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

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

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

. . . . . . . . . . . . . . . . . 1 5 9 1 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . . .4 . . . 1 4 2 1 1 . . . . . . . . . . 1 2 3 9 . . . . . . . . . . . . 1 8 2 5 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . . . . . 1 2 9 1 0 . . . . R eq u i re d Sk il l s . . . . . . . . . . . . . . . . . . . . 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 2 4 9 . . . 1 4 2 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 1 D ETA I LED TAB L E OF CO N T ENT S . . . . . . . . . . . . . . . . . 1 6 5 C ON C LU SIO N . . . . . . Ma j or O ut s ou r ci n g P r ovi de r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . 1 6 9 T A B LE O F IL L U ST RAT IO N S . 1 5 0 1 2 . . . . . . . . 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 . . . . . . . . . . . . . . . 1 3 8 C H A P T E R 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . . . . . . . . . Comp e ti t ive Hu m an Re so u rc e s O rg a n iz at io n . . . . . . 1 2 8 C H A P T E R 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 7 A FT ER WO RD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 1 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 8 1 2 . . . . . . . . . . . . . . . . . CAS E S TU DIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 6 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Co nc l u si on . 1 5 2 1 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . . . . . . . . . . . . . .9 . . . . . . . . . . E le men t s T o K e ep I n te r na l ly . . . . . . . . . . . . . . . . . . . . . . . Ot he r S ol u ti on s To K ee p Con t r ol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 9 1 0 . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H uma n Re s ou rc e s S e rvi ce s P rov id er . . . . . . . . . . . . .2 . . . . . . .3 . . . . . . . . . . 1 4 3 C H A P T E R 12. . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . Comp a ny Ov e rv iew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 5 P A R T IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P ro b lem s Li ke ly T o Oc cu r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . 1 4 8 1 2 . . .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 C U S T O M E R 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 . . . . . . . . . . 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 . . . . . 1 6 8 R EF EREN CES . . . . . . . . . . .4 . . . . . . . . . . . . . . . 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 ) . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . .

outsourcing an activity is always primarily understood as getting rid of the fellow employees of the concerned activity. Outsourcing. in fact. Of course. 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. our shared idea was to explore the outsourcing concept. if indeed it was not already so challenged at the outset. as it suffers most of the time from an extremely bad reputation. the Human Resources field is all the more concerned by the unpleasant connotation of the outsourcing strategy. As the Vice President and Business Transformation Executive IBM Systems Group. Moreover. We quickly found out that the outsourcing world is refreshingly far removed from that instinctively dark view of the practice. starts from an ideal way of imagining the community: collective interdependence and individual recognition.FOREWORD When we chose the topic of our master thesis in December 2002. outsourcing brings closer together identity and action: one identifies with what one does. 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. on an individual basis (the employee). At the time Dominique Calmant agreed to supervise our work.”1 It is always hard to deal with the outsourcing approach. and on the other hand. Jamie Hewitt. In other words. concepts are always welcomed to provide a better understanding of a trend or a 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. p 201 7 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . we could not imagine how fast our theoretical work would be severely challenged by the reality of facts. Harper Business 2001. Indeed. Michael Hammer and James Champy. as far as Human Resources activities are concerned.

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

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

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

It is important to define precisely what is understood by the terms we use. Moreover.PART I. 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. 11 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . SCOPE & DEFINITIONS In this first part of the work. as far as the outsourcing and Human Resources department practices are concerned. our aim is to encompass the substance of the thesis. in the end. but an important consideration for Human Resources departments that has nothing at all to do with minor operations. 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 order.

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

1. insurance. 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. Main objectives of an outsourcing strategy The main objectives for a company when it outsources some of its activities are. Michael Hammer and James Champy. 1. One would obviously try to combine quality improvement with cost reduction. 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. such as tax. Harper Business. Therefore. 2001.2. to improve the quality of the (outsourced) activity thanks to a new expertise that was not internally available. 1 American Management Association. and on the other hand to reduce at the same time (directly or indirectly) the costs of this activity. finance. and if only the costs are reduced. and speed. but one should watch out for possible future harmful consequences. Even while all these related practices might be part of a whole outsourcing operation. they cannot be assimilated to outsourcing strategies.interesting to notice that 23% of downsizing operations result from outsourcing operations.2 Reengineering must certainly not be assimilated to outsourcing. change management.1 Another confusing practice is reengineering. if only the quality improves. on the one hand. which consists in the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical. and ideally finding the optimum point. project management. at least the net result for the company has to improve as well. service. 1997 Reengineering the Corporation. such as cost. contemporary measures of performance. even if it sometimes leads to it. information technology. p 35 2 13 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and a perfect and essential knowledge of the environment involved. the savings are direct. quality. risk management.

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

but activities that were nonetheless formerly internally managed. one deals as well with non-sensitive activities. Jérôme Barthélemy. In this case.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. Here arises the problem of initiating an outsourcing strategy or not. the outsourcing strategy can 1 Stratégies d’Externalisation. Dunod. this one consists in outsourcing activities close to the core business. 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 . 2001. but is on the other hand far removed from the core business. c) Strategic outsourcing with disintegration In contrast to the two first situations. “Disintegration” stands for the transfer of the concerned activities from the client-company to the provider-partner. The client-company outsources and has actually always outsourced this activity as it is permanently needed for the business.

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

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

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

says David Dell. • Improvement of the company overall performance. nine out of ten companies surveyed said they would outsource again if given the choice. particularly the greater responsibility placed on workers to manage their benefits. 1. as such an operation is often felt as a betrayal of the employees. Outsourcing risks The same commentators assess numerous risks of such an operation. • Dependency.3.2. Serge Tchuruk. according to the last report from The Conference Board1. “HR departments are not yet good at this”. which have to be considered and balanced before taking the decision to outsource. The most important factors are: • Underperformance. Outsourcing Trends While discussing his project of a “company without factories”.3. The Conference Board. 1. The report emphasizes the fact that outsourcing is becoming a critical competency for most large companies. publicly announced what all the specialists had 1 HR Outsourcing Trends. • Losing know-how and skills. • Social risk. Notably. In the end. Lisa Gelman and David Dell. 2002 19 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • Improvement of the outsourced activities’ performance. the French CEO of Alcatel. but many said they would do things differently.• Cost reductions on the outsourced activities. • Refocus on core business activities. companies would do more to prepare employees for the change.

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

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

1997 22 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . pension fund management costs are included in HR budgets. Nevertheless.S. A] Internal factors A company performance is nowadays measured by the value that it creates and delivers. it is important to emphasize that.2.In the U. which obviously implies huge amounts of money that are not directly linked to HR management processes. in the U. they are now complex ones dealing with a whole function assigned to a single provider.. and almost no longer by its revenue or by the increase of its market share.3.2. 1. Factors favoring these booming outsourcing trends This increase would not have been so important without a certain number of external and internal factors. administrative services and Human Resources activities (see 3. but rather to pension financing. Whereas before they were limited to small contracts signed with different providers.S. Moreover. a 1997 study1 dealing with outsourcing practices involving 619 companies showed that 94% of American companies outsource at least one activity.. 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.2. b) Development of information technology Another main enabler for such an increase is the development of new 1 American Management Association.) are those that are the most commonly outsourced.

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

SourceNet. 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). 24 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . EDS. 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. Cap Gemini-Ernst & Young. which built upon their traditional consulting strengths to enter the BPO market: Accenture. Creditek. • Traditional Outsourcers. Equitant. • Venture capital funded niche players. OPI/PMG spin-off. ACS. Deloitte Consulting. and CSC.• Big 5 players or their spin-offs.

according to Spencer. Human Resources Department Overview After having polished the outsourcing phenomenon. It insures overall consistency in decisions taking. Organizational roles Organizational roles can be classified in the two following categories: • Human Resources management. Dave Ulrich. It finally prevents one part from playing its own game to the detriment of the other. 60% of the department value-added results from strategic activities that only represent 10% of the costs generated by the department.1. His solution: reengineering and outsourcing. 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. that the company acts in the interests of employees by giving them opportunities to advance their careers. Number 1. on the one hand.1. conversely.Chapter 2.1. 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. 2. Spring 1997 25 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Volume 36. that employees bring as much value-added as possible during their stay in the company. Human Resources Department Roles The Human Resources department supports interactions between managers and employees. 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. We can distinguish two different roles within the HR department: the organizational ones and the operational ones. including HR support to business 1 Human Resource Management. and on the other hand. It makes sure. Indeed.

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

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

The people interest should conduct managers to observe good day-to-day HR management practices. • Company managers: According to the managerial grid of Blake and Mouton. 2. ~ ~ Ensures customer satisfaction of entire HR functions.2. People interest dimension. Structure Of Human Resources Organizational Activities 2.2. Black and Mouton. • Industrial relations managers (HR local specialists): ~ Manage and administer local specific programs with input from corporate HR and from HR functions experts. • Corporate HR: ~ Guides the development and implementation of HR strategy. Key Human Resources functions To explain our idea. 1964 28 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . there are two important dimensions for managers1: ~ ~ Manufacturing interest dimension. we enumerate the main organizational HR functions 1 The managerial grid. Manages executive facilitation and coaching. and economic imperatives. and to consider employees’ desires without losing sight the business unit organization.1.~ Define HR strategy at the business unit level. needs.

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

U. Summer 2002 30 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 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 4.3. for organizational vocabulary definitions).Illustration 4: Activities crossing HR functions Illustration 4 above demonstrates how each HR function is composed of different activities. Les Echos.1.3. The European labor market and intercultural management issues 1 A] Figures The E. from automotive ones to managerial ones. (European Union) contains today more than 370 million 1 “Y a-t-il un marché du travail européen?”.2. Human Resources Issues Of The Multinational Company In Europe 2. 2. 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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EIRO

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p

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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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developments

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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

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

the challenge is here to imagine innovative ways to manage this new type of diversity. and as the key to their success. as they are very easy to notice. More and more groups of workers will be clearly transnational. the first step towards creating a “European bargaining area”.int 35 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . at the initiative of the President of the European Commission. three stages can be distinguished as far as concerns the evolution of social dialogue across European industries.eiro. http://www. • HR organization: more efficient in a more complex environment and more flexible in a more demanding environment. 2.3. probably the key challenge. the social partners embarked upon a dialogue.U. EIRO & E. multinational companies need to participate in the European social integration as European social actors.eu. Commission. Jacques Delors. the one that leads to great success in the end if mastered. Then. An ever more organized social dialogue in Europe A] The European social integration process Since 1985. in other words. • Social capital: legal and geographical unity is not enough to guarantee a shared culture.eurofound. • Diversity: too much importance is given to national cultural differences.2. defending common interests resulting from a complex common association.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 2002.1 First in 1985 when.

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

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

Defining outsourcing Outsourcing Human Resources activities is giving a provider the management of part or all HR functions we listed earlier (see 2. 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.1. Human Resources activities 3.2.1.1. Managers and employees can access tools and information at any time from any intranet access point. Human Resources Outsourcing Definition 3.Chapter 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 . and the Human Resources department organization on the other hand.2. 3. Human Resources outsourcing levels A] Self-Service (e-HR) This first step in HR outsourcing is increasingly developed in Europe.1. Human Resources Outsourcing Overview Now that we have seen what is to be understood by outsourcing on the one hand.).

PricewaterHouseCoopers.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. p 5 39 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as it is represented in the illustration here below. p 5 2 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. November 2000. 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. November 2000.

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

Mazor and Meredith A. procedures and employee history. 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. through the shared services function. Human Resource Effectiveness Practice.D]). Arthur H. which is technologically equipped and has an immediate and accurate knowledge of local policies. C] HR processes outsourcing 1 Transforming the Human Resource Function. It allows an increase in quality.Illustration 11: Shared services model1 b) Objectives The goal is that employees and managers have access to HR information. Buck Consultants.1. an improvement in service. Inc. 2002 41 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .. and a reduction of processing cycle time as well as expenses.2. Paxton. Contrary to the totally HR department outsourcing (see 3.

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

43
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

44
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

according to Dataquest Incorporation. and 81% of them support that e-selection tools will be widespread and will shorten time and marginal costs of the recruiting process.7 billion industry in 2000 to a $58.value-added services. the Human Resources actors will be in 2010 more involved in deciding the company strategies (for 89% of surveyed professionals). Asia). They will no longer manage equality but equity.com American Management Association. U. and focusing on managing skills. 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.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. overview A] HR outsourcing expenses trends The U. Europe. 1997 2 3 45 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .5 billion industry in 2005. and will be more required to show the value-added of their department. Human Resources outsourcing market is expected to grow from a $21. between March and May 2001 http://www.2. Cubiks (a PA Group Company). The new HR roles of the future are predicted to be rethinking the performance and loyalty concepts. The high technologies and the outsourcing of some activities will be the solutions for HR departments to meet these requirements. Australia. 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.dataquest. 1 Predicting the Workplace of 2010. 3.S.S.

Philips.dataquest. Peter Drucker in The Economist1 strengthens this trend. ADP. is now growing at a rate of 30% a year”.In 2001.com European trends in HR Outsourcing. Cranfield 3 School of Management and William M. C. like perks management for instance. Vernon and J.5317. J. 9th November 2001. the Gartner Group2 forecasts a future growth of 25% each year. June 2000 4 Ressources Humaines : l’externalisation en Europe. The Economist. A study4 carried out among companies with more than 200 employees in 15 countries all over Europe. which represents in facts a tripling of revenue in five years.cfo.5642%7C.00. Mercer Research Report. are first of all “training and education” with almost 80%. C] HR outsourcing future For the U. 3. Jean-Pierre Poinas.. The content only is outsourced but not the container: all the “attention management” and the function itself are for the moment kept internally. Europe overview A] HR outsourcing trends In Europe. Peter Drucker. http://www.3 The diversification of HR activities outsourced is more and more important and go over traditional outsourced activities. February 2002. p 12-17 46 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The last most commonly outsourced process is “payroll administration” with 30%.S. Similarly.3. Brewster. the use of recruiting consultants is growing: 59% of European companies outsource their “staffing and recruiting” processes. 40% of employers have increased their use of external HR services providers in the last three years. Agence ARCA publishing. when he wrote: “Outsourcing the entire Human Resources administrative function which ten years ago barely existed. van Ommeren.com/printarticle/0. P. 1 “The Near Future (Part II)”.2. shows that the most commonly outsourced processes. even if their assignments are still very limited (recruitment of a professional for example).html 2 http://www.

because of particularly strong regulations and because of the decisive importance of social links. Les Echos. But on the other hand.4. PricewaterHouseCoopers. as we will see later. which consists in outsourcing complete HR functions and not only some activities. p 4 2 “Externalisation: les solutions de BP Amoco et d’IBM”.000 employees have implemented a shared services center.2. 28th November 2000 47 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1 B] HR outsourcing future The shared services solution seems to have the most predictable potential growth in the near future throughout Europe. whereas only few companies apply the “American model”. Laurence Ritter. the shared services center model is more and more implemented in Europe. 3. 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.As a result. November 2000. 58% of European companies with more than 5. In 2000. social law complexity clearly leads to ever more HR outsourcing.

ey.1 b) Large companies Concerning HR outsourcing in large companies.com. Ernst&Young en collaboration avec Taylor Nelson Sofres. which consists in fact mainly in payroll outsourcing (for 88% of them). Pratiques et tendances du marché de l’externalisation en France. Pratiques et tendances du marché de l’externalisation en France. whereas they are 56% for IT. Ernst&Young en collaboration avec Taylor Nelson Sofres. and 38% of them plan to do so in the next two years. 2002. 1997 2 Baromètre Outsourcing 2002. www. when there were only 17% in 1999. B] HR outsourcing future In France. 19% in 2000. 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. logistics and transportation and 32% for facilities management. 40% of them outsource their HR functions. This trend is higher than for large companies. 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.In France. p 17 3 Baromètre Outsourcing 2002. www. p 17 48 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .3 c) New market companies Concerning HR outsourcing in the new market companies4. but it decreased compared to 2001 (56%). Pratiques et tendances du marché de l’externalisation en France. 2002. and 20% in 2001. as 24% of these kinds of companies have. www. Moreover. figures are on the one hand on a growing trend since 1999. this study shows that only 17% of all large companies prospect to outsource HR. Ernst&Young en collaboration avec Taylor Nelson Sofres.2 But on the other hand. already outsourced parts of their HR activities (recruitment activities for 47% of them).ey. 41% for distribution.com.com. only 9% of small and medium-sized companies have already outsourced their Human Resources functions. p 21 4 Baromètre Outsourcing 2002. 51% for finance and administration. in 2002. 2002.ey.

2002. to social problems (for 38% of them). and as they are afraid that outsourcing would lead to a loss of control (49%).). but almost never a whole function. Finally. to a loss of quality (36%). payroll and selection processes for example.1 1 Baromètre Outsourcing 2002.2. Companies outsource almost only. only specific activities are outsourced in a same department. Ernst&Young en collaboration avec Taylor Nelson Sofres. The chosen option in France is mostly the implementation of shared services centers. and finally to a loss of know-how (17%). to a costs increase (32%). as companies find this solution more flexible.companies are afraid to lose control on strategy and corporate vision.3. For these reasons.com 49 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as for Europe. Pratiques et tendances du marché de l’externalisation en France. the shared services model allows minimizing all the outsourcing risks (see 1. training.ey. www.

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.PART II. 50 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . STRATEGIC APPROACH Now that we have demonstrated the real extent of the phenomenon. 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.

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

Actually. without catching it. 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. The only really new aspect of this environment is the everquicker innovation process. value-added. partners or even clients. if we claimed that the success of a company was hard to define. they are likely to be successful. of taking the advantage more than just winning. if any. and that they are sometimes even partners. it is just a question of point of view. where everything is linked to something else. companies would be completely blind. On the other hand. more than anything else. that they are not just a problem of short-term profits but a problem of positioning. this description of the business competition is not quite original nor is it particularly new. and unfortunately. even better. Business is more an endless chess game with millions of participants . and offers on the other hand the technological tools to cope with this relative instantaneousness of information broadcast. that competitors strongly participate in designing rules. In the end. something is missing in the Jules Verne trophy comparison. In fact. since each stakeholder of the company is a potential distinctive reference for the definition of its success.temporary winners and temporary losers. which imposes on the one hand the shrinkage of the distance between cause and effect. And all this occurs during the same race. way before the arrival line.companies collectively understand that the rules are not as easy as they seem. 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 . and where you need to know how to know. that today’s employees will be tomorrow’s competitors. The race example does not emphasize the fact that business competition is an arena where actors are themselves largely shaping their environment.

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

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

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

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

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

Doubleday Publishing 1999. and customer3 capitals (on both side of the relationship). customer capital is resulting from the accumulation of both human capital and structural capital. The great challenge of HR outsourcing is to reach the last stage of a business relationship degree of maturity. 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. According to him. Customization is the second level as it represents specific solutions. p 158 2 3 4 58 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Thomas A. Stewart. At the business solutions level. The available knowledge a company has on its clients. the client-provider’s relationship will pass several stages from the simple transactions relation to the complex partnering.CBIC’s (Canada Imperial Bank of Commerce) Hubert Saint-Onge depicts the stages of client-provider intimacy and the growth in human1. Intellectual Capital. 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. The fully-owned knowledge a company has accumulated through its operations. structural2. as fast as possible.

4 She probably had simultaneously in mind what Samuel 1 Intellectual Capital. Waterman. Robert H. make a vital contribution to its success. commented on this classification. a French high-tech online newspaper. When Dominique Calmant. ranked IBM France as the number one high-tech company in which people most like to work. C.expertise. Thomas A. Prahalad and Gary Hamel2 used the term core competencies to define the collective learning and coordination skills behind the company’s product lines.com 59 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . K. and offer to companies their largest ROI (Return On Investment). This previous concept comes actually from the elder concept of core business activities as activities that differentiate the company from others. but also immensely rewarding to both parties. in a full-fledged partnership. Doubleday Publishing 1999. August 1988 4 Le Journal du Net. p 159 “The Core Competence of the Corporation”. Finally.3. the provider actually takes over the management of the business extension: this last level is the kind of intense. demanding relationship. They support the idea that core competencies are the source of competitive advantage and enable the company to generate the largest value-added. Fabien Claire.journaldunet.1 4.2. she said that IBM’s best asset consists in the variety of its professions. “Le Journal du Net”. May 1990 3 In Search of Excellence: Lessons from America's Best-Run Companies. K. C. Reissue edition. Warner Books. then IBM France HR Leader. Harvard Business 2 Review. http://www. Core competencies and core business A] Definition In 1990. 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. Thomas Peters. In fact. 11th February 2002. In 2002. Prahalad and Gary Hamel. Stewart.

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

a priori. because it is important to avoid a function hierarchy. In the following illustration are represented by a regular cone all activities included in a value chain. and in the end management activities. for example. administrative or operative activities. according to how high you locate the activity in the cone. related in a way to the level of competency (see Illustration 4). As we are here interested in the identification of the core competencies. And finally. sales functions are not always more important than HR. which are activities that deal with the elaboration and the management of processes. which are activities that are mainly automatically done without too much need of human presence. the more strategic it is. which are related to strategic planning and controlling activities. 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. Finally. That is. first. the activity type dimension consists in the segmentation of activities according to the four types described above. you define the activity as being part of one of the different generic types of activities seen previously. Each activity can be placed in the cone according to the three dimensions described above. 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.to maximize the resulting value-added. then. which are activities that are systematic and repetitive. automotive activities. 61 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . processing activities. next. The function of the activity is placed on the disc. we darkened the virtual position of what are in fact the strategic activities of the value chain.

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

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

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

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

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

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

1 On the other hand. were the fastest-growing business service in the United States during the 1990s. and PEO expect to be collectively the co-employers of 10 million U. not just to business but to employees as well. the TUC (Trade Union Congress) General Secretary. this debate will all the more be on the European agenda. Isabelle Moreaux. pp 70-77 68 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and are by the way already in the U. workers by 2005. including HR activities. last May 2003. June 2003.S. Liaisons Sociales. Even though they were virtually unknown only ten years ago.3 5. the global economy is now about to live its third big business revolution: outsourcing of business services.1.800 such organizations. Peter F. 30th May 2003 “Bosses war against rights for temps”.U. John Monks. 1 “CBI launches new bid to block irreparable damage from E. Drucker. as John Monks has just been elected at the head of the ETUC (European Trade Union Confederation). They’re People”. by 2000.D]). PEO (see 3. workers. they had become. welcomed the draft proposal arguing that lower rates of pay for temporary workers undermine workforce motivation and act as a brake on productivity.General. 18th February 2002 “La CES prend l’accent britannique”. at least 1. taking on temporary employment would do irreparable damage.5 million to 3 million U. The HRO industry as a whole is growing at a rate of 30% a year.S. temping law”. claimed that without improvements. Harvard Business Review. Finally.2 Finally. HRO (Human Resources Outsourcing) industry development 4 In a related but distinct development. CBI Press.2. 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. both the temporary employment industry and HRO industry are growing quickly. which manage their clients’ HR activities.S. the “co-employers” of 2.1.2. BBC News Online. 2 3 4 February 2002. p 6 Inspired from “They’re not Employees.

Scope Expansions 5. but may now be designed from the start to be the co-employer for the largest multinational companies. Drucker. Today.3. but in fact.1. it supplied low-level workers to take the place of employees who were sick or on vacation. http://www. für die Wirtschaft im Wandel.5. It is finally more likely the growing burden of rules and regulations for employers that encouraged both developments. there are temporary agencies for every kind of job. have expanded their scope in recent years. To that extent. 2002. Temporary work scope expansion When the temporary employment industry first started nearly fifty years ago. from bottom line to top management. pp 70-77 69 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Management Angels GmbH. February 2002.1 5. 5.2. The first HRO provider in the late 1980s offered to do bookkeeping. many temporary workers are full-time workers for long periods of time in the same company. They’re People”. Harvard Business Review.managementangels. Peter F. Flexibility The popularity of temporary workers is usually justified by the need of always more flexibility.1. like temporary agencies. HRO providers scope expansion HRO providers. for their clients. especially payroll. Moreover. it seems interesting to briefly present the law case opposing 1 Interimsmanagement.2. but now they can take care of almost all Human Resources activities.2. HRO providers originally confined themselves to taking care of small businesses.2. flexibility has no account on the emergence of HRO providers. Business Village.3. Expansions Explanations 2 5.de 2 Inspired from “They’re not Employees.

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

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

But as all industries are now obliged to cope with the information age. But as we have seen. or employees of its outsourcers. In the end. but it’s hard to see how they deliver. and apparently document. and distributors.4. The temporary agency has no control over those last two areas and this lack of oversight is a real problem. In a total HR outsourcing contract. suppliers. whether they’re temporary workers. part-timers. of the people who work for a company are employees of that company. Every organization must take management responsibility for all the people whose productivity and performance it relies on. that is not true. Balancing its dual responsibilities. that the people they coemploy are high job satisfaction. HR management is all the more expected to perform well as it is applied in brain-based industries such as consulting or services. to the corporate client and to employees. but also on who manages and motivates them. This explains why HRO providers can claim. is probably HRO providers’ most important challenging job. Issues For The Outsourcing Company A] Temporary workers motivation and management HR policies still assume that most. brain resources management or human capital management concerns for now on absolutely all industries. Temporary agencies and HRO providers perform this vital function for employees as well as for their clients. in contradiction to what Human Resources theory says. 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. and to be doing the company’s oversight job for them. Temporary agencies claim to be selling productivity. The productivity of the people they supply to a client depends not only on how and where those workers are placed. 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 . if not all.knowledge workers. 5.

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

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

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

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

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

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. • Are very rare and almost unknown by other competitors. The decision itself As seen before. • Have almost no competitor able to imitate them.2.B] The resource-based theory This theory deals with important topics for managers such as “core business” and factors activating outsourcing. that is to say when they: • Open access to a large number of markets. • Have almost no substitutes possible. The goal is to determine factors that underpin competitive advantages of companies.1. 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. 6. Resources and skills that present all these characteristics must absolutely not be outsourced.) and 81 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2. and thereby give a product value from clients’ points of view. where opportunism has only an obvious secondary role.2. In parallel. outsourcing has advantages (see 1. insourcing has for goal to benefit from coordination abilities and from the flexibility that are more important inside the company.

1.3.disadvantages (see 1. Sloan Management Review. pp 43-55 82 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . A] The belonging of the activity to the core business All activities. as economies can be done and reinvested in the “core business” activities. in order in the end to create always more value.B]). We shall then distinguish several decision criteria: the belonging of the activity to the core business. which is actually the basic logic of the labor division and specialization emphasized by Adam Smith at the end of 18th century.1. and this approach is very limited. • An indirect one. The question is to know how to decide the outsourcing of this or this activity. Hilmer. But one must be aware of the definition of a “core business”. Summer 1994.2. One must have objective approaches by using the four criteria we developed before (see 6. which do not belong to the “core business” can be outsourced. there are two possibilities: whether the internal performance is worse than the provider’s performance and thereby it is recommended to outsource. or the internal 1 “Strategic Outsourcing”.) at the same time. B] The level of performance Supposing the activities do not belong to the core business. companies waste their financial resources when they do not outsource all their activities that are not part of their “core business”. the level of performance and the level of transaction costs. James Brian Quinn and Frederick G. as costs decrease and performance increases. which make the competitive advantage of the company. Quinn1. According to James B. Outsourcing presents two main interests: • A direct one. because general managers often subjectively decide it.

and in this case the activity must whether be kept internally but there is no focusing reinvestment in the core business. As far as HR activities are concerned and as HR core competencies obviously differ from one company to another. In fact. in order to clearly situate each HR activity according to the three defined dimensions: the HR function belonging. and finally the type of activity. as there is a high uncertainty and as they are regularly processed. 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. There are non-negligible fixed-costs. This question is all the more crucial as it strongly determines in the end the HR department competitive advantage. provided it is not critical to the “raison d’être” of the company.performance is better than the provider’s. pp 60-69 83 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Jérôme Barthélemy.3.B]). the degree of proximity to the HR department global strategy. Sloan Management Review. As a consequence. one can use the cone of (HR) competencies previously described (see 4. Spring 2001. 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). Volume 42.2.2. all the more as the outsourced activities are based on specific assets. arises then the problem of defining which of these activities are part of the HR core competencies and which are not. 1 “The hidden costs of IT Outsourcing”. What Should Be Outsourced Any activity can be a candidate for outsourcing. the HR department constitutes a real value chain itself. inside the whole company. Number 3. 6.

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

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

Le Monde. and on the corporate long-term benefits. 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. for American companies that have subsidiaries in Europe. Lisa Gelman and David Dell. p 6 86 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .• Reciprocal services. outsourcing is a good way to manage their HR functions. 6. 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. 7th September 1999 2 HR Outsourcing Trends. even better in financial terms.4.1 6. its impacts on the company’s level of competency as a whole. Drawbacks Outsourcing HR operations may sometimes pose some challenges and problems. The Conference Board.1. 51% of respondents reported that they had fully achieved their outsourcing objectives. Moreover. in the European regulations patchwork. 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. It may also be seen as alternative to making a capital investment in the new technology necessary to support the HR function. 2002. Nevertheless. Quality decrease and loss of control In The Conference Board Survey2. Marie-Béatrice Baudet. Finally. Another 42% had partially achieved them. Those who expressed dissatisfaction cited lower-than- 1 “Le prix réel des nouvelles organisations d’entreprise”.4. as it is an effective mean of harmonizing a number of different regulated HR systems. • Shareholders dividend.

is likely to be discussed and charge negotiated by the outsourcer. Security issues Another preoccupation is the security concern. 6. 6. plant closings. in most of the cases a real nightmare. This implies the development of change management skills on parallel to particularly developed organization skills. and that all work done adheres to proper security procedures. The implementation of a new model in order to gain value in the end will be.4. as it leverages the activity. High unexpected costs The costs can be difficult to control. during the transition.4. 87 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .expected service levels and loss of control as problem areas. major hiring activity and shifts to business strategy will happen while HR is moving to a new model and is totally or partially outsourced.4. Human Resources outsourcing creates indeed an increased security risk. It is all the more crucial as HR activities deal with a lot of confidential and personal data.3. 6. but difficult to control. as far as each new process implementation by the outsourcing company after the contract is signed. High commitment required during outsourcing implementation One must also not forget that mergers and acquisitions. that the provider will adhere to the security policy. which has now the possibility to increase its prices.4.2. It is a necessity for the company that outsources.

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. First is presented how we suggest one should manage an HR outsourcing operation. 88 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Thereafter we describe the legal environment in which such a project takes place.PART III. Finally the essential aspects of the management of outsourced HR activities are analyzed.

as they have the needed experience in managing a project. 7.1. composed of internal employees and/or external consultants specialized in project management. financial. from project definition to staffing reorganization. Managing The Human Resources Functions Outsourcing Project For HR outsourcing to be optimized and successful. environmental. These issues must be directed and resolved by a dedicated team. 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. and communication to the provider’s selection process. The team may also include experts in legal (see chapter 8). It is indeed very important that it is balanced and that it makes both parties winning the deal. as will strongly emphasized later on. technical. as this last cell will coordinate the relations between the outsourcing company and the provider. This project team may also include one or more members of the future piloting committee. Nevertheless. and to anticipate problems. Moreover. and that has the necessary skills to consider all specific issues of this sensitive kind of outsourcing. They may be directed by an external project manager (consultant or interim manager) specialized and experienced in HR outsourcing. a good contract is absolutely essential to the success of any outsourcing operation. Project Team Managing an HR outsourcing project consists for the outsourcing company in considering both internal and external issues. It is essential that they are involved 89 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .Chapter 7. and of course in business areas. the outsourcing company has to focus on the project phase not to forget any aspect of the process.

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

While using the NPV tool.3. mismanaged employee transition. it is possible to use the calculation of the NPV (Net Present Value). etc. to help them managing the organizational change.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. transition costs.7. 7. Moreover.1. not only to be aware of the project. legal advise costs or travel costs for example).). one must be aware of the degree of accuracy of its assumptions. some other internal businesses will be affected and obliged to change. Organization’s ability to absorb change Whatever the kinds of HR functions outsourcing procedures adopted. but the costs of HR function outsourcing must also be assessed (separation costs. Internal Issues 7. In order to obtain a reliable statement of the quality of the investment.3. taxes. as it will evaluate the profitability of the investment based on anticipated cash flows and discounted at a state rate of interest. Cost analysis The costs of the project phase itself have to be assessed (external consultants costs. implementation 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.3. but also to actively 7. running costs. project team has to convince the outsourcing company’s management team.2.1.2. Moreover. A].3. One may also add the use of the transaction cost theory seen earlier in 6. 91 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Management commitment The support it.

but also other departments will have to absorb some changes in the organization. As an example. Staffing reorganization As developed in 7.3. A communication strategy must be set up from the beginning of the project. and leaders would gain remember it. as some functions will be reduced internally. which implies for the project team an assessment of the ability to absorb change. but also on others.4.1 As just mentioned.3.C]. in order to communicate the vision and the strategy of the outsourcing company and to avoid any confidentiality issue. outsourcing support activities such as HR functions consists in fact in a collective empowerment of the people involved. Les Echos. HR outsourcing often includes staff transfer. or even totally transferred. 1 “L’externalisation à toute vapeur”.4.3. 2nd May 2001 92 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .Not only the leaving HR staff will have a completely different job. as they will work with outsourced employees. 7. 7. the impact will not only be apparent in the directly affected department. and such an operation surely leads to staffing reorganization. which will also maybe have to reorganize their staff themselves. Frank Niedercorn. Communication The project team should include in the project guidelines procedures related to confidentiality and internal communication. If some departments will be positively affected. Finally. when at the beginning of the year 2001. the outsourcing company will maybe need new staff with other profiles. others will be disadvantaged.7 billion contract with IBM. according to the sensitivity of the project. AstraZeneca signed a $1. On the other hand. But IBM was also committed to integrate in its own staff the 1.200 former employees of the Anglo Swedish company. IBM was committed to run and support the information system of the pharmaceutical company for duration of seven years.3.

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

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

one will have to deal with fewer candidates. as precise as possible. both processes are exactly the same. As this method implies that all providers of the market should be in demand. 1 “Common Problems. 2003. and this situation sometimes strongly weakens its impetus need of competition. it takes a long time to manage the perusal that brings to the decision. In fact.php?t=25 2 Strategic Outsourcing.com/particle.broken down to a level that makes "apples to apples" comparisons possible. Amacom. 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. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”. Attorney at Shaw Pittman. 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. 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. 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. some providers simply ignore this kind of selection process to concentrate on the two others. December 1998 95 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . if it is quite easy to evaluate prices according to the market. the quality is a lot harder to define in strict terms. to maximize the use of this technique2. In the end. Moreover providers investing themselves in such an invitation to tender consider this method as being less interesting as the competition is the largest. In other words. in spite of its theoretical efficiency. http://www.chiefofficer.1 However. but in this case. Maurice F. Greaver. as a consequence. Advantages for companies willing to outsource are: less applications to assess.

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

The subjective suggested criteria above are all dealing with the suitability between the client and the provider: • Trustful and respectful of confidentiality. • Flexibility and ability to change. • Constructive general behavior. December 1998 Business Process Outsourcing. • Permanent wish of improvement.. Greaver1: • Good reputation. Strategies and Contracts. • Strong experience as far as staff and equipment transfer are concerned. 2000. • Commitment to invest in specific assets for its client-partner. Process. 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.4. Amacom. • Good managerial competencies. John K. p 51 97 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .3. Maurice F. such as facilities and business 1 Strategic Outsourcing. • Willingness to share expertise. Halvey and Barbara Murphy 2 Melby. • Clear vision of the market. John Wiley & Sons. • Suitability between interacting corporate cultures. • Problem-solving method implying the client-partner. Inc. 7. Greaver. • Satisfaction of current clients.thanks to Maurice F. • Financial stability.

2. it can choose to simply lease them. • 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. 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. when the outsourcing company does not want to transfer its assets to the provider. B] Equipment transfer Many outsourcing deals lead to equipment sale from the outsourcing company to the provider.3. As we will further develop in 8.equipment. and other related tangible assets. 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). in exchange for payment or reduction in annual fees. • The assignment or sublicense to the provider of any third-party methodologies previously used by the client in connection with its business function operations. • The assignment or license to the provider of proprietary methodologies or technologies used by the client in connection with its business function operations. 98 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . what could be critical in the case of assets transfers in general and equipment transfers in particular.K].2.1. They will need to negotiate a purchase and sale agreement. A] Assets leasing As we saw in 1.A]. the contract should include a clause for intellectual property protection.

Indeed. staff transfer is a lot more complex. people make the difference. On the contrary. employers putting out to tender are usually keen to ensure that the provider can offer outgoing staff with good career development opportunities. Moreover. pp 47-48 99 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Les Echos. and they are now asked to focus on their profession and to redefine their points of reference in this new environment. and one cannot. 1 “Le délicat volet social de l’externalisation”. which gives them the chance to become much mire rounded in their skills. as Alison Humphries. Staff transfer is. often felt by the concerned collaborators as being a staff failure. • Find opportunities outside the company (outplacement).1 Moreover. Director of BNB (Barkers Norman Broadbent) Outsourcing says: “Nor need HR staff being transferred to another company necessarily feel they are being dumped”. Even while. as Michelle Walker. 26th October 1999. And when they choose to progress.• Try to transfer the greatest number possible to the provider. Personnel Services Director Rebus HR Services. most of them did not participate in choosing this particular provider or they did not even know it existed. their CVs will be much more broader as a result. underlines: “My staff act more as consultants. In fact. salary. it is still often felt like a tangible traumatism that companies must necessarily cope with. they will most of them benefit from such a transfer. if on the one hand they surely feel betrayed by the outsourcing company. in the long term. in any outsourcing operation. Anne Galez-Rovan and Catherine Lévi. during an outsourcing operation. as well as their future carrier. perks. they also feel insecure as far as their future business environment is concerned.” Finally. brand or culture. etc. In her experience. just as in any other business operation. a) Transfer perception The only difficulty with transferring equipment is the evaluation of its value. on no account. Collaborators were used to identify themselves to a particular product.

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

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

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

In the particular case of HR outsourcing. In fact.2. conflicts must arise whatever precautions were taken. that is to say a “give and take” process. legal professionals who are moreover quite used to it will exclusively share all negative feelings that could be given off conflicts during negotiations. effects can be different according to the chosen governing law. All the future outsourcing relationship management will depend on this choice. state or local). 103 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . It will also lead the whole negotiation process. or within Europe).1. The outsourcing company must not forget that the deal must be built on business value and desired outcomes.8. Legal Framework 8. It can be a businessperson or most of the time a legal professional team. That is mainly the reason why companies will have made the negotiations by a third-party. a partner absolutely necessary to the good functioning of the company’s business.) that will anticipate as much as possible the likely occurrence over the term and anticipate with a process to resolve disputes.2. the negotiation opponent is likely to be soon one of the most important business partners.1. but one should not let it have too much useless impact. It is very important that conflicts with future partners do not get personal. as they surely best fit to the job. conflict is part of the game. Outsourcing negotiator In all kinds of negotiation situations. 8. but the negotiator can help obtaining a fair contract (see 8. Governing law Because laws can be different from one country to another or even from a state to another (like in the U.S. federal.3.1.2. and it is always better to agree on one before the conflict arise (national.

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

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

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

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

seniority and position. pp 181-188 108 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .K. that is to say everything related to status. since 1981. Chandos Publishing.2. remuneration. as an outsourcing operation often give rise to 1 The Challenge of Outsourcing Human Resources. Sally Vanson. as it is subject to three necessary conditions that are: • The existence of an autonomous economical entity. • The transfer of the whole entity. • On a collective scale. 2001.4. • The standing by of the entity after the transfer. are: • The standing by of individual advantages. the contract includes a provision on informal dispute resolution methodologies. The purpose is to protect the rights of employees where there is a transfer of undertakings of their work to a new employer. etc. 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. as far as the transfer of their work contract is concerned. The consequences for collaborators. the standing by of the former industry-wide collective labor agreements during fifteen months.• Change management help: cultural adaptation. This law seems nevertheless not always applicable to outsourcing operation.1 8. identity transformation. Dispute resolution A] Informal dispute resolution Most of the time. practical organization. and to reintegrate it if it finally insources the activity back.

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

int/2002/11/feature/EU0211206F. and maybe new governmental permissions. as HR outsourcing implies new and different data flows.int/2002/11/feature/EU0211206F. most E. and in particular their right to 1 http://www.eu.1 B] Data security Concerning the outsourcing company’s data security.U.eu.eiro.U. several countries: • Impose minimal security measures (access code for example). Directives The E. As the E. members do not have specific legislation concerning the protection of employees’ data.eu. countries ensure the protection through more or less strong regulations. Commission states2.eurofound.eiro. C] E.html http://www.Countries generally impose restrictions on transborder data flow.eu.eurofound. Most of the E. requires Member States to ensure the rights and freedoms of natural persons with regard to the processing of personal data.U. countries have general legislation on the processing of personal data and the free movement of data. • Prohibit all third-party access to certain types of data.U.int/2002/11/feature/EU0211206F. 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).html http://www.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 .U. Indeed.eurofound. • Require or prohibit encryption.html http://europa. which needs to be taken into account.eiro.

to protect both employers and employees. These Directives are very general and without enough precisions on their application to the workplace. But the outsourcing company must refuse this contract.pdf http://www.int/eur-lex/pri/en/oj/dat/1998/l_024/l_02419980130en00010008. even if the tools are quite universal. It is particularly the case with HR outsourcing contracts.2 8. That is the reason why the E. Indeed.eu.3. and make its project team negotiate and work closely with the provider to elaborate a new and singular contract.U.privacy. Most of the time. any company would expect its HR services to be 1 http://europa. 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.eiro.html 2 111 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . in order to ensure the free flow of personal data in the Community. Outsourcing Contracts A particular attention must be given to the structure of the outsourcing contract for the viability of the deal. in the form of a statutory instrument or a social partner’s agreement. providers propose their standard and prepared contract.eu. and are unwilling to change it.eurofound. and economies of scales made unquestionably possible.int/2002/11/feature/EU0211206F. and in particular the right to privacy. as earlier seen in this thesis HR services are necessary tailor-made. • The Directive concerning the processing of personal data and the protection of privacy in the telecommunications sector (97/66/EC1). as it will be used in the event of a dispute between the parties. Commission is working on data protection. 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. as each outsourcing process and conditions are different.

Inc. it is likely that the relationship between the parties will survive the inevitable day-to-day disputes that arise in complex contractual relationships. most of the time. a very important aspect of the contract deals with staff and equipment transfer.3.1. 8. and “What happens if it is not done?”. the outsourcing company agrees to compensate the provider according to a negotiated fee schedule. and hopefully. Halvey and Barbara Murphy Melby. A fair contract may well be one that requires both parties to perform in a 1 Business Process Outsourcing.. companies are outsourcing activities that they used to manage internally. John K. which can be simply distilled in five basic issues that must be considered and addressed by the parties1: “What is it?”. “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. In other words. As a consequence.performed in accordance with its own and singular corporate strategy. A negotiation with respect to an outsourcing arrangement is not one that either party should be willing to win. at the end of the contract negotiation process. Strategies and Contracts. Process. it should come as no surprise that one of the most difficult stages of an outsourcing transaction is drafting and negotiating the contract. “How much is paid for it?”. The contract will accurately record each party’s rights and responsibilities at any given time during its term. It is important to note at this point that a fair contract is not one that is necessarily ideal from either party’s perspective. the parties are confident that these five issues have been fairly and comprehensively addressed. 2000. Overview Numerous outsourcing contracts are set up from an insourcing situation. p 52 112 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The most common form of outsourcing contract involves the transfer of control and ownership of all or part of HR functions to the provider. In return. “Who does it?”. If. flourish as methodologies and technology advance. John Wiley & Sons.

These agreements describe the level of HR services expected. 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. The structure of the contract is crucial to motivate service providers to deliver and create value-added. seem comprehensive for one organization could be. but more likely in an optimal balanced economic performance. Strategies and Contracts. pp 53-66 113 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as far as. Depending on the complexity and variety of services and countries involved. the contract must include the most exhaustive detailed list of HR services to be provided. Process. Inc. for example. that might as comprehensiveness subjective. John Wiley & Sons.2. Halvey and Barbara Murphy Melby. 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). C] Service level agreements It is necessary to mention the level of HR service expected.3. 2000. as it will allow the outsourcing company to monitor the provider performance.. considered insufficiently detailed.way that will not result in optimal economic performance. B] Scope of services To avoid future problems. delivery 1 Inspired from Business Process Outsourcing. 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. in the eyes of another organization. Similarly. 8. response time. John K.

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

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

inequity or mistrust are dangerous to an outsourcing agreement. • Governs the parties’ attitudes and reactions.J] Governing agreement 1 As seen earlier. K] Intellectual property 2 As a general matter. tools. 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. trademarks. 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. L] Confidential information 1 Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships. 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. the contract should include provisions with respect to the ownership of HR processes for instance. handle changing business requirements and new objectives. John Wiley & Sons. inventions.). preventing misaligned attitudes from governing the relationship.. software. Strategies and Contracts. p 59 116 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . patents. strategically plan for the future and continuously improve the value they wish to achieve through their relationships. Halvey and Barbara Murphy Melby. to the right to use of each parties. 2000. Inc. John K. instability. when challenges occur. It should indeed be clearly specified the respective proprietary rights of the provider and its client. Kathleen Goolsby. etc. Outsourcing Center. Process.

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. Indeed.5. methodologies and technologies. know-how. N] Data security To the same extent. such as personal data on the outsourcing outsourcing company’s company employees. Too many details seem to be always better than too few. the provider will necessarily access to very confidential information. M] Data flow The legal framework of transborder data flow has already been described in 8.2. but the outsourcing company should re-mention it in the contract to minimize risks. and a lot more. the access provider’s methodologies. except if both the 117 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .In this particular case of HR outsourcing. and technologies. O] Reports and documentation All reports expected by the outsourcing company must be defined in the contract. strategic plans. Similarly..5. the contract should protect and secure the confidentiality of each party’s data and information. For this reason. specifying their delivery times. but it is more secure to re-mention this issue in the contract as well. Q] Currency risk The contract must also include the definition of the currency or currencies that will be used for the payments just evoked. A provision that will force changes in the service charges in case of overcharging should be included. the legal framework of data security has been developed in 8.. will also but to also the data on know-how.2.

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

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

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

It does not manage throughout direct authority but throughout contractual relations. Elements To Keep Internally 9. In our opinion. On the one hand. • Assuring the coordination with the business. • Taking strategic decision for the business. on the one hand. one can say that it may seem harder to do so. HR activities that are mandatory in certain European countries and.1. 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.2. on the other hand. Managing Outsourced Human Resources Activities 9. as they are core to the outsourcing company’s business.1. in fact. except for both. The most important is that the HR overall responsibility stays inside the outsourcing company.1.Chapter 9. the piloting committee is a new organ that will take in charge the control of the outsourcing relation. As explained further.1. The managerial function may stay the same. Piloting committee 121 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . In the end. companies of the future will outsource their whole HR department. 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. and to some extent could even be outsourced to a third-party. activities that have for essence the strategic coordination with the whole company. 9. Managerial activities The outsourcing company should necessarily keep in-house the strategic coordination of the outsourced activities and their control. the only difference is that it does not own the resources it manages anymore.

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

2.2. European leader for HR outsourcing at PricewaterhouseCoopers. not a service. even more than an 1 “Change Management”. 9. 9.2. Required Skills In the end.2. Influencing and conflict management skills These skills are very important as well. Alliances management skills These skills make it possible to manage the relation with the different providers.2. The aim is to reach a win-win situation. Strategic vision skills These skills allow defining which outsourcing strategy would best serve the competitive advantage of the company.2. Outsourcing implementation skills These skills allow making sure that the provider does its job the way it announced it would do it. Personnel Today. the company has to make absolutely sure that it has the following competencies at its disposal.1. as they imply developing flexibility and credibility. said: “You are establishing a partnership with the organization. As David Koch.3.4. someone who is focused on managing relationships rather than handling transactions. 9. 9.”1 9. It doesn’t take a lot of those sorts of people but it needs someone with clout. 18th April 2000 123 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . so you will need a different kind of person. • Investing in always more human capital management asset.• Mastering the knowledge of the company’s business and its environment. to maximize its chances to build a successful outsourcing operation.

3. pp 86-93 124 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . As an example both companies should think of incentives that workers could enjoy together (and not alone and outside the company). most of the time.unbalanced particularly winning situation.3. especially in order to help collaborators facing their new environment. In fact. 9. and when possible mixing both employees of the provider and the outsourcing company. Change management skills Outsourcing implies strong operational changes for companies. June 2001. and if those specific assets are being hard to standardize for the need of other deals with other client-companies. 9. enabling trust and fostering cooperation. thereby the exclusive client-company gain a big influence on the provider. Harvard Business Review. it seems that social capital development would be very useful. and that is mainly the reason why it is important and surely decisive to have internal excellent change management skills.2. Social capital development skills 1 It order to make a HR outsourcing operation work on a long-term basis. But it is always 1 “How to invest in social capital”. 9.2. the provider accepts only assets that can often be standardized. other structural mechanisms allow a certain control on the outsourced operation. Transfer of specific assets If the client-company transfers particularly specific assets to the provider as part of the deal. 9.5.1. Laurence Prusak (Executive Director IBM Institute for Knowledge Management) and Don Cohen. Other Solutions To Keep Control Aside the contract. Developing social capital consists in fact in favoring people connections.6.

On the other hand. Problems Likely To Occur 2 9. 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.3. that is to say. 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.4. Hermès Science Publication. 9.useful to know the exact implicit power one has on the provider in order to have done what exactly needs to be done. as the same stakeholder will privilege the performance of its core competencies. 9. European Management Journal. during the six months before the forecasted starting date. in other words.4. 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. Spin-off structure 1 Of course. There might indeed be a contract between the two organizations. but it is nevertheless not of decisive value comparing to a strong common stakeholder. it gains influence but it is limited enough not to interfere with core business focusing investments. 2000 125 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as already seen.1.3. the solution of creating a spin-off allows the company to keep quite an entire control on the service. Most of the time. in the activities that have the best ROI.2. Bad start In 10% of the cases. Jérôme Barthélemy and Dominique Geyer.3. 9. it seems that the spin-off solution does not offer the best performance results (unless the activity becomes a core business). 2001 2 Dictionnaire de l’infogérance.

4. it does not take too much time to do pressure on the client-company in order to obtain a better deal. 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. 9.2.4. 9. No respect of pricing In 20% of the cases. during the first year of outsourcing. the client-company has to do the job simultaneously. during the first three months.4. and so perceived client service degrades. 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.4. In other words. but unfortunately it has hardly any possibility or will to focus on change management skills. during the first year of outsourcing. Thereby. pricing sometimes goes drifting off.5.3. etc. No evolution perspectives In 50% of the cases. 9. In fact. it may happen that the provider did not succeed in meeting contracted expectations. it has a too stable or rigid service offer.4. 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 . Most of the time. this has for sure a negative impact on financial forecasts. whereas the whole outsourcing operation seems to be a success. whatever the price its clients would be ready to pay.9. Maladapted services In 30% of the cases.. it appears that the possibilities of service evolution are very weak. which is really not a satisfying situation. the provider’s employees do not necessarily have the incentive to do that.

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

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

com/about_csfb/company_information/about_csg/index. investment advisory work and pensions to its former benefits group. which spun off to form Black Mountain Management.csfb. It serves global institutional. 1 http://www.Chapter 10. Companies That Resources Outsourcing Have Outsourced Their Transactional Activities 10.1.1. Knowledge@Wharton in collaboration with 2 Aon Corporation. including employee record keeping. corporate. c) Results According to an AON’s report2. Its around 73.1 b) HR outsourcing deal Credit Suisse Boston decided to outsource most of its transactional HR functions. Human Experienced Customers 10. Credit Suisse First Boston estimates its savings at $115 million since 1994. Externally outsourced A] Credit Suisse First Boston Group a) Company overview Credit Suisse First Boston is the investment bank of Credit Suisse Group.shtml The Beat Goes On: Outsourcing Your Human Resource.1. AON Human Capital Consulting. which is a leading global financial services company headquartered in Zurich.000 employees operate in more than 69 locations across more than 34 countries on five continents.p 5 129 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . government and individual clients in its role as a financial intermediary. 2002.

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

131
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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AON Human Capital Consulting.com 133 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The last division. Health and Personnel Relations). “People Managing Processes” offers: • Compensation and Benefits Consulting and Delivery. each one focused on an expertise domain: • Asset Productivity Processes. for example. Work/life. • Work environment Services (Diversity. p 4 3 http://eu. Knowledge@Wharton in collaboration with Aon Corporation.dupont.1 b) Implementation overview DuPont Europe. • Value Chain Processes.operates in 70 countries worldwide. • People Managing Processes. are available by phone and are organized into six divisions. generating $24 billion revenue in 2002.jsp?page=/content/EU/en_US/overview/glance. 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. • People and Organizational Development Consulting.html 2 The Beat Goes On: Outsourcing Your Human Resource. 1 http://eu. • Legal Services. These shared services centers. • Business Services. aligned and consolidated its HR services inhouse before outsourcing. • Staffing and Relocation Services.dupont. • DuPont Consulting Solution.com/NASApp/dupontglobal/eu/index.

The People Managing Processes team is committed to creating unique HR offerings that will help clients’ employees to reach higher levels of productivity.4%. as employees’ representatives argue that there is overwork. c) Results This new organization led to strikes and discrepancies between direction and trade unions. Finally. The next step is to reduce it to 1. C] French shared services center: France Telecom a) Company overview France Telecom is the French national telephone company. as some HR processes are indeed directly provided on line). According to them. to set up 10 HR platforms in France. especially in Europe. decided in October 1999. 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.145 employees.9%. hot lines dedicated to all questions connected with personnel management. and of course with the help of new technologies. 80% of them are civil servants. with a worldwide headcount of 240. through a project called “DRH demain”. indeed.900 HR employees for a total amount of 120.000 employees. 41% of its revenue is generated outside the French borders. It provides services to about 100 million customers within more than 20 different countries. and a lack of HR employees. b) Implementation overview France Telecom. as there are 2. without dismissing but by dividing up HR tasks between HRSC (HR Services centers and managers. This one was in 2001 of 2. D] Other model outsourcing companies that applied this 134 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Its goal was to decrease its HR staff-to-employee ratio.

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

HR outsourcing deal Kellogg Foods decided to outsource all its recruitment functions in 1999. September 2 2002 136 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .2. A Company That Has Outsourced Some Of Its Human Resources Processes: Kellogg Foods 10. meat alternatives.2 A team of RES recruiters works only for Kellogg.1 10. Michigan. • To reduce the headcount and obtain better candidates. Company overview Kellogg Foods is the world's leading producer of cereal and a leading producer of convenience foods. frozen waffles. a division of Bernard Hodes Group. HRFOCUS. toaster pastries. cereal bars. 10.As noticed before.kelloggs.com/company/ “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”. crackers. some of them are based in RES’ Houston Headquarters and some others are based in 1 http://www.2. • To guarantee a flexible recruiting resources in order to answer the uncertain changing environment and hiring needs of the company. Its products are manufactured in 19 countries and marketed in more than 160 countries around the world.2. Houston). pie crusts and cones based in Battle Creek. shared services centers are a good first step for companies that are looking to externally outsource. It decided to outsource the department (keeping the strategic aspects internally) to RES (Recruitment Enhancement Services. Its goal was: • To reduce headhunter fees and improve efficiencies for the company.2.1. including cookies.

from $7. September 2 2002 137 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and uses Kellogg designs and standards for recruiting. Outsourcing implementation results The outsourcing arrangement succeeds thanks to the strong partnership between Kellogg and RES. and 96% in 2001.3. • The cost per hire was cut in half. 10. agency fees were just $294. • Outside agency fees were $1. In 2001. HRFOCUS.784 in 1 Cydney Kilduff. There are indeed savings in costs and time. The program also included an efficient maximization of recruiting and hiring program.Kellogg’s HR department in Battle Creek. Outsourcing had in the end positive results for Kellogg: • The provider filled 52% of available jobs in 2000.946. thanks to the use of technologies. 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.2. but Kellogg encountered resistance from hiring managers who preferred their outside agencies. 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. Director of recruiting and staffing at Kellogg “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”.163 in 2000 and 202 jobs were filled. handles all related recruiting work except for relocation. Kellogg implemented a Webbased recruitment management system. including online internal job posting and employee referral programs.905 in 2000 to $ 3. and there were many calls for customizing features in the technology program that caused problems in implementation.375 and 389 jobs were filled.

S.com/company_overview/profile/index.000 U. North and South America. supply and transportation. refining. marketing.. BP Amoco (British Petroleum Amoco) A] Company overview BP is the holding company of one of the world's largest petroleum and petrochemicals groups. BP has well-established operations in Europe. that has dropped to 39 days.K. and U.2001. Its main activities are exploration and production of crude oil and natural gas.exult. were: 1 http://www.asp http://www.1. Australasia and Africa. the BP-Exult agreement was the largest HR outsourcing contract in history. and manufacturing and marketing of petrochemicals. managing any contracts with other third party suppliers on behalf of BP.net/clients/contract_bp. BP’s goals.html 2 138 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . according to Exult Inc.3.bp. They agreed2 on a 7-year relationship for HR Services to over 50. The programs’ center of operations is located in Glasgow. • In 2000.3. In 2001. At the time.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. it took an average of 67 days to fill jobs. Companies That Have Outsourced All Of Their Human Resources Business Processes Except Managerial Ones 10. employees. Exult support BP through its own services centers and will act as a service integrator. 10.

The team was organized by region with functional team responsible for their specialties in all areas (myHR. was in charge to drive the programme.• Access to further economies of scale. • Build a collaborative partnership to deliver services. • 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. information for foreign placements. • Speed of deployment of new services. 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. enabling a closer alignment of company strategy and organizational capability. “The Atlas Project Team”. 17th October 2000 139 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .net”.net. • A desire to improve workforce satisfaction with BP as an employer. Personnel Today.). • International consolidation efficiencies. Under the title of “The Atlas Programme”1. the outsourcing deal would see the creation of “myHR.). composed by subject matter and functional experts from BP and Exult (50 members). • 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. etc. even if there have been 1 “BP”.

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

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

They work on filling gaps in their array of services so they can better compete for big-volume and big-money outsourcing contracts. Human Experienced Providers Resources Outsourcing In the U. KornFerry Futurestep Americas. This part will give through the Exult Inc.com. Spencer Stuart. Adecco. As main HR outsourcing deals have just been described. HRO providers are increasingly forming partnerships and acquiring resources in a bid to get contracts from big business. and Monster.S. Staffing and Recruiting 2 The main providers are: Manpower. Payroll and Benefits 3 142 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . clients are in a recession period interested in access to technologies without the large implementation costs. HRO Providers Specialized In Some Human Resources Functions Outsourcing Services 11. Dice. 11.1. As it is underlined in HR Magazine1. the main HR outsourcing providers have also been quoted.Chapter 11. Careerbuilder.1.com. Bernard Hodes/RES. Robert Half. but the trend is also noticeable in Europe.1.2. Spherion. example an overview of this industry. 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. primarily.1.

November 2002. International Paper and Prudential Financial contracts over $100 million. April 2002 143 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . it has signed with BP Amoco. 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)”. Steve Bates. April 2002 4 “ The 100 Superstars of HR Outsourcing”. It promises clients a “comprehensive solution” of HR outsourcing services. 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)”. Paychex. A] Company overview This Irvine (California) HRO provider is pursuing aggressively this market5. Exult Inc. 1 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a bid to get contracts from big business (Outsourcing)”.com. Specific providers in specific countries In Belgium (with “Secrétariat social”) and in Italy (with “Consulenti di lavoro”). Employee health and Pension benefits 4 The main providers are: AFLAC. TALX UC Express and ADP. Human Resources Outsourcing Today.hrotoday.3.2.hrotoday. HR Magazine.com. HR Magazine. 11. 11. www. 11. Steve Bates.1. Steve Bates. and employee relations. To date. April 2002 2 “ The 100 Superstars of HR Outsourcing”. Human Resources Outsourcing Today. November 2002. Unisys. HRO Providers Proposing An Integrated Solution Including The Whole Range Of Human Resources Processes 11. Bank of America. some providers are specialized in HR transactional activities. HR Magazine.4.1.The main providers are: ProBusiness. in social security contributions.2. Definity Health and VSP/Vision Service Plan. www.1.

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

Exult is the most meaningful provider. C] Key facts • In 1998. with $50 million.000 employees. • Exult concluded 2001 with 7 clients.000 learning enrolments. targets global Fortune 500 corporations as clients and to establish with them long-term relationships. in 2003. • Exult reached $270 million in revenue and cash flow. for $600 million. Its strategy is to use its e-HR solution set of applications to enhance HR performance. • Administration of 250. General Atlantic Partners founded Exult Inc. • Exult completed in June 2000 an IPO (Initial Public Offering) reaching $300 million.2. Other main providers proposing an integrated solution So far. 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 . since it signed the deal with BP developed earlier.2. representing 400.• Relocation of 2. D] Strategy Exult Inc. As seen. 11. • Exult closed BP Amoco HR outsourcing in December 1999.500 expatriate assignees. 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.

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

It provides services to more than 33.5 billion in 2002.com/company_overview.000 business and government clients around the world.html http://www. It provides service over 4 million participants4.1 billion in 2002.2.com/hewitt/about/overview/index.000 on assignment daily.000 companies.hewitt. HR consulting & technology. with an average of 59. • Spherion.S.eds.mellon. Its revenue in 2002 was $2.com/hrsolutions/aboutus/ 2 3 4 147 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .000 people worldwide. It employs 2900 professionals in nine operating locations and administers over $150 billion in retirement plan assets.Asia. including 85% of the Fortune 100. Hewitt Associates’ client roster includes more than half of Fortune 500 companies and more than a third of Fortune Global 500 companies.com/about_eds/en_about_eds. 45 percent non-U. As the largest multi-service HR delivery provider in the world. • Hewitt Associates. • EDS (Electronic Data Systems) BPO. It employs approximately 137. EDS is also one of the leading global IT services company. Spherion provides staffing. outsourcing. it handles more than 53 million HRrelated customer interactions a year from more than 13 million participants3.3 billion1. It employs more than 310.shtml http://was4. • Mellon HR Solutions.convergys. 1 http://www.htm http://www. It has more than 35.000 in 60 countries. recruiting. Its revenue: $21. Its annual revenue was $2. Mellon HR Solutions is the fourth largest HR services provider and one of the largest financial services companies in the world. It reaches 9 countries with its more than 800 locations.

000 people working in about 1. skills.ibm.com Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround.1.. Gerstner Jr.S. it also has global standards and levels of services. with more than 325. 2002 3 “ Crisis Survival Tactics for HR”. Louis V. we did not read all valuable business books available.. When one considers IBM. values. HRFOCUS. 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. as Louis V.Chapter 12. seems to have done. But on the other hand.3 IBM EMEA operates in more than 124 countries. 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.000 locations. we of course cannot be absolutely sure of the previous affirmation. but it seems that the answer is close to “no” anyway. p 12 148 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . one may be totally fascinated by the idea of making that huge elephant dance2. 1 http://www. Harper 2 Business. Gerstner Jr. To have a clear idea. in fact completely the opposite of the reactivity we generally attribute to start-ups. where IBM works with homogeneous strategies. and 293 dialects. April 2002. one may (wrongly) think it is a multinational elephant.1. nearly 60% of revenue is generated outside the U. and processes. Company Overview 12. where everything is being slowed down. Facts and figures IBM is responsible worldwide for operations in 160 countries. 12.1. Finally. with 149 different languages spoken.

market value).msnbc. • 2nd in software. profits. ranked IBM the third best global brand after Coca-Cola and Microsoft. it is ranked 8th among all companies ranked and 1st among IT companies in Fortune Magazine “Fortune 500” (fiscal-year revenue).asp?sym=msft#body 149 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . In July 2003.1. 1 http://famulus. B] IGS (IBM Global Services) IBM Global Services is the largest business and IT services company in the world. architects. and specialists. helping customers managing IT operations and resources and capitalizing on IT to improve performance. • 1st in IT rental and financing. project managers. It hires almost 175.1 12. • 1st in research and development..IBM is ranked 9th among all companies ranked and 1st among IT companies in the Forbes Magazine annual “Super 100” (ranking of sales. Activities A] IBM IBM is the world’s largest IT company. BusinessWeek and Interbrand Corp.2.000 professionals. • Integrated Technology Services. • 1st in IT Services. consultants. • 5th in PC. There are four main lines of business: • Business Consulting Services.com/FamulusCom/reuters07-24-140033. as it is: • 1st in hardware. Moreover. assets.

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

• 133 Data Centers and 73. IBM outsourcing deals are at the EMEA or global level. • A wide range of solutions on different trademarked products.1. even if a majority is based in the UK. L 122-12 in France for example) developed in part three.2.000 IBMers). IBM Strategic Outsourcing manages human and social dimensions of an outsourcing operation.000 servers worldwide for maintenance or development. systems. 12. and offers human and technical means without equal in the market. as being completely part of its core competencies. Finally. It helps its client to assess its operational objectives.2.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 .ibm. Most of the time. as will be developed in the next point. • Knowledge capitalization (Knowledge Management database available by 138. 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. determines which IT processes and activities should be outsourced for a better competitiveness. Strategic Outsourcing Services 1 IBM Strategic Outsourcing Services is the management of companies’ applications and IT Systems.2. and are coordinated by an HR outsourcing specialist in the country where the 1 http://www-1. because of the different employments laws and variation of the Acquired Rights Directive (TUPE in the UK. Indeed. IBM EMEA 2 Strategic Outsourcing Team IBM EMEA implemented a strategic outsourcing team widespread across Europe.12. or Art. and softwares (90% of IBM’s outsourcing deals). one can say IBM is a major outsourcing provider.

S.1. 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. and will also guide the outsourced employees towards a better integration. 12. A] U. Competitive Human Resources Organization 12. or find a partner who could provide 152 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .3. As Peter J. said: “Their choice were clear: either make a significant investment over the next three years or more to upgrade systems.S.S. Example IBM U. Smail. keeping its quality programs and becoming more efficient.S. These specialists are responsible for proposals on how the staff can be transferred and treated to increase their comfort level with the transfer operation. But IBM decided to go to the next level. • Strict transfer and integration processes realized by HR culture and internal experience concerning outsourcing operations (more than 80 operations in France for professionals. the IBM EMEA strategic outsourcing team looks after human and social aspects of the outsourcing operation thanks to: • Corporate example).3. Finally. HR Service Center IBM created an Employee Service Center in 1994 to consolidate the delivery of all its HR processes across the U. already outsourced some of its Human Resources activities. • Skills development and career opportunities management. President of FESCo.deal is pursued. IBM U.

Human Resources administration and payroll programs. retirement planning.com 3 153 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . FESCo is a division of Fidelity Investments Institutional Services Company.fidelity. health and welfare. Human Resources and benefits strategies to more than 200 companies (including Shell Oil. Inside the IBM-Fidelity outsourcing partnership”.com 2 http://www.). Fidelity Investments. the first provider of workplace retirement savings plans. The company is the largest mutual fund company in the U. 11.S.. Inc.fidelity. http://www.1 As developed later. founded in 1998. ii/ Fidelity Investments Institutional Services Company.com http://www. B] Deal with Fidelity Employer Services Company a) Company overview i/ FESCo (Fidelity Employer Services Company) FESCo.100 retirement. and 1 “Substantial Benefits.500 financial intermediaries. one of the largest mutual fund arrays.fidelity. which provides the technology and people required by IBM. Monsanto. Philip Morris. Moreover. FESCo can leverage its investments. provides2 retirement. the decision has been taken to sign a partnership with Fidelity Employer Services Company. Fidelity Investments3. because it serves many large companies. based in Boston.excellent services and had the technological advancements IBM requires”. Inc. is one of the world’s largest providers of financial services. It offers investment management. 20th December 2002. as well as through 5. HR and benefits outsourcing services to 17 million individuals and institutions. brokerage. and has experience and capabilities to offer a wide range of services and products. and Ford Motor Co.2 million American workers through the administration of more than 11.

20th 2 3 December 2002. Boston Business Journal. that IBM opened in 1994 (see 12. David Cay Johnston. and other benefits.2 c) Tangible transfers i/ Staff transfer As a whole. North Carolina. Vice President of Alliances. IBM Global Services.a leading online brokerage company.000 workers in the U. FESCo said that it plans to expand the Raleigh. b) HR outsourcing deal IBM outsources to Fidelity Employer Services Company (2nd July 2002) the administration of its benefits1: pension and health & welfare plans. with assets of $56.3. 2nd July 2002 “Fidelity to oversee IBM’s pension plan”. The New York Times. pay. Fidelity Investments. Towney Kennard.S. charitable giving. “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. 3rd July 2002 4 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. 3rd July 2002 154 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .000 retirees about retirement.S. 2nd July 2002 “Substantial Benefits. health.S. Inside the IBM-Fidelity outsourcing partnership”.1.” ii/ Equipment Transfer FESCo leases a call center in Raleigh. Boston Business Journal. http://www. service center to 1 “Fidelity to oversee IBM’s pension plan”. IBM’s pension plan is the 12th largest in the U. and 120. promotions and other issues. firing..com. who provided HR transaction and administrative support to IBM U.C. discipline.5 billion last year.500 or so IBM personnel workers would remain with IBM “to handle hiring. employees and retirees. The New York Times. became FESCo employees (1st August 2002) and continue to provide HR support to the same IBM population..fidelity. N. announced4 that another 2.A]) to handle questions from its 140. 4503 IBM Employee Service Center workers. David Cay Johnston. along with a broad range of HR services.

FESCo will also use IBM’s former facilities in Endicott and White Plains. http://www.A]. 1 “Fidelity to run IBM pension and health plans”. Fidelity 4 Employer Services. FESCo was a solution for them to achieve this target. IBM wanted to go to the next level after the service center becomes more efficient.2 Fidelity Investments provides benefits expertise.accommodate growth in its HR payroll and outsourcing solutions. Executives of both companies said indeed they saw “a promising business in selling payroll and benefits services to large employers. 2nd July 2002. Reuters Company News. 5th July 2002 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”. “this agreement enhances our e-HR portfolio and leverages IBM’s expertise in process change management as customers automate more business processes”. New York. including government agencies and major non-profit organizations”. The Motley Fool. 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. e) Benefits expected by both parties The two parties said. without losing the level of quality. Fidelity Investments and IBM announced that they form venture to market HR payroll and benefits outsourcing services to other companies. IBM Global Services.1.fidelity. As mentioned in 12. The industry takes in about $12 billion today”. 3rd July 2002 3 “Intel’s No Bargain”.com 155 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . experience and capabilities and IBM provides computers and databases. David Cay Johnston.3.3 i/ IBM According to Towney Kennard4. 2nd July 2002 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. d) Business opportunity At the same time1. The New York 2 Times.

As companies evaluate outsourcing options. will accelerate our clients’ benefits outsourcing plans. employees have the latest available information at their fingertips and the HR function is able to concentrate on critical strategic activities”. IBM EMEA HR Organization A] Self-Service As Martin Stockton. Fidelity Investments.fidelity. “Substantial Benefits. 20th December 2002.2. New York. as “IBM-trained Human Resources staff with a high level of expertise and professionalism”. but also IBM’s former facilities. President of FESCo. said “By creating a collaborative “self-service” environment for the majority of issues. we think they will seek trusted providers such as Fidelity and IBM to provide end-to-end solutions”.fidelity. Smail claimed: “[…] we’ll now have locations in Raleigh.5 1 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”.ii/ FESCo According to Peter J. Inside the IBM-Fidelity outsourcing partnership”. http://www. http://www. Inside the IBM-Fidelity outsourcing partnership”. 2nd July 2002. Inside the IBM-Fidelity outsourcing partnership”. “Substantial Benefits. recognized consulting and technology expertise. Inside the IBM-Fidelity outsourcing partnership”.com 2 “Substantial Benefits. “Substantial Benefits. With this expansion.fidelity. Fidelity Employer Services. Personnel Today.fidelity. Inside the IBM-Fidelity outsourcing partnership”. Smail1. we can serve even more large corporate clients efficiently. 20th December 2002. 20th December 2002. Fidelity Investments. as well as in Endicott and White Plains. Including Raleigh.com 5 “Web HR frees up time for strategy”.”4 12. North Carolina. Moreover. Inside the IBM-Fidelity outsourcing partnership”. http://www. e-HR Practice Executive at IBM EMEA.3.com 3 “Substantial Benefits. http://www. FESCo integrates 450 of the “best Human Resources and payroll people in the business”2.3 Not only FESCo gains the best practices and professionals. Fidelity will have phone centers in 6 regional locations altogether. As Peter J. “we believe that combining our significant HR experience with IBM Global Services. 31st October 2000 156 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .com 4 “Substantial Benefits. Fidelity Investments.

U.1. Czech Republic. Moreover. the Middle-East. and Africa. 2 3 4 Netherlands.K. Portugal.. HR managers’ manual. Sweden. it is easy to adapt as the business grows. Belgium. personnel data maintenance. and speaks 15 different languages. Turkey. etc. Norway. Personnel Today.”1 B] EMEA HR Service Center a) Presentation IBM launched an internal centralized HR Service Center called “AskHR” in June 19992.2. and developed below. Israel. Switzerland. Letter of the week. because it allocates flexibility to a growing business. Almost all HR administration and paperwork are now electronic and self-service. This e-HR is developed in IBM through the Intranet. 31st October 2000 “Les RH au bout du fil”. as developed in a more general way in 3. 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”. Denmark. Finland. France. but also through e-learning (more than 40% of internal training) and erecruitment (70% of applications in France for example). this is quite a competitive advantage for IBM. Personnel Today. holidays management. in the U. is supported by a customized e-HR system for HR staff. it supports about 98. Indeed. The employees and managers have access to formula.K. 10th July 2001 Austria. 28th March 2000 “IBM HR caters for over 40 countries”.000 employees in 20 countries4. Entreprises & Carrières. working hours management. Italy. Concerning European countries only. Germany. 157 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Slovakia. speaking many languages. Spain.The EMEA HR Service Center implemented by IBM EMEA. based in Portsmouth. as Martin Stockton explained: “Because IBM’s new e-HR solution is based on web technology and best-ofbreed HR solutions. This center supports over 100.000 employees across 40plus countries3. South Africa. employees and managers. Ireland. process description and execution..

Of course. Personnel Today. 1 “Service center creation”. providing different levels of service responding to different requirements. from the extensive information on the IBM Intranet. workforce management and staffing. Indeed. 6th June 2000 “IBM takes a more general view of global HR delivery”. learning and executive resources. EMEA employees and managers can now get help directly by accessing the intranet. and skills. 6th March 2001 2 158 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 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”.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”. Moreover. c) Organization The center is composed of about 120 employees2. as Tim Stevens. the aim of such centralization is a reduction of costs and a higher value work and workload. through first level (HR Generalists) to HR Specialists. sending e-mail or calling the EHRSC.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. The HR specialists form three teams: compensation and benefits. Personnel Today.

6th March 2001 “IBM takes a more general view of global HR delivery”.000 e-mails2). 12. and allowed HR managers not to answer all calls or e-mails now handled by the EHRSC (in 2000.1.4. Personnel Today. it fielded 190. 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.3. The customer satisfaction was of 90%3 in 2000. Human Resources Services Provider 1 “IBM takes a more general view of global HR delivery”.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. (see 12. IBM was not sure this would be so feasible and successful (efficiency and service quality improvements) with a group of so many different countries.S. Finally. 6th March 2001 “IBM takes a more general view of global HR delivery”. 6th March 2001 2 3 159 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Personnel Today. Personnel Today.A]).

• Delivering dynamic workplace. It answers to client’s strategic needs by offering a complete offer. from advise until services implementation. CRM (Customer Relationship Management). human capital solutions and business transformation outsourcing. HCS defined its key drivers as following: • Developing an efficient and effective organization.0001 consultants and employees located in 160 countries worldwide. learning & development). HR management systems. p 16 160 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . IBM Business Consulting Services IBM acquired in August 2002 the consulting branch of PwC (Pricewaterhouse Coopers) for $3.4. • Implementing better HR (HR delivery and process. BCS is composed of more than 60. 1 IBM 2002 Annual Report. To find the optimum point. performance leadership.5 billion and formed this new entity: BCS (Business Consulting Services). The purpose was for IBM to combine business expertise with the technology leadership in order to accelerate its clients’ business performance.12.1. A] Human Capital Solutions HCS (Human Capital Solutions) aims to help clients achieve business through: • Gaining more from people (people strategy. And doing so in the most cost-efficient manner. but employees expect in turn ever more from their organizations. organizations require always more from their employees. with business process expertise in areas such as supply chain. operating HR). Indeed. professionals ranging from financial services to healthcare.

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

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

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

Reduction of locations number. 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. like for example coaching. IBM HR technological services proposes a large array of services in organizational change management. including: • HR Access.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). learning programs including design and implementation of new processes. support in communicating important change projects. Processes automation. • SAP HR.com. • Organizational Change Management. Outsourcing. c) Support and implementation • Learning Services. • Outsourcing. organization analysis and redesign. • Peoplesoft. b) ERP (Enterprise Resource Planning) services IBM HR technological services offers the administration of a large range of HR ERP. • ASP with mySAP.

12. • Global Financing.• ASP with HR Access. develop. and not on the only technology industry. thanks to its very advanced teaching technologies. IBM offers. In the end.5. 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. IBM in Europe. IBM Learning Services helps companies to design. without increasing costs (travel costs and loss of productivity are reduced compared to classic training).3. 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.4. Through this chapter we have been able to demonstrate that IBM could not be reduced to this computer industry. IBM is now evidently focusing on “e-business on demand” in general. It has chosen to manage its Human Resources with the help of the most modern tools ever imagined so far. IBM Europe consists in a huge network of efficiently organized 1 “IBM recrute et forme pour le compte de son réseau”. web solutions that enlarge the diversity of training proposed. and rapidity. IBM Learning Services IBM is the 1st e-learning (training technologies and services on line) provider worldwide. Conclusion IBM is worldwide famous for being a major actor of the computer industry. To sum up. and implement training programs to optimize their employees’ potential. counts more than 100.1 12. accumulating one of the greatest experience as far as a successful Human Resources management is concerned. 000 brains organized in a dense network. As an example. 1st February 2000 165 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . improving efficiency. as we saw. in 2000. Les Echos.

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. in the long term. 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.knowledge workers that stand among the best in technology and outsourcing services. 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”. Finally.

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

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 . and critical feedback. meetings. But it also has positive aspects. We are now more than motivated to apply our knowledge at the service of our future employers in exchange for ambitious. writing it in couple is incredibly more demanding than anticipated. Of course. it prefigures most of all our professional future.AFTERWORD After about six months of research. and writing periods. we finally reached the end to this thesis. such as complementarities. 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. readings. we could never be completely satisfied with our work. exciting. but we will probably never forget the good (and also the bad) time we had working together. It is in fact a real starting point. practical. and enriching new experiences. constant support. Writing a thesis alone is already a tough exercise.

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

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

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

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

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

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

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

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

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

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

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

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

. 132 a) Company overview . ......... ...................... . . .... ..... .... CAS E S TU DIES ... ... ............................ .. .... .... 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 . ........... ... .. 129 c) Results ....... ....4 .................. .............. .......... 129 b) HR outsourcing deal . . ..... . ............... .................................. ..................... .......... .................... . 1 3 6 191 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ........ 129 B] Other outsourcing companies that applied this model..... N o ev olut ion pe rs pect iv es .... .. 1 2 8 C H A P T E R 10..... .................... 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 ..... ..... . .... . ............. .. . ... ....1 ........... ..... ............ ... .. ............ ...... . .. 130 a) Company overview ... . ... 126 9 ......... ............. .. .... ............. ...... ..... 134 b) Implementation overview ....... .......1 ... .. . 1 2 9 10 ... ....... .. .... .. . .... 130 b) Implementation overview ...... .. 134 c) Results ..... ... ......9 ... ...... ... 129 a) Company overview .............. ..... . . ........... 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 ... . ... ... .... .... ...5 .... ....... ..... .....4 ........ 130 A] Global shared services Center example: Boeing.. .... .... .... . ..................... ... ......... .... ..... ...... ... ..... ..... ..... ..... ... ...... . ...... ..... 133 C] French shared services center: France Telecom ... .... . ......... 126 9 ................ ... ........ .. ..... .... ....... . 134 a) Company overview ..... . ...2 . 132 b) Implementation overview ...... .............1 .... . ....3 ...... ......4 ........ 1 2 9 1 0 .. ... ....... 130 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 . ........... . ........ .... . .... 1 ......... ..... 126 P A R T IV..... ....... ........ . ... ..... .......... 129 A] Credit Suisse First Boston Group .. 134 1 0 .. ......... ..... . ............. . .... .. . 131 c) Results ........... . ...... . ........... 134 D] Other outsourcing companies that applied this model .. ... ... 132 B] European shared services center example: DuPont Europe ......... ....4 ...... .. .... . ... ..... .... ......... ....... .... N o res pect of p r ic in g . E xte rn all y out sou r ced . ....... .......... .. ....... .... .. .. ... ............ .. ..... ... . 2 ........ ...... . ......... ............ ............. ......

.. .............. Out sou r c in g impl eme ntat ion re sult s ..... . 143 B] Activities ....... ...1 .....2 .. 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 .. .. . ........ ......... ............ Othe r ma in c om pan ies w h ich ap pl ie d t h is m odel .. Payr oll an d Bene fit s ...... St affin g an d Recru it ing ...... . ..... ................... 142 11 ... ....... ....... 145 192 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ...............1 ........ ... ... .... ...1 ... ... ..... ... 138 B] HR outsourcing deal .... 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 ....3 . 139 a ) P o s i ti v e o n e s . ........ ...... ... ..... . H R out sou rc ing de al ... ......... .......... ...... ........ .....3 . . BP Am oc o (B r it ish Pet r oleum Amoc o) ....... ... Empl oyee hea lt h a nd Pen s ion bene fit s ....... ...... .. . 140 C H A P T E R 11.... ...................... 136 10 .1 ...3 ...1 ............... ...1 ....................... ... . .. ... ...... .. 2 .........3 .. ............... 137 10. ............ ......... .......... ........ ....... ....... .......1 .. .. ............ ...... ...... ....... ... .............. . 144 C] Key facts ... .... ... ... ...... 1 4 2 11. ... ... ....2 ....... .. ............. ..... . . 1 4 3 11 . ...... ......... ..... .. ......... .... ... 143 11 ..... ... . ....1 ..2 ... 145 D] Strategy .......... ....... .... .. ....... .. 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 ...4 ....... .... 1 3 8 10 ...1 . . . .. ...... . .10 ...... ............ 1 4 2 11 ..........2 . ........ .................... . ...... 136 10 ............... .......... . .. 139 D] Outsourcing implementation observed results ... .. ..3 ............ E xult I nc ....... ......... ........................ Specific p r ov ide rs in spe c ific count r ie s .. ...... ......... 143 A] Company overview ................... ..... ..... .. .. ... ..... ....... . ........ ... ............ .... ...............2 ...... ........... ................... . ... ... 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 . ........ .... .. . . .................. ........ ..... 140 10 ................. .......... .. 143 1 1 ...... ... .......... ..... . ............... ...... .2 ... . . ... O t her ma in p r ov ide rs p r opos in g an int e grated s olut ion ... ... .......... ... ........ 142 11 ...2 ...... ........ Comp an y ove rv iew . ... ... 138 A] Company overview ....... 145 11 ...... 138 C] Comments .... .... 1 3 9 b) Negative ones ... ................ ................. .... ...2 ..... ... . ......................... .. .......... ..... ...... ....

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

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

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. This paper has not been submitted in the same or a similar form to another examination authority. Crach’. 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. 31st July 2003. Crach’. I marked as such all quotations I used from published and non-published writings.

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