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…

1
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.

2
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

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

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

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

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

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

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

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

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

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

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

Summer 1998. 1. Number 4. Volume 97. Sloan Management Review. one obtains a typology of the four main possible outsourcing situations: 1 Inspired from the article “Strategic intent for IT outsourcing”.2.Companies sometimes want to take advantage of this new outsourced activity to create the new business opportunity themselves. pp 67-80 14 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • The proximity of the activity to the core business.1.2. • Exploiting business advantages of the outsourced activity. if the venture is successful. whatever the type of outsourcing approach or situation one has. thus generating new revenue and services that will be sold to others and. Outsourcing Situations And Approaches 1. maximizing both its outsourcing strategy and its investment. By crossing these two criteria. Anthony DiRomualdo and Vijay Gurbaxani. three kinds of strategic intents usually drive the decision to outsource: 1 • Improving the outsourced activity’s operations. Different kinds of outsourcing operations A] Different outsourcing situations Two fundamental characteristics distinguish the different situations involving outsourcing: • The prior existence of the activity inside the company. • Increasing the outsourced activity’s contribution to the global performance of the company. Finally.

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

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

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

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

the French CEO of Alcatel. The Conference Board. but many said they would do things differently. The most important factors are: • Underperformance. which have to be considered and balanced before taking the decision to outsource. as such an operation is often felt as a betrayal of the employees. • Improvement of the company overall performance.3. • Dependency. “HR departments are not yet good at this”. companies would do more to prepare employees for the change. according to the last report from The Conference Board1. 1. Serge Tchuruk. • Social risk. The report emphasizes the fact that outsourcing is becoming a critical competency for most large companies. Outsourcing risks The same commentators assess numerous risks of such an operation. Lisa Gelman and David Dell.• Cost reductions on the outsourced activities. • Losing know-how and skills. nine out of ten companies surveyed said they would outsource again if given the choice. says David Dell.3. publicly announced what all the specialists had 1 HR Outsourcing Trends. Outsourcing Trends While discussing his project of a “company without factories”. particularly the greater responsibility placed on workers to manage their benefits. 1.2. • Improvement of the outsourced activities’ performance. • Refocus on core business activities. In the end. 2002 19 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Notably.

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

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

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

). it will try to “play the same game”. and the costs of communication with providers (see 4. which allow a decrease in the costs of coordination between companies. Indeed. technologies) to one or several “company-yardsticks” for each part of their organization. it is no longer necessary to use specific production assets. Moreover. 1. Everest Group. September 2002 23 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Main BPO providers There are no real exemplars yet. For Buyers’ Eyes Only”.3. A good example of this occurred in 1989 when Kodak outsourced its IT department to IBM. productivity. The “company-yardstick” is usually a model company in its area. 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. mimicry plays a very important role as far as outsourcing behaviors are concerned. but three distinct groups of competitors:1 1 “Building a Case for BPO-Part 2.4. c) Benchmarking By benchmarking. companies compare their performance (internal costs. and if a company selects a “company-yardstick” that is a specialized provider.technologies and particularly of information technologies. If a company selects a “company-yardstick” that is its competitor. Damon Rosenhan.3. it can consider a possible outsourcing of the concerned activity. d) Mimicry Finally. This risky tendency can also be seen within a single company when one department is outsourced and thereby others follow in turn. more and more complex operations can be processed thanks to the circulation of large amounts of information at a very low cost.

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

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

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

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

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

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

2. The European labor market and intercultural management issues 1 A] Figures The E. 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. Maurice Thévenet. Les Echos. Human Resources Issues Of The Multinational Company In Europe 2. (European Union) contains today more than 370 million 1 “Y a-t-il un marché du travail européen?”.3.Illustration 4: Activities crossing HR functions Illustration 4 above demonstrates how each HR function is composed of different activities. Summer 2002 30 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . for organizational vocabulary definitions).U.1. 2.3. from automotive ones to managerial ones.

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

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

1

Industrial

relations

developments

in

Europe

2002,

EIRO

&

E.U.

Commission,

p

29,

http://www.eiro.eurofound.eu.int * September 2002, ** October 2002, *** November 2002

31
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

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

1

Industrial

relations

developments

in

Europe

2002,

EIRO

&

E.U.

Commission,

p

55,

http://www.eiro.eurofound.eu.int * Population between 15 and 74, ** Population over 15, *** 2000 data

32
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

33
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

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

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

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

Chapter 3.).2. Human Resources activities 3. Human Resources Outsourcing Overview Now that we have seen what is to be understood by outsourcing on the one hand. Human Resources outsourcing levels A] Self-Service (e-HR) This first step in HR outsourcing is increasingly developed in Europe. 3.1. we may now enter this chapter trying to get a better overview of the Human Resources Outsourcing phenomenon itself. Defining outsourcing Outsourcing Human Resources activities is giving a provider the management of part or all HR functions we listed earlier (see 2. Self-Service strategy is mainly applied in Europe for the four following processes: 38 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and the Human Resources department organization on the other hand. Managers and employees can access tools and information at any time from any intranet access point. Human Resources Outsourcing Definition 3.2. It consists in managing some HR processes directly on the Internet.1.1.1.1.

p 5 2 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. November 2000. p 5 39 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .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. November 2000. PricewaterHouseCoopers. Illustration 10: HR Self-Service: resource reallocation on higher added-value activities2 1 Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business. PricewaterHouseCoopers. as it is represented in the illustration here below.

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

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

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

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

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

3.2. Human And Trends

Resources

Outsourcing

Specificities

3.2.1. Global overview

1

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

2

43
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

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

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

1

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

November 2002, p 51
2

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

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

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

4

5

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

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

Europe overview A] HR outsourcing trends In Europe. Peter Drucker in The Economist1 strengthens this trend. p 12-17 46 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . are first of all “training and education” with almost 80%.00. van Ommeren. Brewster. The Economist. Peter Drucker.In 2001. 1 “The Near Future (Part II)”.com European trends in HR Outsourcing.3. is now growing at a rate of 30% a year”. even if their assignments are still very limited (recruitment of a professional for example).2. like perks management for instance. 3. the use of recruiting consultants is growing: 59% of European companies outsource their “staffing and recruiting” processes.com/printarticle/0. Similarly. C.S.cfo. Mercer Research Report.. ADP. P. The content only is outsourced but not the container: all the “attention management” and the function itself are for the moment kept internally. February 2002. http://www. Philips. The last most commonly outsourced process is “payroll administration” with 30%.5642%7C. Jean-Pierre Poinas.dataquest. June 2000 4 Ressources Humaines : l’externalisation en Europe.3 The diversification of HR activities outsourced is more and more important and go over traditional outsourced activities. 40% of employers have increased their use of external HR services providers in the last three years. 9th November 2001.5317. J. the Gartner Group2 forecasts a future growth of 25% each year. Cranfield 3 School of Management and William M. when he wrote: “Outsourcing the entire Human Resources administrative function which ten years ago barely existed. which represents in facts a tripling of revenue in five years. shows that the most commonly outsourced processes. Vernon and J. C] HR outsourcing future For the U. A study4 carried out among companies with more than 200 employees in 15 countries all over Europe. Agence ARCA publishing.html 2 http://www.

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. 58% of European companies with more than 5. as we will see later.As a result. PricewaterHouseCoopers. p 4 2 “Externalisation: les solutions de BP Amoco et d’IBM”. November 2000. because of particularly strong regulations and because of the decisive importance of social links. the shared services center model is more and more implemented in Europe. 28th November 2000 47 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . which consists in outsourcing complete HR functions and not only some activities. Laurence Ritter.1 B] HR outsourcing future The shared services solution seems to have the most predictable potential growth in the near future throughout Europe.000 employees have implemented a shared services center. social law complexity clearly leads to ever more HR outsourcing. In 2000. Les Echos.4.2. But on the other hand. 3. whereas only few companies apply the “American model”.

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. but it decreased compared to 2001 (56%). which consists in fact mainly in payroll outsourcing (for 88% of them). 2002. figures are on the one hand on a growing trend since 1999. www. Pratiques et tendances du marché de l’externalisation en France. already outsourced parts of their HR activities (recruitment activities for 47% of them).1 b) Large companies Concerning HR outsourcing in large companies. and 20% in 2001. logistics and transportation and 32% for facilities management. www. and 38% of them plan to do so in the next two years. Moreover. 2002. 41% for distribution. 2002.com. 51% for finance and administration. This trend is higher than for large companies. whereas they are 56% for IT. when there were only 17% in 1999.2 But on the other hand. 40% of them outsource their HR functions.com. www. 19% in 2000. as 24% of these kinds of companies have. Ernst&Young en collaboration avec Taylor Nelson Sofres.3 c) New market companies Concerning HR outsourcing in the new market companies4. p 17 48 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . only 9% of small and medium-sized companies have already outsourced their Human Resources functions. B] HR outsourcing future In France. Ernst&Young en collaboration avec Taylor Nelson Sofres. p 21 4 Baromètre Outsourcing 2002.ey. in 2002.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. Pratiques et tendances du marché de l’externalisation en France. Pratiques et tendances du marché de l’externalisation en France.com. 1997 2 Baromètre Outsourcing 2002.ey. Ernst&Young en collaboration avec Taylor Nelson Sofres. this study shows that only 17% of all large companies prospect to outsource HR. p 17 3 Baromètre Outsourcing 2002.In France.

Ernst&Young en collaboration avec Taylor Nelson Sofres. For these reasons.1 1 Baromètre Outsourcing 2002. to a loss of quality (36%). The chosen option in France is mostly the implementation of shared services centers. but almost never a whole function. as companies find this solution more flexible. to a costs increase (32%). and as they are afraid that outsourcing would lead to a loss of control (49%). payroll and selection processes for example.com 49 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Companies outsource almost only.). 2002. only specific activities are outsourced in a same department. Pratiques et tendances du marché de l’externalisation en France. to social problems (for 38% of them). training. and finally to a loss of know-how (17%). Finally. as for Europe.2. the shared services model allows minimizing all the outsourcing risks (see 1.3.ey.companies are afraid to lose control on strategy and corporate vision. www.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

p 6 Inspired from “They’re not Employees. HRO (Human Resources Outsourcing) industry development 4 In a related but distinct development. including HR activities.S. last May 2003.General.1 On the other hand.2. 1 “CBI launches new bid to block irreparable damage from E. the TUC (Trade Union Congress) General Secretary. at least 1. which manage their clients’ HR activities. workers. Peter F. 30th May 2003 “Bosses war against rights for temps”. taking on temporary employment would do irreparable damage.5 million to 3 million U. both the temporary employment industry and HRO industry are growing quickly. The HRO industry as a whole is growing at a rate of 30% a year. BBC News Online. welcomed the draft proposal arguing that lower rates of pay for temporary workers undermine workforce motivation and act as a brake on productivity. claimed that without improvements. Finally. Harvard Business Review.1. the “co-employers” of 2. June 2003. workers by 2005.D]). not just to business but to employees as well.U. Isabelle Moreaux. the global economy is now about to live its third big business revolution: outsourcing of business services. and are by the way already in the U. pp 70-77 68 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 18th February 2002 “La CES prend l’accent britannique”.S. as John Monks has just been elected at the head of the ETUC (European Trade Union Confederation). and PEO expect to be collectively the co-employers of 10 million U. temping law”.1.2.2 Finally. 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. They’re People”. this debate will all the more be on the European agenda.800 such organizations. 2 3 4 February 2002. CBI Press. they had become. Liaisons Sociales. PEO (see 3. by 2000.S. Drucker. John Monks. were the fastest-growing business service in the United States during the 1990s.3 5. Even though they were virtually unknown only ten years ago.

They’re People”.3.3. HRO providers originally confined themselves to taking care of small businesses. pp 70-77 69 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . To that extent. but may now be designed from the start to be the co-employer for the largest multinational companies.1. Management Angels GmbH. 5.5.1 5. Temporary work scope expansion When the temporary employment industry first started nearly fifty years ago. there are temporary agencies for every kind of job.managementangels. but in fact.de 2 Inspired from “They’re not Employees. like temporary agencies. Flexibility The popularity of temporary workers is usually justified by the need of always more flexibility.2.2. It is finally more likely the growing burden of rules and regulations for employers that encouraged both developments. Drucker. Business Village. have expanded their scope in recent years. it seems interesting to briefly present the law case opposing 1 Interimsmanagement. HRO providers scope expansion HRO providers. flexibility has no account on the emergence of HRO providers. Moreover. Today. The first HRO provider in the late 1980s offered to do bookkeeping. Expansions Explanations 2 5.2.2. Scope Expansions 5. 2002. für die Wirtschaft im Wandel. February 2002. it supplied low-level workers to take the place of employees who were sick or on vacation. but now they can take care of almost all Human Resources activities. many temporary workers are full-time workers for long periods of time in the same company. especially payroll. http://www. for their clients. Harvard Business Review.1. Peter F. from bottom line to top management.

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

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

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

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

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

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

75
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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?

76
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

77
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

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

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

The mission of the management board is to create a high level of resources and skills by making them adapted to the environment. Resources and skills that present all these characteristics must absolutely not be outsourced. where opportunism has only an obvious secondary role.2.2. C] Conclusion of the two theories In conclusion. The goal is to determine factors that underpin competitive advantages of companies. 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. and thereby give a product value from clients’ points of view. • Have almost no competitor able to imitate them. outsourcing has advantages (see 1.1. Resources and skills are strategic when they are the foundations of a lasting competitive advantage.2. insourcing has for goal to benefit from coordination abilities and from the flexibility that are more important inside the company. • Have almost no substitutes possible. one can say that insourcing resulting from the risk of individual opportunism tries to avoid this opportunism by keeping the targeted activity inside the company. • Are very rare and almost unknown by other competitors. that is to say when they: • Open access to a large number of markets.B] The resource-based theory This theory deals with important topics for managers such as “core business” and factors activating outsourcing. 6. In parallel.) and 81 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The decision itself As seen before.

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

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

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

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

2002. outsourcing is a good way to manage their HR functions. Moreover. Lisa Gelman and David Dell. 7th September 1999 2 HR Outsourcing Trends. 6.4.• Reciprocal services. Marie-Béatrice Baudet. even better in financial terms. as it is an effective mean of harmonizing a number of different regulated HR systems. Le Monde. The Conference Board. Finally.4.1 6. 51% of respondents reported that they had fully achieved their outsourcing objectives. Those who expressed dissatisfaction cited lower-than- 1 “Le prix réel des nouvelles organisations d’entreprise”. most of the current management tools still do not allow an accurate measure of the hidden-costs generated by these advantages and by flexible corporate organization in general. It may also be seen as alternative to making a capital investment in the new technology necessary to support the HR function. • Shareholders dividend.1. Drawbacks Outsourcing HR operations may sometimes pose some challenges and problems. Another 42% had partially achieved them. in the European regulations patchwork. It seems indeed necessary to rethink systematically HR indicators (or scorecards) in the direction of a better assessment of the HR contribution to global value-added. and on the corporate long-term benefits. Nevertheless. p 6 86 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . for American companies that have subsidiaries in Europe. 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. its impacts on the company’s level of competency as a whole. Quality decrease and loss of control In The Conference Board Survey2.

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

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

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

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

the project team should not forget to tactfully inform all the other and parallel areas managers which could be affected by the project. Cost analysis The costs of the project phase itself have to be assessed (external consultants costs.1. transition costs. 7. but the costs of HR function outsourcing must also be assessed (separation costs. Moreover. it is possible to use the calculation of the NPV (Net Present Value). etc. taxes. While using the NPV tool.7. Management commitment The support it.2. as it will evaluate the profitability of the investment based on anticipated cash flows and discounted at a state rate of interest.3. In order to obtain a reliable statement of the quality of the investment. project team has to convince the outsourcing company’s management team. One may also add the use of the transaction cost theory seen earlier in 6. some other internal businesses will be affected and obliged to change.2. one must be aware of the degree of accuracy of its assumptions. mismanaged employee transition.3. 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. legal advise costs or travel costs for example). implementation costs.1. Internal Issues 7.). A].3. to help them managing the organizational change. 91 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Moreover.1. travel costs. not only to be aware of the project. running costs. Organization’s ability to absorb change Whatever the kinds of HR functions outsourcing procedures adopted. but also to actively 7.3.

but also on others. 7.Not only the leaving HR staff will have a completely different job. which implies for the project team an assessment of the ability to absorb change.200 former employees of the Anglo Swedish company.C]. Communication The project team should include in the project guidelines procedures related to confidentiality and internal communication. But IBM was also committed to integrate in its own staff the 1. IBM was committed to run and support the information system of the pharmaceutical company for duration of seven years. On the other hand. Frank Niedercorn.3.4. the impact will not only be apparent in the directly affected department. which will also maybe have to reorganize their staff themselves. outsourcing support activities such as HR functions consists in fact in a collective empowerment of the people involved. as they will work with outsourced employees.3. 2nd May 2001 92 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . and leaders would gain remember it. A communication strategy must be set up from the beginning of the project. and such an operation surely leads to staffing reorganization. As an example. but also other departments will have to absorb some changes in the organization. 7. according to the sensitivity of the project. Les Echos.7 billion contract with IBM. others will be disadvantaged.4. Staffing reorganization As developed in 7. AstraZeneca signed a $1. or even totally transferred. HR outsourcing often includes staff transfer. when at the beginning of the year 2001.1 As just mentioned.3. as some functions will be reduced internally. If some departments will be positively affected. Finally. the outsourcing company will maybe need new staff with other profiles.3. 1 “L’externalisation à toute vapeur”. in order to communicate the vision and the strategy of the outsourcing company and to avoid any confidentiality issue.

93 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . or once the deal is done and the contract is signed. or hiding everything to employees until the deal is done and the contract signed. in order to remedy in the end to the often very sensitive dimension of such an operation. and the outsourcing company’s clients. Communication The outsourcing company. Each approach has its reasons for being according to its specific environment. Moreover. 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. or at the limit simultaneously. Announcement and information to some other stakeholders has to be carefully managed: government. as the reversibility of this particular choice will be very difficult to consider in the future. Indeed. as we already mentioned it. implementing an HR outsourcing project.4. with pros and cons for each approach: being transparent with employees from the beginning and along all the different phases. stockholders. has to plan an external communication strategy. External Issues 7.1. just informing employees that there will be an outsourcing operation but waiting until the negotiations are well under way.4. the decision to outsource and the name of the selected provider should be announced to the press after announced internally to employees. Provider’s selection issues The decision to deal with one or another provider is absolutely crucial.We can distinguish three main communication strategies. 7. 7.4.2. during the provider’s selection.

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

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

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

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

the contract should include a clause for intellectual property protection. it can choose to simply lease them.3.A].2. when the outsourcing company does not want to transfer its assets to the provider. • The transfer to the provider of all or a significant portion of the client’s employees previously involved in the internally managed business function operations to the customer’s organization. A] Assets leasing As we saw in 1.K].2.equipment. As we will further develop in 8.1. 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. B] Equipment transfer Many outsourcing deals lead to equipment sale from the outsourcing company to the provider. 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). what could be critical in the case of assets transfers in general and equipment transfers in particular. 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. and other related tangible assets. in exchange for payment or reduction in annual fees. 98 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • The assignment or license to the provider of proprietary methodologies or technologies used by the client in connection with its business function operations.

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

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

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

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

but one should not let it have too much useless impact. that is to say a “give and take” process. a partner absolutely necessary to the good functioning of the company’s business. federal.2.) that will anticipate as much as possible the likely occurrence over the term and anticipate with a process to resolve disputes.S.8. In the particular case of HR outsourcing.2. Outsourcing negotiator In all kinds of negotiation situations. and it is always better to agree on one before the conflict arise (national. legal professionals who are moreover quite used to it will exclusively share all negative feelings that could be given off conflicts during negotiations. as they surely best fit to the job. conflict is part of the game.1. That is mainly the reason why companies will have made the negotiations by a third-party. All the future outsourcing relationship management will depend on this choice. effects can be different according to the chosen governing law. conflicts must arise whatever precautions were taken. Governing law Because laws can be different from one country to another or even from a state to another (like in the U.1. It is very important that conflicts with future partners do not get personal. 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. but the negotiator can help obtaining a fair contract (see 8. 103 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . It can be a businessperson or most of the time a legal professional team. or within Europe). the negotiation opponent is likely to be soon one of the most important business partners.1.2. In fact. 8.3. Legal Framework 8. state or local).

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

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

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

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

Dispute resolution A] Informal dispute resolution Most of the time. Sally Vanson. etc. The consequences for collaborators. identity transformation.K. pp 181-188 108 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • The standing by of the entity after the transfer. C] English context The TUPE (Transfer of Undertakings Protection of Employment) regulates the employees’ transfers in the U. The purpose is to protect the rights of employees where there is a transfer of undertakings of their work to a new employer. since 1981. as it is subject to three necessary conditions that are: • The existence of an autonomous economical entity. • On a collective scale. and to reintegrate it if it finally insources the activity back. that is to say everything related to status. This law seems nevertheless not always applicable to outsourcing operation. practical organization. • The transfer of the whole entity.• Change management help: cultural adaptation. remuneration. 2001.2. the standing by of the former industry-wide collective labor agreements during fifteen months. the contract includes a provision on informal dispute resolution methodologies. as far as the transfer of their work contract is concerned. are: • The standing by of individual advantages. Chandos Publishing. • The possibility to be transferred again if the outsourcing company changes its provider. as an outsourcing operation often give rise to 1 The Challenge of Outsourcing Human Resources.4. seniority and position.1 8.

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

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

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

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

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

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

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

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

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

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

W] Indemnities It is also advisable to add an indemnification clause to prevent potential property damage.. for change of control. intellectual property infringement. personal injuries. On the other hand. According to a Gartner Group Outsourcing Study & Report 19971. for cause. but not on problems regulated by the social law.). X] Termination The contract should finally include all cases by which each party may terminate the agreement according to certain events (termination for convenience.com 119 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . As just mentioned.Moreover. It is also useful to define the way dispute will be resolved (applicable fees. such as staff transfer regulations. security violations. currency chosen.). etc. these kinds of resolution will only be possible for businesses disputes. V] Dispute resolution As seen in 8. 1 http://www. for failing to meet service levels. parties should also add a formal dispute resolution: mediation or arbitration procedures if applicable for example. what will happen if the change prohibits some processes of the outsourced operation. but all the main topics concerning HR outsourcing in Europe are covered. which party pays. etc.dataquest. These key contract issues list is a non-exhaustive one. the contract should include a clause mentioning how changes in laws and regulations will be handled (which party is responsible for it. 25% of outsourcing contracts will have to be renegotiated or cancelled within 3 years. etc. or environmental claims that might occur. it is advisable to include in the contract an informal dispute resolution process.).4.2.

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

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

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

9. • Investing in always more human capital management asset.4. said: “You are establishing a partnership with the organization. so you will need a different kind of person. Personnel Today. someone who is focused on managing relationships rather than handling transactions. Outsourcing implementation skills These skills allow making sure that the provider does its job the way it announced it would do it. 9.2. even more than an 1 “Change Management”. The aim is to reach a win-win situation. not a service. European leader for HR outsourcing at PricewaterhouseCoopers.2.• Mastering the knowledge of the company’s business and its environment.3. Required Skills In the end. 18th April 2000 123 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Strategic vision skills These skills allow defining which outsourcing strategy would best serve the competitive advantage of the company.”1 9. Alliances management skills These skills make it possible to manage the relation with the different providers. As David Koch. 9.1.2.2. as they imply developing flexibility and credibility.2. Influencing and conflict management skills These skills are very important as well.2. the company has to make absolutely sure that it has the following competencies at its disposal. It doesn’t take a lot of those sorts of people but it needs someone with clout. to maximize its chances to build a successful outsourcing operation. 9.

Other Solutions To Keep Control Aside the contract. pp 86-93 124 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .5. But it is always 1 “How to invest in social capital”. especially in order to help collaborators facing their new environment.3. Social capital development skills 1 It order to make a HR outsourcing operation work on a long-term basis.unbalanced particularly winning situation. Laurence Prusak (Executive Director IBM Institute for Knowledge Management) and Don Cohen.1. and if those specific assets are being hard to standardize for the need of other deals with other client-companies. 9. it seems that social capital development would be very useful. the provider accepts only assets that can often be standardized. As an example both companies should think of incentives that workers could enjoy together (and not alone and outside the company). 9. June 2001.6. 9. 9. thereby the exclusive client-company gain a big influence on the provider. enabling trust and fostering cooperation. and when possible mixing both employees of the provider and the outsourcing company.2. Developing social capital consists in fact in favoring people connections. In fact. Transfer of specific assets If the client-company transfers particularly specific assets to the provider as part of the deal. most of the time.3. Harvard Business Review.2. 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. Change management skills Outsourcing implies strong operational changes for companies.

Most of the time. 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. European Management Journal. but it is nevertheless not of decisive value comparing to a strong common stakeholder. 1 “IT outsourcing: finding from an empirical survey in France and Germany”. as the same stakeholder will privilege the performance of its core competencies. Bad start In 10% of the cases. Pierre Laigle. in the activities that have the best ROI.4. in other words. Jérôme Barthélemy and Dominique Geyer. Interest acquisition The acquisition of equity by the client-company in the company providing the outsourcing services is a good solution to have a control on it without being its main stakeholder.3. 2001 2 Dictionnaire de l’infogérance.useful to know the exact implicit power one has on the provider in order to have done what exactly needs to be done. Spin-off structure 1 Of course. that is to say. On the other hand.3.3. There might indeed be a contract between the two organizations. it gains influence but it is limited enough not to interfere with core business focusing investments. 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. it seems that the spin-off solution does not offer the best performance results (unless the activity becomes a core business). during the six months before the forecasted starting date. 9. 2000 125 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 9. Problems Likely To Occur 2 9. 9.2.4.1. the solution of creating a spin-off allows the company to keep quite an entire control on the service. as already seen. Hermès Science Publication.

5. but unfortunately it has hardly any possibility or will to focus on change management skills. pricing sometimes goes drifting off.9. In other words. 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. Thereby. No respect of pricing In 20% of the cases.4. In fact. 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 . Maladapted services In 30% of the cases. during the first year of outsourcing. which is really not a satisfying situation. whereas the whole outsourcing operation seems to be a success. it may happen that the provider did not succeed in meeting contracted expectations.3.. No evolution perspectives In 50% of the cases. during the first year of outsourcing. 9. etc. Most of the time. it has a too stable or rigid service offer.4. the provider in this type of cases has a valuable know-how in a certain kind of service. When the provider has previously underestimated the prices of services. 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. 9. the provider’s employees do not necessarily have the incentive to do that.2. if the outsourcing company tries to get them to work harder by offering them some extra incentives such as stock-options. this has for sure a negative impact on financial forecasts.4. 9. whatever the price its clients would be ready to pay.4. it appears that the possibilities of service evolution are very weak. during the first three months. the client-company has to do the job simultaneously.4.

3.3d713 (9th Cir 1999) 127 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . http://www. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”. At that point. illustrated by the law case opposing Vizcaino to Microsoft in the U. can therefore be purchased in certain countries. Attorney at Shaw Pittman.php?t=25 2 Vizcaino v. Microsoft Corp. to add further security.1. and implemented properly.2. legal framework can sometimes overlap and even while the outsourcing contract is drafted.com/particle. 173F. This means allocating the risk to other parties.eyes of the law. 1 “Common Problems.1 As seen before in 5.S. not all legal HR issues can be easily anticipated..and which it had hoped to not pay by outsourcing in the first place. the key is a proper management. written. 2003.. Insurance like the EPLI (Employer Practices Liability Insurances) for example.chiefofficer. but still. of course the outsourcing company had better get ready to pay them the full package of fringe-benefits its regular employees get .

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

shtml The Beat Goes On: Outsourcing Your Human Resource. AON Human Capital Consulting.1 b) HR outsourcing deal Credit Suisse Boston decided to outsource most of its transactional HR functions.csfb.Chapter 10. 2002. government and individual clients in its role as a financial intermediary. including employee record keeping. Credit Suisse First Boston estimates its savings at $115 million since 1994.1. which is a leading global financial services company headquartered in Zurich. investment advisory work and pensions to its former benefits group. 1 http://www.000 employees operate in more than 69 locations across more than 34 countries on five continents.p 5 129 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Its around 73. Knowledge@Wharton in collaboration with 2 Aon Corporation. It serves global institutional. Human Experienced Customers 10.1. Externally outsourced A] Credit Suisse First Boston Group a) Company overview Credit Suisse First Boston is the investment bank of Credit Suisse Group. c) Results According to an AON’s report2. corporate.1. which spun off to form Black Mountain Management. Companies That Resources Outsourcing Have Outsourced Their Transactional Activities 10.com/about_csfb/company_information/about_csg/index.

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

130
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

1

http://www.boeing.com

131
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

~ ~

Employee discount; Community involvement opportunities.

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

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

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

1

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

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

132
OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY

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

and a lack of HR employees.000 employees. to set up 10 HR platforms in France. with a worldwide headcount of 240.145 employees. D] Other model outsourcing companies that applied this 134 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . decided in October 1999.The People Managing Processes team is committed to creating unique HR offerings that will help clients’ employees to reach higher levels of productivity.900 HR employees for a total amount of 120. indeed. and of course with the help of new technologies. It provides services to about 100 million customers within more than 20 different countries. especially in Europe. 80% of them are civil servants. Its goal was to decrease its HR staff-to-employee ratio. as employees’ representatives argue that there is overwork. 41% of its revenue is generated outside the French borders. hot lines dedicated to all questions connected with personnel management. c) Results This new organization led to strikes and discrepancies between direction and trade unions. through a project called “DRH demain”. According to them. The next step is to reduce it to 1.9%. as there are 2. as some HR processes are indeed directly provided on line). C] French shared services center: France Telecom a) Company overview France Telecom is the French national telephone company. b) Implementation overview France Telecom. Finally. 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. without dismissing but by dividing up HR tasks between HRSC (HR Services centers and managers. This one was in 2001 of 2.4%.

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

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

784 in 1 Cydney Kilduff. In 2001. and there were many calls for customizing features in the technology program that caused problems in implementation.Kellogg’s HR department in Battle Creek. September 2 2002 137 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The Director of Recruiting and Staffing at Kellogg1 announced at the 2002’s annual conference of the Society for HR Management in Philadelphia2 some of her outsourcing results.905 in 2000 to $ 3. Outsourcing had in the end positive results for Kellogg: • The provider filled 52% of available jobs in 2000. but Kellogg encountered resistance from hiring managers who preferred their outside agencies. • The cost per hire was cut in half. handles all related recruiting work except for relocation. The program also included an efficient maximization of recruiting and hiring program. Kellogg implemented a Webbased recruitment management system. thanks to the use of technologies. and 96% in 2001. Kellogg’s efforts to establish a more efficiency system with an outsourcing provider and with internal technologies are paying off. There are indeed savings in costs and time.375 and 389 jobs were filled. RES advertises open exempt jobs.946. Outsourcing implementation results The outsourcing arrangement succeeds thanks to the strong partnership between Kellogg and RES. HRFOCUS. 10. • Outside agency fees were $1. including online internal job posting and employee referral programs. Director of recruiting and staffing at Kellogg “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”.163 in 2000 and 202 jobs were filled. from $7.3.2. agency fees were just $294. and uses Kellogg designs and standards for recruiting.

Australasia and Africa.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. refining. marketing.S. the BP-Exult agreement was the largest HR outsourcing contract in history.net/clients/contract_bp.exult.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.bp.K. and manufacturing and marketing of petrochemicals. In 2001. and U.2001.. that has dropped to 39 days. Companies That Have Outsourced All Of Their Human Resources Business Processes Except Managerial Ones 10. BP’s goals. supply and transportation. At the time.com/company_overview/profile/index.1. They agreed2 on a 7-year relationship for HR Services to over 50.3.html 2 138 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . were: 1 http://www. it took an average of 67 days to fill jobs.000 U. North and South America. 10. • In 2000. BP has well-established operations in Europe. BP Amoco (British Petroleum Amoco) A] Company overview BP is the holding company of one of the world's largest petroleum and petrochemicals groups.3. Its main activities are exploration and production of crude oil and natural gas. employees. according to Exult Inc. managing any contracts with other third party suppliers on behalf of BP.

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

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

000 employees8). a 5-years outsourcing contract (£80 million2) including all the HR transactional functions as well as the non-transactional ones. because of its willingness to offer jobs to all of its HR employees1.html http://www. Personnel Today. Personnel Today. Cable & Wireless signed with Accenture HR Services in 2001.000 U. 23rd April 2002 http://www. a ten-years HR outsourcing agreement with Exult Inc. and an achievement of target cost reductions. 23rd April 2002 3 4 5 6 7 8 141 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . covering the predominance of the bank’s back-office HR and affiliated financial processes that support the needs of over 130.net/clients/contract_boa. a ten-years contract with Exult Inc.000 employees.net/clients/contract_ip.S. ($600 million) for its almost 70. employees. To outsource HR processes for approximately 47. in 2001. General Electric.html “The cautious approach”. Following the success of this first agreement. Computerworld.net/clients/contract_pru.7 Some other companies also chose this model. BAE Systems (with Xchanging).000 U. in part.exult. Key accomplishments5 to date have included a complex payroll conversion. Personnel Today.exult.exult. $200 million contract over seven years. It chose AON. International Paper signed. etc. 1 “How to succeed at HR outsourcing – by really trying”. 23rd April 2002 http://www.net/clients/contract_boa. and other administrative services) for 70.6 Prudential Financial signed. including 36.S. as Colgate-Palmolive. 14th February 2003 2 “The cautious approach”. employees.html “The cautious approach”. Bank of America signed with Exult Inc. Unisys (with Exult. a 10-year contract3 ($1billion4). the contract has been extended to include regional staffing and recruiting functions. a successful annual benefits enrollment. in 2002.000 of its employees. Linda Rosencrance.exult.agreement to provide “end-to-end” HR services (and payroll.html http://www.

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

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

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

• Exult reached $270 million in revenue and cash flow. • Exult concluded 2001 with 7 clients. Other main providers proposing an integrated solution So far. • Exult completed in June 2000 an IPO (Initial Public Offering) reaching $300 million. As seen.• Relocation of 2. representing 400. Its strategy is to use its e-HR solution set of applications to enhance HR performance. Exult is the most meaningful provider. since it signed the deal with BP developed earlier. with $50 million.2. in 2003.000 employees. General Atlantic Partners founded Exult Inc. 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 . 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. for $600 million.500 expatriate assignees. targets global Fortune 500 corporations as clients and to establish with them long-term relationships. 11. D] Strategy Exult Inc. • Exult closed BP Amoco HR outsourcing in December 1999.000 learning enrolments. C] Key facts • In 1998.2. • Administration of 250.

Inc. and 1 “ The 100 Superstars of HR Outsourcing”.aon. It employs more than 44. Canada. Human Resources Outsourcing Today.solutions. With more than 75.html http://www. It is a Fortune 500 company comprised of more than 40. pp 56-57 2 http://www.com/about/aon_corporation/history_facts.hrotoday. and it delivers today BPO.6 billion for the fiscal year ended August 31.000 people in multiple locations around the world. • ACS (Affiliated Computer Services). ACS is a premier provider of diversified business process and information technology outsourcing solutions to commercial and government clients worldwide. employee care and other industries in more than 40 countries. the company generated a net revenue of $11. reinsurance and wholesale brokerage. and human capital consulting services. • Convergys. www. Accenture is one of the world's leading management consulting and technology services company. and systems and integration services to hundreds of clients worldwide3.com/about/index. specialty services.accenture. • AON Consulting HR Outsourcing Group. IT outsourcing. claims management. retail. as for the main other ones on the market1: • Accenture HR Services. 20022. November 2002.000 employees in more than 600 offices4. data centers and offices in the United States. the Middle East.com/xd/xd.000 people in their contact centers. Convergys serves top companies in communications.com. technology. Latin America. Europe. financial services. AON is a Fortune 500 company that is a world leader in risk management.000 people in 47 countries.xml http://www.acs-inc.jsp 3 4 146 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .asp?it=enweb&xd=_dyn\dynamicpressrelease_560. It operates in more than 125 countries with over 55.

It reaches 9 countries with its more than 800 locations. It employs 2900 professionals in nine operating locations and administers over $150 billion in retirement plan assets.3 billion1.000 people worldwide. • Spherion. EDS is also one of the leading global IT services company.S.html http://www.000 on assignment daily.Asia. It employs more than 310.com/company_overview.000 companies. Spherion provides staffing. with an average of 59. Its revenue in 2002 was $2. • EDS (Electronic Data Systems) BPO.htm http://www. As the largest multi-service HR delivery provider in the world.000 business and government clients around the world. It provides services to more than 33.2.000 in 60 countries. Its revenue: $21. • Hewitt Associates. Its annual revenue was $2.convergys.mellon.hewitt. It has more than 35. Hewitt Associates’ client roster includes more than half of Fortune 500 companies and more than a third of Fortune Global 500 companies.shtml http://was4.1 billion in 2002. including 85% of the Fortune 100. 45 percent non-U. It provides service over 4 million participants4.5 billion in 2002. 1 http://www.eds.com/hrsolutions/aboutus/ 2 3 4 147 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . • Mellon HR Solutions. Mellon HR Solutions is the fourth largest HR services provider and one of the largest financial services companies in the world. It employs approximately 137. it handles more than 53 million HRrelated customer interactions a year from more than 13 million participants3.com/about_eds/en_about_eds. HR consulting & technology. recruiting. outsourcing.com/hewitt/about/overview/index.

Chapter 12. 1 http://www.1. it also has global standards and levels of services. Louis V. skills.ibm. one may (wrongly) think it is a multinational elephant.3 IBM EMEA operates in more than 124 countries. but it seems that the answer is close to “no” anyway. we did not read all valuable business books available. nearly 60% of revenue is generated outside the U. Finally.000 people working in about 1. Gerstner Jr.. To have a clear idea. and 293 dialects. But on the other hand. in fact completely the opposite of the reactivity we generally attribute to start-ups.1. and processes. seems to have done. Gerstner Jr. where everything is being slowed down. 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. as Louis V.. Facts and figures IBM is responsible worldwide for operations in 160 countries. 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. 2002 3 “ Crisis Survival Tactics for HR”. one may be totally fascinated by the idea of making that huge elephant dance2. we of course cannot be absolutely sure of the previous affirmation.S. HRFOCUS.com Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround. April 2002. p 12 148 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Harper 2 Business. 12. with 149 different languages spoken. where IBM works with homogeneous strategies. When one considers IBM. Company Overview 12.000 locations. with more than 325.1. values.

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

For the 10th consecutive year.000 in 2002. IBM received the most U.1. • Learning Services. explains it in the “Chairman’s letter” of the IBM 2002 annual report.1 1 “2000 Outsourcing Services: Market Share and Forecast”. 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. 12.3.2. and to reduce inventories. IBM also made the computing model evolve to an “On Demand Operating Environment”. Strategy As Samuel J. Major Outsourcing Provider IBM Global Services has been pointed out as the 1st “Worldwide Professional Management Services Provider”. That means that the strategy focuses on providing e-business “on demand” for clients. March 2001 150 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . IBM allows its clients to convert fixed costs into variable costs. Palmisano. 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. applications and the underlying IT systems. To this purpose. patents with almost 3. Gartner. To serve its strategy. 12. because the increasing complexity of systems is making them extremely costly to manage and maintain. IBM CEO. IBM’s core business is “e-business on demand”.S.• Strategic Outsourcing Services. which implies “sense-and-respond” or “real-time”. IBM helped its customers to become “on demand businesses” by integrating business processes and operations. an extreme responsiveness to the needs of clients.

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. because of the different employments laws and variation of the Acquired Rights Directive (TUPE in the UK.000 servers worldwide for maintenance or development. as will be developed in the next point. • 133 Data Centers and 73. and are coordinated by an HR outsourcing specialist in the country where the 1 http://www-1. Indeed.com/services/stratout/ IBM EMEA (IBM Europe Middle-East Africa) 2 151 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as being completely part of its core competencies.000 IBMers). • A wide range of solutions on different trademarked products. systems. Finally. IBM Strategic Outsourcing manages human and social dimensions of an outsourcing operation. IBM EMEA 2 Strategic Outsourcing Team IBM EMEA implemented a strategic outsourcing team widespread across Europe. 12. • Knowledge capitalization (Knowledge Management database available by 138. determines which IT processes and activities should be outsourced for a better competitiveness. It helps its client to assess its operational objectives.ibm. L 122-12 in France for example) developed in part three. or Art.2. and softwares (90% of IBM’s outsourcing deals).1.2. Strategic Outsourcing Services 1 IBM Strategic Outsourcing Services is the management of companies’ applications and IT Systems.12. Most of the time. IBM outsourcing deals are at the EMEA or global level. and offers human and technical means without equal in the market. one can say IBM is a major outsourcing provider. even if a majority is based in the UK.2.

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

because it serves many large companies. provides2 retirement.500 financial intermediaries.com 2 http://www. and Ford Motor Co. based in Boston. founded in 1998. retirement planning. which provides the technology and people required by IBM. health and welfare. http://www. It offers investment management. Moreover. Monsanto.100 retirement. Fidelity Investments3. HR and benefits outsourcing services to 17 million individuals and institutions. and has experience and capabilities to offer a wide range of services and products. FESCo can leverage its investments.com http://www. the first provider of workplace retirement savings plans. B] Deal with Fidelity Employer Services Company a) Company overview i/ FESCo (Fidelity Employer Services Company) FESCo.fidelity. Fidelity Investments. The company is the largest mutual fund company in the U.2 million American workers through the administration of more than 11. Human Resources administration and payroll programs. ii/ Fidelity Investments Institutional Services Company.S. one of the largest mutual fund arrays.excellent services and had the technological advancements IBM requires”.. Inc. brokerage. the decision has been taken to sign a partnership with Fidelity Employer Services Company.). Philip Morris.fidelity. and 1 “Substantial Benefits. Inside the IBM-Fidelity outsourcing partnership”.com 3 153 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . as well as through 5.1 As developed later. 11. Inc.fidelity. FESCo is a division of Fidelity Investments Institutional Services Company. is one of the world’s largest providers of financial services. Human Resources and benefits strategies to more than 200 companies (including Shell Oil. 20th December 2002.

with assets of $56.S. 3rd July 2002 4 “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. Towney Kennard.000 retirees about retirement. and 120.com. discipline. North Carolina. employees and retirees. 4503 IBM Employee Service Center workers. service center to 1 “Fidelity to oversee IBM’s pension plan”. Boston Business Journal. charitable giving. along with a broad range of HR services.S. and other benefits. Vice President of Alliances. The New York Times. b) HR outsourcing deal IBM outsources to Fidelity Employer Services Company (2nd July 2002) the administration of its benefits1: pension and health & welfare plans. Inside the IBM-Fidelity outsourcing partnership”.000 workers in the U.3. pay. N. 20th 2 3 December 2002.2 c) Tangible transfers i/ Staff transfer As a whole.5 billion last year. 2nd July 2002 “Substantial Benefits. Boston Business Journal.A]) to handle questions from its 140.C. “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. David Cay Johnston..S. FESCo said that it plans to expand the Raleigh.” ii/ Equipment Transfer FESCo leases a call center in Raleigh.1. promotions and other issues. Fidelity Investments..fidelity.500 or so IBM personnel workers would remain with IBM “to handle hiring. David Cay Johnston. The New York Times. IBM’s pension plan is the 12th largest in the U. 2nd July 2002 “Fidelity to oversee IBM’s pension plan”.a leading online brokerage company. 3rd July 2002 154 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . that IBM opened in 1994 (see 12. became FESCo employees (1st August 2002) and continue to provide HR support to the same IBM population. http://www. IBM Global Services. firing. who provided HR transaction and administrative support to IBM U. announced4 that another 2. health.

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

Inside the IBM-Fidelity outsourcing partnership”. Fidelity Employer Services. as “IBM-trained Human Resources staff with a high level of expertise and professionalism”. “Substantial Benefits.2. With this expansion. 2nd July 2002. Inside the IBM-Fidelity outsourcing partnership”. 20th December 2002. Inside the IBM-Fidelity outsourcing partnership”.fidelity.com 5 “Web HR frees up time for strategy”. As Peter J. as well as in Endicott and White Plains.5 1 “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”. Personnel Today.fidelity. Moreover. Smail1. e-HR Practice Executive at IBM EMEA. “Substantial Benefits.3 Not only FESCo gains the best practices and professionals.com 3 “Substantial Benefits. recognized consulting and technology expertise. Fidelity Investments. 20th December 2002.3. we think they will seek trusted providers such as Fidelity and IBM to provide end-to-end solutions”.fidelity.com 2 “Substantial Benefits. “Substantial Benefits. IBM EMEA HR Organization A] Self-Service As Martin Stockton. 20th December 2002. Fidelity Investments.ii/ FESCo According to Peter J. North Carolina. Inside the IBM-Fidelity outsourcing partnership”. http://www. said “By creating a collaborative “self-service” environment for the majority of issues. Fidelity will have phone centers in 6 regional locations altogether. employees have the latest available information at their fingertips and the HR function is able to concentrate on critical strategic activities”. http://www. but also IBM’s former facilities. As companies evaluate outsourcing options. President of FESCo. Fidelity Investments. will accelerate our clients’ benefits outsourcing plans. http://www. 31st October 2000 156 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . http://www. Inside the IBM-Fidelity outsourcing partnership”. “we believe that combining our significant HR experience with IBM Global Services. we can serve even more large corporate clients efficiently. FESCo integrates 450 of the “best Human Resources and payroll people in the business”2. Inside the IBM-Fidelity outsourcing partnership”.fidelity.com 4 “Substantial Benefits.”4 12. Smail claimed: “[…] we’ll now have locations in Raleigh. New York. Including Raleigh.

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

Indeed. workforce management and staffing. 1 “Service center creation”. sending e-mail or calling the EHRSC. through first level (HR Generalists) to HR Specialists. and skills. from the extensive information on the IBM 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”. as Tim Stevens. c) Organization The center is composed of about 120 employees2. Personnel Today. Of course. Moreover. 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. Personnel Today.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. 6th June 2000 “IBM takes a more general view of global HR delivery”. learning and executive resources. EMEA employees and managers can now get help directly by accessing the intranet. 6th March 2001 2 158 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . providing different levels of service responding to different requirements. IBM EMEA Employee Relations and IBM France HR Leader said: “its creation followed a major reorganization by a new Chief Executive who also believed that HR had a leading role to play in IBM’s success”.

6th March 2001 “IBM takes a more general view of global HR delivery”. Human Resources Services Provider 1 “IBM takes a more general view of global HR delivery”. the implementation of this service center combined with the e-HR solution allowed IBM to save in 2000 over 57%1 of its previous HR costs.4.000 calls and 46. it fielded 190. Personnel Today.A]). Finally. and allowed HR managers not to answer all calls or e-mails now handled by the EHRSC (in 2000.3. 12.000 e-mails2).S. 6th March 2001 2 3 159 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The customer satisfaction was of 90%3 in 2000.Illustration 16: IBM European HR Service Center C] Results Even while the Employee Service Center experience had already been applied in the U. (see 12. Personnel Today.1. 6th March 2001 “IBM takes a more general view of global HR delivery”. IBM was not sure this would be so feasible and successful (efficiency and service quality improvements) with a group of so many different countries. Personnel Today.

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

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

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

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

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

As an example. 000 brains organized in a dense network. in 2000. It has chosen to manage its Human Resources with the help of the most modern tools ever imagined so far. and rapidity. improving efficiency. IBM Learning Services IBM is the 1st e-learning (training technologies and services on line) provider worldwide. Conclusion IBM is worldwide famous for being a major actor of the computer industry. counts more than 100. without increasing costs (travel costs and loss of productivity are reduced compared to classic training). Les Echos. IBM in Europe. • Global Financing. thanks to its very advanced teaching technologies. 12. web solutions that enlarge the diversity of training proposed. Through this chapter we have been able to demonstrate that IBM could not be reduced to this computer industry. 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. and not on the only technology industry. IBM is now evidently focusing on “e-business on demand” in general. and implement training programs to optimize their employees’ potential. accumulating one of the greatest experience as far as a successful Human Resources management is concerned. In the end. develop. 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.1 12. 1st February 2000 165 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .• ASP with HR Access.3. IBM offers. IBM Learning Services helps companies to design. IBM Europe consists in a huge network of efficiently organized 1 “IBM recrute et forme pour le compte de son réseau”.4. To sum up. as we saw.5.

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

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

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

2001. and Norton David P. L’Europe des ressources humaines.. coopération. 1992. • Jolly Dominique. Strategies and Contracts.. • • Greaver Maurice F. Stratégies d’Externalisation. and Melby Barbara Murphy. • Champy James and Hammer Michael. Process. Harper Business Publishing. Alliances interentreprises. Halvey 2000. Les Editions d’Organisation. • • Collectif HEC. Jr. Strategic Outsourcing. Le tableau de bord prospectif. Harper Business. Dunod. Business Process Outsourcing. Cazal D. • Kaplan Robert S. 1997. Harper Business. Gerstner Louis V. 3rd edition. 2001. Reengineering the Corporation. 2001. John Wiley & Sons. December 1998. and Malone Michael S. 169 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . STRATEGOR... Dunod. Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround. Benetton ou l’entreprise virtuelle. 2002. and Peretti Jean-Marie. Amacom. Inc... entre concurrence et John K. Davidow William H. Editions Liaisons. 1998. Dunod 1999.REFERENCES BOOKS • • Barthélemy Jérôme. Vuibert. • • Fréry F. The Virtual Corporation: Structuring and Revitalizing the Corporation of the 21st Century. October 1993.

Edition Liaisons.. www. July 1992. Stewart Thomas A. Vanson Sally. Warner Books. Intellectual Capital.cgey. Droit du Travail.. • Quinn James Brian. Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry. L’Avantage concurrentiel. Philips J. Ernst & Young. • Cap Gemini. Dictionnaire de l’infogérance. PROFESSIONAL PUBLICATIONS • American Management Association Special Reports. methods. July 1992. • • Porter Michael. Reissue edition. Research Report. Free Press Publishing. Dunod. 2002. Saratoga Institute. 1997. Doubleday Publishing 1999.. European trends in HR Outsourcing. • • • Ray Jean-Emmanuel. Chandos Publishing. trends. 2000.• Peters Thomas.. Quinn James Brian... Droit Vivant. Van Ommeren J.com 170 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . The Challenge of Outsourcing Human Resources. Changing the course of business services. August 1988. Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry. • Laigle Pierre. and Vernon P. Restructuring the Human Resource Department. objectives. In Search of Excellence: Lessons from America's Best-Run Companies. Waterman Robert H. Hermès Science Publication. Transformational Outsourcing. 2001. 1999. Free Press Publishing. Mercer William M. 2001. Cranfield School of Management. • Brewster C. June 2000.

dir/QR000914. Research Report. Commission.http://www. • Dell David and Gelman Lisa. 2002. between March and May 2001. Predicting the Workplace of 2010.ey. • EIRO & E. The maturing of outsourcing.web/document.infoeurope. Strategies. Dialogue dans l’entreprise: consultation des travailleurs et comité d’entreprise européen.eiro. Creating value through HR Outsourcing. Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships. Pitfalls.eurofound. AON Human Capital Consulting.• Centre d’Information sur l’Europe. • KPMG. • Cubiks (a PA Group Company). 1997. The Beat Goes On: Outsourcing Your Human Resource.int • Ernst&Young en collaboration avec Taylor Nelson Sofres Baromètre Outsourcing 2002. The Conference Board. Industrial relations developments in Europe. Melbourne. February 2002. 1997. Pratiques et tendances du marché de l’externalisation en France. www. http://www.com • Goolsby Kathleen. Knowledge@Wharton in collaboration with Aon Corporation. HR Outsourcing Trends.fr/europe. Opportunities.U. Sourcing Interests Group.eu. 23rd April 2003. 171 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 2002. Outsourcing Center. • Coopers & Lybrand Consultants and l’Association Nationale des Directeurs Financiers et de Contrôle de Gestion (DFCG) Study.htm • Connaughton Dave (Director Business Development Asia Pacific Region Exult). • • IBM 2002 Annual Report. 2002. May 2002.

February 2002. 1996. Interimsmanagement. Chaîne logistique globale: l’externalisation en marche? Etude sur l’externalisation de la chaîne logistique globale dans les entreprises industrielles en France.p Towers Perrin.outsourcing. Agence ARCA publishing. • PricewaterHouseCoopers. and Paxton Meredith A. Sloan Management Review. Number 3. Transforming the Human Resource Function. Buck Consultants. “The hidden costs of IT Outsourcing”. 2002.. http://www.de • Mazor Arthur H. Le management des Ressources Humaines en Europe: les professionnels RH doivent développer de nouvelles compétences face aux défis du e-business.org/etudes_statistiques/Rapport_économiŠl_2002_SETT. Ressources Humaines : l’externalisation en Europe. Volume 42. für die Wirtschaft im Wandel.com • SETT (Syndicat des Entreprises et de social Travail Temporaire). April 2003. ARTICLES • Barthélemy Jérôme. Converting the Managers Makes Self-Service HR Work. Comment évoluent les stratégies de rémunération en Europe. Human Resource Effectiveness Practice. 2002. • Management Angels GmbH. Study of January 1998. annuel Rapport 2002. Spring 2001.• Logistique et Management. Inc.managementangels. • Rosenthal Beth Ellyn.requests..sett. 172 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . http://www. • Poinas Jean-Pierre. Business Village. ADP. November 2000. économique df • http://www.

December 2002. April 2002. HR Outsourcing Today. Le Monde. and Freeman Marcia S. • Boston Business Journal. “India warns U. “Le prix réel des nouvelles organisations d’entreprise”. 2001. “Organizational downsizing: a convergence and reorientation framework”. 173 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY .. • Beary Habib. HR Magazine. • Business The Ultimate Resource. “ Bigg fishing for business: HR outsourcing firms are forming partnerships and acquiring resources in a bid to get contracts from big business (Outsourcing)”. 7th September 1999. “IT outsourcing: finding from an empirical survey in France and Germany”. Le Monde. 12th June 2003. “Au-delà de l’interim. BBC News Online. 20th April 1999. Organization Science. “CBI launches new bid to block irreparable damage from E. 4. “Bosses war against rights for temps”.S. 1993. • CBI Press. “Dictionary”. • Baudet Marie-Béatrice. Adecco veut gérer les ressources humaines de ses clients”. • Belot Laure. “Fidelity to oversee IBM’s pension plan”. • BBC News Online.U. • Bates Steve. 2nd July 2002. Bloomsbury Publishing. “Legal Eagles of HR Outsourcing”. • Bierce William. 30th May 2003. over outsourcing”. 2002. • Cameron Kim S. European Management Journal. 18th February 2002. temping law”.• Barthélemy Jérôme and Geyer Dominique.

. Spring 1996.• Claire Fabien. and Sayer Per.html • Drucker Peter F.eurofound. • Drucker Peter F.html • • Entreprises & Carrières. http://www. Le Journal du Net.00. April 2002. “Les RH au bout du fil”. “The Near Future (Part II)”.fidelity.eiro. 15th April 2003. “The Value of Selective IT Outsourcing”. • Fidelity Employer Services. http://www. Law Gillian. Info World. “Protectionism hits the outsourcing industry”. Lacity Mary C. • EIRONLINE. Volume 37. 9th November 2001. and Willcocks Leslie P. http://www. Harvard Business Review. “They’re not Employees.5317. Number 3. Feeny David F. They’re People”.5642%7C. The Economist. June 2001.com • Cohen Don and Prusak Laurence (Executive Director IBM Institute for Knowledge Management). “Commission proposes directive on temporary agency workers”..com/printarticle/0. “Strategic intent for IT outsourcing”. • DiRomualdo Anthony and Gurbaxani Vijay.. “Fidelity Investments And IBM Sign Benefits And Human Resources Outsourcing Agreement”. Sloan Management Review. Sloan Management Review.int/2002/04/feature/EU0204205F. Number 4. http://www.eu. Volume 97.com 174 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY ..journaldunet. “How to invest in social capital”.cfo. Summer 1998. February 2002. 28th March 2000. 11th February 2002. • Ferranti John Blau Marc.. Harvard Business Review. 2nd July 2002.

Sloan Management Review. and Quinn James Brian. Inside the IBM-Fidelity outsourcing partnership”. “Ces entreprises qui externalisent leurs salariés”. The New York Times. Summer 1994. 3rd July 2002. The New York Times. Les Echos. • Gartner. “2000 Outsourcing Services: Market Share and Forecast”.“Zeitarbeit als Brücke auf dem Weg zum neuen Job”.• Fidelity Investments. “7 conseils pour… réussir une demarche d’externalisation”. INSEP CONSULTING. • Johnston David Cay. • Johnston David Cay. Inside the IBM-Fidelity outsourcing partnership”. • • HRFOCUS. • • HRFOCUS. September 2002.fidelity. 20th December 2002. “How Outsourced Recruiting Saves Time and Money – and Gets Quality Hires”. • Grandadam Sabine. “ Fidelity and IBM in Venture To Handle Worker Benefit Plans”. November 2002. Human Resources Outsourcing Today. 175 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . 26th October 1999. November 2002. Weser Kurier Online.hrotoday. “Substantial Benefits. “Strategic Outsourcing”. • Gundel Elke. http://www. 3rd July 2002. 3rd October 1995. “The 100 Superstars of HR Outsourcing”.com • Galez-Rovan Anne and Lévi Catherine. “Le délicat volet social de l’externalisation”. “Substantial Benefits. 6th June 2003.com. • Genelot Dominique. Les Echos. www. March 2001. April 2002. “Trends to Watch in HR’s Future”. December 2002. “ Crisis Survival Tactics for HR”. HRFOCUS. • Hilmer Frederick G.

23rd April 2002. “IBM takes a more general view of global HR delivery”. • Koellner Laurette (Shared Services President). Les Echos. “L’externalisation à toute vapeur”. • Niedercorn Frank. “L’externalisation. 2nd May 2001. June 2003. • Miliotis Patrick J. 10th July 2001. May-June 1997. 6th June 2000. Liaisons Sociales. • Les Echos. 176 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . “Change Management”. “La CES prend l’accent britannique”. Personnel Today. “IBM recrute et forme pour le compte de son réseau”. • Personnel Today. • Marchant Catriona. • Moreaux Isabelle. 17th October 2000. un mouvement de fond”. “Service center creation”. Les Echos. February 2002.• Kiely Thomas. “IBM HR caters for over 40 countries”. Personnel Today. 1st February 2000.. Personnel Today. • • • Personnel Today. 6th March 2001. • • Personnel Today. The Boeing Company. “Business Process: Consider Outsourcing”. 26th September 2000. 29th August 2001. 18th April 2000. National Management Association Boeing Space Coast Chapter. Harvard Business Review. Personnel Today. “The cautious approach”. “The evolving Role of Managers and Leaders”. “BP”. Letter of the week. “Oil giant flies the flag for keeping HR skills in-house”.

“L’outsourcing : une approche par les coûts de transaction”. “How to succeed at HR outsourcing – by really trying”. Les Echos. Réseaux. “Intel’s No Bargain”. September 2002. Perz Alain. Summer 2002.• Personnel Today. 2003. “Be seen and heard or face extinction”. Legal and Otherwise With Outsourcing Deals and How to Avoid Them”. • Shaw Pittman (Attorney at).php?t=25 • • The Motley Fool. “Externalisation: les solutions de BP Amoco et d’IBM”. Les Echos. Les Echos. “L’irrésistible montée de l’externalisation”. • Rosenhan Damon. 177 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . “Building a Case for BPO-Part 2. 14th February 2003.com/particle. “ The odd couple produces model for HR outsourcing”. • Rosencrance Linda. “Fidelity to run IBM pension and health plans”. http://www. 26th June 2001. Personnel Today. 2nd July 2002. “Web HR frees up time for strategy”. July-August 1997. 28th November 2000. • Ritter Laurence. • Quélin Bertrand. • • Personnel Today. For Buyers’ Eyes Only”. Everest Group. • Reuters Company News. 5th July 2002.chiefofficer. 21st October 1998. Thévenet Maurice. Computerworld. • Richards Lance. “Common Problems. “Y a-t-il un marché du travail européen?”. 31st October 2000. 19th February 2002.

pdf • http://europa. Number 1.pdf • http://europa. 1999.dupont.dupont.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CEL EXnumdoc&lg=EN&numdoc =31977L0187&model=guichett • http://europa.xml 178 OUTSOURCING HUMAN RESOURCES ACTIVITIES OF A MULTINATIONAL COMPANY IN EUROPE Mathilde RENAUX & Eloi MALTA-BEY . Human Resource Management.eu.int/eurlex/pri/en/oj/dat/1998/l_024/l_02419980130en00010008.com/NASApp/dupontglobal/eu/index. L’Art de l’entreprise globale.eu.com/ http://eu.int/eurlex/pri/en/oj/dat/1998/l_201/l_20119980717en00880092.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CEL EXnumdoc&lg=EN&numdoc=31995L0046&model=guichett • http://famulus.jsp?page=/cont ent/EU/en_US/overview/glance.int/eurlex/pri/en/oj/dat/2001/l_082/l_08220010322en00160020.asp?it=enweb&xd=_dyn\dynamicpre ssrelease_560. WEB SITES • • http://eu.msnbc.asp?sym=msft#body • • http://was4. Village Mondial.eu. Spring 1997 • Willcocks Leslie.eu. Volume 36.html • http://europa.accenture.eu.• Ulrich Dave.hewitt.htm http://www.com/hewitt/about/overview/index. “L’externalisation maîtrisée des systèmes d’information”.com/xd/xd.com/FamulusCom/reuters07-24140033.pdf • http://europa.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sign up to vote on this title
UsefulNot useful