Hochschule Bremen School of International Business - HBSIB

University of Applied Sciences Herr Prof. Dr. Ulrich ROHR

MBA in Global Management

OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE

Master Thesis 31st July 2003

Ms. Mathilde RENAUX & Mr. Eloi MALTA-BEY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

if only the quality improves. 1997 Reengineering the Corporation. Therefore. such as tax. One would obviously try to combine quality improvement with cost reduction. and if only the costs are reduced. which consists in the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical.interesting to notice that 23% of downsizing operations result from outsourcing operations. service.1 Another confusing practice is reengineering. risk management. contemporary measures of performance. project management. even if it sometimes leads to it. 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. Michael Hammer and James Champy. information technology. on the one hand. and a perfect and essential knowledge of the environment involved. the savings are direct. at least the net result for the company has to improve as well. 1 American Management Association. to improve the quality of the (outsourced) activity thanks to a new expertise that was not internally available. change management. Even while all these related practices might be part of a whole outsourcing operation. 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. and on the other hand to reduce at the same time (directly or indirectly) the costs of this activity. insurance. p 35 2 13 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and ideally finding the optimum point. but one should watch out for possible future harmful consequences. 1. quality.1.2. Harper Business.2 Reengineering must certainly not be assimilated to outsourcing. and speed. finance. 2001. they cannot be assimilated to outsourcing strategies. Main objectives of an outsourcing strategy The main objectives for a company when it outsources some of its activities are. such as cost.

Sloan Management Review. 1. pp 67-80 14 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . whatever the type of outsourcing approach or situation one has. Finally. thus generating new revenue and services that will be sold to others and. one obtains a typology of the four main possible outsourcing situations: 1 Inspired from the article “Strategic intent for IT outsourcing”. if the venture is successful. Anthony DiRomualdo and Vijay Gurbaxani.2.2. Volume 97. three kinds of strategic intents usually drive the decision to outsource: 1 • Improving the outsourced activity’s operations.Companies sometimes want to take advantage of this new outsourced activity to create the new business opportunity themselves. • Increasing the outsourced activity’s contribution to the global performance of the company. maximizing both its outsourcing strategy and its investment. Different kinds of outsourcing operations A] Different outsourcing situations Two fundamental characteristics distinguish the different situations involving outsourcing: • The prior existence of the activity inside the company. • Exploiting business advantages of the outsourced activity. Outsourcing Situations And Approaches 1. • The proximity of the activity to the core business. Summer 1998.1. Number 4. By crossing these two criteria.

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

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

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

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

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

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

after-sales services. Illustration 2: European outsourcing practices in 19981 Outsourcing is nowadays very well developed and accepted for activities such as office management. the European market will reach $52 billion in 2003 and will concern ever more different kinds of activities. the European market reached $40.2 billion in 1998. It is also increasingly implemented (but is not very developed yet) for logistics. security. 1. payroll. which gives in the end a maximum value-added to companies that are part of the network. Alain Perz. at a time when the American market reached more than $160 billion. according to forecasts. Moreover. 21st October 1998 21 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the outsourcing phenomenon developed rapidly during the last few years.core competencies. and other similar activities that are closer to the core competency.3. Les Echos. Global evolution of outsourcing According to a study by Dun & Bradstreet and The Outsourcing Institute. and office maintenance.1. In comparison. IT. 1 “L’irrésistible montée de l’externalisation”.

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

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

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

Organizational roles Organizational roles can be classified in the two following categories: • Human Resources management. including HR support to business 1 Human Resource Management. It determines the rules of the game in situations where employees and companies accept not to spend their whole professional path together but just a part of it.1 2. 60% of the department value-added results from strategic activities that only represent 10% of the costs generated by the department. It insures overall consistency in decisions taking. It finally prevents one part from playing its own game to the detriment of the other.1.1.Chapter 2.1. on the one hand. 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. 2. 60% of the costs generated by the HR department concern traditional administrative activities of the job while representing only 10% of the department value-added. We can distinguish two different roles within the HR department: the organizational ones and the operational ones. It makes sure. that the company acts in the interests of employees by giving them opportunities to advance their careers. Spring 1997 25 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Indeed. according to Spencer. Dave Ulrich. and on the other hand. that employees bring as much value-added as possible during their stay in the company. Human Resources Department Overview After having polished the outsourcing phenomenon. Number 1. conversely. His solution: reengineering and outsourcing. Human Resources Department Roles The Human Resources department supports interactions between managers and employees. Volume 36.

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

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

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

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

Maurice Thévenet. 2. Summer 2002 30 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Les Echos.3. Human Resources Issues Of The Multinational Company In Europe 2. The European labor market and intercultural management issues 1 A] Figures The E.1. for organizational vocabulary definitions).Illustration 4: Activities crossing HR functions Illustration 4 above demonstrates how each HR function is composed of different activities.2. This table provides a clear vision of all the different types of activities involved in the HR management of almost any medium or large-sized company in Europe (See 4.3.U. from automotive ones to managerial ones. (European Union) contains today more than 370 million 1 “Y a-t-il un marché du travail européen?”.

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

1

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

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

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

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

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

1

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

2

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

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

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

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

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

1. we may now enter this chapter trying to get a better overview of the Human Resources Outsourcing phenomenon itself.1.1. It consists in managing some HR processes directly on the Internet. 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 Definition 3. Managers and employees can access tools and information at any time from any intranet access point.1. and the Human Resources department organization on the other hand.1. Defining outsourcing Outsourcing Human Resources activities is giving a provider the management of part or all HR functions we listed earlier (see 2.2. 3.Chapter 3. Human Resources activities 3.).2. Human Resources outsourcing levels A] Self-Service (e-HR) This first step in HR outsourcing is increasingly developed in Europe. Human Resources Outsourcing Overview Now that we have seen what is to be understood by outsourcing on the one hand.

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

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

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

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

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

Agence ARCA publishing. Europe overview A] HR outsourcing trends In Europe.3. shows that the most commonly outsourced processes. Brewster. Peter Drucker. http://www. P. 1 “The Near Future (Part II)”. The Economist.S. C. J. the use of recruiting consultants is growing: 59% of European companies outsource their “staffing and recruiting” processes. even if their assignments are still very limited (recruitment of a professional for example).5317. Philips. 3. are first of all “training and education” with almost 80%. Peter Drucker in The Economist1 strengthens this trend. when he wrote: “Outsourcing the entire Human Resources administrative function which ten years ago barely existed.com European trends in HR Outsourcing. The content only is outsourced but not the container: all the “attention management” and the function itself are for the moment kept internally.3 The diversification of HR activities outsourced is more and more important and go over traditional outsourced activities. the Gartner Group2 forecasts a future growth of 25% each year. Jean-Pierre Poinas. The last most commonly outsourced process is “payroll administration” with 30%. like perks management for instance. Vernon and J. February 2002.com/printarticle/0.. Similarly.5642%7C. Cranfield 3 School of Management and William M. which represents in facts a tripling of revenue in five years.dataquest.00.In 2001.2. p 12-17 46 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 9th November 2001. C] HR outsourcing future For the U. June 2000 4 Ressources Humaines : l’externalisation en Europe. is now growing at a rate of 30% a year”. Mercer Research Report. van Ommeren. 40% of employers have increased their use of external HR services providers in the last three years. A study4 carried out among companies with more than 200 employees in 15 countries all over Europe.html 2 http://www. ADP.cfo.

because of particularly strong regulations and because of the decisive importance of social links. which consists in outsourcing complete HR functions and not only some activities. In 2000. France overview A] HR outsourcing trends Illustration 12: French HR outsourcing market shares in 20002 a) Small and medium-sized companies 1 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. But on the other hand. p 4 2 “Externalisation: les solutions de BP Amoco et d’IBM”. 58% of European companies with more than 5. PricewaterHouseCoopers. 3.000 employees have implemented a shared services center. the shared services center model is more and more implemented in Europe. Les Echos. November 2000.As a result. 28th November 2000 47 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .4.1 B] HR outsourcing future The shared services solution seems to have the most predictable potential growth in the near future throughout Europe. social law complexity clearly leads to ever more HR outsourcing. whereas only few companies apply the “American model”.2. Laurence Ritter. as we will see later.

this study shows that only 17% of all large companies prospect to outsource HR. but it decreased compared to 2001 (56%).1 b) Large companies Concerning HR outsourcing in large companies.com. as 24% of these kinds of companies have. This trend is higher than for large companies. 40% of them outsource their HR functions. only 9% of small and medium-sized companies have already outsourced their Human Resources functions. 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. in 2002. www. 2002.ey. Ernst&Young en collaboration avec Taylor Nelson Sofres. p 17 3 Baromètre Outsourcing 2002. which consists in fact mainly in payroll outsourcing (for 88% of them). Ernst&Young en collaboration avec Taylor Nelson Sofres. p 21 4 Baromètre Outsourcing 2002. 51% for finance and administration.ey. 2002. 41% for distribution. when there were only 17% in 1999. whereas they are 56% for IT. Ernst&Young en collaboration avec Taylor Nelson Sofres.In France.com. 1997 2 Baromètre Outsourcing 2002. already outsourced parts of their HR activities (recruitment activities for 47% of them). p 17 48 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 19% in 2000.com. www. and 20% in 2001.ey. 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. 2002. B] HR outsourcing future In France. Pratiques et tendances du marché de l’externalisation en France. Pratiques et tendances du marché de l’externalisation en France. logistics and transportation and 32% for facilities management. www. Pratiques et tendances du marché de l’externalisation en France.2 But on the other hand. and 38% of them plan to do so in the next two years. figures are on the one hand on a growing trend since 1999.3 c) New market companies Concerning HR outsourcing in the new market companies4. Moreover.

to a loss of quality (36%). For these reasons. to social problems (for 38% of them).ey. Pratiques et tendances du marché de l’externalisation en France.companies are afraid to lose control on strategy and corporate vision. www. Ernst&Young en collaboration avec Taylor Nelson Sofres. The chosen option in France is mostly the implementation of shared services centers. payroll and selection processes for example. Companies outsource almost only. the shared services model allows minimizing all the outsourcing risks (see 1. 2002.3. as companies find this solution more flexible. Finally. as for Europe. but almost never a whole function. only specific activities are outsourced in a same department.com 49 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . training. and as they are afraid that outsourcing would lead to a loss of control (49%).1 1 Baromètre Outsourcing 2002.2. and finally to a loss of know-how (17%).). to a costs increase (32%).

STRATEGIC APPROACH Now that we have demonstrated the real extent of the phenomenon. 50 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . our aim through this second part is to show why multinational companies in Europe can simply not ignore outsourcing when the reengineering of their Human Resources functions becomes necessary.PART II. 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.

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

In fact. In the end. 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. that competitors strongly participate in designing rules. partners or even clients. and that they are sometimes even partners. Actually.companies collectively understand that the rules are not as easy as they seem. even better. if we claimed that the success of a company was hard to define. of taking the advantage more than just winning. without catching it. companies are commonly defined by the process of generating value or. and unfortunately. since each stakeholder of the company is a potential distinctive reference for the definition of its success. that they are not just a problem of short-term profits but a problem of positioning. And all this occurs during the same race. where everything is linked to something else. The only really new aspect of this environment is the everquicker innovation process. that today’s employees will be tomorrow’s competitors. 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 . 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. something is missing in the Jules Verne trophy comparison. Business is more an endless chess game with millions of participants . On the other hand. The race example does not emphasize the fact that business competition is an arena where actors are themselves largely shaping their environment. they are likely to be successful.temporary winners and temporary losers. it is just a question of point of view. way before the arrival line. This example does not underline either the extremely decisive fact that a company’s workforce is not exclusive anymore. more than anything else. and where you need to know how to know. companies would be completely blind. value-added. if any. and offers on the other hand the technological tools to cope with this relative instantaneousness of information broadcast.

for the HR department). 4. HR. Indeed. by administration. that is either by management. Borderless Organizations Before starting and in order to clarify our demonstration. every observed value creation process may be represented by a value chain as designed by Porter. etc. The value chain To analyze the specific activities through which companies can create a competitive advantage. marketing. we considered the company to be composed of “departments” (such as finance. or by self-services. similarly.). departments have been considered to be composed themselves of “functions” (or sub-departments such as payroll. to make it perfectly clear and simple. (See Illustration 4) 4.2. Michael Porter identified a set of interrelated generic activities common to a wide range of companies that he named the “value chain”.1. 53 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .on short-term financial key performance indicators. In fact. benefits. production. it seems useful to specify here the definition of the vocabulary we used to describe the organization of the company. etc. it is useful to model the company as a chain creating value through its activities. and in the end the “activity” is a subfunction characterized by its type. by processing. but on the whole valuecreating process model shared by most companies. The value chain is a chain of activities that generates the value and hopefully most of the time value-added.2.

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

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

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

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

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

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

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

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

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

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

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

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

the resource itself is no more valuable. Temporary development A] Figures 1 employment industry Europe is the geographical area where the temporary employment 1 Rapport économique et social annuel 2002. that developing talents is companies’ most important task to compete in a knowledge economy. They are expected to demonstrate their value-added and to reduce their costs always more. but it is quite another not to forget.sett. It is one thing for a company to take advantage of long-term freelance talent or to outsource its Human Resources management. as knowledge replaces strength: intangible beats tangible. in the process. 5. Human Resources Outsourcing And The New Challenges Human Resources are facing the ever more demanding evolution of companies. 5.1.Chapter 5. 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.1.1. • A growing number of businesses have outsourced their Human Resources functions. http://www.pdf 66 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The Human Resources are moreover drastically changing. and the value comes for now on from the mastering management of its flows. SETT (Syndicat des Entreprises de Travail Temporaire).org/etudes_statistiques/Rapport_économiŠl_2002_SETT.

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

S. the “co-employers” of 2. temping law”. not just to business but to employees as well. 2 3 4 February 2002. They’re People”. the global economy is now about to live its third big business revolution: outsourcing of business services. they had become. taking on temporary employment would do irreparable damage.3 5. 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.2. and PEO expect to be collectively the co-employers of 10 million U. including HR activities.5 million to 3 million U. PEO (see 3. this debate will all the more be on the European agenda. pp 70-77 68 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .U. John Monks. claimed that without improvements.General. Peter F. Finally. workers by 2005. at least 1.2 Finally. Liaisons Sociales. both the temporary employment industry and HRO industry are growing quickly. Drucker.1 On the other hand.800 such organizations. Isabelle Moreaux. The HRO industry as a whole is growing at a rate of 30% a year.D]). 30th May 2003 “Bosses war against rights for temps”. p 6 Inspired from “They’re not Employees. CBI Press. and are by the way already in the U. as John Monks has just been elected at the head of the ETUC (European Trade Union Confederation). 1 “CBI launches new bid to block irreparable damage from E.2. HRO (Human Resources Outsourcing) industry development 4 In a related but distinct development. Harvard Business Review. the TUC (Trade Union Congress) General Secretary. BBC News Online. last May 2003. were the fastest-growing business service in the United States during the 1990s. 18th February 2002 “La CES prend l’accent britannique”.S.S. June 2003.1. by 2000. welcomed the draft proposal arguing that lower rates of pay for temporary workers undermine workforce motivation and act as a brake on productivity.1. Even though they were virtually unknown only ten years ago. which manage their clients’ HR activities. workers.

2.de 2 Inspired from “They’re not Employees.managementangels. Moreover. http://www. but in fact.2. 2002.1. Management Angels GmbH. February 2002. Drucker. Today.1.2. The first HRO provider in the late 1980s offered to do bookkeeping. like temporary agencies. für die Wirtschaft im Wandel. there are temporary agencies for every kind of job. Business Village. HRO providers scope expansion HRO providers. Flexibility The popularity of temporary workers is usually justified by the need of always more flexibility. it seems interesting to briefly present the law case opposing 1 Interimsmanagement.2. for their clients. but now they can take care of almost all Human Resources activities. Expansions Explanations 2 5.5. They’re People”. pp 70-77 69 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . It is finally more likely the growing burden of rules and regulations for employers that encouraged both developments. especially payroll. many temporary workers are full-time workers for long periods of time in the same company. Temporary work scope expansion When the temporary employment industry first started nearly fifty years ago. Harvard Business Review. flexibility has no account on the emergence of HRO providers. from bottom line to top management.3. 5. but may now be designed from the start to be the co-employer for the largest multinational companies. HRO providers originally confined themselves to taking care of small businesses. Peter F.1 5. Scope Expansions 5. it supplied low-level workers to take the place of employees who were sick or on vacation. To that extent.3. have expanded their scope in recent years.

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

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

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

This trend will require more than just same new programs and new practices. they may become impersonal. they are still a capital resource for the organization and critical to its business performance. but a network of partly-owned knowledge workers. Indeed. Stewart. and new policies. Doubleday Publishing 1999. the main benefit of decreasing administrative work may be to gain more time for people relations. mentor them and listen to them. satisfaction. whether by systematizing employee management in-house or by outsourcing it to temporary agencies or to HRO providers. while increasing 1 Intellectual Capital. It will require new measurements. and paperwork.5. pp 79-106 73 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . If employee relations are being outsourced. motivation. executives thereby need to work closely with their HRO provider counterparts on the professional development. new values. But they need to be careful that they do not damage or destroy their relationships with people in the process. Leaders in knowledge-based businesses must spend time with promising professionals: get to know them and be known by them. regulations. Even while those people are not traditional employees. challenge them and encourage them. Thomas A. People are capital. new goals. but then.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. 5.1 HR must enable companies to meet the expectations of their stakeholders. HR does not manage a collection of fully-owned workers. and the key to greatness is to look for people’s potential and spend time developing it. The functions that are involved with employee relations should be systematized. people are opportunities. develop and retain human capital. 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. and productivity of the knowledge workers on whose performance their own results depend.

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

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

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

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

1

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

2

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

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

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

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

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

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

1

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

1997

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

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

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

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

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

Outsourcing presents two main interests: • A direct one.3. the level of performance and the level of transaction costs. or the internal 1 “Strategic Outsourcing”. in order in the end to create always more value. We shall then distinguish several decision criteria: the belonging of the activity to the core business. One must have objective approaches by using the four criteria we developed before (see 6. The question is to know how to decide the outsourcing of this or this activity. Summer 1994. and this approach is very limited. which is actually the basic logic of the labor division and specialization emphasized by Adam Smith at the end of 18th century. Hilmer. A] The belonging of the activity to the core business All activities. Quinn1. Sloan Management Review. • An indirect one.) at the same time. But one must be aware of the definition of a “core business”. According to James B. companies waste their financial resources when they do not outsource all their activities that are not part of their “core business”.2.1.B]). because general managers often subjectively decide it. which do not belong to the “core business” can be outsourced. pp 43-55 82 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . James Brian Quinn and Frederick G. as economies can be done and reinvested in the “core business” activities.1.disadvantages (see 1. there are two possibilities: whether the internal performance is worse than the provider’s performance and thereby it is recommended to outsource. which make the competitive advantage of the company. B] The level of performance Supposing the activities do not belong to the core business. as costs decrease and performance increases.

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

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

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

7th September 1999 2 HR Outsourcing Trends. Nevertheless. even better in financial terms. Moreover. Marie-Béatrice Baudet. as it is an effective mean of harmonizing a number of different regulated HR systems.1. 2002. Another 42% had partially achieved them. and on the corporate long-term benefits. 51% of respondents reported that they had fully achieved their outsourcing objectives. Le Monde. 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.1 6. 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. • Shareholders dividend. Lisa Gelman and David Dell. Those who expressed dissatisfaction cited lower-than- 1 “Le prix réel des nouvelles organisations d’entreprise”. for American companies that have subsidiaries in Europe.• Reciprocal services. Drawbacks Outsourcing HR operations may sometimes pose some challenges and problems. its impacts on the company’s level of competency as a whole. It may also be seen as alternative to making a capital investment in the new technology necessary to support the HR function. Quality decrease and loss of control In The Conference Board Survey2. The Conference Board. outsourcing is a good way to manage their HR functions. p 6 86 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 6. 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. in the European regulations patchwork.4.4. Finally.

87 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . This implies the development of change management skills on parallel to particularly developed organization skills.4. as far as each new process implementation by the outsourcing company after the contract is signed.2. It is all the more crucial as HR activities deal with a lot of confidential and personal data.4.4. It is a necessity for the company that outsources. in most of the cases a real nightmare. is likely to be discussed and charge negotiated by the outsourcer. plant closings. 6. Security issues Another preoccupation is the security concern. during the transition.4. that the provider will adhere to the security policy. The implementation of a new model in order to gain value in the end will be. High unexpected costs The costs can be difficult to control. but difficult to control. High commitment required during outsourcing implementation One must also not forget that mergers and acquisitions. as it leverages the activity. 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.expected service levels and loss of control as problem areas. 6. Human Resources outsourcing creates indeed an increased security risk. which has now the possibility to increase its prices.3. 6.

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

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

in order to manage it the best way. Project Definition 7. for example. (documentation). training requirement. may also be members of this project team. implementation schedules. the finally outsourcing company’s 7. and a second one (in the final stage) specifying commitments and deadlines for the provider. implementation meetings and requirements. Risk assessment The project team must identify and outline the risks HR outsourcing operation could lead to.2. the project team develops two project plans. by defining parallel running environment or pilot phases. and assess the weight of benefits compared to risks. assets and environmental requirements. The major typical topics included are: project specifications.2. Finally. The more detailed it is. the first one defining the outsourcing company’s initial requirements. according to the size and the ambition of the project. one or more members of the managerial activities. once the outsourcing deal is effective. authorizations. one must remember that the more detailed the final project plan is. definition of specific provider’s tasks with milestones and deliverable dates. the better the operation development will be.2. installation reports quality and and plans.2. Project plan The project plan defines the project requirements in more or less detailed. Identify these risks due to new methodologies implementation will allow the project team considering the way these risks can be reduced. testing permits and and acceptance requirements. responsibilities. the more the provider is hold to fixed pricing and time tables. 7.1.and take part in the project from the beginning. 90 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . As already mentioned. Generally.

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

C]. Staffing reorganization As developed in 7.7 billion contract with IBM. 7. On the other hand. 7.200 former employees of the Anglo Swedish company. in order to communicate the vision and the strategy of the outsourcing company and to avoid any confidentiality issue.1 As just mentioned. AstraZeneca signed a $1. Communication The project team should include in the project guidelines procedures related to confidentiality and internal communication. Frank Niedercorn. 2nd May 2001 92 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Finally. HR outsourcing often includes staff transfer. the impact will not only be apparent in the directly affected department. the outsourcing company will maybe need new staff with other profiles.3. when at the beginning of the year 2001. as some functions will be reduced internally. as they will work with outsourced employees. As an example. but also on others. IBM was committed to run and support the information system of the pharmaceutical company for duration of seven years. 1 “L’externalisation à toute vapeur”.3. But IBM was also committed to integrate in its own staff the 1. A communication strategy must be set up from the beginning of the project. If some departments will be positively affected. and such an operation surely leads to staffing reorganization. others will be disadvantaged. and leaders would gain remember it.4. outsourcing support activities such as HR functions consists in fact in a collective empowerment of the people involved. but also other departments will have to absorb some changes in the organization. which implies for the project team an assessment of the ability to absorb change.3. Les Echos. or even totally transferred.4. which will also maybe have to reorganize their staff themselves. according to the sensitivity of the project.3.Not only the leaving HR staff will have a completely different job.

Provider’s selection issues The decision to deal with one or another provider is absolutely crucial. has to plan an external communication strategy. in order to remedy in the end to the often very sensitive dimension of such an operation.We can distinguish three main communication strategies. 93 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as we already mentioned it. with pros and cons for each approach: being transparent with employees from the beginning and along all the different phases. 7. during the provider’s selection. Announcement and information to some other stakeholders has to be carefully managed: government. 7. implementing an HR outsourcing project.4. a particularly critical issue is the selected period when to make the announcement: is it during the project phase and before the provider is selected. Each approach has its reasons for being according to its specific environment. stockholders. or at the limit simultaneously. just informing employees that there will be an outsourcing operation but waiting until the negotiations are well under way. Indeed. or hiding everything to employees until the deal is done and the contract signed.1. External Issues 7. and the outsourcing company’s clients. Communication The outsourcing company. as the reversibility of this particular choice will be very difficult to consider in the future.2. or once the deal is done and the contract is signed. the decision to outsource and the name of the selected provider should be announced to the press after announced internally to employees.4.4. Moreover.

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

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

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

2000.4.3. p 51 97 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • Permanent wish of improvement. • Clear vision of the market. John K.. • Good managerial competencies. • Strong experience as far as staff and equipment transfer are concerned. • Suitability between interacting corporate cultures. • Problem-solving method implying the client-partner. The subjective suggested criteria above are all dealing with the suitability between the client and the provider: • Trustful and respectful of confidentiality. • Flexibility and ability to change. • Willingness to share expertise. Greaver1: • Good reputation. • Constructive general behavior. 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. 7. Process.thanks to Maurice F. Greaver. Amacom. Inc. such as facilities and business 1 Strategic Outsourcing. December 1998 Business Process Outsourcing. • Satisfaction of current clients. • Financial stability. John Wiley & Sons. Halvey and Barbara Murphy 2 Melby. Strategies and Contracts. Maurice F. • Commitment to invest in specific assets for its client-partner.

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

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

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

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

Moreover. One of the profiles must correspond to a legal professional. until at least the beginning of the HR functions outsourcing first effects. • Negotiating as the company’s spokesman all the contractual details and framework of the deal.1. This legal support has in fact two very important roles to fulfill: • Actively participating to the whole outsourcing implementation process. 8. That is mainly the reason why companies have to appeal to legal professionals. as many large companies expect that internal legal professionals must stamp all contracts involving transactions from a certain amount. implementing an HR outsourcing solution is managed like any other project. Outsourcing Legal Actors 8. 102 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Legal Aspects Of A Human Resources Outsourcing Operation Outsourcing operations have a lot to do with complex legal issues.1.1. and of course especially when the contractual aspects arise. as it will then be able to assess the legal risks following such an HR outsourcing operation. and if possible especially with HR functions outsourcing contracts. It is indeed crucial to gather appropriate profiles to be part of the leading team. from the decision motivation to the board. the legal support may also consist in a law-firm or any independent attorney specialized in outsourcing cases. The legal professional in the team should not have a leading position but has to be part of all operation stages. with experience in outsourcing contracts.Chapter 8. Legal professional As we saw before. They can just be the internal legal staff.

2.) that will anticipate as much as possible the likely occurrence over the term and anticipate with a process to resolve disputes. a partner absolutely necessary to the good functioning of the company’s business. federal. legal professionals who are moreover quite used to it will exclusively share all negative feelings that could be given off conflicts during negotiations. 103 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and it is always better to agree on one before the conflict arise (national. effects can be different according to the chosen governing law. or within Europe). That is mainly the reason why companies will have made the negotiations by a third-party. the negotiation opponent is likely to be soon one of the most important business partners. It is very important that conflicts with future partners do not get personal.S. 8. Legal Framework 8. The outsourcing company must not forget that the deal must be built on business value and desired outcomes. It will also lead the whole negotiation process. Governing law Because laws can be different from one country to another or even from a state to another (like in the U. state or local).8.1. conflict is part of the game. It can be a businessperson or most of the time a legal professional team.1. but one should not let it have too much useless impact. All the future outsourcing relationship management will depend on this choice. In the particular case of HR outsourcing.2.3. Outsourcing negotiator In all kinds of negotiation situations.2. but the negotiator can help obtaining a fair contract (see 8. In fact.1. that is to say a “give and take” process. conflicts must arise whatever precautions were taken. as they surely best fit to the job.

8. John K. before to relocate any service outside its borders. and that certainly determines the success of the outsourcing company’s decision to outsource. Halvey and Barbara Murphy Melby. The main issue is that if authorities are not cooperative. • 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.2. Staff transfer The provider might be required to make offers of employment to parts or all the outsourcing company’s staff.8. Strategies and Contracts. Process. 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. the entire operation can be delayed or even cancelled. In some cases.. the government can even impose to keep a service location in its country.2. 1 Business Process Outsourcing. Relocation of service locations Some countries expect the outsourcing company to get a government consent and approval (or sometimes just to notify it). The terms and conditions of employment (employee transitioning.2. • Countries where approval from a regulatory agency is necessary prior to migrating business process operations to a provider site. Inc. • The fourth category is for those countries where no action is necessary. 2000.3. p 124 104 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . John Wiley & Sons.

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

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

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

pp 181-188 108 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and to reintegrate it if it finally insources the activity back. are: • The standing by of individual advantages.1 8. Sally Vanson. • On a collective scale. as an outsourcing operation often give rise to 1 The Challenge of Outsourcing Human Resources. as it is subject to three necessary conditions that are: • The existence of an autonomous economical entity. as far as the transfer of their work contract is concerned. C] English context The TUPE (Transfer of Undertakings Protection of Employment) regulates the employees’ transfers in the U. Dispute resolution A] Informal dispute resolution Most of the time. since 1981. The consequences for collaborators.K.• Change management help: cultural adaptation.4. seniority and position. practical organization. Chandos Publishing. etc.2. that is to say everything related to status. 2001. • The standing by of the entity after the transfer. • The possibility to be transferred again if the outsourcing company changes its provider. remuneration. the contract includes a provision on informal dispute resolution methodologies. the standing by of the former industry-wide collective labor agreements during fifteen months. The purpose is to protect the rights of employees where there is a transfer of undertakings of their work to a new employer. • The transfer of the whole entity. identity transformation. This law seems nevertheless not always applicable to outsourcing operation.

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

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

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

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

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

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

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

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

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

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

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

It is indeed important to notice that contracting processes can reach almost 20% of the total annual costs of any outsourcing service. As a result. deadlines and costs previsions might not be completely respected. Most of the time. Problems Likely To Occur In 75% of the cases. it may happen that the time negotiating the contract goes beyond what was initially expected. during the year before the signature of the outsourcing contract. Moreover. lot of hidden costs can appear once the contract is signed. 120 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 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.8.4. traditional contracts are too rigid (fixed-prices for instance) and cannot be changed in consideration of the technological or activities changes. if the contract is not complete and not totally clear.

activities that have for essence the strategic coordination with the whole company. Managing Outsourced Human Resources Activities 9.Chapter 9. on the one hand. It does not manage throughout direct authority but throughout contractual relations. companies of the future will outsource their whole HR department. Piloting committee 121 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . As explained further. on the other hand. Elements To Keep Internally 9. The most important is that the HR overall responsibility stays inside the outsourcing company. one can say that it may seem harder to do so. 9. as they are core to the outsourcing company’s business. the only difference is that it does not own the resources it manages anymore. the piloting committee is a new organ that will take in charge the control of the outsourcing relation.1.2. 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. On the one hand. Managerial activities The outsourcing company should necessarily keep in-house the strategic coordination of the outsourced activities and their control. In our opinion. • Assuring the coordination with the business. in fact.1. • Taking strategic decision for the business. 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. HR activities that are mandatory in certain European countries and. and to some extent could even be outsourced to a third-party. The managerial function may stay the same.1. except for both.1. In the end.

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

• Investing in always more human capital management asset. 18th April 2000 123 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Personnel Today. 9. the company has to make absolutely sure that it has the following competencies at its disposal. even more than an 1 “Change Management”. so you will need a different kind of person. Influencing and conflict management skills These skills are very important as well.4. Outsourcing implementation skills These skills allow making sure that the provider does its job the way it announced it would do it. 9.• Mastering the knowledge of the company’s business and its environment. 9. not a service. As David Koch.”1 9. to maximize its chances to build a successful outsourcing operation. Required Skills In the end. Alliances management skills These skills make it possible to manage the relation with the different providers.2.1.2. The aim is to reach a win-win situation.2.3. Strategic vision skills These skills allow defining which outsourcing strategy would best serve the competitive advantage of the company.2. as they imply developing flexibility and credibility. European leader for HR outsourcing at PricewaterhouseCoopers. someone who is focused on managing relationships rather than handling transactions.2. said: “You are establishing a partnership with the organization. 9. It doesn’t take a lot of those sorts of people but it needs someone with clout.2.

Transfer of specific assets If the client-company transfers particularly specific assets to the provider as part of the deal. Other Solutions To Keep Control Aside the contract. it seems that social capital development would be very useful. Change management skills Outsourcing implies strong operational changes for companies. Harvard Business Review.5. 9.6. Laurence Prusak (Executive Director IBM Institute for Knowledge Management) and Don Cohen. But it is always 1 “How to invest in social capital”. June 2001.3. In fact.3.unbalanced particularly winning situation.2. Developing social capital consists in fact in favoring people connections. other structural mechanisms allow a certain control on the outsourced operation. and that is mainly the reason why it is important and surely decisive to have internal excellent change management skills. and when possible mixing both employees of the provider and the outsourcing company.2. Social capital development skills 1 It order to make a HR outsourcing operation work on a long-term basis. especially in order to help collaborators facing their new environment. the provider accepts only assets that can often be standardized. 9. thereby the exclusive client-company gain a big influence on the provider. As an example both companies should think of incentives that workers could enjoy together (and not alone and outside the company). pp 86-93 124 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1. and if those specific assets are being hard to standardize for the need of other deals with other client-companies. 9. enabling trust and fostering cooperation. most of the time. 9.

9. Spin-off structure 1 Of course. Hermès Science Publication. On the other hand. Most of the time. it seems that the spin-off solution does not offer the best performance results (unless the activity becomes a core business). Pierre Laigle.3. 9. European Management Journal.useful to know the exact implicit power one has on the provider in order to have done what exactly needs to be done.3. 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. 2000 125 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . in the activities that have the best ROI. 9. Jérôme Barthélemy and Dominique Geyer. the solution of creating a spin-off allows the company to keep quite an entire control on the service. 2001 2 Dictionnaire de l’infogérance. Interest acquisition The acquisition of equity by the client-company in the company providing the outsourcing services is a good solution to have a control on it without being its main stakeholder. 1 “IT outsourcing: finding from an empirical survey in France and Germany”. There might indeed be a contract between the two organizations. during the six months before the forecasted starting date. that is to say.4. it gains influence but it is limited enough not to interfere with core business focusing investments.3. in other words. as already seen. but it is nevertheless not of decisive value comparing to a strong common stakeholder. Problems Likely To Occur 2 9.4.1.2. as the same stakeholder will privilege the performance of its core competencies. 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. Bad start In 10% of the cases.

during the first year of outsourcing. it appears that the possibilities of service evolution are very weak. it has a too stable or rigid service offer.4. it may happen that the provider did not succeed in meeting contracted expectations. In fact.2. No evolution perspectives In 50% of the cases. 9. it does not take too much time to do pressure on the client-company in order to obtain a better deal. and so perceived client service degrades. Most of the time. 9.4. whereas the whole outsourcing operation seems to be a success. but unfortunately it has hardly any possibility or will to focus on change management skills. the provider in this type of cases has a valuable know-how in a certain kind of service.5. if the outsourcing company tries to get them to work harder by offering them some extra incentives such as stock-options. during the first three months. the provider’s employees do not necessarily have the incentive to do that. Maladapted services In 30% of the cases. Thereby. 9. In other words.4.9. No respect of pricing In 20% of the cases. whatever the price its clients would be ready to pay.3.4.. this has for sure a negative impact on financial forecasts.4. Overlapping legal framework An additional critical aspect is that while the former outsourcing company's employees would frequently go above and beyond the call of duty to make sure that problems are resolved and impact minimized. When the provider has previously underestimated the prices of services. it probably has destroyed that essential dividing line between the provider’s employees and them becoming its agents and employees in the 126 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . the client-company has to do the job simultaneously. which is really not a satisfying situation. during the first year of outsourcing. pricing sometimes goes drifting off. etc.

1 “Common Problems.2. Insurance like the EPLI (Employer Practices Liability Insurances) for example. not all legal HR issues can be easily anticipated. 173F.com/particle. This means allocating the risk to other parties. 2003.3.1 As seen before in 5. written.1. to add further security.php?t=25 2 Vizcaino v. the key is a proper management. can therefore be purchased in certain countries. Attorney at Shaw Pittman. http://www.S.. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”.eyes of the law. At that point. illustrated by the law case opposing Vizcaino to Microsoft in the U. but still.and which it had hoped to not pay by outsourcing in the first place. and implemented properly..chiefofficer. Microsoft Corp. of course the outsourcing company had better get ready to pay them the full package of fringe-benefits its regular employees get . legal framework can sometimes overlap and even while the outsourcing contract is drafted.3d713 (9th Cir 1999) 127 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .

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

including employee record keeping.Chapter 10. It serves global institutional.shtml The Beat Goes On: Outsourcing Your Human Resource. Credit Suisse First Boston estimates its savings at $115 million since 1994.000 employees operate in more than 69 locations across more than 34 countries on five continents.csfb.1 b) HR outsourcing deal Credit Suisse Boston decided to outsource most of its transactional HR functions.1. Companies That Resources Outsourcing Have Outsourced Their Transactional Activities 10. c) Results According to an AON’s report2. corporate.p 5 129 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . government and individual clients in its role as a financial intermediary. Knowledge@Wharton in collaboration with 2 Aon Corporation.com/about_csfb/company_information/about_csg/index. 1 http://www.1. which spun off to form Black Mountain Management.1. 2002. AON Human Capital Consulting. which is a leading global financial services company headquartered in Zurich. Its around 73. Externally outsourced A] Credit Suisse First Boston Group a) Company overview Credit Suisse First Boston is the investment bank of Credit Suisse Group. investment advisory work and pensions to its former benefits group. Human Experienced Customers 10.

B] Other model

outsourcing

companies

that

applied

this

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

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

1

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

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

3

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

1

http://www.boeing.com

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~ ~

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

145 employees. with a worldwide headcount of 240. as there are 2. the quality of service is worse than before and the employees’ population is too “special” to operate the same ratio than in the private sector. C] French shared services center: France Telecom a) Company overview France Telecom is the French national telephone company. D] Other model outsourcing companies that applied this 134 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 41% of its revenue is generated outside the French borders. to set up 10 HR platforms in France. c) Results This new organization led to strikes and discrepancies between direction and trade unions.900 HR employees for a total amount of 120. According to them. indeed.000 employees. It provides services to about 100 million customers within more than 20 different countries. and a lack of HR employees. without dismissing but by dividing up HR tasks between HRSC (HR Services centers and managers.4%. as employees’ representatives argue that there is overwork. 80% of them are civil servants. b) Implementation overview France Telecom. Its goal was to decrease its HR staff-to-employee ratio. Finally. through a project called “DRH demain”. and of course with the help of new technologies.The People Managing Processes team is committed to creating unique HR offerings that will help clients’ employees to reach higher levels of productivity. especially in Europe. hot lines dedicated to all questions connected with personnel management. decided in October 1999.9%. as some HR processes are indeed directly provided on line). The next step is to reduce it to 1. This one was in 2001 of 2.

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

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

Kellogg’s efforts to establish a more efficiency system with an outsourcing provider and with internal technologies are paying off. Outsourcing had in the end positive results for Kellogg: • The provider filled 52% of available jobs in 2000. agency fees were just $294. and uses Kellogg designs and standards for recruiting. HRFOCUS. from $7. thanks to the use of technologies.905 in 2000 to $ 3. Outsourcing implementation results The outsourcing arrangement succeeds thanks to the strong partnership between Kellogg and RES. September 2 2002 137 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 10. and there were many calls for customizing features in the technology program that caused problems in implementation.163 in 2000 and 202 jobs were filled. 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.784 in 1 Cydney Kilduff. • The cost per hire was cut in half. Kellogg implemented a Webbased recruitment management system. The program also included an efficient maximization of recruiting and hiring program. Director of recruiting and staffing at Kellogg “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”.2. handles all related recruiting work except for relocation. • Outside agency fees were $1. including online internal job posting and employee referral programs. RES advertises open exempt jobs. In 2001.Kellogg’s HR department in Battle Creek.375 and 389 jobs were filled.3.946. There are indeed savings in costs and time. but Kellogg encountered resistance from hiring managers who preferred their outside agencies. and 96% in 2001.

3. BP Amoco (British Petroleum Amoco) A] Company overview BP is the holding company of one of the world's largest petroleum and petrochemicals groups. BP’s goals. supply and transportation.. BP has well-established operations in Europe. were: 1 http://www. the BP-Exult agreement was the largest HR outsourcing contract in history. employees.S. Its main activities are exploration and production of crude oil and natural gas.com/company_overview/profile/index. North and South America. refining.K.exult. that has dropped to 39 days.3. and U.net/clients/contract_bp. In 2001.html 2 138 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .1.asp http://www. Exult support BP through its own services centers and will act as a service integrator. The programs’ center of operations is located in Glasgow. • In 2000. At the time. They agreed2 on a 7-year relationship for HR Services to over 50.2001. it took an average of 67 days to fill jobs. Companies That Have Outsourced All Of Their Human Resources Business Processes Except Managerial Ones 10. managing any contracts with other third party suppliers on behalf of BP. 10.1 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. according to Exult Inc. Australasia and Africa.000 U. marketing.bp. and manufacturing and marketing of petrochemicals.

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

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

the contract has been extended to include regional staffing and recruiting functions. Computerworld.7 Some other companies also chose this model. in 2002.S. 23rd April 2002 http://www. 1 “How to succeed at HR outsourcing – by really trying”. Following the success of this first agreement. $200 million contract over seven years.net/clients/contract_boa.net/clients/contract_boa. employees. ($600 million) for its almost 70.6 Prudential Financial signed. because of its willingness to offer jobs to all of its HR employees1.000 employees. in part. including 36.html http://www. and an achievement of target cost reductions.html “The cautious approach”. etc.html http://www. International Paper signed.net/clients/contract_pru. 14th February 2003 2 “The cautious approach”.000 of its employees. in 2001.exult. Personnel Today. a successful annual benefits enrollment. General Electric.000 U.000 employees8). To outsource HR processes for approximately 47.S. as Colgate-Palmolive.exult. covering the predominance of the bank’s back-office HR and affiliated financial processes that support the needs of over 130. Unisys (with Exult. Key accomplishments5 to date have included a complex payroll conversion. a ten-years HR outsourcing agreement with Exult Inc. 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 contract with Exult Inc. Personnel Today.net/clients/contract_ip. Linda Rosencrance. Personnel Today.agreement to provide “end-to-end” HR services (and payroll. a 10-year contract3 ($1billion4). employees. a 5-years outsourcing contract (£80 million2) including all the HR transactional functions as well as the non-transactional ones.exult. Bank of America signed with Exult Inc.exult. BAE Systems (with Xchanging). It chose AON.000 U. 23rd April 2002 http://www. Cable & Wireless signed with Accenture HR Services in 2001. and other administrative services) for 70.html “The cautious approach”.

Dice.S. 11. 11. Bernard Hodes/RES. Careerbuilder. Spherion. the main HR outsourcing providers have also been quoted. clients are in a recession period interested in access to technologies without the large implementation costs. and Monster. primarily. They work on filling gaps in their array of services so they can better compete for big-volume and big-money outsourcing contracts. and then the author concludes that any company that would want to get into HR Outsourcing successfully needs to make some sort of alliance with a technology outsourcer. example an overview of this industry. Spencer Stuart. HRO providers are increasingly forming partnerships and acquiring resources in a bid to get contracts from big business.Chapter 11.1.1.1.com.2. KornFerry Futurestep Americas. As main HR outsourcing deals have just been described. HRO Providers Specialized In Some Human Resources Functions Outsourcing Services 11. but the trend is also noticeable in Europe.com. As it is underlined in HR Magazine1. This part will give through the Exult Inc. Adecco.1. Human Experienced Providers Resources Outsourcing In the U. Staffing and Recruiting 2 The main providers are: Manpower. Payroll and Benefits 3 142 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Robert Half.

HR Magazine. Human Resources Outsourcing Today. TALX UC Express and ADP. Definity Health and VSP/Vision Service Plan. www.1. 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. Bank of America. Exult Inc.hrotoday.hrotoday.3. www.1. it has signed with BP Amoco. 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)”. Steve Bates.2.2. A] Company overview This Irvine (California) HRO provider is pursuing aggressively this market5. some providers are specialized in HR transactional activities. HR Magazine. and employee relations. 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)”. 11. November 2002. November 2002. It promises clients a “comprehensive solution” of HR outsourcing services. International Paper and Prudential Financial contracts over $100 million. To date.1. Steve Bates.com. 11. HRO Providers Proposing An Integrated Solution Including The Whole Range Of Human Resources Processes 11. Paychex.4. HR Magazine. April 2002 2 “ The 100 Superstars of HR Outsourcing”. Specific providers in specific countries In Belgium (with “Secrétariat social”) and in Italy (with “Consulenti di lavoro”). Human Resources Outsourcing Today. Unisys. April 2002 143 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .The main providers are: ProBusiness.com. 11. Employee health and Pension benefits 4 The main providers are: AFLAC. April 2002 4 “ The 100 Superstars of HR Outsourcing”. Steve Bates.

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

targets global Fortune 500 corporations as clients and to establish with them long-term relationships. Exult is the most meaningful provider. As seen. representing 400. • Exult concluded 2001 with 7 clients. • Administration of 250. in 2003. • Exult closed BP Amoco HR outsourcing in December 1999. Its value proposition is to provide broadly integrated process management services and improve its efficiencies by sharing resources over a broad client base and standardizing practices. D] Strategy Exult Inc.000 employees. since it signed the deal with BP developed earlier. Its strategy is to use its e-HR solution set of applications to enhance HR performance. C] Key facts • In 1998. General Atlantic Partners founded Exult Inc. for $600 million. with $50 million.• Relocation of 2. 11. Other main providers proposing an integrated solution So far.2.000 learning enrolments.2. • Exult reached $270 million in revenue and cash flow.500 expatriate assignees. • Exult completed in June 2000 an IPO (Initial Public Offering) reaching $300 million. 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 .

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

recruiting.Asia.000 in 60 countries. Hewitt Associates’ client roster includes more than half of Fortune 500 companies and more than a third of Fortune Global 500 companies.com/hewitt/about/overview/index. It reaches 9 countries with its more than 800 locations.hewitt.com/hrsolutions/aboutus/ 2 3 4 147 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .000 business and government clients around the world. Its annual revenue was $2. outsourcing. Its revenue: $21. 1 http://www. • EDS (Electronic Data Systems) BPO.000 people worldwide. It employs 2900 professionals in nine operating locations and administers over $150 billion in retirement plan assets. • Spherion.mellon. It provides services to more than 33.000 companies. • Mellon HR Solutions. It has more than 35. with an average of 59. including 85% of the Fortune 100. Mellon HR Solutions is the fourth largest HR services provider and one of the largest financial services companies in the world. 45 percent non-U.shtml http://was4. It provides service over 4 million participants4. • Hewitt Associates.html http://www.S.convergys.com/company_overview. Its revenue in 2002 was $2.000 on assignment daily.com/about_eds/en_about_eds. EDS is also one of the leading global IT services company. HR consulting & technology.htm http://www. It employs more than 310.eds. It employs approximately 137.5 billion in 2002.1 billion in 2002. Spherion provides staffing.3 billion1. As the largest multi-service HR delivery provider in the world. it handles more than 53 million HRrelated customer interactions a year from more than 13 million participants3.2.

com Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround.000 people working in about 1.000 locations. Finally. one may be totally fascinated by the idea of making that huge elephant dance2. Harper 2 Business. 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.S. skills.. 2002 3 “ Crisis Survival Tactics for HR”. Gerstner Jr.Chapter 12.. we of course cannot be absolutely sure of the previous affirmation. one may (wrongly) think it is a multinational elephant. nearly 60% of revenue is generated outside the U. but it seems that the answer is close to “no” anyway. seems to have done. values. HRFOCUS. p 12 148 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 12.3 IBM EMEA operates in more than 124 countries. and processes. Gerstner Jr. 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.1. Louis V. 1 http://www.1. Company Overview 12. where everything is being slowed down. where IBM works with homogeneous strategies. Facts and figures IBM is responsible worldwide for operations in 160 countries. with 149 different languages spoken. When one considers IBM. we did not read all valuable business books available. with more than 325. as Louis V. it also has global standards and levels of services. and 293 dialects. April 2002. in fact completely the opposite of the reactivity we generally attribute to start-ups. But on the other hand. To have a clear idea.ibm.

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

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

000 IBMers). Indeed. determines which IT processes and activities should be outsourced for a better competitiveness. IBM outsourcing deals are at the EMEA or global level. • Knowledge capitalization (Knowledge Management database available by 138. as will be developed in the next point.2. systems. and offers human and technical means without equal in the market. • A wide range of solutions on different trademarked products. IBM Strategic Outsourcing manages human and social dimensions of an outsourcing operation. Most of the time. Finally.000 servers worldwide for maintenance or development. as being completely part of its core competencies. • 133 Data Centers and 73. one can say IBM is a major outsourcing provider. even if a majority is based in the UK. 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). L 122-12 in France for example) developed in part three.2.1. IBM EMEA 2 Strategic Outsourcing Team IBM EMEA implemented a strategic outsourcing team widespread across Europe.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 .12. or Art. 12.ibm. It helps its client to assess its operational objectives.2. because of the different employments laws and variation of the Acquired Rights Directive (TUPE in the UK. and are coordinated by an HR outsourcing specialist in the country where the 1 http://www-1. 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.

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

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

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

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

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

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

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

3. 12. Personnel Today.Illustration 16: IBM European HR Service Center C] Results Even while the Employee Service Center experience had already been applied in the U.A]). 6th March 2001 2 3 159 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . it fielded 190.S.4. 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. 6th March 2001 “IBM takes a more general view of global HR delivery”. and allowed HR managers not to answer all calls or e-mails now handled by the EHRSC (in 2000. IBM was not sure this would be so feasible and successful (efficiency and service quality improvements) with a group of so many different countries. Personnel Today. Human Resources Services Provider 1 “IBM takes a more general view of global HR delivery”.1.000 calls and 46. Finally. Personnel Today. (see 12. 6th March 2001 “IBM takes a more general view of global HR delivery”. The customer satisfaction was of 90%3 in 2000.000 e-mails2).

HR management systems. The purpose was for IBM to combine business expertise with the technology leadership in order to accelerate its clients’ business performance. • Delivering dynamic workplace. from advise until services implementation. To find the optimum point. professionals ranging from financial services to healthcare. And doing so in the most cost-efficient manner.5 billion and formed this new entity: BCS (Business Consulting Services). with business process expertise in areas such as supply chain. 1 IBM 2002 Annual Report.4. HCS defined its key drivers as following: • Developing an efficient and effective organization. organizations require always more from their employees. It answers to client’s strategic needs by offering a complete offer. A] Human Capital Solutions HCS (Human Capital Solutions) aims to help clients achieve business through: • Gaining more from people (people strategy. human capital solutions and business transformation outsourcing.12. p 16 160 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . performance leadership. learning & development). BCS is composed of more than 60.0001 consultants and employees located in 160 countries worldwide. IBM Business Consulting Services IBM acquired in August 2002 the consulting branch of PwC (Pricewaterhouse Coopers) for $3.1. CRM (Customer Relationship Management). but employees expect in turn ever more from their organizations. Indeed. operating HR). • Implementing better HR (HR delivery and process.

4.2. • Downsizing painlessly. B] Business Transformation Outsourcing BTO (Business Transformation Outsourcing) provides superior business value by an outsourcing multiple business process strategy. at lower costs. Concerning the HR activities.• Reducing costs.). 12. 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. • Procurement. • Customer Relationship Management. BTO helps its clients to build a strategic transformation agenda. 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 . IBM accompanies its client to transform its HR in order to manage continuous improvement in people. • Human Resources. • Ensuring workforce flexibility. transition and long-term support. These services help clients to construct efficient HR strategies and to focus on new HR priorities. • Aligning people and business strategies. 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). and technology development. process. its aim is also to make its clients’ processes run more efficiently. etc. and no longer to be reduced only to Personnel Management (that is administrative and transactional activities.

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

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

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

and rapidity. As an example. as we saw. 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. counts more than 100. in 2000. IBM Learning Services helps companies to design. 000 brains organized in a dense network. 1st February 2000 165 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . IBM opened its pool of applicants and its learning services to its business partners network: an excellent way to encourage their loyalty and to improve their efficiency. IBM Learning Services IBM is the 1st e-learning (training technologies and services on line) provider worldwide. In the end. and not on the only technology industry. and implement training programs to optimize their employees’ potential. To sum up. IBM in Europe. thanks to its very advanced teaching technologies. 12. improving efficiency. without increasing costs (travel costs and loss of productivity are reduced compared to classic training). web solutions that enlarge the diversity of training proposed. Conclusion IBM is worldwide famous for being a major actor of the computer industry.4.5. Through this chapter we have been able to demonstrate that IBM could not be reduced to this computer industry. IBM offers.3. IBM is now evidently focusing on “e-business on demand” in general. IBM Europe consists in a huge network of efficiently organized 1 “IBM recrute et forme pour le compte de son réseau”. develop. It has chosen to manage its Human Resources with the help of the most modern tools ever imagined so far. Les Echos.• ASP with HR Access. • Global Financing. accumulating one of the greatest experience as far as a successful Human Resources management is concerned.1 12.

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”.knowledge workers that stand among the best in technology and outsourcing services. Finally. 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. 166 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . We do not know if IBM will take the lead of the HR outsourcing industry in Europe. in the long term.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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