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

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

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

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

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

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

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

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

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

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

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

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

1. Volume 97.2. Outsourcing Situations And Approaches 1. Summer 1998. maximizing both its outsourcing strategy and its investment. thus generating new revenue and services that will be sold to others and.Companies sometimes want to take advantage of this new outsourced activity to create the new business opportunity themselves. Anthony DiRomualdo and Vijay Gurbaxani. whatever the type of outsourcing approach or situation one has. • Exploiting business advantages of the outsourced activity.1. Finally. three kinds of strategic intents usually drive the decision to outsource: 1 • Improving the outsourced activity’s operations. 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. Sloan Management Review. • The proximity of the activity to the core business.2. if the venture is successful. By crossing these two criteria. one obtains a typology of the four main possible outsourcing situations: 1 Inspired from the article “Strategic intent for IT outsourcing”. pp 67-80 14 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • Increasing the outsourced activity’s contribution to the global performance of the company. Number 4.

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

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

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

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

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

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

security. and office maintenance. 21st October 1998 21 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . payroll. the outsourcing phenomenon developed rapidly during the last few years. the European market will reach $52 billion in 2003 and will concern ever more different kinds of activities. Global evolution of outsourcing According to a study by Dun & Bradstreet and The Outsourcing Institute. In comparison. Moreover. IT.core competencies. 1 “L’irrésistible montée de l’externalisation”. 1. which gives in the end a maximum value-added to companies that are part of the network. Illustration 2: European outsourcing practices in 19981 Outsourcing is nowadays very well developed and accepted for activities such as office management. Les Echos. after-sales services. It is also increasingly implemented (but is not very developed yet) for logistics. at a time when the American market reached more than $160 billion. and other similar activities that are closer to the core competency. Alain Perz. according to forecasts. the European market reached $40.1.2 billion in 1998.3.

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

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

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

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

1.3.and HR design & delivery. and according to the two organizational and operational role distinctions above. the public face of the HR department. locally and operationally speaking. 2.2. including industrial relations managers (HR local specialists). • Personnel management. All employee relations’ issues occurring in any company are nowadays mostly organized by country regulations. and if personnel management is as operational as people management is. it is nevertheless completely part of the HR department. Human Resources organization If a “shared services center” also called a “HR services center” is included in the HR organization. on the other hand. people management is absolutely essential to HR management as a whole. Personnel management is. • Legal obligations including employee relations and well-being programs. even if large companies try to homogenize them globally. including company managers. Even though it does not and cannot belong to the HR department.1. Both roles are in fact involved in the HR process as far as they are responsible for the day-to-day HR management. 2. the HR organization could be drawn as following: 26 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Operational roles Operational roles can be in turn divided into the two following categories: • People management.

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

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

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

Illustration 4: Activities crossing HR functions Illustration 4 above demonstrates how each HR function is composed of different activities.3.3. This table provides a clear vision of all the different types of activities involved in the HR management of almost any medium or large-sized company in Europe (See 4. Summer 2002 30 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The European labor market and intercultural management issues 1 A] Figures The E. (European Union) contains today more than 370 million 1 “Y a-t-il un marché du travail européen?”. 2. Maurice Thévenet.U.2. Human Resources Issues Of The Multinational Company In Europe 2.1. Les Echos. for organizational vocabulary definitions). from automotive ones to managerial ones.

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

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

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

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

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

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

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

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

1

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

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

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

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

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

Human Resources activities 3.1. Human Resources Outsourcing Definition 3.2.2.1. Self-Service strategy is mainly applied in Europe for the four following processes: 38 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Human Resources Outsourcing Overview Now that we have seen what is to be understood by outsourcing on the one hand. It consists in managing some HR processes directly on the Internet. 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. 3. Managers and employees can access tools and information at any time from any intranet access point.1.Chapter 3.).1. and the Human Resources department organization on the other hand.1. Human Resources outsourcing levels A] Self-Service (e-HR) This first step in HR outsourcing is increasingly developed in Europe.

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

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

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

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

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

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

3.2. Human And Trends

Resources

Outsourcing

Specificities

3.2.1. Global overview

1

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

2

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

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

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

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

1

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

November 2002, p 51
2

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

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

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

4

5

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

overview A] HR outsourcing expenses trends The U. Australia. 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. 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.S. Cubiks (a PA Group Company). 1 Predicting the Workplace of 2010. 3. Human Resources outsourcing market is expected to grow from a $21.2.S.2. Europe. the Human Resources actors will be in 2010 more involved in deciding the company strategies (for 89% of surveyed professionals). and focusing on managing skills. Asia). and 81% of them support that e-selection tools will be widespread and will shorten time and marginal costs of the recruiting process. and will be more required to show the value-added of their department. The high technologies and the outsourcing of some activities will be the solutions for HR departments to meet these requirements.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. 1997 2 3 45 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .value-added services.dataquest. They will no longer manage equality but equity. The new HR roles of the future are predicted to be rethinking the performance and loyalty concepts.com American Management Association.5 billion industry in 2005.7 billion industry in 2000 to a $58. U. according to Dataquest Incorporation. between March and May 2001 http://www.

Mercer Research Report. Philips. Jean-Pierre Poinas.00.5317.In 2001. p 12-17 46 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the use of recruiting consultants is growing: 59% of European companies outsource their “staffing and recruiting” processes. are first of all “training and education” with almost 80%. C] HR outsourcing future For the U.S.3 The diversification of HR activities outsourced is more and more important and go over traditional outsourced activities. Agence ARCA publishing. June 2000 4 Ressources Humaines : l’externalisation en Europe. Cranfield 3 School of Management and William M. Europe overview A] HR outsourcing trends In Europe. van Ommeren. shows that the most commonly outsourced processes. 3. Vernon and J. The last most commonly outsourced process is “payroll administration” with 30%. P.2.com European trends in HR Outsourcing. 1 “The Near Future (Part II)”. 40% of employers have increased their use of external HR services providers in the last three years.. Peter Drucker. the Gartner Group2 forecasts a future growth of 25% each year.dataquest. J.cfo.com/printarticle/0.5642%7C. The Economist. ADP. A study4 carried out among companies with more than 200 employees in 15 countries all over Europe. C. Peter Drucker in The Economist1 strengthens this trend. when he wrote: “Outsourcing the entire Human Resources administrative function which ten years ago barely existed. February 2002. is now growing at a rate of 30% a year”.html 2 http://www. 9th November 2001. The content only is outsourced but not the container: all the “attention management” and the function itself are for the moment kept internally. which represents in facts a tripling of revenue in five years.3. even if their assignments are still very limited (recruitment of a professional for example). Brewster. Similarly. like perks management for instance. http://www.

the shared services center model is more and more implemented in Europe. November 2000.4. Laurence Ritter. 58% of European companies with more than 5. as we will see later. which consists in outsourcing complete HR functions and not only some activities. 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. 3. because of particularly strong regulations and because of the decisive importance of social links.2. p 4 2 “Externalisation: les solutions de BP Amoco et d’IBM”. whereas only few companies apply the “American model”.1 B] HR outsourcing future The shared services solution seems to have the most predictable potential growth in the near future throughout Europe. In 2000. PricewaterHouseCoopers.000 employees have implemented a shared services center.As a result. But on the other hand. social law complexity clearly leads to ever more HR outsourcing. Les Echos. 28th November 2000 47 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

www. 2002. 19% in 2000. p 17 3 Baromètre Outsourcing 2002. 1997 2 Baromètre Outsourcing 2002. 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. www. 41% for distribution. Pratiques et tendances du marché de l’externalisation en France.com.1 b) Large companies Concerning HR outsourcing in large companies. B] HR outsourcing future In France. This trend is higher than for large companies. the number of providers is very small and 1 A Coopers & Lybrand Consultants and l’Association Nationale des Directeurs Financiers et de Contrôle de Gestion (DFCG) Study. Moreover. Pratiques et tendances du marché de l’externalisation en France. only 9% of small and medium-sized companies have already outsourced their Human Resources functions. www.In France. figures are on the one hand on a growing trend since 1999. Ernst&Young en collaboration avec Taylor Nelson Sofres.3 c) New market companies Concerning HR outsourcing in the new market companies4. p 21 4 Baromètre Outsourcing 2002. 40% of them outsource their HR functions.ey. whereas they are 56% for IT. already outsourced parts of their HR activities (recruitment activities for 47% of them). Ernst&Young en collaboration avec Taylor Nelson Sofres. as 24% of these kinds of companies have. logistics and transportation and 32% for facilities management. in 2002. and 20% in 2001. but it decreased compared to 2001 (56%). 51% for finance and administration.ey. Pratiques et tendances du marché de l’externalisation en France. and 38% of them plan to do so in the next two years. 2002. this study shows that only 17% of all large companies prospect to outsource HR. when there were only 17% in 1999. Ernst&Young en collaboration avec Taylor Nelson Sofres. 2002.2 But on the other hand. p 17 48 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .ey. which consists in fact mainly in payroll outsourcing (for 88% of them).com.com.

to a loss of quality (36%).3. For these reasons. www. to a costs increase (32%).1 1 Baromètre Outsourcing 2002. Pratiques et tendances du marché de l’externalisation en France. 2002. but almost never a whole function. and finally to a loss of know-how (17%).companies are afraid to lose control on strategy and corporate vision. Finally. training. the shared services model allows minimizing all the outsourcing risks (see 1. only specific activities are outsourced in a same department. as companies find this solution more flexible. to social problems (for 38% of them).2.). and as they are afraid that outsourcing would lead to a loss of control (49%). Companies outsource almost only.com 49 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .ey. The chosen option in France is mostly the implementation of shared services centers. Ernst&Young en collaboration avec Taylor Nelson Sofres. payroll and selection processes for example. as for Europe.

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

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

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

Michael Porter identified a set of interrelated generic activities common to a wide range of companies that he named the “value chain”. HR. departments have been considered to be composed themselves of “functions” (or sub-departments such as payroll. and in the end the “activity” is a subfunction characterized by its type. we considered the company to be composed of “departments” (such as finance. etc. production. or by self-services.2.2. Borderless Organizations Before starting and in order to clarify our demonstration. Indeed. but on the whole valuecreating process model shared by most companies.). by processing. (See Illustration 4) 4. for the HR department). it is useful to model the company as a chain creating value through its activities. marketing. benefits. that is either by management. similarly. to make it perfectly clear and simple. it seems useful to specify here the definition of the vocabulary we used to describe the organization of the company. The value chain To analyze the specific activities through which companies can create a competitive advantage.1. by administration. 53 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .on short-term financial key performance indicators. The value chain is a chain of activities that generates the value and hopefully most of the time value-added. every observed value creation process may be represented by a value chain as designed by Porter. In fact. etc. 4.

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

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

• The third leaf represents the whole temporary workers that participate in the reaching of the company’s targets. Vuibert. 1996 Alliances interentreprises. but bringing each their resources and skills in order to make up a specialized network. but the new global competitive environment encourages ever more different kinds of joint actions. legally separated. entre concurrence et coopération Dominique Jolly. 2001 2 3 4 56 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Charles Handy. 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. 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. • The second one represents the specialized provider that takes charge of the resting activities. Moreover one may observe that both small and large companies are concerned. Dunod. Dunod. and 1 STRATEGOR. Collectif HEC. Fréry. The alliance is not a new form of relations between companies. Village Mondial. 3rd edition.1 The virtual corporation can be defined as being “composed of several companies interdependent to another. A] Clover leaf The virtual corporation is also called the ”clover leaf” organization3. F. whether they are new or old. its specialization allows it to be more efficient and less expensive than internal services. national or multinational. able to generate more value than the sum of its individual components”. 1997.2 The virtual corporation keeps indeed internally a hard core of strategic activities and outsources all the others. p 50 Benetton ou l’entreprise virtuelle.chains system. 1999 L’Age de la déraison.

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

as fast as possible. Doubleday Publishing 1999. The available knowledge a company has on its clients. Illustration 14: Customer Relationship Management evolution4 At the bottom are transactions where sellers simply sell and the buyers merely buy. and customer3 capitals (on both side of the relationship). structural2. customer capital is resulting from the accumulation of both human capital and structural capital.CBIC’s (Canada Imperial Bank of Commerce) Hubert Saint-Onge depicts the stages of client-provider intimacy and the growth in human1. Stewart. The great challenge of HR outsourcing is to reach the last stage of a business relationship degree of maturity. At the business solutions level. the client-provider’s relationship will pass several stages from the simple transactions relation to the complex partnering. 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. 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. and with time and experience. According to him. Intellectual Capital. The fully-owned knowledge a company has accumulated through its operations.

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

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

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

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

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

it is absolutely expected. On the other hand. to develop a business in accordance to the vision of its core activity. Today. Technological change accelerates overall environmental change. Drucker. by offering its first contract to the new start-up and sometimes even by taking equities. some companies simply outsource some of their workers. There was a time when people had the choice to be linked electronically or not. Harvard Business Review. considering that the reality of an official scale of authority encourages managers to be more professional. it is a great opportunity to be its own boss. Alfred Chandler has always been an adept of clear hierarchy.1 Finally. February 2002.2 Companies offer indeed the opportunity to build their own business to 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. p 26 64 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . They’re People”. For the ex-employee. The method allows the company to get rid of a noncore but still perfectly strategic competency. 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. which explains why the company is motivated to secure the survival of the start-up. Tom Peters supports the idea that workers tend to be given irrevocably a lot more responsibilities and autonomy. To try to remedy this lack of balance between the efficient hierarchy and the creative chaos. Les Echos.performance of capital is not what it costs but how much it is being invested. pp 70-77 2 “Ces entreprises qui externalisent leurs salariés”. 4. contesting the hierarchical power that is inefficient in facing the chaos. 3rd October 1995. Peter F.4. Sabine Grandadam. Rapid 1 “They’re not Employees.

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

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. Temporary development A] Figures 1 employment industry Europe is the geographical area where the temporary employment 1 Rapport économique et social annuel 2002. The Human Resources are moreover drastically changing. They are expected to demonstrate their value-added and to reduce their costs always more. It is one thing for a company to take advantage of long-term freelance talent or to outsource its Human Resources management.org/etudes_statistiques/Rapport_économiŠl_2002_SETT. SETT (Syndicat des Entreprises de Travail Temporaire).1. 5. but it is quite another not to forget. Human Resources Outsourcing And The New Challenges Human Resources are facing the ever more demanding evolution of companies. • A growing number of businesses have outsourced their Human Resources functions. 5.pdf 66 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1.1. in the process. as knowledge replaces strength: intangible beats tangible. and the value comes for now on from the mastering management of its flows.sett.Chapter 5. http://www. the resource itself is no more valuable. that developing talents is companies’ most important task to compete in a knowledge economy.

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

as John Monks has just been elected at the head of the ETUC (European Trade Union Confederation). this debate will all the more be on the European agenda. 2 3 4 February 2002. HRO (Human Resources Outsourcing) industry development 4 In a related but distinct development. Liaisons Sociales. John Monks. p 6 Inspired from “They’re not Employees.S. BBC News Online. both the temporary employment industry and HRO industry are growing quickly.3 5. not just to business but to employees as well. were the fastest-growing business service in the United States during the 1990s.General.800 such organizations. Peter F. claimed that without improvements. last May 2003. and are by the way already in the U. and PEO expect to be collectively the co-employers of 10 million U. welcomed the draft proposal arguing that lower rates of pay for temporary workers undermine workforce motivation and act as a brake on productivity.2. the TUC (Trade Union Congress) General Secretary. 18th February 2002 “La CES prend l’accent britannique”. Isabelle Moreaux. 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. Finally.2. Even though they were virtually unknown only ten years ago.1 On the other hand.1. at least 1. 30th May 2003 “Bosses war against rights for temps”. PEO (see 3. workers by 2005.S. They’re People”.D]). 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.U. including HR activities. Drucker.S. they had become. workers. pp 70-77 68 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . June 2003. the “co-employers” of 2. by 2000. the global economy is now about to live its third big business revolution: outsourcing of business services. Harvard Business Review. which manage their clients’ HR activities. 1 “CBI launches new bid to block irreparable damage from E.2 Finally. temping law”.1. CBI Press.

Moreover. Peter F. HRO providers scope expansion HRO providers. like temporary agencies. Harvard Business Review. but now they can take care of almost all Human Resources activities. Management Angels GmbH.3. Flexibility The popularity of temporary workers is usually justified by the need of always more flexibility.2. 2002.2. für die Wirtschaft im Wandel. for their clients. Scope Expansions 5. They’re People”.3. Expansions Explanations 2 5. many temporary workers are full-time workers for long periods of time in the same company. there are temporary agencies for every kind of job. Today. http://www. but in fact. flexibility has no account on the emergence of HRO providers. but may now be designed from the start to be the co-employer for the largest multinational companies. 5. pp 70-77 69 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Temporary work scope expansion When the temporary employment industry first started nearly fifty years ago. To that extent. it seems interesting to briefly present the law case opposing 1 Interimsmanagement.1.1. It is finally more likely the growing burden of rules and regulations for employers that encouraged both developments.1 5. Drucker.2. especially payroll. February 2002. The first HRO provider in the late 1980s offered to do bookkeeping.2. HRO providers originally confined themselves to taking care of small businesses. have expanded their scope in recent years. from bottom line to top management.5. Business Village. it supplied low-level workers to take the place of employees who were sick or on vacation.de 2 Inspired from “They’re not Employees.managementangels.

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

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

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

This trend will require more than just same new programs and new practices. executives thereby need to work closely with their HRO provider counterparts on the professional development. Stewart. they may become impersonal. they are still a capital resource for the organization and critical to its business performance. pp 79-106 73 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Even while those people are not traditional employees. If employee relations are being outsourced. challenge them and encourage them. But they need to be careful that they do not damage or destroy their relationships with people in the process. new values.Temporary agencies and especially HRO providers free up managers to focus on the business rather than on employment-related rules. Companies have thereby ample reason to try to do away with the routine issues of employee relations. 5. Human Resources New Objectives The HR function faces a growing challenge from business leaders: it has indeed to enable the organization to achieve excellence by developing strategies to attract. develop and retain human capital.1 HR must enable companies to meet the expectations of their stakeholders. people are opportunities. People are capital. Indeed. new goals. Leaders in knowledge-based businesses must spend time with promising professionals: get to know them and be known by them. the main benefit of decreasing administrative work may be to gain more time for people relations. mentor them and listen to them. whether by systematizing employee management in-house or by outsourcing it to temporary agencies or to HRO providers. and paperwork. HR does not manage a collection of fully-owned workers. regulations. but a network of partly-owned knowledge workers. and new policies. The functions that are involved with employee relations should be systematized. Doubleday Publishing 1999.5. satisfaction. and the key to greatness is to look for people’s potential and spend time developing it. Thomas A. but then. motivation. It will require new measurements. and productivity of the knowledge workers on whose performance their own results depend. while increasing 1 Intellectual Capital.

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

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

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

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

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

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.2.) and 81 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . In parallel. • Have almost no competitor able to imitate them. • Are very rare and almost unknown by other competitors. The decision itself As seen before. outsourcing has advantages (see 1. The mission of the management board is to create a high level of resources and skills by making them adapted to the environment.B] The resource-based theory This theory deals with important topics for managers such as “core business” and factors activating outsourcing. The goal is to determine factors that underpin competitive advantages of companies.2. 6.1. Resources and skills are strategic when they are the foundations of a lasting competitive advantage. that is to say when they: • Open access to a large number of markets. Resources and skills that present all these characteristics must absolutely not be outsourced. C] Conclusion of the two theories In conclusion. and thereby give a product value from clients’ points of view. 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. • Have almost no substitutes possible. insourcing has for goal to benefit from coordination abilities and from the flexibility that are more important inside the company. where opportunism has only an obvious secondary role.2.

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

arises then the problem of defining which of these activities are part of the HR core competencies and which are not. provided it is not critical to the “raison d’être” of the company. Spring 2001. and in this case the activity must whether be kept internally but there is no focusing reinvestment in the core business.3. There are non-negligible fixed-costs. in order to clearly situate each HR activity according to the three defined dimensions: the HR function belonging. 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. as there is a high uncertainty and as they are regularly processed. Jérôme Barthélemy. What Should Be Outsourced Any activity can be a candidate for outsourcing. the HR department constitutes a real value chain itself. This question is all the more crucial as it strongly determines in the end the HR department competitive advantage. pp 60-69 83 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . In fact. As a consequence.2. Number 3. and the difference of performance and costs that are necessary to set about an outsourcing operation is all the more important as amounts involved are low. and finally the type of activity. all the more as the outsourced activities are based on specific assets. inside the whole company.B]). the degree of proximity to the HR department global strategy. Sloan Management Review. one can use the cone of (HR) competencies previously described (see 4. 1 “The hidden costs of IT Outsourcing”.performance is better than the provider’s. As far as HR activities are concerned and as HR core competencies obviously differ from one company to another. C] The level of transaction costs 1 These costs can be very high. 6.2.

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

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

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

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

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

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

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

3.3. it is possible to use the calculation of the NPV (Net Present Value). but also to actively 7. to help them managing the organizational change. project team has to convince the outsourcing company’s management team. but the costs of HR function outsourcing must also be assessed (separation costs. travel costs. Moreover. In order to obtain a reliable statement of the quality of the investment. legal advise costs or travel costs for example). mismanaged employee transition. transition costs.2. etc.2.1. the project team should not forget to tactfully inform all the other and parallel areas managers which could be affected by the project. taxes. implementation costs.3.). one must be aware of the degree of accuracy of its assumptions. Organization’s ability to absorb change Whatever the kinds of HR functions outsourcing procedures adopted. Management commitment The support it.1. running costs.7. 7. A]. One may also add the use of the transaction cost theory seen earlier in 6. 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. While using the NPV tool. 91 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1. Cost analysis The costs of the project phase itself have to be assessed (external consultants costs. some other internal businesses will be affected and obliged to change. Moreover. Internal Issues 7. not only to be aware of the project. as it will evaluate the profitability of the investment based on anticipated cash flows and discounted at a state rate of interest.3.

outsourcing support activities such as HR functions consists in fact in a collective empowerment of the people involved. but also on others. IBM was committed to run and support the information system of the pharmaceutical company for duration of seven years. when at the beginning of the year 2001. the outsourcing company will maybe need new staff with other profiles. others will be disadvantaged. If some departments will be positively affected. which will also maybe have to reorganize their staff themselves. or even totally transferred. 1 “L’externalisation à toute vapeur”.C]. As an example. 7.Not only the leaving HR staff will have a completely different job.7 billion contract with IBM. Frank Niedercorn. 7. the impact will not only be apparent in the directly affected department. Les Echos. Finally. A communication strategy must be set up from the beginning of the project. as some functions will be reduced internally. and such an operation surely leads to staffing reorganization.4. On the other hand.4. according to the sensitivity of the project.3. AstraZeneca signed a $1. HR outsourcing often includes staff transfer. in order to communicate the vision and the strategy of the outsourcing company and to avoid any confidentiality issue.3. Staffing reorganization As developed in 7. Communication The project team should include in the project guidelines procedures related to confidentiality and internal communication. 2nd May 2001 92 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . but also other departments will have to absorb some changes in the organization.3. which implies for the project team an assessment of the ability to absorb change. and leaders would gain remember it. But IBM was also committed to integrate in its own staff the 1.200 former employees of the Anglo Swedish company.1 As just mentioned.3. as they will work with outsourced employees.

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

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

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

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

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

A] Assets leasing As we saw in 1.A]. and other related tangible assets. it can choose to simply lease them. As we will further develop in 8. • 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.1.K].2.2. They will need to negotiate a purchase and sale agreement. when the outsourcing company does not want to transfer its assets to the provider.3. in exchange for payment or reduction in annual fees. 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.equipment. B] Equipment transfer Many outsourcing deals lead to equipment sale from the outsourcing company to the provider. • 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. • 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 parties have to assess the most favorable means to transfer these assets on a site-by-site basis (to minimize tax and regulations weight). the contract should include a clause for intellectual property protection.

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

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

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

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

Governing law Because laws can be different from one country to another or even from a state to another (like in the U. and it is always better to agree on one before the conflict arise (national. conflicts must arise whatever precautions were taken. but one should not let it have too much useless impact. In the particular case of HR outsourcing. a partner absolutely necessary to the good functioning of the company’s business. federal. The outsourcing company must not forget that the deal must be built on business value and desired outcomes. 103 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1. It can be a businessperson or most of the time a legal professional team.8. that is to say a “give and take” process.2. or within Europe).2. In fact. legal professionals who are moreover quite used to it will exclusively share all negative feelings that could be given off conflicts during negotiations. It will also lead the whole negotiation process. effects can be different according to the chosen governing law.1. the negotiation opponent is likely to be soon one of the most important business partners.2. That is mainly the reason why companies will have made the negotiations by a third-party. but the negotiator can help obtaining a fair contract (see 8.1. Outsourcing negotiator In all kinds of negotiation situations. Legal Framework 8. 8. All the future outsourcing relationship management will depend on this choice. state or local).3.S. as they surely best fit to the job. conflict is part of the game. It is very important that conflicts with future partners do not get personal.) that will anticipate as much as possible the likely occurrence over the term and anticipate with a process to resolve disputes.

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

and slow down the integration process of the staff into the outsourcer’s organization. As a general way. contract-related issues.) 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. They must accompany the staff with waving their former company goodbye and with their integration in their new professional environment. termination notice requirements. the legal framework of such a transfer represents only a minimum protection for collaborators. administrative and financial responsibilities. The outsourcing company may even follow the transferred staff situation a long period after the deal. Hermès Science Publication. etc. The more transparent and clear the management communication will be. as the staff motivation is the key to the success. in order to help the concerned staff to evacuate worries linked to this situation. it is nevertheless very important not to go too far. In this case. by expecting from the outsourcer regular quantitative as well as qualitative information. the more constructive will be the debates. the faster solutions or answers are found. Whatever your ambitions are. Finally. Pierre Laigle. Managing the issues associated with staff transfers will be a key issue. if companies want to be successful. whatever the legal environment is. when you manage a project. As a consequence. particularly given the HR expertise of the employees involved. many brilliant elements will just leave the company even before the transfer is over.schedule for employee communications. and union rights for example. concerning especially pension plans. The faster problems or doubt arise. one of the most important aspects in managing such a transfer is the communication policy.1 Both companies have to organize the transfer in a transition period. It is all the more necessary to work on a fair plan. One does not want transferred staff that feels it has been sold with furniture. severance payments. The legal procedures are very heavy and take quite a long time. 2000 105 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

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

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

as far as the transfer of their work contract is concerned. Sally Vanson. The consequences for collaborators. • The possibility to be transferred again if the outsourcing company changes its provider. • On a collective scale. 2001.K. as an outsourcing operation often give rise to 1 The Challenge of Outsourcing Human Resources. identity transformation. Dispute resolution A] Informal dispute resolution Most of the time. the contract includes a provision on informal dispute resolution methodologies. since 1981.• Change management help: cultural adaptation. and to reintegrate it if it finally insources the activity back. pp 181-188 108 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . remuneration.4. C] English context The TUPE (Transfer of Undertakings Protection of Employment) regulates the employees’ transfers in the U. This law seems nevertheless not always applicable to outsourcing operation. practical organization. • The standing by of the entity after the transfer. the standing by of the former industry-wide collective labor agreements during fifteen months. are: • The standing by of individual advantages. seniority and position. that is to say everything related to status. • The transfer of the whole entity.2.1 8. The purpose is to protect the rights of employees where there is a transfer of undertakings of their work to a new employer. Chandos Publishing. etc. as it is subject to three necessary conditions that are: • The existence of an autonomous economical entity.

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

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

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

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

John K. These agreements describe the level of HR services expected.. and to check the contract compliance or non-compliance. 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).2. Process. 8. Similarly. Halvey and Barbara Murphy Melby. B] Scope of services To avoid future problems. delivery 1 Inspired from Business Process Outsourcing. as far as. pp 53-66 113 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 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. response time. Inc. there is no bright line for determining when is a contract too is sufficiently A contract comprehensive. C] Service level agreements It is necessary to mention the level of HR service expected. considered insufficiently detailed. that might as comprehensiveness subjective. but more likely in an optimal balanced economic performance. as it will allow the outsourcing company to monitor the provider performance. seem comprehensive for one organization could be.3. Strategies and Contracts. for example. the contract must include the most exhaustive detailed list of HR services to be provided.way that will not result in optimal economic performance. in the eyes of another organization. 2000. Depending on the complexity and variety of services and countries involved. The structure of the contract is crucial to motivate service providers to deliver and create value-added. John Wiley & Sons.

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

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

preventing misaligned attitudes from governing the relationship. Process. software.J] Governing agreement 1 As seen earlier. p 59 116 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 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. 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. tools. strategically plan for the future and continuously improve the value they wish to achieve through their relationships. inventions. etc. Inc.). May 2002 2 Business Process Outsourcing. John K. Halvey and Barbara Murphy Melby. Outsourcing Center. patents. John Wiley & Sons. K] Intellectual property 2 As a general matter. instability. handle changing business requirements and new objectives. 2000. when challenges occur. Strategies and Contracts. • Establishes how the parties will work together on an ongoing basis at the level beyond day-to-day operations and metrics.. inequity or mistrust are dangerous to an outsourcing agreement. L] Confidential information 1 Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships. Kathleen Goolsby. to the right to use of each parties. • Governs the parties’ attitudes and reactions. It should indeed be clearly specified the respective proprietary rights of the provider and its client.

specifying their delivery times. the contract should protect and secure the confidentiality of each party’s data and information. O] Reports and documentation All reports expected by the outsourcing company must be defined in the contract.. the access provider’s methodologies. and a lot more. and technologies. the provider will necessarily access to very confidential information.5. but the outsourcing company should re-mention it in the contract to minimize risks. except if both the 117 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Q] Currency risk The contract must also include the definition of the currency or currencies that will be used for the payments just evoked. the legal framework of data security has been developed in 8. methodologies and technologies.In this particular case of HR outsourcing. 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. For this reason. know-how.. M] Data flow The legal framework of transborder data flow has already been described in 8. Similarly. will also but to also the data on know-how. A provision that will force changes in the service charges in case of overcharging should be included. such as personal data on the outsourcing outsourcing company’s company employees. Too many details seem to be always better than too few. strategic plans. Indeed.2.2. but it is more secure to re-mention this issue in the contract as well. N] Data security To the same extent.5.

In the contract.provider and the outsourcing company stay in the same economical area such as E. http://www. 1 “Common Problems. To limit the damages. 2003.1 U] Governing law As explained in 8.U.1. in order to manage any future potential problems.php?t=25 118 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . service. it is necessary to mention the governing law chosen in the contract. it must be considered possible variabilities in the outsourcing company’s business. such as termination clause as it will be developed later. There should be no "Assumptions" in the final agreement. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”. Attorney at Shaw Pittman. both parties should assess the tax exposure." Any assumption should be discussed in detail and the impact to the price or services of variations in that assumption should be clearly documented. this selected currency is subject to exchange rates fluctuations. 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..2. or renegotiation right for example. "Assumptions" are providers’ codes for "If this doesn't turn out to be true.com/particle. as only one party will support the risk. or in the provider’s business.. R] Taxes Because the tax liability imposed on an HR outsourcing operation can be very heavy.chiefofficer. parties should include in the contract flexibility and clauses (agreements) to allow this potential variability. sales) on a country-by-country basis for example. they can decide the allocation of responsibility for taxes (VAT. the price will change. T] Business variability If the term of the contract is long. This leads to possible discussions.

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

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

The most important is that the HR overall responsibility stays inside the outsourcing company. Piloting committee 121 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . HR activities that are mandatory in certain European countries and.Chapter 9. In our opinion. The managerial function may stay the same.1. On the one hand.1. • Assuring the coordination with the business. activities that have for essence the strategic coordination with the whole company. companies of the future will outsource their whole HR department. but on the other hand it is easier for the management to lead on effective results without having to take care of the day-to-day issues. as they are core to the outsourcing company’s business. In the end. Managerial activities The outsourcing company should necessarily keep in-house the strategic coordination of the outsourced activities and their control. one can say that it may seem harder to do so. the piloting committee is a new organ that will take in charge the control of the outsourcing relation. As explained further.1. on the one hand. Elements To Keep Internally 9. It does not manage throughout direct authority but throughout contractual relations. the only difference is that it does not own the resources it manages anymore. • Taking strategic decision for the business.1.2. 9. and to some extent could even be outsourced to a third-party. on the other hand. the management team has three main activities to fulfill in order to assume their complete responsibility of the function: • Defining big orientation needs and priorities of the business. Managing Outsourced Human Resources Activities 9. in fact. except for both.

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

even more than an 1 “Change Management”.2. to maximize its chances to build a successful outsourcing operation. someone who is focused on managing relationships rather than handling transactions.• Mastering the knowledge of the company’s business and its environment. Outsourcing implementation skills These skills allow making sure that the provider does its job the way it announced it would do it. 9.4. 18th April 2000 123 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as they imply developing flexibility and credibility. The aim is to reach a win-win situation.1. 9.2. so you will need a different kind of person. the company has to make absolutely sure that it has the following competencies at its disposal. Personnel Today. It doesn’t take a lot of those sorts of people but it needs someone with clout. Strategic vision skills These skills allow defining which outsourcing strategy would best serve the competitive advantage of the company. • Investing in always more human capital management asset. Alliances management skills These skills make it possible to manage the relation with the different providers. Influencing and conflict management skills These skills are very important as well. As David Koch. European leader for HR outsourcing at PricewaterhouseCoopers.”1 9.2. 9. not a service.2. Required Skills In the end. 9.3.2.2. said: “You are establishing a partnership with the organization.

2. 9. Other Solutions To Keep Control Aside the contract. In fact. especially in order to help collaborators facing their new environment. Laurence Prusak (Executive Director IBM Institute for Knowledge Management) and Don Cohen. Social capital development skills 1 It order to make a HR outsourcing operation work on a long-term basis.3. Change management skills Outsourcing implies strong operational changes for companies. pp 86-93 124 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and that is mainly the reason why it is important and surely decisive to have internal excellent change management skills. Transfer of specific assets If the client-company transfers particularly specific assets to the provider as part of the deal. June 2001.5. Developing social capital consists in fact in favoring people connections. other structural mechanisms allow a certain control on the outsourced operation. thereby the exclusive client-company gain a big influence on the provider. and when possible mixing both employees of the provider and the outsourcing company. most of the time. the provider accepts only assets that can often be standardized. As an example both companies should think of incentives that workers could enjoy together (and not alone and outside the company). Harvard Business Review. and if those specific assets are being hard to standardize for the need of other deals with other client-companies. enabling trust and fostering cooperation. it seems that social capital development would be very useful.1. 9.6.unbalanced particularly winning situation. 9. 9.3. But it is always 1 “How to invest in social capital”.2.

it seems that the spin-off solution does not offer the best performance results (unless the activity becomes a core business). the solution of creating a spin-off allows the company to keep quite an entire control on the service. 9. as the same stakeholder will privilege the performance of its core competencies. 9. Most of the time.3.2.useful to know the exact implicit power one has on the provider in order to have done what exactly needs to be done. it gains influence but it is limited enough not to interfere with core business focusing investments. European Management Journal.4. it may happen that the transition period during which the two companies proceed to the transfer of assets from one to another is not enough well managed. On the other hand. There might indeed be a contract between the two organizations. 1 “IT outsourcing: finding from an empirical survey in France and Germany”. 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.3. in other words. Bad start In 10% of the cases. Pierre Laigle. as already seen. Hermès Science Publication. that is to say. 2000 125 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 2001 2 Dictionnaire de l’infogérance. during the six months before the forecasted starting date. Problems Likely To Occur 2 9.3.4. in the activities that have the best ROI. Spin-off structure 1 Of course. 9.1. 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. but it is nevertheless not of decisive value comparing to a strong common stakeholder. Jérôme Barthélemy and Dominique Geyer.

during the first year of outsourcing. the provider in this type of cases has a valuable know-how in a certain kind of service. In fact.4. it has a too stable or rigid service offer. which is really not a satisfying situation.4. No respect of pricing In 20% of the cases. Thereby. this has for sure a negative impact on financial forecasts.2. 9.3. but unfortunately it has hardly any possibility or will to focus on change management skills. it appears that the possibilities of service evolution are very weak. In other words. 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 . When the provider has previously underestimated the prices of services. the client-company has to do the job simultaneously. whatever the price its clients would be ready to pay. and so perceived client service degrades. if the outsourcing company tries to get them to work harder by offering them some extra incentives such as stock-options.. 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. it may happen that the provider did not succeed in meeting contracted expectations. it does not take too much time to do pressure on the client-company in order to obtain a better deal.4. Most of the time. pricing sometimes goes drifting off. during the first year of outsourcing. whereas the whole outsourcing operation seems to be a success.9. etc. 9.5. Maladapted services In 30% of the cases.4. during the first three months.4. 9. the provider’s employees do not necessarily have the incentive to do that. No evolution perspectives In 50% of the cases.

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

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

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

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

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

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

As noticed before. 10.2 A team of RES recruiters works only for Kellogg. Its products are manufactured in 19 countries and marketed in more than 160 countries around the world.1 10. September 2 2002 136 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Michigan.1. • To guarantee a flexible recruiting resources in order to answer the uncertain changing environment and hiring needs of the company. pie crusts and cones based in Battle Creek.2. Its goal was: • To reduce headhunter fees and improve efficiencies for the company. HRFOCUS. meat alternatives.2. Houston). A Company That Has Outsourced Some Of Its Human Resources Processes: Kellogg Foods 10. • To reduce the headcount and obtain better candidates.kelloggs.2. frozen waffles. toaster pastries. Company overview Kellogg Foods is the world's leading producer of cereal and a leading producer of convenience foods. HR outsourcing deal Kellogg Foods decided to outsource all its recruitment functions in 1999.com/company/ “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”. It decided to outsource the department (keeping the strategic aspects internally) to RES (Recruitment Enhancement Services. some of them are based in RES’ Houston Headquarters and some others are based in 1 http://www. including cookies. cereal bars. shared services centers are a good first step for companies that are looking to externally outsource.2. crackers. a division of Bernard Hodes Group.

handles all related recruiting work except for relocation. HRFOCUS.3. thanks to the use of technologies. Director of recruiting and staffing at Kellogg “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”.2. including online internal job posting and employee referral programs. agency fees were just $294. In 2001. and there were many calls for customizing features in the technology program that caused problems in implementation. • Outside agency fees were $1. Outsourcing implementation results The outsourcing arrangement succeeds thanks to the strong partnership between Kellogg and RES. 10. September 2 2002 137 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . but Kellogg encountered resistance from hiring managers who preferred their outside agencies.375 and 389 jobs were filled. Kellogg implemented a Webbased recruitment management system.905 in 2000 to $ 3. 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.163 in 2000 and 202 jobs were filled. and 96% in 2001. RES advertises open exempt jobs. from $7. and uses Kellogg designs and standards for recruiting. • The cost per hire was cut in half. The program also included an efficient maximization of recruiting and hiring program. There are indeed savings in costs and time.Kellogg’s HR department in Battle Creek.946. Kellogg’s efforts to establish a more efficiency system with an outsourcing provider and with internal technologies are paying off.784 in 1 Cydney Kilduff. Outsourcing had in the end positive results for Kellogg: • The provider filled 52% of available jobs in 2000.

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

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

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

exult. because of its willingness to offer jobs to all of its HR employees1. $200 million contract over seven years. covering the predominance of the bank’s back-office HR and affiliated financial processes that support the needs of over 130.exult. a 5-years outsourcing contract (£80 million2) including all the HR transactional functions as well as the non-transactional ones. 1 “How to succeed at HR outsourcing – by really trying”. etc.net/clients/contract_pru.net/clients/contract_boa.S. Key accomplishments5 to date have included a complex payroll conversion. Following the success of this first agreement. ($600 million) for its almost 70.000 employees8). To outsource HR processes for approximately 47. General Electric.html “The cautious approach”.net/clients/contract_boa. employees.net/clients/contract_ip. a 10-year contract3 ($1billion4). and other administrative services) for 70. including 36. Computerworld.6 Prudential Financial signed. Linda Rosencrance.html http://www. International Paper signed. the contract has been extended to include regional staffing and recruiting functions.S. Personnel Today.000 employees. a successful annual benefits enrollment.000 of its employees.html “The cautious approach”. 23rd April 2002 http://www. Bank of America signed with Exult Inc.exult. BAE Systems (with Xchanging). in part. in 2002.agreement to provide “end-to-end” HR services (and payroll. Cable & Wireless signed with Accenture HR Services in 2001. and an achievement of target cost reductions. Personnel Today. Personnel Today.7 Some other companies also chose this model. employees. a ten-years contract with Exult Inc.html http://www.000 U. It chose AON. 14th February 2003 2 “The cautious approach”.000 U. in 2001.exult. 23rd April 2002 http://www. as Colgate-Palmolive. 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 . a ten-years HR outsourcing agreement with Exult Inc. Unisys (with Exult.

example an overview of this industry. Bernard Hodes/RES.1. the main HR outsourcing providers have also been quoted. Payroll and Benefits 3 142 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . KornFerry Futurestep Americas.Chapter 11. This part will give through the Exult Inc. primarily. 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. Robert Half. Adecco.1. Human Experienced Providers Resources Outsourcing In the U. 11. and Monster. clients are in a recession period interested in access to technologies without the large implementation costs. Dice.1.1.2. Spencer Stuart. As main HR outsourcing deals have just been described. 11. Spherion. Staffing and Recruiting 2 The main providers are: Manpower. As it is underlined in HR Magazine1.S. HRO providers are increasingly forming partnerships and acquiring resources in a bid to get contracts from big business.com. but the trend is also noticeable in Europe. HRO Providers Specialized In Some Human Resources Functions Outsourcing Services 11. They work on filling gaps in their array of services so they can better compete for big-volume and big-money outsourcing contracts.com. Careerbuilder.

HR Magazine. November 2002. April 2002 4 “ The 100 Superstars of HR Outsourcing”.1. 11. Steve Bates. Definity Health and VSP/Vision Service Plan.1.2. Paychex. www. Specific providers in specific countries In Belgium (with “Secrétariat social”) and in Italy (with “Consulenti di lavoro”). Exult Inc. 11.2. Human Resources Outsourcing Today. TALX UC Express and ADP.4. Steve Bates.The main providers are: ProBusiness. November 2002.3.1. Bank of America. A] Company overview This Irvine (California) HRO provider is pursuing aggressively this market5. April 2002 2 “ The 100 Superstars of HR Outsourcing”. To date.com. It promises clients a “comprehensive solution” of HR outsourcing services. it has signed with BP Amoco. HR Magazine. International Paper and Prudential Financial contracts over $100 million. 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)”. www. Employee health and Pension benefits 4 The main providers are: AFLAC. and employee relations. April 2002 143 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 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)”. some providers are specialized in HR transactional activities.hrotoday. 11. Steve Bates.hrotoday.com. Unisys. HR Magazine. 1 “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a bid to get contracts from big business (Outsourcing)”. in social security contributions. HRO Providers Proposing An Integrated Solution Including The Whole Range Of Human Resources Processes 11. Human Resources Outsourcing Today.

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

500 expatriate assignees. • Exult closed BP Amoco HR outsourcing in December 1999. in 2003. • Administration of 250. Other main providers proposing an integrated solution So far. C] Key facts • In 1998.000 employees. Exult is the most meaningful provider.2. for $600 million.• Relocation of 2. • Exult concluded 2001 with 7 clients. since it signed the deal with BP developed earlier. targets global Fortune 500 corporations as clients and to establish with them long-term relationships. As seen. D] Strategy Exult Inc. • Exult completed in June 2000 an IPO (Initial Public Offering) reaching $300 million. General Atlantic Partners founded Exult Inc.000 learning enrolments. 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. representing 400. 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 . 11.2. Its strategy is to use its e-HR solution set of applications to enhance HR performance. • Exult reached $270 million in revenue and cash flow. with $50 million.

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

com/hewitt/about/overview/index. It employs approximately 137. including 85% of the Fortune 100. Its revenue: $21.html http://www.com/hrsolutions/aboutus/ 2 3 4 147 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Hewitt Associates’ client roster includes more than half of Fortune 500 companies and more than a third of Fortune Global 500 companies. it handles more than 53 million HRrelated customer interactions a year from more than 13 million participants3.000 on assignment daily.000 companies.mellon. It reaches 9 countries with its more than 800 locations. It has more than 35. 1 http://www. It provides services to more than 33.hewitt. Its annual revenue was $2. outsourcing.000 business and government clients around the world.Asia. It employs more than 310.000 in 60 countries. It employs 2900 professionals in nine operating locations and administers over $150 billion in retirement plan assets.convergys.S.5 billion in 2002. with an average of 59. 45 percent non-U.2. Its revenue in 2002 was $2. As the largest multi-service HR delivery provider in the world. • Hewitt Associates. It provides service over 4 million participants4.eds. • EDS (Electronic Data Systems) BPO.htm http://www. recruiting.com/about_eds/en_about_eds.com/company_overview. • Spherion. Spherion provides staffing.3 billion1. Mellon HR Solutions is the fourth largest HR services provider and one of the largest financial services companies in the world.1 billion in 2002.shtml http://was4. EDS is also one of the leading global IT services company.000 people worldwide. HR consulting & technology. • Mellon HR Solutions.

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

. In July 2003. architects. consultants. helping customers managing IT operations and resources and capitalizing on IT to improve performance. 1 http://famulus. project managers.asp?sym=msft#body 149 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as it is: • 1st in hardware. • 1st in IT Services. Moreover. Activities A] IBM IBM is the world’s largest IT company. • 2nd in software.com/FamulusCom/reuters07-24-140033. it is ranked 8th among all companies ranked and 1st among IT companies in Fortune Magazine “Fortune 500” (fiscal-year revenue).IBM is ranked 9th among all companies ranked and 1st among IT companies in the Forbes Magazine annual “Super 100” (ranking of sales. ranked IBM the third best global brand after Coca-Cola and Microsoft. • Integrated Technology Services. BusinessWeek and Interbrand Corp. It hires almost 175. • 1st in IT rental and financing. assets.000 professionals. and specialists.msnbc.1 12. • 5th in PC. There are four main lines of business: • Business Consulting Services.2. profits. • 1st in research and development. market value).1. B] IGS (IBM Global Services) IBM Global Services is the largest business and IT services company in the world.

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

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 . as being completely part of its core competencies. IBM Strategic Outsourcing manages human and social dimensions of an outsourcing operation. Strategic Outsourcing Services 1 IBM Strategic Outsourcing Services is the management of companies’ applications and IT Systems. and softwares (90% of IBM’s outsourcing deals). or Art. as will be developed in the next point. 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. one can say IBM is a major outsourcing provider.000 IBMers). • Knowledge capitalization (Knowledge Management database available by 138. because of the different employments laws and variation of the Acquired Rights Directive (TUPE in the UK. systems.2. L 122-12 in France for example) developed in part three.12.000 servers worldwide for maintenance or development.ibm. It helps its client to assess its operational objectives. • A wide range of solutions on different trademarked products. • 133 Data Centers and 73. even if a majority is based in the UK. determines which IT processes and activities should be outsourced for a better competitiveness. IBM outsourcing deals are at the EMEA or global level. Finally.1. and are coordinated by an HR outsourcing specialist in the country where the 1 http://www-1.2. and offers human and technical means without equal in the market.2. 12. Most of the time. Indeed. IBM EMEA 2 Strategic Outsourcing Team IBM EMEA implemented a strategic outsourcing team widespread across Europe.

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

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

IBM’s pension plan is the 12th largest in the U. health. Vice President of Alliances. charitable giving. and 120. and other benefits.A]) to handle questions from its 140. firing. service center to 1 “Fidelity to oversee IBM’s pension plan”. along with a broad range of HR services.1. employees and retirees. who provided HR transaction and administrative support to IBM U.3. David Cay Johnston.com.” ii/ Equipment Transfer FESCo leases a call center in Raleigh. FESCo said that it plans to expand the Raleigh. Boston Business Journal. 3rd July 2002 4 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. with assets of $56.fidelity. 2nd July 2002 “Fidelity to oversee IBM’s pension plan”.000 retirees about retirement. discipline. N. The New York Times. 4503 IBM Employee Service Center workers. North Carolina.. David Cay Johnston..S. became FESCo employees (1st August 2002) and continue to provide HR support to the same IBM population. 2nd July 2002 “Substantial Benefits. “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”.C.a leading online brokerage company. Boston Business Journal. b) HR outsourcing deal IBM outsources to Fidelity Employer Services Company (2nd July 2002) the administration of its benefits1: pension and health & welfare plans.5 billion last year.2 c) Tangible transfers i/ Staff transfer As a whole. promotions and other issues. http://www.S. announced4 that another 2. 3rd July 2002 154 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .S. that IBM opened in 1994 (see 12. Inside the IBM-Fidelity outsourcing partnership”. pay. Towney Kennard. 20th 2 3 December 2002.000 workers in the U. IBM Global Services.500 or so IBM personnel workers would remain with IBM “to handle hiring. Fidelity Investments. The New York Times.

3 i/ IBM According to Towney Kennard4. 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 4 Employer Services. Reuters Company News. New York. Executives of both companies said indeed they saw “a promising business in selling payroll and benefits services to large employers. 5th July 2002 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”. d) Business opportunity At the same time1. The New York 2 Times.3.2 Fidelity Investments provides benefits expertise. http://www. “this agreement enhances our e-HR portfolio and leverages IBM’s expertise in process change management as customers automate more business processes”.accommodate growth in its HR payroll and outsourcing solutions. 2nd July 2002 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. including government agencies and major non-profit organizations”.1. The industry takes in about $12 billion today”. 2nd July 2002.A]. David Cay Johnston. IBM Global Services. As mentioned in 12. experience and capabilities and IBM provides computers and databases. 1 “Fidelity to run IBM pension and health plans”. Fidelity Investments and IBM announced that they form venture to market HR payroll and benefits outsourcing services to other companies.fidelity. FESCo was a solution for them to achieve this target. 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 . The Motley Fool. IBM wanted to go to the next level after the service center becomes more efficient. FESCo will also use IBM’s former facilities in Endicott and White Plains.

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

and Africa. Letter of the week.”1 B] EMEA HR Service Center a) Presentation IBM launched an internal centralized HR Service Center called “AskHR” in June 19992. Almost all HR administration and paperwork are now electronic and self-service. working hours management. This center supports over 100. b) Objective 1 “Web HR frees up time for strategy”.K. Concerning European countries only. France. Israel. based in Portsmouth. Czech Republic. Portugal. as developed in a more general way in 3. Personnel Today. HR managers’ manual. 2 3 4 Netherlands. in the U. 10th July 2001 Austria. Moreover. Italy. speaking many languages. Germany. Sweden. Indeed. Denmark. this is quite a competitive advantage for IBM. to provide HR services (direct help and information) to all IBM employees and managers across Europe. is supported by a customized e-HR system for HR staff.The EMEA HR Service Center implemented by IBM EMEA.2.1. U.000 employees in 20 countries4. personnel data maintenance. This e-HR is developed in IBM through the Intranet. the Middle-East. Switzerland. Finland. as Martin Stockton explained: “Because IBM’s new e-HR solution is based on web technology and best-ofbreed HR solutions.000 employees across 40plus countries3. holidays management. and developed below. Slovakia.K. because it allocates flexibility to a growing business. it is easy to adapt as the business grows. The employees and managers have access to formula. and speaks 15 different languages. it supports about 98. South Africa. Belgium. 28th March 2000 “IBM HR caters for over 40 countries”. Spain. process description and execution. 31st October 2000 “Les RH au bout du fil”.. etc. employees and managers. Personnel Today. Entreprises & Carrières.. but also through e-learning (more than 40% of internal training) and erecruitment (70% of applications in France for example). Ireland. Turkey. Norway. 157 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

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

3. Personnel Today. 12. Personnel Today. IBM was not sure this would be so feasible and successful (efficiency and service quality improvements) with a group of so many different countries.000 e-mails2).Illustration 16: IBM European HR Service Center C] Results Even while the Employee Service Center experience had already been applied in the U. Finally. and allowed HR managers not to answer all calls or e-mails now handled by the EHRSC (in 2000. The customer satisfaction was of 90%3 in 2000. 6th March 2001 “IBM takes a more general view of global HR delivery”.S. 6th March 2001 2 3 159 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Human Resources Services Provider 1 “IBM takes a more general view of global HR delivery”.1. 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.000 calls and 46.A]). 6th March 2001 “IBM takes a more general view of global HR delivery”. it fielded 190. Personnel Today. (see 12.4.

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

These services help clients to construct efficient HR strategies and to focus on new HR priorities. and technology development. 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. at lower costs. 12.4. Concerning the HR activities. • Procurement. BTO helps its clients to build a strategic transformation agenda. etc. 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). • Ensuring workforce flexibility. process. and no longer to be reduced only to Personnel Management (that is administrative and transactional activities.• Reducing costs.). IBM accompanies its client to transform its HR in order to manage continuous improvement in people. transition and long-term support. its aim is also to make its clients’ processes run more efficiently. • Aligning people and business strategies.2. Its value proposition includes a suite of offerings that can provide a foundation for continuous strategic change in: • Finance and administration. 161 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • Customer Relationship Management. • Downsizing painlessly. • Human Resources. B] Business Transformation Outsourcing BTO (Business Transformation Outsourcing) provides superior business value by an outsourcing multiple business process strategy.

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

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

b) ERP (Enterprise Resource Planning) services IBM HR technological services offers the administration of a large range of HR ERP. • Peoplesoft. • ASP with mySAP. organization analysis and redesign. Processes automation. IBM HR technological services proposes a large array of services in organizational change management. including: • HR Access. learning programs including design and implementation of new processes. • SAP HR. • Organizational Change Management. • Outsourcing. This service is increasingly gaining importance as factors influencing companies through rethinking organizational structures multiply: ~ ~ ~ ~ Change in skills requirements. c) Support and implementation • Learning Services. 164 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . like for example coaching.com. Outsourcing.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). Reduction of locations number. support in communicating important change projects.

As an example. thanks to its very advanced teaching technologies. web solutions that enlarge the diversity of training proposed. we all know that IBM is still unquestionably one of the global leader as far as technological services are concerned and has pioneered in this area the best outsourcing practices. IBM in Europe. Through this chapter we have been able to demonstrate that IBM could not be reduced to this computer industry. • Global Financing. 1st February 2000 165 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . To sum up. IBM offers. Conclusion IBM is worldwide famous for being a major actor of the computer industry. It has chosen to manage its Human Resources with the help of the most modern tools ever imagined so far. Les Echos. improving efficiency. and implement training programs to optimize their employees’ potential.5. and not on the only technology industry. IBM is now evidently focusing on “e-business on demand” in general. IBM Learning Services helps companies to design. accumulating one of the greatest experience as far as a successful Human Resources management is concerned. without increasing costs (travel costs and loss of productivity are reduced compared to classic training). and rapidity. In the end. counts more than 100. in 2000. 12. 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. develop.1 12.• ASP with HR Access.4.3. 000 brains organized in a dense network. IBM Learning Services IBM is the 1st e-learning (training technologies and services on line) provider worldwide. as we saw. IBM Europe consists in a huge network of efficiently organized 1 “IBM recrute et forme pour le compte de son réseau”.

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

The only valuable asset of a company is the path it builds to achieve continuous success. medium. Individual opportunism is no longer as profitable as brains networks. however wild it may be. they should immediately start to share it efficiently. The market is changing and the “take it or leave it” approach is headed to extinction. provided that it has been well tamed. 167 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and large European multinational companies to reinforce their competitive advantage in an increasingly demanding environment. 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. but it seems to us even more evident that the market. 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. since no company fully owns its intellectual capital.CONCLUSION In conclusion.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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