Human resource outsourcing: an outcome-based move to improve the groove

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By: Sapanjeet Chatwal --

01 January, 2017

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Many companies in the U.S. and Europe are beginning to evaluate the efficacy of Human resource outsourcing (HRO) services based on the outcome i.e., results produced, rather than cost differentials.

Service quality measures are gaining prominence with the advancement of technology. KPI measures are now focused on outcome based pricing model in the U.S. and Europe.

For example, ADP, a global outsourcing firm in the U.S. transformed its recruitment process outsourcing based on retention rates rather than hiring rates. IBM, a leading software company is using the model for insurance on outsourced resources.

As the wind continues to blow in favour of “outcome” model, companies would look to derive benefit out of HRO through employee satisfaction and service quality.

The U.S. and Europe have adopted outcome based model given its suitability for large and volatile businesses across the world and due to the increasing cost in HRO.

SLAs and Reverse SLA

The service agreements are prepared based on the revenue or outcome per resource model and not on cost based approach. Organizations seek changes in SLAs based on the outsource volume and also engage with multiple suppliers to standardize the SLA terms and conditions. Contract tenure has increased from 36 to 48 months. IBM and Kimberly Clark have adopted reverse SLAs to evaluate suppliers based on the outcome of the resources provided to the buyers.




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