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HROA Report The Path At the April meeting of the HROA European Chapter Board, the directors discussed what they believed were the key factors to consider when going through a renewal process. Participants included John Hindle of Accenture, Darren Bartholomew of Selex Galileo, Andrea Schafell of PA Consulting, Gary Madden of BP, Howard Nelson of IBM, Sally Hunter of Kelly Services, Cathy Tracey of Alexander Mann Solutions, Henry Barenholz of Oracle, Seb O'Connell of Randstad, Paul Mallinson of Hays, Margaret Spink of Xchanging, Sarah Seabury of ISG, and Tom Mason of Allegis Talent2. —The Editors Is the process a renewal or extension? Perhaps the answer lies somewhere in-between. Many of the original HRO contracts were negotiated five to 10 years ago; since then, there has been a change in expectations on both sides of the partnership. Frequently these historic contracts reflect early adopters in the industry who probably got a very good deal in terms of pricing, scope of services, and SOWs. During the renewal process, there can be a tendency to focus on the past—the 'old' way of buying outsourcing with outdated approaches to constructing contracts. But the commercial model of the service providers and the original rationale for outsourcing has more than likely changed. Early days of the industry involved a transactional approach despite all the noise around strategic partnership. Regardless of renewal or extension, buyers need to consider what is best for their organisation: Do they want a gentle evolution, business improvement, refreshing technology as well as updating ways of working or is this a big bang—a whole new way of working? Do they want to go through all the growing pains of a big bang transition either with their current provider or potentially with a new provider? Or is the time right to step out of the HRO market and bring the services back in-house? Furthermore, buyers should ask themselves certain questions when deciding whether it's time to extend or renew. If they've really [38] HRO TODAY GLOBAL | SUMMER 2012 to Renewal How to get the most out of extending your HRO contract. By Emma Darke and Faye Holland outsourced, have they passed on certain tasks but continued to police them? A good health check includes the following processes: • Assess how many resources have been added in your organisation to do a job that your provider could do during the HRO contract tenure. • Look at the total cost, including your internal team, and understand if there is an opportunity to ask more of your provider. • Review performance measures. How is your provider measuring the performance and the output or the transaction? • Is there an upheaval of systems? Is it an evolution or a change? • Make sure that you are reviewing the actual service and not what the original contract indicated. The directors agree that they don't know a single person who hasn't sat down for renewal and heard buyers remark: 'you haven't innovated enough' or 'you haven't delivered continuous improvements.' This highlights the importance of building an explicit continuous improvement clause in the contract. Buyers tend to look at this as something their provider didn't follow through on while providers argue that they've hit all their service level agreements (SLAs) so they don't need to. This common problem in the renewal/ extension process is often a product of inefficient relationships between both parties. The Importance of Relationships There shouldn't be any surprises when renewal time comes because a relationship should have developed over the life of the contract. However, a lot of things can change, like big companies divest or make acquisitions. This can bring tension into the contract if it hasn't been rewritten and parts are seemingly simply 'bolted on.' When renewing, there should be honest and frank discussions about what is working and what is not in the engagement. If there