide range of services and products. Inc. HR and benefits outsourcing services to 17 million individuals and institutions.S.excellent services and had the technological advancements IBM requires”. It offers investment management. based in Boston.fidelity. Human Resources administration and payroll programs. brokerage. http://www. health and welfare. Inside the IBM-Fidelity outsourcing partnership”. Moreover.fidelity.100 retirement. 11. B] Deal with Fidelity Employer Services Company a) Company overview i/ FESCo (Fidelity Employer Services Company) FESCo. and Ford Motor Co. the first provider of workplace retirement savings plans.fidelity. which provides the technology and people required by IBM.com 3 153 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . provides2 retirement. Philip Morris. FESCo is a division of Fidelity Investments Institutional Services Company. Monsanto. Human Resources and benefits strategies to more than 200 companies (including Shell Oil. founded in 1998.1 As developed later.).com http://www. FESCo can leverage its investments. the decision has been taken to sign a partnership with Fidelity Employer Services Company. is one of the world’s largest providers of financial services.2 million American workers through the administration of more than 11.

The New York Times. employees and retirees.500 or so IBM personnel workers would remain with IBM “to handle hiring.1. 4503 IBM Employee Service Center workers. 2nd July 2002 “Fidelity to oversee IBM’s pension plan”.S. N.” ii/ Equipment Transfer FESCo leases a call center in Raleigh. charitable giving. IBM Global Services. and 120. service center to 1 “Fidelity to oversee IBM’s pension plan”.2 c) Tangible transfers i/ Staff transfer As a whole..A]) to handle questions from its 140. Boston Business Journal. Towney Kennard. b) HR outsourcing deal IBM outsources to Fidelity Employer Services Company (2nd July 2002) the administration of its benefits1: pension and health & welfare plans.000 retirees about retirement. pay. Fidelity Investments. The New York Times.C. David Cay Johnston. discipline. 3rd July 2002 154 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .S. Vice President of Alliances. “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”.a leading online brokerage company. Inside the IBM-Fidelity outsourcing partnership”. promotions and other issues. became FESCo employees (1st August 2002) and continue to provide HR support to the same IBM population.000 workers in the U. Boston Business Journal. IBM’s pension plan is the 12th largest in the U.3.. with assets of $56. FESCo said that it plans to expand the Raleigh. David Cay Johnston. who provided HR transaction and administrative support to IBM U. North Carolina.S. that IBM opened in 1994 (see 12. and other benefits.com. health. http://www. 2nd July 2002 “Substantial Benefits.5 billion last year. 20th 2 3 December 2002. along with a broad range of HR services. firing. announced4 that another 2. 3rd July 2002 4 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”.fidelity.

The industry takes in about $12 billion today”. FESCo will also use IBM’s former facilities in Endicott and White Plains. Executives of both companies said indeed they saw “a promising business in selling payroll and benefits services to large employers.1. 1 “Fidelity to run IBM pension and health plans”. without losing the level of quality.2 Fidelity Investments provides benefits expertise. IBM wanted to go to the next level after the service center becomes more efficient. The Motley Fool. David Cay Johnston.3 i/ IBM According to Towney Kennard4. http://www. e) Benefits expected by both parties The two parties said. The New York 2 Times.accommodate growth in its HR payroll and outsourcing solutions.fidelity. IBM Global Services. 2nd July 2002. including government agencies and major non-profit organizations”.3. “this agreement enhances our e-HR portfolio and leverages IBM’s expertise in process change management as customers automate more business processes”. 2nd July 2002 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. 5th July 2002 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”. according to the New York Times that they expected in 2005 “benefits to grow into an industry with $43 billion to $45 billion of annual revenue. Fidelity Investments and IBM announced that they form venture to market HR payroll and benefits outsourcing services to other companies. d) Business opportunity At the same time1.com 155 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . New York. Reuters Company News. FESCo was a solution for them to achieve this target. 3rd July 2002 3 “Intel’s No Bargain”.A]. experience and capabilities and IBM provides computers and databases. As mentioned in 12. Fidelity 4 Employer Services.

North Carolina.fidelity. Fidelity Investments. As Peter J. http://www. will accelerate our clients’ benefits outsourcing plans. 20th December 2002. “Substantial Benefits. employees have the latest available information at their fingertips and the HR function is able to concentrate on critical strategic activities”.2. we can serve even more large corporate clients efficiently. as “IBM-trained Human Resources staff with a high level of expertise and professionalism”. Personnel Today. http://www. Fidelity Investments. Inside the IBM-Fidelity outsourcing partnership”.com 4 “Substantial Benefits.3 Not only FESCo gains the best practices and professionals. e-HR Practice Executive at IBM EMEA. http://www. FESCo integrates 450 of the “best Human Resources and payroll people in the business”2. Inside the IBM-Fidelity outsourcing partnership”. Inside the IBM-Fidelity outsourcing partnership”. said “By creating a collaborative “self-service” environment for the majority of issues. Including Raleigh.5 1 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”. 20th December 2002. As companies evaluate outsourcing options. 2nd July 2002. Fidelity will have phone centers in 6 regional locations altogether. as well as in Endicott and White Plains.com 3 “Substantial Benefits. IBM EMEA HR Organization A] Self-Service As Martin Stockton. President of FESCo. Fidelity Investments. “Substantial Benefits.fidelity.fidelity. Smail1.ii/ FESCo According to Peter J.com 2 “Substantial Benefits.com 5 “Web HR frees up time for strategy”. recognized consulting and technology expertise. Inside the IBM-Fidelity outsourcing partnership”. but also IBM’s former facilities. Inside the IBM-Fidelity outsourcing partnership”. Inside the IBM-Fidelity outsourcing partnership”.fidelity. we think they will seek trusted providers such as Fidelity and IBM to provide end-to-end solutions”. http://www. Smail claimed: “[…] we’ll now have locations in Raleigh. 20th December 2002. “Substantial Benefits.”4 12. 31st October 2000 156 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . New York.3. Fidelity Employer Services. “we believe that combining our significant HR experience with IBM Global Services. Moreover. With this expansion.

Spain. as Martin Stockton explained: “Because IBM’s new e-HR solution is based on web technology and best-ofbreed HR solutions.000 employees across 40plus countries3. to provide HR services (direct help and information) to all IBM employees and managers across Europe. b) Objective 1 “Web HR frees up time for strategy”. Letter of the week.000 employees in 20 countries4. working hours management. Portugal. speaking many languages. etc. HR managers’ manual. Moreover. as developed in a more general way in 3.K. Ireland. Sweden. because it allocates flexibility to a growing business.1.. the Middle-East.. 10th July 2001 Austria. Slovakia. based in Portsmouth. 157 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Indeed. this is quite a competitive advantage for IBM. and developed below. Concerning European countries only. Personnel Today. U.”1 B] EMEA HR Service Center a) Presentation IBM launched an internal centralized HR Service Center called “AskHR” in June 19992. Germany. employees and managers. and speaks 15 different languages. 31st October 2000 “Les RH au bout du fil”.2. is supported by a customized e-HR system for HR staff. Czech Republic. Israel. Almost all HR administration and paperwork are now electronic and self-service. and Africa. in the U. 28th March 2000 “IBM HR caters for over 40 countries”. Belgium. Switzerland.The EMEA HR Service Center implemented by IBM EMEA. France. Finland. Denmark. This e-HR is developed in IBM through the Intranet. it is easy to adapt as the business grows. The employees and managers have access to formula. process description and execution. it supports about 98. This center supports over 100. Turkey. South Africa. but also through e-learning (more than 40% of internal training) and erecruitment (70% of applications in France for example). 2 3 4 Netherlands. personnel data maintenance.K. holidays management. Entreprises & Carrières. Personnel Today. Norway. Italy.

providing different levels of service responding to different requirements. IBM EMEA Employee Relations and IBM France HR Leader said: “its creation followed a major reorganization by a new Chief Executive who also believed that HR had a leading role to play in IBM’s success”. learning and executive resources. Personnel Today. The HR specialists form three teams: compensation and benefits.1 He also claimed: “the aim of the service centre at Portsmouth is to ensure HR professionals in each country are not burdened with routine administrative functions”. sending e-mail or calling the EHRSC. EMEA employees and managers can now get help directly by accessing the intranet. 1 “Service center creation”. Indeed.The primary goal is to maximize HR support for all employees and managers and to ensure that clear and consistent information is available from the intranet and by phone. as Tim Stevens. 6th June 2000 “IBM takes a more general view of global HR delivery”. the aim of such centralization is a reduction of costs and a higher value work and workload. Moreover. workforce management and staffing. Of course. Personnel Today. through first level (HR Generalists) to HR Specialists. from the extensive information on the IBM Intranet. 6th March 2001 2 158 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . c) Organization The center is composed of about 120 employees2. and skills.

it fielded 190.3. Finally. Human Resources Services Provider 1 “IBM takes a more general view of global HR delivery”.4.1. (see 12.Illustration 16: IBM European HR Service Center C] Results Even while the Employee Service Center experience had already been applied in the U.000 calls and 46.A]). Personnel Today.000 e-mails2). 6th March 2001 “IBM takes a more general view of global HR delivery”. IBM was not sure this would be so feasible and successful (efficiency and service quality improvements) with a group of so many different countries. 6th March 2001 2 3 159 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .S. The customer satisfaction was of 90%3 in 2000. and allowed HR managers not to answer all calls or e-mails now handled by the EHRSC (in 2000. 12. Personnel Today. Personnel Today. 6th March 2001 “IBM takes a more general view of global HR delivery”. the implementation of this service center combined with the e-HR solution allowed IBM to save in 2000 over 57%1 of its previous HR costs.

4. CRM (Customer Relationship Management). professionals ranging from financial services to healthcare.0001 consultants and employees located in 160 countries worldwide. • Implementing better HR (HR delivery and process. 1 IBM 2002 Annual Report.1. • Delivering dynamic workplace. performance leadership. from advise until services implementation. BCS is composed of more than 60. The purpose was for IBM to combine business expertise with the technology leadership in order to accelerate its clients’ business performance. IBM Business Consulting Services IBM acquired in August 2002 the consulting branch of PwC (Pricewaterhouse Coopers) for $3. HCS defined its key drivers as following: • Developing an efficient and effective organization. A] Human Capital Solutions HCS (Human Capital Solutions) aims to help clients achieve business through: • Gaining more from people (people strategy. human capital solutions and business transformation outsourcing. organizations require always more from their employees. p 16 160 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . but employees expect in turn ever more from their organizations. operating HR). with business process expertise in areas such as supply chain.5 billion and formed this new entity: BCS (Business Consulting Services). learning & development). To find the optimum point. HR management systems.12. And doing so in the most cost-efficient manner. It answers to client’s strategic needs by offering a complete offer. Indeed.

161 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .4. Concerning the HR activities. IBM accompanies its client to transform its HR in order to manage continuous improvement in people. • Customer Relationship Management. process. 12. etc. These services help clients to construct efficient HR strategies and to focus on new HR priorities. Its value proposition includes a suite of offerings that can provide a foundation for continuous strategic change in: • Finance and administration. to set new directions and reduce risks by identifying and delivering future market positions and providing capabilities to capitalize on them (win in existing markets and enter new ones).• Reducing costs. • Human Resources. BTO helps its clients to build a strategic transformation agenda. • Procurement. transition and long-term support. and no longer to be reduced only to Personnel Management (that is administrative and transactional activities. IBM HR Technological Services IBM Global Services offers new IT solutions to help the Human Resources department to be integrated in the whole company politics in a more efficient way. • Aligning people and business strategies. at lower costs. and technology development. B] Business Transformation Outsourcing BTO (Business Transformation Outsourcing) provides superior business value by an outsourcing multiple business process strategy. • Downsizing painlessly. • Ensuring workforce flexibility.2. its aim is also to make its clients’ processes run more efficiently.).

IBM HR Practice has built up. • Support and implementation. Strategic advice. based on optimized procedures like Electronic HR (e-HR) or HR portals for employees. methods and experience in this field. and Knowledge Management. For this purpose. IBM HR technological services helps its clients to choose the adequate software and recommends adapted IT solutions.com/services/de/pdf/erp_hr-practice. • Products advice. IBM HR technological services has unique process analysis methods.A] Services overview Illustration 17: IBM HR technological services1 IBM HR technological services offers: • HR Management Consulting and Coaching.pdf 162 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . thanks to more than thousands worldwide implementations. 1 http://www-5.ibm.

but also tools like competencies management tools. 163 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . B] Services description IBM HR technological services allows decreasing the time and the money spent in dealing with employees’ data. It not only takes into account the employee self-service opportunity. Its performance in successful knowledge management methods and tools implementations. but also a successful know-how transfer to clients has been proved. and on the other hand increasing the level of employee services. IBM HR technological services works on the whole IT strategy for its clients HR departments. IBM masters the flowing services: • Electronic Human Resources Management.Beside this support and implementation services. and also financing possibilities thanks to IBM Global Financing. IBM HR technological services has a large experience in knowledge management thanks to its numerous clients’ projects in teams. a) Human Resources management consulting The goal is to optimize HR processes and to make them more competitive and efficient. To this purpose. It indeed sets up organizational measures like culture diagnostics or communities of practice. • Knowledge Management. IBM HR technological services provides several kinds of outsourcing solutions. certified project managers. like online job offers or online job applications to optimize the workflow or data warehouses and other decisional tools. and training for clients’ employees via “Train the Trainer” or “Computer Based Trainings” (IBM Learning Services). but also anticipates requirements for a future partnership with an outsourcing provider. to take HR decisions better and faster.

learning programs including design and implementation of new processes. like for example coaching. IBM HR technological services proposes a large array of services in organizational change management. Reduction of locations number. b) ERP (Enterprise Resource Planning) services IBM HR technological services offers the administration of a large range of HR ERP. • Peoplesoft.Knowledge management is reinforced by the context of globalization of transactional activities and of virtual teams (composed by members everywhere in the world who almost never concretely meet). Outsourcing. 164 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . This service is increasingly gaining importance as factors influencing companies through rethinking organizational structures multiply: ~ ~ ~ ~ Change in skills requirements. • SAP HR. organization analysis and redesign. Processes automation. • Organizational Change Management. support in communicating important change projects.com. including: • HR Access. c) Support and implementation • Learning Services. • ASP with mySAP. • Outsourcing.

as we saw.3. accumulating one of the greatest experience as far as a successful Human Resources management is concerned. we all know that IBM is still unquestionably one of the global leader as far as technological services are concerned and has pioneered in this area the best outsourcing practices. IBM offers. web solutions that enlarge the diversity of training proposed. IBM opened its pool of applicants and its learning services to its business partners network: an excellent way to encourage their loyalty and to improve their efficiency. 000 brains organized in a dense network. in 2000. To sum up. counts more than 100. 12. Through this chapter we have been able to demonstrate that IBM could not be reduced to this computer industry. IBM Learning Services helps companies to design.4.1 12. Les Echos. thanks to its very advanced teaching technologies.• ASP with HR Access. and rapidity. develop. IBM Learning Services IBM is the 1st e-learning (training technologies and services on line) provider worldwide. and not on the only technology industry. IBM Europe consists in a huge network of efficiently organized 1 “IBM recrute et forme pour le compte de son réseau”. Conclusion IBM is worldwide famous for being a major actor of the computer industry. It has chosen to manage its Human Resources with the help of the most modern tools ever imagined so far. In the end. As an example. • Global Financing. improving efficiency. IBM in Europe. IBM is now evidently focusing on “e-business on demand” in general. 1st February 2000 165 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . without increasing costs (travel costs and loss of productivity are reduced compared to classic training).5. and implement training programs to optimize their employees’ potential.

Finally.knowledge workers that stand among the best in technology and outsourcing services. 166 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . We do not know if IBM will take the lead of the HR outsourcing industry in Europe. we believe that IBM will offer an even wider range of business services with a slogan that could say something like: “you focus on your core competencies and we perform the rest on demand”. in the long term. but we affirm that IBM has a great potential in this industry and would probably succeed if it choose to get involved in the future.

and large European multinational companies to reinforce their competitive advantage in an increasingly demanding environment. It is absolutely evident that the Human Resources outsourcing industry still needs some time to position its offerings in a market that is only on its infancy. medium. 167 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . provided that it has been well tamed. but it seems to us even more evident that the market. they should immediately start to share it efficiently.CONCLUSION In conclusion. This is the core of the challenge we propose to confront head-on by outsourcing Human Resources activities. we would like to reaffirm that we strongly believe that outsourcing Human Resources activities will soon be the best way for small. however wild it may be. is nonetheless the most profitable terrain. The market is changing and the “take it or leave it” approach is headed to extinction. since no company fully owns its intellectual capital. Individual opportunism is no longer as profitable as brains networks. The only valuable asset of a company is the path it builds to achieve continuous success.

meetings. But it also has positive aspects. practical. This thesis period helped us tremendously to determine with greater precision the idea we have of what we want to do next: if it indeed sounds the death knell for our initial education. We are now more than motivated to apply our knowledge at the service of our future employers in exchange for ambitious. such as complementarities. and writing periods. readings. It is in fact a real starting point. we could never be completely satisfied with our work. we finally reached the end to this thesis. writing it in couple is incredibly more demanding than anticipated.AFTERWORD After about six months of research. Writing a thesis alone is already a tough exercise. exciting. but we will probably never forget the good (and also the bad) time we had working together. it prefigures most of all our professional future. and critical feedback. and enriching new experiences. constant support. They are actually one of the most unexpected rewards of the experience. 168 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Of course.

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shtml http://www.com http://www.aon.accenture.html • • • http://www.acs-inc.html http://www.com/about_eds/en_about_eds.eu.html http://eu.shtml • • • • http://www.exult.int/2002/11/feature/EU0211206F.com/NASApp/dupontglobal/eu/index.convergys.com http://www.html 179 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .bp.xml • http://www.com/about/aon_corporation/history_facts.net http://www.html http://www.asp http://www.accenture.exult.csfb.boeing.com/xd/xd.asp?it=enweb&xd=services%5Chp%5 Chrservices%5Ccase%5Chrs_bt.xml • • • • • • • http://www.com/xd/xd.dupont.eds.html http://www.jsp?page=/cont ent/EU/en_US/overview/glance.boeing.eurofound.com/about/index.jsp http://www.accenture.com/xd/xd.html http://www.asp?it=enweb&xd=_dyn%5Cdynamic pressrelease_560.asp?it=enweb&xd=_dyn/dynamicpre ssrelease_563.net/clients/contract_boa.dataquest.com/company_overview.net/clients/contract_bp.com/companyoffices/aboutus/brief.exult.com/about_csfb/company_information/about_csg/ind ex.com/company_overview/profile/index.eiro.• http://www.xml • http://www.

html http://www.com http://www-1.kelloggs.html http://www.com/company/ http://www.com/services/de/pdf/erp_hr-practice.exult.• • • • • • • • http://www.com/hrsolutions/aboutus/ http://www.ibm.fidelity.mellon.pdf 180 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .exult.ibm.net/clients/contract_pru.net/clients/contract_ip.com/services/stratout/ http://www-5.com http://www.ibm.

..............................62 Illustration 16: IBM European HR Service Center............39 Illustration 11: Shared services model ......33 Illustration 8: Average collectively agreed normal weekly hours.............................................21 Illustration 3: HR Organization .............................................................15 Illustration 2: European outsourcing practices in 1998 .................................................41 Illustration 12: French HR outsourcing market shares in 2000................................34 Illustration 9: The four processes that are mostly managed by Self-Service in Europe ..................................................................... 162 181 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ........................... seasonally adjusted .................58 Illustration 15: The Cone of Core Competencies ...........................................................................................................................................27 Illustration 4: Activities crossing HR functions ...............................................TABLE OF ILLUSTRATIONS Illustration 1: The four types of outsourcing situations .54 Illustration 14: Customer Relationship Management evolution ............................................ % of workforce in December 2002 and December 2001....................................................U...................................................32 Illustration 7: Average collectively agreed pay increases............................39 Illustration 10: HR Self-Service: resource reallocation on higher addedvalue activities ......................... 2002 ............................. member States ..... 2001 and 2002 (in %) ............................................................................................30 Illustration 5: Unemployment in the EU................................................. 159 Illustration 17: IBM HR technological services....................31 Illustration 6: Fixed-term work in E..47 Illustration 13: Porter’s Value Chain..........

. .... . . . . .... .. .. .. ... ... ... 15 b ) T r a d i t i o n a l o u t s o u r c i n g wi t h d i s i n t e g r a t i o n . . . . .. .. 14 A] Different outsourcing situations . . . .. ..... . D iffe rent k in ds of out sou rc ing ope rat ions .... .. 9 P A R T I.. . . . .... . ... .. .. . . . . ... .... . . 16 C] Different uses of outsourcing . . .... . .. .. . ... ... ... .... . .... .. ...... ... . .... .. .. ... . . Out sou rc in g de fin it ion .. . ... .. . . . . .. . .. .. . . . . .... . . . .. . . ... .. Ou t sou r c in g Defi n i ti on A nd Ob j ec tive s ..2 ... .... .. . . .. . . . 17 a) Automotive and administrative/operative outsourcing .. . ... .... . . . ... . . . .. . .. Out sou rc in g adv a nt ages . .. .... . 18 c) Total outsourcing . .. ... ... 18 182 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .. .. ... . .. 1 5 c ) S t r a t e g i c o u t s o u r c i n g wi t h d i s i n t e g r a t i o n . . .. . ... . ..... OUTSOURCING OVERVIEW . . . .. . . .... . .. . ... .. .. .... .. ... ..... . ... ... ... . .... .... .... . ...... ... .. . .. . .. . .. ...1 ...... . . .. .. ..... ....... . . . .. .. ... .. . . . ... . . . . . . ... . . 3 F O RE WO RD . .. .... . ..... .. .. ..2 ...1 .. .. . . . . . ....... . . . ... ... . . .. . .. ... . . . . . ..... . . . . ... . .... ... . . ... .... .. . .. .. . . . ... . . . . . . . ..... . ....... .... .. .... . .. .. ..... ....... . . ..... ... . . .. .. .... . . ... . . .. .. .. .... .... 1 4 1 . . ... . . .... ... . . . ... .. . .. . . .. ... .. .. Ou t sou r c in g Si t ua t io n s A nd A pp r oac he s .. ... ..... . ... . . . . . .1 . . . . ..... . .. ... . ... .. .. . .. . . . ...... .... . .. . ... .....2 . ... ... ... . .. .. . ....... . .... 1 8 i/ Selective BPO .. .. .. . ...... .... . ......... 1 5 d) Strategic outsourcing .. . . .. ....DETAILED TABLE OF CONTENTS A CK N O W LE DG MEN TS .. .. .. . ... .. .. ..... 1 1 CHAPTER 1... . ... .. .. .. . . Ma in ob ject ives of a n out sou r c in g st r at egy . .... .. . .. ...... . . ... .... .. .... ... .. . . 2 G EN E RA L TAB L E OF CO N T ENT S ... .... . ... .. . . .. .. ... 14 a) Traditional outsourcing .. . . S CO P E & DE FIN I TI ONS ..... .... .. . ... . ... . . .. ..... . . . . .. ... . .. . . .... ... . . . .. ... . .. .. . ...... .. . . . . . .. ....... .. .. ... .... . . ... ... .. . . .... . ..... .... .. .. ... ... .. . . .. .. .. ......... ... . . .. .. . 18 1 .. . . .. 7 IN TR OD UCT I ON . . ...... 16 e ) O u t s o u r c i n g wi t h a s s e t s l e a s i n g .. .. . . ... . .. . . .. . .. .. .1 . . .... ...2 ....... .... ..... . .. . . .. 18 ii/ Total BPO ....... .. .... ... . . . ..... . .. . . 12 1 .... ... . .. . . 12 1 ... ....... .... . . . .... . .. .. . ..2 . .... . 12 1 . ... . ....... . .. . ... . ...... ..... . . . . .. ... .. ... .. . .. .. 1 6 B] Different outsourcing approaches . . . ... . . . . . .... .. ...... ... . .. . ... . .. . ...... ...1 . .. . ....... .. .. . . . ... . . . .. .. ... .. 13 1 ... . . 17 b ) B P O (B u s i n e s s P r o c e s s O u t s o u r c i n g ) . .. .. .... . ..... . ...... ... .

.................. ....... . ........ .. .. .. . .......... . 22 B] External factors .3 ......... ...... .... .............. ....................... ..... ..... ... . .. ..... .1 .................................... ....... .......... . .. ..2 . ...2 . .. ......2 .............. Fa ctor s fav or ing t hese boom in g out sou r c in g t ren ds ......... .. .. .. . Oper at ional r oles ... ........ .. ....... 32 C] Challenges ... ... ......3 .......... .... ....... 34 2 ..... .... .3 ... ...3 ........ 29 2 . . .....1 ....................... . 30 A] Figures ........ ........ 21 1 . ......2 .................... .. ..... .. ........ . ........ ... . .... ........ .... ...3 .......... O rga n iz at ion al role s ..... .......... .. .... ................ ... ..2 .. . . . .. .1 ............ ... ................... HUMAN RESOURCES DEPARTMENT OVERVIEW ... ......... .. ...... .. . .. ........... 26 2 ... ...3 ... .... . ................1 ..... ...... 22 b) Development of information technology . .... Gl ob al ev olutio n of out sou rc in g ... .......... 28 2 . .... .. . 22 c) Benchmarking.. . .......1 ............. .. .......... ....... 25 2 ... .. ..2 .......... H um an R e so u rce s I s s ue s O f T he Mul t i na ti o na l C om pa ny I n E u ro pe ....... ....... .. ......... . 35 A] The European social integration process . .. ................ ..............1 . .............. 25 2 .. ... .. ................ ... .. .... .. ... ........ 3 ........ ..... ........ ...... 19 1 . ......... 1 9 1 ......... ........ .2 ... 23 CHAPTER 2.... .... ..... .. ...... . 30 B] Trends .... ..... .... 3 0 2 ...... .. .. 22 A] Internal factors .. ... ..... S t ructure Of Hum a n R e source s Organiz a ti onal Ac tiv i ti e s .............. .. 2 5 2 .. ........... ....... .. .... ... .... .......... ..... ........ ...........3 ... ....... ...... ......3 ........ . ..... ... ........... .... ....... .............. .......... .......... .... . .............................. The Eu ropea n labor m a rket and int er cult ural m ana gement issues . Act iv it y t ypes c r os s in g HR funct ions ...... ............... ... ............ Ou t sou r c in g T ren d s ....... Out sou rc in g r isk s .... ..... Ma in B PO p r ov ide rs . . .......... ... ........ 28 2 .....1 ...1 .. .... . . .. Ke y Hum an Res ou rce s fun ct ions ... .. ........... ... .................. . ........ . ....... .. 35 183 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ........... An ev er more or gan ized s oc ial dia logue in Eu r ope .. ..........3 .................. ......... . .... ........ 22 a) Supply pressure .. .. . ....2 .. H um an R e so u rce s De p a rtm en t Ro les ...... ......... 26 2..... ......... 23 d) Mimicry .......... 23 1 .. .. ..... .. .......... .....1 ..... ....... Huma n Re s ource s or gan iz at ion .........

... ........ . ........................................................... ................. ..............................S . ... .......... . ......2 . 41 C] HR processes outsourcing .... 38 3 ... .. .... ............ .. ... .... 44 D] HR outsourcing future ............. . ....... ... ..................1 ............. ............. ........... 40 a ) D e f i n i ti o n . ............................... 45 B] HR outsourcing trends .............................. ......... Gl ob al ov erv iew .... 42 3 ... H um an R e so u rce s O u t so u rc i ng S pec if ic i tie s A nd T re nd s .. .............. .. .. ........... ........2 ............. ............................ ..... ... ........... ................ ........... .. H um an R e so u rce s O u t so u rc i ng De fi ni t io n ....... .....4 ... .. F rance ov erv iew ...... 47 3 ....... 38 3 ............ ... ........ 44 B] HR outsourcing trends .... .............. ...................... .............. 3 8 3 .............................. ...... ......... ........2 .......................................... Eu r ope ov erv iew ..... ... 46 3 .... ......................2 .............. or HR services center... ........................ De fin ing Huma n Re s ource s a ct iv ities ou t sour c ing. .. ... Huma n Re s ource s out s ou rc ing levels ... ....... ........... ............. . 4 0 b) Objectives .................. ..... ... ........... ........ ..................2 . ... ....... .............. .................... . ........2 . U.......... 38 B] Transactional HR outsourcing...........B] European Works Council .... shared services centers...... .. ..... .......... ..................... ......... ............... ........3 ... ........................ ........ 44 C] Reasons to outsource trends .. 45 3 . ov e rv iew ................................ .............................. .....1 ..........1 .... .......... ..... ............ .. 45 A] HR outsourcing expenses trends ........... ... ........ .......... 47 b) Large companies ................. 41 D] Totally HR department outsourcing .............. ... ....... .... 45 C] HR outsourcing future . ..... 48 184 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ...... 4 3 3 ...... 47 a) Small and medium-sized companies .. .... .... ... 43 A] HR outsourcing expenses trends ...... 38 A] Self-Service (e-HR) ... ...... .................... 46 B] HR outsourcing future ...........1 . ........................ .. . ......... . .......... ... ....................... .....................1 . . .. 46 A] HR outsourcing trends .... .... ......... ........... . ....... ..... ............. .......................... ....................... HUMAN RESOURCES OUTSOURCING OVERVIEW ...... 47 A] HR outsourcing trends ........... ..... .....2 .................. .... .. ........ 36 CHAPTER 3...

. . .. ....... .. ........ . .... .. ... ..... ... . . .. ..... ... ... . ...... . ... ....... .. ....... .. ... ..... .... . ... ..... .... . ... .... ......... 53 4 . .. . 5 3 4 . .......2 . ....... On go in g C om pet i t io n ... . . . 68 5 .. .... . . .. . .. .. ..1 ..2 ...... ... 6 6 5 . . ..... . ..... ..... .. . . .... . .. ..... Temp ora r y empl oyment in dust r y dev elopment ... ...... . .... . ... .. . .. . .. . . ....3 ....... . ... ...... . .... .... .... . . ........... ..... ... .... ... ..... ... ..2 ... 60 4 ....... . ..... ......c) New market companies . ...... ... .... . ... .. ... . .. 56 B] Alliances ... 55 A] Clover leaf . ... ... ... .... ........ ....... . . .... .. .... . .. . . ... .. ... ..... The v alue ch a in ..... . ... N TIC (New T e c hn ol o gi e s of I nfo rma t io n an d C om mu n ic a ti on ) .. .. . ........... . ....... . .. .. ...4 .. . ..1 ...... Two Fa s t .. .. ... 6 3 4...... ..... . ...... .. .. . .. . ..... ..... . ..3 ....... .... ... ..... . ..... 6 9 5 . ..... . ... . ... ............ . .. ...... . ...... .... ... .. ..... ...... .... .. HUMAN RESOURCES OUTSOURCING AND THE NEW CHALLENGES .. .. S co pe Exp a n si on s ....... .... . ....... . .. . .. . ... ... 57 4 ...... .2 .. .. ........ ....Mov ing T re nd s . ........ .... ..... 48 B] HR outsourcing future .. . .... . . ...... . ............ ...... .... 67 C] Threatened flexibility. .. ... . .... ....... . .... ..... ....... .... .. ... .......... . . ... .. .... . .... ... 66 B] Trend ........... .. ... .... . .... . 5 1 4 .. K now le d ge w o rke r s ... . ... ... ..... ..2 .. .... . .. ....... ... . .. .... .. 67 5 . . 59 A] Definition .. . .... .. .... ...... .... . ....... ... .. ...... .....1 . ... ....... . ... .. .... ... . .. . ............... ..... The v irt ual or ga n iz at ion ..... ..2 .... . ...... . ........ ........ . .... ...... .... 48 P A R T I I . .. .2 . . .... ....... .. . ... 59 B] Segmentation of activities. . ..... .1 . B o rd erl e s s O r gan i za t io n s . ...... .. . .. .... .... .... ... .... . .. ...... .. .. .. ....... 5 0 CHAPTER 4............ . ............ .. .. .. .. .... ..... .. . . . .. ... ... ..... .......... .... ..... . . ....... ..... .. 66 5 . C ore c ompet en c ies a nd c ore bus iness .. ..... ......1 .... H RO (H u ma n Res ou rce s Out sou r c in g) in du st ry dev elopment . 51 4 .. ... .... ....... . .. .......... .... ........ .. 56 C] CRM...... . . ..... ..... . ......... . .. .. ........ . . ......... ........ ..... ........ .1 ... ..... .1 . .. . ......... ..... ..... ..... .. .... . ...... .. .. ...... . .......... .. .. ... ..... ... .. ......... . .. . 69 185 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ........2 ... ........ .. . HUMAN RESOURCES OUTSOURCING AND THE NEW COMPETITIVE ENVIRONMENT ..... ........... .... . ....... ..... .. . Temp ora r y w or k s c ope ex p ans ion . .. . ... .. . ... S TR A TE GI C A P P R OA CH .. . .. . ......... . . . .. . .... ..... .. 6 4 CHAPTER 5. . . ..... .... 66 A] Figures .. .... ........ . .. ... . .. ...... ..

.......... .....3 ...... ....................... ....... 77 a) Principles ................... Ex p ansi o n s Ex p la n a ti on s ..................3 ...... .. ..... ........ ... .... .. .. 70 B] Time gains .... 79 d) Governance structures ........ .. 69 5 .......... ...... .. .. .... ..... 80 186 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ........ ........ ........ ..... ........ 75 CHAPTER 6... 79 i/ Insourcing ............. ..... ...... ............. .. .....3 ........ ....... .............. ..... ............. C osts re duct ion an d t ime ga in s ...... ...... ...... ............. . Mana ging kn owle dge wor ke rs . ...1 ..... 79 iv/ The difficulty to measure the provider’s performance ...... .. ... .................... Meet st o ck hol de rs ex pectat ions t hr o ugh cost s r e duct ion ............ ....... .. ... ..... .. 77 6 .... 7 3 5 ..........2 .. . . ............ .... .... ... ........................... .. ... ................. ................. .......3 ......... ...... ..... ..... .... ........ Flex ib il it y .. ......................... . ........ .... 72 B] People development ...... ................ ... 77 A] The transaction costs theory ....... ..... .. ..... .. .. .......... ..... ...... ....... ... I s s ue s Fo r T he Ou t s ou r ci n g Co mp a ny .1 .... . H um an R e so u rce s N ew Ob j ec t ive s ... .... HUMAN RESOURCES OUTSOURCING STRATEGIC APPROACH ... .. . Ba ses.. 70 5 ................ ..... ........... ... ...............5 ........................................ .. . 7 2 A] Temporary workers motivation and management ....1 ..... ...... ....... .................... ....... .................. ...... . Ou t sou r c in g Dec i s io n Th eo r y .............. .. Seven que st ion s t o ch allen ge ob ject iv es . ..... ...3 ... 75 5 ... .. ........... ... ......5 ........ ....... ........ .... ...... . ... 74 5 .2 ............. 71 5 .. ...2 ..5 .... .... .. . .....5 ..........4 ......... ................... .... ...... ...... .... 78 i/ The assets specificity . .... .. ... ..... 6 9 5 .. ... ......... ....................... ... ............ ... . . ............ 69 5 ......... ..................... ..... .......... .......... .3 . 78 ii/ The uncertainty ..1 .... .......... ..5 ....2 ........... .... ............ ................. ..... ...... ....... 78 c) Transaction attributes ..... .. ........ ... ............ 77 b) Fundamental hypothesis ..... . .. ...... .. 79 iii/ The frequency ........ ....... .................. ............ 7 7 6 ...... .... ...1 ... 70 A] Costs reduction .. ... ......... . . .................... ........ ... ............ .. ........................ ............ . 80 ii/ Outsourcing with classical contract law.... .... . .............. .... ... H RO p r ov ider s s c ope ex pans ion . .......... ..................... . . ...... ...... .. 72 5 ... Ge ne rat in g v alue for t he c omp an y ...

.....4 ...... ...... A dv an t a ge s . ... ... ....... .. ....... . ...... . .... ..... ........... . .. . 8 3 6 .. ....... . . ... 91 7 . . .... ... .. ........ .. .4 .... . . . . . . . .. . ...... . 9 1 7 . . ... . .. .... .. ... ........... ... . . . ... .. .. .2 ..... ....3 ..... . .... . .. .. . ....... MANAGING THE HUMAN RESOURCES FUNCTIONS OUTSOURCING PROJECT ..... .. .. . ..... ....... . ............. ..... .. . . . ... . .. . . ............ .. . 87 6 . 90 7 ..........3 .... ... Risk a sse ssment .... ... . ... ......... .. .. .. ... .. .. .1 ..... .. .. . . ... .. .... .. . .............. .... .. ... ... .. .... . .... .3 ... ..... . . . ... . .1 ..2 ... .. .. . ... ... . .. . 8 9 7 .. . 80 B] The resource-based theory ...... .. . . ....4 .. .... .......... .. ....... ... ... ....... ... ....2 ... . ... ....... . .. ............ . . 91 7 .. . .2 .....3 . . .. .... . .. P ro j ect D ef in it ion .......... .. . . . .. I M P LE ME N TA TI ON .. .. .... . . .. .... . . .. ..... ... . ......... ...3 . ... ... ... Wh a t S ho u ld Be O u t so u rc ed ........ . ... ...2 .. ...... .. ..... . .... I n te rna l I s s ue s ..... ..... D r aw ba ck s .. 89 7 ............ .. . . .1 .... .. ..1 ........ . . ... . .... .. .3 ... O rga n iz at ion’s ab il it y t o a bs orb ch an ge . .. . ... ..2 . .. ..... ...... ........ . . ... . ..... ... .. ..4 .. ... .. . . .......... .. .. ..... . . ..... 90 7 . 87 6 ... .. . .. .. .... . 83 6 ..... .... Mana geme nt c omm it ment . . 8 6 6 ........ .3 . ........ . .... .. .. ....... .... . C ost a nal ys is . ...... . . .. ...... .. ........... ..... ... ... . .. ........ . 80 iv/ Outsourcing with relational contract law .. . . . .. .. ..... ... 90 7 .. ..... . . . .. .. . . . .... .. ... . .. .. ... ......... ...... . ..... . The dec is ion itsel f . . ..... . .. . . H igh une xpe cte d c ost s ...... ... . 81 A] The belonging of the activity to the core business ... . ... . .. .. . .. ...... ... .... .. . . . .. .. . . . .... ... . . . . . ... .. .. . .. .. ..... .... . .. ..1 . ...... .. . .... .... ...... .. .. Secu r it y is sues .... .. . .. .. . ...iii/ Outsourcing with neoclassical contract law .. .... P ro j ect Te am ... Pr oject pla n . .. ......... ........ .. .... ... .... .... .. ..... . ..... . 81 6 .3 .. .. ... .2 ...... ...... ....... 91 7 . . . . . .. ... .. ... 82 B] The level of performance ... ... . . .. .. ...... . ... ......... . ... .. .... .. .. ....... 81 C] Conclusion of the two theories ...... ... . ........ . ..... . ........... . . ... . . .. .. .. . ... .. . .......4 ... ... .. .. ......2 . ... ... . . . .. .. Qu al it y dec rea se an d l os s of cont rol .... .. ........ .. ......... . .... .......... ...4 .. .. ............. .. .. . .. ..... . . . .. .. .. . .. .... 87 P A R T I I I .. St a ffin g re or gan izat ion ... . . ....... . .... ... ... .. 88 CHAPTER 7.2 .. ... . . H ig h c omm it ment r equ ired du r in g o ut sou rc in g impleme ntat ion ... . 92 187 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .... .. . . . 82 C] The level of transaction costs . 86 6 ...... 8 5 6 ... ... .... ........ .. .... ...

..1 ............ .. ..... ... . .... 1 0 0 7 . .... .. ... .. . ............... .. ... ... .......... ....1 . ...... ... 102 8 .. . . ... .. ...... Pr ovide r’s select ion issues .......... . .... .. . ..... ....... . 103 8 .... ............. ... .. ........... . .... ............ 97 A] Assets leasing ....... ..... ......... .. . .... ........ .. ................. . ...... ..3 ..... ................... ........... . .....5 ... ... ......... ... .... ................... ..... 1 0 2 8 ..... . . ... ........ .. ............. ......... . . . .... ..... . . . ... .. ...2 ..1 .. ... ....... . C ommun icat ion .... .......... . . .... ..... .... Fa ct o rs de te r mi ni n g t he s uc ce s s . P ro b lem s Li ke ly T o Oc cu r . 102 8 ..... ....... ..4 ..... ... ... ..... ............... ....... 98 C] Staff transfer .. C ommun icat ion . ....... . .. . ........4 ......2 .. ..... .2 . .. .. .... 92 7 ...... 100 7 . ..... ................ .. .. ...................... . ...... ....... 104 8 ............. 99 b) Staff transfer: a good bargain . .. ....4 . 1 0 3 8 . . . St a ff t ra ns fe r .. .. ..... 98 B] Equipment transfer . .. 9 5 c) The direct provider’s selection ...6 .. .......... ...... ...2 .................. .2 .. .. ... .............. . ... .... . .. ....... ... ... . .... .. ... ... ......... LEGAL ASPECTS OF A HUMAN RESOURCES OUTSOURCING OPERATION ..... ...2 . ...... ... ..... ......... ... ........ ...... .... ... ..... .. ... ...... .... ........ 98 a) Transfer perception . ........ ...... 9 3 7 . .... ...... .... 96 7 . .. ....... .... ..1 . .. . ........ .. ..... 107 188 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . .. . .. ..... ... .. ..................... Ou t sou r c in g L ega l A c to r s ..... .. .. .... ........ ... ...... ....... . ..... .. .........7 ..... .. ..... ...... ... .... G ove rn in g l aw ... Asset s t r ans fe r .... ..... . .......... .. ..... .. Ex te r na l I s s ue s .... ..... ..4 . ....... .3 .... 93 7 ..... Le ga l pr ofe ss ion al .......... ....... ... ..... . .. .... . . . ..... ... .. .... ........... Out sou rc in g ne got iat or . . 103 8 .. .... .. ... 94 a) The ordinary invitation to tender ....... 104 A] European context ... . Le g al F r a mewo rk . . .. .................... . . . ... ..... . .. ............. ....... .............. ..... . ........ .....1 .. Rel oc at ion of se rv ice loc at ion s ......... . ........ . ....... ... ...... ..1 ... ..... ... ....... .. ... .... 1 0 1 CHAPTER 8... 93 A] Three different selection processes . ... .. .... 106 B] French context .4 .... ............... ...... . ............ .. ......... 94 b ) T h e i n v i t a t i o n t o t e n d e r wi t h p r e s e l e c t i o n s .... ....... ... .2 ..... ..... .. .......... ... ....... .... . ... 96 B] The selection criteria ...... ..... ... ....... .. . . ....... ... .... ... ... .. ... ...... ............. .. .. . .... ... ....... .......... ....... ... .... .... ............ . ..... . ...........3 ...... ..... ........... ....... .... ....

........... Ov erv iew ...................4 .................... ............... 114 E] Transition ..................... Directives ........... .. ... 108 B] Formal dispute resolution ............................................................... .......... ................................................ ..... 109 8 ..2 ........................................................ .......... 113 A] Structure of the agreement . .... ............................ ....... ........................ ..........3 ............... 115 I] Roles and responsibilities.............. 116 M] Data flow ......5 ............................................................... 1 1 1 8 .........3 ........ .................... 113 B] Scope of services ....................... ............................ ................ ............................................................................. ............... 114 F] Staff transfer .. .... ......... ................ 115 J] Governing agreement .............................................. ................................ ........................... 117 O] Reports and documentation.. Ke y c ont ra ct is sues .. 117 N] Data security .... ... .... ... ..................................................... ............................. 112 8 ........... 108 8 .... .............. ......... ........... D is put e res olution ...... 116 L] Confidential information ......................................... ............................................ 109 A] International data flow ............................ 107 b) Collective transfer ..... ...................... 109 B] Data security .................................... ....... .......... ........................... 116 K] Intellectual property ............... D ata issues .2 ............................ ... ................. 108 A] Informal dispute resolution . 117 P] Pricing / Method of payment .. .. .................... 110 8 .................... 107 C] English context ........ 113 D] Term/Effective date ............................... ............. 110 C] E...... .............................. Ou t sou r c in g Con t r ac t s ....................................................... ...................... ....... ... ... ... 115 G] Assets transfer ............ .... ..................... ................................1 ..................... 113 C] Service level agreements ...a) Individual transfer ................................................ 117 189 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ............... .....2 ........................................ .....................3 ................U. ............ 115 H] Integration of methodologies/technologies ............................................................. ........ .......... ................ ......................

... E le men t s T o K e ep I n te r na l ly ..... ..4 .. 121 9 . ..... . 118 T] Business variability . .. .......... Mala dapt ed se rv ice s .....1 ........ .... .. .. .... . ............. ... ....3 .... ......... . .......2 ... 119 X] Termination .. ... 1 2 5 9 .... . .. .. .... .. . . .....4 ... P ilot in g c omm itt ee .................. .... .... . ... ......... . ......3 .... ............. .. .. ....4 .. ... ..... ........ . . ......1 . ............. ..... .. ......... .......... ............ ......... .. .......... .. .Q] Currency risk . . .. ... . . Ot he r S ol u ti on s To K ee p Con t r ol ..... .............. .. ... 123 9 ......... ........2 ..... .. . .. .. 121 9 ....... .. ..... .. .. ..... 126 190 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .. ...... 118 S] Audit .. ..........2 . ........ ...... ... . ....... MANAGING OUTSOURCED HUMAN RESOURCES ACTIVITIES ... ..... ...... ..2 ...... ....... ....2 .. .. I nt erest ac qu isit ion ... ..... ......... R eq u i re d Sk il l s ..... . .. .. ..3 .. ............ . .... ... ....2 .. 117 R] Taxes ..................... .... ..... ......... Ba d st a rt ....... P ro b lem s Li ke ly T o Oc cu r . 123 9 .... .1 . 123 9 ........ 123 9 ... 118 U] Governing law .. . ... ...... ... 125 9 .. C han ge ma nagement s kills ......... ....... ....... ... .......... ........ .... ............... ........ ........... ...... .. ............. ... .........................5 ... .... ......... ....... ....... . ................. 119 W] Indemnities .. . All ian ces ma na geme nt sk ill s . ...... ... . ...................3 ....... .... Sp in-off st ructu re .... .. ....... ....2 .. ....... Out sou rc in g impleme nt ation s k ills ..... 125 9 ...... . . ........... 118 V] Dispute resolution....... ... 1 2 4 9 . .. ......... ....... ...... .... S oc ia l ca p it al dev elopment sk ills ...4 . ........ ........... .............. . . ...... ......1 ... ....... ...... ...... .. . .. .1 .. ...... ... ... .... ......... St rat e gic v is ion s k ills .... ......... . . .. ... .... .. .... ... ...... ..... .... ... ...... . ...... .. ... ...2 .... . ... . 124 9 .... ... . .......... .... ........ ........ ..4 .. .. P ro b lem s Li ke ly T o Oc cu r ... . .. .. .. ...... ............ .. ......... ... ................. .... ......... . ...... .... . ... .. ......... .... ... .. . ...... ....... Mana ge r ial act iv it ie s . .. ... .. . ................ .. ...2 . 1 2 0 CHAPTER 9.. . ....... ... .... I n fluen c in g a nd c on fl ict m ana gement sk ills ........ .. 1 2 1 9 . . .... ..... . .... .. .... . 119 8 .. .. Trans fe r of specific assets .... .......... ...1 ..2 . .....2 .. 121 9 ......3 ..... ................. .......... ...... ................... . .... ......... 124 9 ................... .......... . ... ....3 . .1 ... .. . ....... 124 9 .... 1 2 3 9 ...... ...... 125 9 . ... ....6 ....................... ... .... . .

.......... .. ....... .. .......... .......... .. ... .... .. . ..... ..... ....... ........ .... N o res pect of p r ic in g .......... ..... .. ............. ..... ..... . ........................ ............. ............ 1 2 9 10 ... .. . ..................... ... ... ......... ... . .... .... ........ ...... Ov er la pp in g le gal framew ork ............. ... A Co m p a ny Th a t H a s O u t so u rc e d S o m e O f I t s H um an R e so u rce s P r oce s s e s: K e ll og g Fo od s ... . . 134 1 0 ... 130 a) Company overview ...4 ..... 1 3 6 191 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .... ..... .. .......... . .......... . 131 c) Results ...... 129 a) Company overview ................. ... ... 134 a) Company overview .... .... ......4 .. ... . ........ 126 9 .3 ... ... ... ....... .. . ........... .... 132 B] European shared services center example: DuPont Europe ....... .....1 .. ........ ..... ............. 1 ... I nte rn all y out sou r ced t hr ou gh t he sh ared se rv ices ce nt er m odel ..... .....4 ........ ....1 . . ... .. 126 P A R T IV...... .. ....... .... ... .. .... ..... .. ........ 126 9 . ....... ........... ..... ....... .... ...... ..... ......... .. . ..... .... .......... .. ...... . ...... .. .. ..... .... .... . .... 1 2 8 C H A P T E R 10............... ....... .. ....9 . .. 130 10 . .... N o ev olut ion pe rs pect iv es .. ...... .. ............. ..... ...... . ..... .. ..... ............ ..... ........ ......... .... 129 c) Results ..... ................. ..................... ... ... ..... ..... ...... ... ........ .. ..... .. . .... 129 A] Credit Suisse First Boston Group ... . ... ........ .... ...2 ... . ................ .... 134 b) Implementation overview ......... ......... . 133 C] French shared services center: France Telecom .............. ........... . CAS E S TU DIES .. ..... .... 132 a) Company overview ..... ............. ......... ................ . ...... 2 .. .... ...... .......... ... . ... ..... .. .......................... .....5 .........1 ... ...... ... .... ........................ ..... . . 134 c) Results ......4 .. . ...... .. 132 b) Implementation overview ..... ...................... ...... . 134 D] Other outsourcing companies that applied this model ...... 130 b) Implementation overview ... ... 129 B] Other outsourcing companies that applied this model.... ......... . ... ... ....... ........ .. .......... ... . Com p an ie s T h a t H av e O u t so u rc e d T h e i r T r a n s ac t io n al A c t iv i ti e s ........... .... .. .. . ....... H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D C U S T O M E R S ..... ............ 129 b) HR outsourcing deal ... 1 2 9 1 0 .. ............ ..... ... . ........... 130 A] Global shared services Center example: Boeing..... .......... ....... ... E xte rn all y out sou r ced ...

........ ..... . . ....... ........... ......... ............... .... ... HR O P rovi de rs S p ec ial ize d In Som e H um an R e so urce s F u nc t io n s O u t so u rc in g Se rv ic es ..1 ....... ... . .......................2 . .... ... ...3 ........ ....... ... .. .. . .. ....... ...... ......3 .. ...... ... .... ... . ............ 1 4 3 11 ..... ..... .......... 143 11 ... ..... .. . .. 138 A] Company overview ..........1 . ..... .. .. ....... ... .. ........... ... . 145 11 ...... ..... .... 140 C H A P T E R 11............ ... 137 10..... 139 a ) P o s i ti v e o n e s . 1 4 2 11 ................ H R out sou rc ing de al . ...... ......... .......... ...2 ....... ... .. ... ..2 . ...... ....... ................ .. ... ....... . .......... St affin g an d Recru it ing .. .. .............. ............ 145 192 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ........ ........ ............... .......... ....... .......... ..... ..... .. .. .2 ... ........ ......... ........................... .... ............... ...... E xult I nc ..3 ..10 ....... ..... Empl oyee hea lt h a nd Pen s ion bene fit s ........ ....... ............ 144 C] Key facts . ... .... 136 10 ............. ................. . . ..... ....1 ...... . . .. .... ....3 . 1 3 8 10 .... ...4 .......... .... ... .. H R O P rov i de r s P ro po s i ng A n I n te g ra t ed So l uti o n I nc l udi n g T h e Wh ol e Ra n ge Of H um an Res o u rc e s P ro ce s se s .............. Comp an y ove rv iew ........ 1 3 9 b) Negative ones . ......... . .......... ........ 140 10 . Companies That H ave Outsourced A ll Of Their H uman R e so u rce s Bu s i ne s s P ro ce s se s Ex ce pt M an a ge r i al On e s ........ ...... .....1 ....... .. .. . . ..........1 . ...... .. ....1 ....1 .... ...... Payr oll an d Bene fit s ..... ......... 136 10 ......... ................ .......................... 139 D] Outsourcing implementation observed results . BP Am oc o (B r it ish Pet r oleum Amoc o) ............. . ...... 142 11 ......2 .. .................... .1 .. O t her ma in p r ov ide rs p r opos in g an int e grated s olut ion .............. ...... Othe r ma in c om pan ies w h ich ap pl ie d t h is m odel . . .3 .. ... . H U M A N R E S O U R C E S O U T S O U R C I N G E X P E R I E N C E D P R O V I D E R S ... ............ ............ . ............ 2 .... . ........ .. .............. 138 C] Comments ................ .......... .... . ...... ...... ... 143 1 1 .................2 . . ..... .. .............. . 138 B] HR outsourcing deal ..... . ........ ........ ............. . ...... 1 4 2 11....1 .2 ...... .... Out sou r c in g impl eme ntat ion re sult s ....2 .... .... 143 B] Activities . Specific p r ov ide rs in spe c ific count r ie s ......... . .... 145 D] Strategy ....... 142 11 ..2 .......... . ...... ....... ......... 143 A] Company overview ................... . .....

... ........ 148 12 ...3 ...... ........ ... . 151 12 ...... Act iv it ie s ........... . .......... ... ............ ............. .. ................................... .............1 . ... ..................... ... .................. 153 b) HR outsourcing deal .... ..... . ... ........... ...... St rat egy ..... ..... . ... ......... .... ..................... .. ..... ........ ..... Inc.. ... Comp e ti t ive Hu m an Re so u rc e s O rg a n iz at io n ......... 149 12 ........... ... ......... ..... ....... .......... 156 12 ..... .. . ...... ........ . ... .... ... 154 d) Business opportunity . ..... . .......... .............. .......... Ma j or O ut s ou r ci n g P r ovi de r ... ................ 153 ii/ Fidelity Investments Institutional Services Company..........1 .....1 ...................................... .................. . ............ . ..... ...... .. . 1 5 0 12 .. .............. 152 B] Deal with Fidelity Employer Services Company . . ............ .. .... ......... .. 157 193 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ..................... 149 A] IBM ..... ........ .. ..... ........2 .. Fact s a nd figu res ............ ... 154 i/ Staff transfer ........... ....... .. ..........3 ....................... 152 A] U... .. ......... ....... ................... ...... ...............................1 .... ..... ...... . St rat egic Out sou r c in g S erv ices ......... .. ................... .......................... .... .......... ...................... . . 1 4 8 12 ....... I BM EME A Str at egic Out sou r c in g Te am ........................ ......3 .... ........ ......... .... ..... 155 e) Benefits expected by both parties . 154 c) Tangible transfers ....................... .................... .......... ........3 .....2 ... .......... ... ..... ....... ....... 1 5 2 12 ... 157 a) Presentation . . . ............ I BM U....... ....... 151 1 2 ....... 155 ii/ FESCo....... ................................... ...... ........ .1 ... ... .. .....1 ........ ..... . ...........2 . ..... ............................. ... IBM (I N T E R N A T I O N A L B U S I N E S S M A C H I N E S ) .. HR Service Center ... .........C H A P T E R 12. ................. ......1 .. ... ............ ................ ............... ...... .......... 154 ii/ Equipment Transfer ... ..... 149 B] IGS (IBM Global Services) ...S.... .... 153 a) Company overview .... 155 i/ IBM ...... ........... . ............. E x ample ......... 156 B] EMEA HR Service Center ......... 156 A] Self-Service .. .... . 153 i/ FESCo (Fidelity Employer Services Company) ............. ........ .. ... .........S . . ....... ............. .............. I BM EME A HR O r ga n izat ion ................ ........... ...............2 ........... ............ ..2 . 1 4 8 1 2 ............. 150 1 2 ............ . ...... ................2 .. ............... ...... .. Comp a ny Ov e rv iew ............... ... .....

...... . . .. .. ..... . .... . .. . . . . . ... .. . . .. .. .... . ... ...... .. .. .... . .. .. . . H uma n Re s ou rc e s S e rvi ce s P rov id er . . .. .. ... ....... . . . . .. .. . ...b) Objective .. . .. . . . .. .. ... ... ... . . ... .... ... . .... .... ...... . 165 1 2 . ..... .. . .. .. .. . . .. . .. .. .. ..2 . . . . . .. .... . .. ... ... . .... ... . . 159 1 2 . .. . ..5 . .. . .. ... ..... . ... . .. . .4 . .. .. . 1 6 8 R EF EREN CES . ... . .. .. . . .... . 1 6 7 A FT ER WO RD . . .. . .. .. . ... ... .... .. ... . . .. . . 1 6 9 T A B LE O F IL L U ST RAT IO N S .. .. . ....... .. ... ..... .. .. .... .. . ... . . ... . . . .. . . . .. . . 157 c) Organization. ... . ... .... . ... ....... 163 b ) E R P (E n t e r p r i s e R e s o u r c e P l a n n i n g ) s e r v i c e s . ..... ...... . . . . . .. . . .. . . . ..... . ... . .... .. . ... .... .. .. .... . 163 a) Human Resources management consulting . I BM Le a rn ing Se rv ices . .... . . . .. .. .. . .. ... .. . . . . . .... . . . .... . .... . Co nc l u si on .. ......... .. . ........ . .. . . . .. . . . .. . . I BM H R Te chn ol ogic al S erv ices ...... . .. . .. . .... ...... . 1 9 5 194 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . .. .. ..... .. ... ... . . . ... . . ... .. .. .. . . . ... . . .. . . . . . .. ... ..... . . ... . . .. .. ... . . .... .. . . ....... .. . . .. . ... ... . .. .. . .. .. ... .. .. .. .... . .. .... .. . . . .. . ... . .. 164 12 . .. . .. . ...... .... . . . . . .. . .. . . ... . . .... . ..... ... .... . ... .. .. .. .. . . . . . ... ... .. . . .... .. . .... . .. ... ..... . .. .... 1 8 1 D ETA I LED TAB L E OF CO N T ENT S .. . ... . . 1 5 9 12 .. . . .. . ..... .... ... .. . . . ........ .. . .4 . .... .. .. ... . .. .. . .. ... .. ... .. .. . . .. . . . . . ... . .... . . . ... . .. . .. . 162 B] Services description .. . . ... . ... . 1 6 4 c) Support and implementation . .3 . .. . .. .. . .. .. .. 1 8 2 D EC LA RA TIO N S .... .... ...... .. ... . . . . . ... . ..... .. ... . . .. ... . ........ .. . .. 1 6 5 C ON C LU SIO N .. . ...4 .... .. .. . . . . .. .... . 158 C] Results . ...... . . . . .. ......... . .. I BM Bus iness C onsult ing Se rv ices . . ... . .. 160 B] Business Transformation Outsourcing .. . . ... ..... . .1 . . . .. . . . .. ..... .. . . . . .... .. ..... . . . . .... . . 160 A] Human Capital Solutions .......... . . . .. . ..... ..... . . . .. . . ....... . . ... .... .. .. 161 A] Services overview . ........ .. . . .. .. ... . .... .. . ..... . . .. .. . .. .. . ... . .. .... .. . ....... ..... ... ........ . .. .. . . . . . .. . .....4 . . . . . . . ... ... . . . . . .. 161 12 .. .. . . .. .. . ..

195 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . I marked as such all quotations I used from published and non-published writings. This paper has not been submitted in the same or a similar form to another examination authority. 31st July 2003.DECLARATIONS Mathilde RENAUX I herewith declare that I completed the thesis submitted on my own and that I applied only those resources as indicated. This paper has not been submitted in the same or a similar form to another examination authority. Eloi MALTA-BEY I herewith declare that I completed the thesis submitted on my own and that I applied only those resources as indicated. I marked as such all quotations I used from published and non-published writings. Crach’. 31st July 2003. Crach’.

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