Service excellence in HR business process outsourcing

by Tom Lester

"Our long-term client retention and client satisfaction rates are over 90%." These are the two parameters that Jeff Bizzack lives by in his role as executive vice president of sales and marketing for ProBusiness Services, the California-based specialist in HR business process outsourcing. He knows these and many more statistics by heart, having lived and breathed ProBusiness since he helped found it in 1986.

"These kinds of retention and satisfaction ratings don't come about by accident. They're a result of our client-centred service philosophy", he says. Today, the company provides payroll, payroll tax, benefits administration, web self-service and comprehensive outsourcing solutions to nearly 2,000 employers within the United States. It has built up this customer base by a simple but rare concentration on offering a better service than its rivals.

Service, believes Bizzack, is the one sustainable competitive advantage among outsourcing providers. In the US, where more than 75% of companies already outsource some HR functions, continuing competitiveness is a necessary condition for life. That figure, for 2002, contrasts with a figure from two years earlier of only 50%, according to Gartner's research.

Nowadays, technology merely qualifies a company for market entry, since any advance is rapidly equalled or overtaken by competitors. Service has become the differentiator and key contributor to the success of any business process outsourcing venture. In Gartner's latest report, service was the highest-rated selection criterion among potential clients, and mediocre service the largest obstacle they saw to further outsourcing.

Service has been a feature of the ProBusiness offering since the beginning. When ProBusiness entered the market, says Bizzack, its competitors were all using big mainframe computers running large centralised payroll systems, which meant that their clients were forced to adapt their own systems to fit. ProBusiness opted to deliver data and services to clients via PC.

This more flexible and scalable client-server configuration could easily be adapted to fit clients' operating environment and flex and change with the growth and contraction of their business. It also ensured that clients and ProBusiness staff viewed the same data on the same equipment in the same format, allowing rapid response and data change all the way through production.

As competitors responded, ProBusiness also built its client relationship management structure with specialised systems including computer telephony, an integrated knowledge base, and new file management systems. As the industry continues its evolution from mainframes to client/server to web-based applications, the company is developing its technology and service infrastructure to match.

"The larger employers wanted flexibility" explains Bizzack, "and we were able to offer them a solution that they could use in-house for the outsourcing processes." The company's ability to change with the market and anticipate future needs has served it in good stead. It initially specialised in two core operations: the payroll itself, starting with the data from the client and ending with the payment to each employee, either direct to his bank account or by a delivered cheque; and payroll tax - calculation, filing and compliance.

HR services were added in the mid 1990s following the purchase of a small firm that had built an innovative Human Resource Management System (HRMS) to manage employee records, analyse HR data etc. Further acquisitions brought expertise in administration of employee benefits such as health care, and of the ability to deliver employee information via web self-service portals.

The size of the US market has helped ProBusiness' growth, and the numbers of employees in any one category are large compared to the number in similar categories in Europe. Many differences in tax regulations and rates exist across the US, but they are relatively minor compared to the radical differences between and within European countries. Even so, ProBusiness required "a very, very comprehensive and defined engine for handling tax." However, the investment to build and develop it into a complete system and service infrastructure capable of handling the complex needs of large employers has paid off, Bizzack claims; and since the early 1990s it has been powering ProBusiness' growth.

At the height of the technology boom, the Californian company was growing at a rate of up to 100% annually, but the subsequent economic conditions have naturally taken their toll on the large numbers of IT and telecom clients on its books. The flexibility that ProBusiness has developed however, has also helped many clients to weather the shifts in the economy. ProBusiness has been able to adapt its capacity to match business growth and contraction.

The company has been growing vertically as well as horizontally. The core payroll and tax work is essentially a back-office function, at one remove from the employees, but now, it's working directly with them. "For the last three to four years, we've been very focussed on HR business process outsourcing, where we literally are the client's payroll and tax departments, we maintain the HR database and provide tier one support for employees and their inquiries."

A ProBusiness call centre handles ProBusiness Comprehensive Outsourcing clients' US employees' enquiries on HR matters (they are not aware that it is not a company employee who answers them). Employees can now also manage their own data, check their pay slips, change their banking relationships etc., over an intranet via a web-based front end that ProBusiness has designed.

Since the company's development work has concentrated on building an integrated platform around employee data, it can easily pass the data across to new services as clients require it.

This is also an advantage, Bizzack points out: many rivals are forced to spread their budgets across several platforms that have resulted from earlier acquisitions. Further, it should help ProBusiness' entry to global markets. In spite of the wide differences between countries, big corporations expect uniformly-high levels of service across borders, and in marketing terms, "there's a fairly significant hole across the globe."

The big challenge for any growing service company is to maintain the high standards that propelled its early success, especially when crossing national frontiers. From the outset, ProBusiness has therefore put great emphasis on understanding the client?s needs in detail: "we look at the complexity, its expectations, its structure, its culture and, crucially, how its needs are likely to change over time."

Part of its methodology centres around a "Clients for Life" commitment. The effectiveness of this strategy can be judged from the average length of its relationships.  Bizzack prefers to call them partnerships which, at 12 years, is not much shorter than the age of the firm. A priority is to make a careful assessment at the beginning, of how the various processes can be scaled up or down to fit the client's business.

The technology bubble tested this facility to the ultimate. Small companies grew almost overnight into big companies, and shrank again just as quickly. "One client that we've had to help had 80,000 employees at one time", recalls Bizzack. "It's now down to 20,000. The whole telecom sector has shrunk by 27%."
Another client that had less than 100 employees in the mid 1980s had 14,500 on its payroll by last year. "We were able to anticipate much of its growth," says Bizzack., "As it's gone ex-growth now, we are able to help it contain its costs." ProBusiness was also able to help the client in other ways, by keeping pace with its strategic goals.

It has had a long-term ambition to become a paperless organisation, and one of its early targets was to eliminate the time sheets that some 900 employees were required to fill in. ProBusiness' relationship manager was able to suggest a number of alternative ways to do the job, and reconcile the individual totals with other data. He also suggested a solution to the problem of employees who have no bank accounts to which pay could be credited electronically. The company is currently testing a Visa payroll debit card system that he proposed, and naturally, ProBusiness will handle the administrative processes involved.

The relationship manager is a key figure in ProBusiness' methodology. He or she has an average of 19 years' experience in the industry, and his or her role is to form a partnership with the client's executives, to understand its business strategy as it develops, and ensure the service provided remains fully aligned, including updating the service-level agreement in conjunction with client change, if necessary. Acquisitions, divestments, internal re-organisations, trading fluctuations etc. may all have a significant impact on service demands, and the relationship manager's job is to maintain or increase the value to the client throughout.

Day-to-day operations are the responsibility of the account manager who works alongside the client's operational team. The account manager's job is to ensure that performance standards are reached if not exceeded every week, fortnight or month, whatever changes, anomalies and problems that Fate may throw his way.
Performance is recorded at every turn: "We call it "metrics madness"", says Bizzack. "We measure everything. If people think we can't measure something, we still measure it, because it's so critical to have the data necessary to improve service delivery." Every transaction with the client is tracked by Siebel software.
Results are then compared to service level agreements to show actual performance against the agreed levels, so that any shortfalls, on the part of the client as well as ProBusiness, can be examined, discussed and hopefully remedied.
The matter doesn't end there. ProBusiness has internal benchmarks for each of three centres of excellence, derived from the complete client base. Surveys conducted twice a year show if the operating teams are hitting their objectives, while Tenacity, an independent US firm of client retention consultants? is commissioned to independently visit clients in order to check what the managers really think about the service ProBusiness is providing.

Bizzack finds that if there's an issue detected with one client, it's usually found among them all. In one case a few years ago, he saw that in one yearly quarter the promptness of delivery by courier of the payroll cheques to client locations had fallen sharply. It was in a particular region of the country, and an immediate investigation showed that the independent courier concerned could not handle the growing volume of deliveries adequately, and so a switch was made to a national firm that produced better results.

The case demonstrated a wider truth about the kind of service that ProBusiness offers. Not only was a relatively minor problem quickly detected and remedied before it could swell into a crisis that might have hit a number of big clients; but their HR or finance vice presidents were freed from what would have been a major fire fighting exercise, so that they could concentrate on HR or financial strategy and the issues that would add real value to their companies.

That, in the end, is what HR outsourcing is all about. Surveys show that boards worry about handing over such sensitive issues as payroll and employee support to a third party. ProBusiness' concentration on top level performance and the resulting approval of some of the top US companies shows how the reluctance can be overcome.