MANAGING THE SUPPLY CHAIN

1. MANAGING THE SUPPLY CHAIN ITU Regional Workshop on “Strategic HR Management”Cairo Egypt 13-17 April 2008 Lecture 8

2. One of the key roles of Strategic HR Management is the Management of Relationships. • Business survives because there are outsiders. • The know-who (Relationships- network) as well as the Know-how (Skills, Knowledge, Capacity, Talent)

3. The Know-Who are usually the other stakeholders who have a role in the successful implementation of the Business Strategy. • In doing so, avoid stepping on other people’s toes and doing their job (if you cannot beat them –bypass). • Stick to relationships that have a bearing on the business directly, and on HR

4. Traditionally HR has always focused exclusively on the Internal Customer (the workers, the Managers, the unions.) • Now we need to look at the whole business value chain to see who matters

5. MANAGING SUPPLIERS • Suppliers of products to the company who have been subcontracted to do so on behalf of the Company: • Suppliers of products to HR that have been outsourced markets. • Managing HR to Non Traditional International Markets( managing Diversity)

6. Managing subcontracted companies: • Service Providers, Retail Agents etc.To be treated as Business Partners in a Win –Win situation. • Need to maintain Brand image. • May need to provide Training on such issues as Customer care and brand imaging. • Need to provide protection and promotion of brand image. • Remember, Brand image is a powerful tool for the attraction and retention of staff.

7. Managing the Customers • HR is involved in the Customer Care Program • This is essentially a Culture issue that has a bearing on training and Culture creation program, based on the corporate Strategy. • Implemented in liaison with other departments (Sales, Customer Service).

8. OUTSOURCING HR • Outsourcing HR services directly related to the HR Business Partner role. • A product of Business Process Reengineering, and the introduction of IT( Knowledge Management).

9. OUTSOURCING HR • HR OUTSOURCING HAS BEEN A GROWING BUSINESS IN THE US (UP TO 94 % OF COMPANIES OUTSOURCE AT LEAST ONE HR FUNCTION) • MOST OUTSOURCED SERVICES – HEALTH BENEFIT MANAGEMENT, PENSION BENEFITS, PAYROLL, RECRUITMENT SERVICES, COMPENSATION ANALYSIS, TRAINING)

10. REASONS FOR OUTSOURCING • COST SAVINGS THROUGH REDUCED HEADCOUNT: 30-40 % SAVINGS • ACCESS TO EXPERTISE AND TECHNOLOGY • YOU USE AN EXPERT WHEN YOU OUTSOURCE. THIS EXPERTISE DOES NOT EXIST IN YOUR OWN ORGANISATION • NEUTRALITY • TO REDUCE YOUR INVESTMENT COSTS IN TECHNOLOGY • INCREASE YOUR FOCUS ON YOUR CORE COMPETENCIES/BUSINESS

11. DECIDING TO OUTSOURCE • START BY CREATING A STRATEGIC PLAN FOR HR • A CLEAR VISION, MISSION AND STRATEGIC GOALS YOU WANT TO ACHIEVE • EVALUATE YOUR INTERNAL RESOURCES

12. WHAT TO OUTSOURCE: 5 STEPS • CREATE A PROJECT TEAM • TO DEVELOP A PROJECT PLAN • IDENTIFY DESIRED RESULTS • ASSESS POTENTIAL BARRIERS • RESOURCES AND SUPPORT REQUIRED • PLANNING THE STEPS

13. Outsourcing Process • CONDUCT A PROCESS REVIEW • MAPPING ALL THE HR PROCESSES (RECRUITINT, PAYROLL, PERFORMANCE MANAGEMENT, TRAINING ETC) • DETERMINE WHAT IS DONE, BY WHOM, FOR HOW LONG ? AT WHAT COSTS ?

14. Outsourcing Process • REVIEW STRATEGIC PLAN • ASSESS CURRENT HR ACTIVITIES (STEP 2) AGAINST THE BUSINESS PLAN • IDENTIFY ACTIVITIES THAT NEED TO BE DONE BUT DO NOT HAVE A DIRECT CONNECTION TO THE BUSINESS PLAN • ASK WHAT YOU AS HR NEED TO DO TO SUPPORT THE BUSINESS PLAN

15. Outsourcing process • IDENTIFY YOUR CORE AREAS • CAPITALIZE ON YOUR INTERNAL EXPERTISE

16. Outsourcing Process • DECIDE WHAT TO OUTSOURCE • ONCE YOU DECIDE WHAT TO OUTSOURCE, THIS IS NOT THE END, BUT THE END OF THE BEGINNING. YOU NEED TO FACILITATE THE OUTSOURCING PROCESS. • THIS HAS PROVED TO BE TRICKY !

17. DISADVANTAGES OF OUTSOURCING • NEED TO CHECK THE VENDOR – THE TASK DOES NOT GO AWAY • DEMOTIVATION OF STAFF • INVOLVES RISKS (DISSAPOINTED STAFF) • CONFIDENTIALITY – PLACING COMPANY INFO IN HANDS OF OUTSIDERS

18. HR OUTSOURCING EFFECTIVENESS SURVEY • By Towers Perrin, now in its third year. • Assesses State of Outsourcing and HR transformation. • Says that the honeymoon is over. Both Buyers and providers are now expecting more from the relationship.

19. WHAT HR NEEDS TO KNOW BEFORE OUTSOURCING: • In terms of the work an organization does prior to outsourcing, HRO can take it to a new level of effectiveness in how HR spends its time; • Before signing the contract, know your own situation in terms of current quality levels, volume, and the level of transaction quality fundamental to your organization;

20. 2006 Survey of 38 of the 70 Fortune 100 Companies in the midst of large scale outsourcing deals.( ie those involving outsourcing more than six processes to one vendor). • The picture shows increasing frustration.

21. Buyers increasingly focus on “getting it right” and are less tolerant of poor quality than they used to be; • HR departments are not realizing the cost and time savings they seek from outsourcing major HR functions; • In an outsourcing world that’s all about quality, companies can make key interventions to help ensure satisfaction before the deal, when it’s signed, in mid-process, and beyond; and • As experience levels rise, expectations are changing among buyers and sellers.

22. Sixty-seven percent of those surveyed noted that the vendor’s ability to continuously improve service quality of contracted services has become more important since deal inception; • Organizations that invest more in governance of the outsourcing arrangement tend to be more satisfied with their results; • Twenty-four percent spend five to six percent of annual outsourcing costs on governance;

23. Buyers’ satisfaction levels with “next-generation processes” such as staffing and training administration are considerably lower than their satisfaction with the delivery of first-generation processes; • Fifty-seven percent were “very” to “somewhat dissatisfied” with staffing/recruitment outsourced processes; • Thirty percent were “very” to “somewhat dissatisfied” with learning/training administration outsourced processes;

24. Satisfaction is low overall. Buyers report that they are spending more time than anticipated on managing the HRO deal, and they report that the time they allocate in many areas of HR has not changed significantly post-outsourcing;

25. On a scale of 1 (strongly disagree) to 5 (strongly agree), those surveyed averaged a 4.06 when asked if they focused a significant amount of time on the HRO project, and averaged 3.97 when asked if they invested significant time and other resources on the change management efforts to support the HRO deal;

26. Most respondents believe client retained organizations will require new competencies to get the most value from the outsourced HR model; and • Fifty percent indicated they need to add new competencies to a “great” or “very great” extent to leverage the full value of the outsourced HR model. • Steps can be taken on both sides to improve quality. “From the buyers’ side, it’s about having a common set of objectives that vendors agree with and buy into

27. What that tells us is that it’s becoming a high priority to define quality as quickly as possible. Users are less tolerant of poor performance or of correcting ongoing issues for very long.

28. WHAT HR NEEDS TO KNOW BEFORE OUTSOURCING: • Build quality into the contract through improvement clauses and metrics. Do not give quality a backseat to financial measures; and • Develop and execute a quality plan in stages; tackle critical areas first and move forward incrementally. Consider a quality council as part of governance to ensure the quality process is followed.

29. Towers Perrin advises its clients to understand their business operations thoroughly. “If you outsource a certain function such as recruiting or payroll or whatever, know how you operate today, what the key drivers are, what are the customers’ expectations, the costs, and the historic service levels,”. • “Understand the business environment very well before sourcing someone else to do it. Get a clear understanding of what’s happening and what the expectations are, so that when you start to transition, you know what you are transitioning over, and you have a better expectation set based on how you operate today.”

30. CONCLUSION • Managing the external customer down the Business value chain is becoming an important component of the HR Manager as a Business Partner. • Care however needs to be taken to avoid conflicts with other departments for whom certain functions might be seen as Line Functions