Hewlett Packard: Talent Show - John Schlueter

In the world of benchmark data and performance results, the difference between world-class and average is about two percentage points. World-class organisations use a variety of tools and strategies to achieve this critical difference. As Hewlett Packard’s BPO record-to-report service line director John Schlueter explains, one such strategy is the deployment of a Talent Management Programme (TMP).

Studies from leading benchmark organisations suggest that, when clients adopt a comprehensive Talent Management Programme (TMP), there is exceptional opportunity for significant return, relative to the required level of investment. Table 1 highlights a recent Hackett Group study of Fortune 500 organisations that invest in planned TMPs. It shows that, on average, top performers realise an annualised boost of $247 million to the net profit margin.

In relation to other critical measures such as EBITDA and ROA, the study revealed around 2% better results for top versus average performers. Most notably, ROA improvement provided a leveraged impact of nearly $1 billion, a four-fold improvement over the net profit margin.

As shown in Table 1, the opportunity for improvement is significant and in HP’s experience TMPs bring key tangible benefits to the BPO process.

They can:

  • Reduce voluntary turnover
  • Streamline the process of recruiting, selecting, and promoting staff
  • Bring about a measurable increase in productivity
  • Link rewards to the achievement of individual and organisational objectives
  • Provide easy access to high quality staffing information, skills development, and career management

However, in HP’s experience, the return on investment from a successful TMP depends on two factors: first, directing the talent management effort towards creating the skills needed to generate value-add outcomes; and second, using outsourcing strategies to retain a lean finance organisation dedicated to driving success for the business, not just generating financial data and regulatory compliance reports.

Protecting talent in transition

In a business process outsourcing (BPO) relationship, the tasks and large resource pools are moved offshore, leaving the retained organisation free to manage multiple outcomes across many platforms. Instead of spending their time on low-value-add tasks related to generating a never-ending cycle of financial reports, retained personnel now have the time and capacity to focus on analysing those reports and advising on what they mean to the organisation, providing management with deeper insight and enabling clear decisions about the operation of the business.

At HP, we often see a transition in roles as difficult for many individuals to achieve without having access to planned assistance and support. We also know, from many engagements, that protecting identified key personnel during the transition phase by providing planned TMP assistance and Management of Change (MoC) strategies for such individuals is a critical success factor – and one that cannot be overlooked or dismissed as simply unnecessary soft-side skills development. The risk of not doing so can mean the loss of the potential opportunity to unearth future key individuals who, in time, may become the organisation’s next-generation controller or CFO.

Absence of Management of Change and Talent Management Programmes can undermine a BPO deployment and generate high levels of unexpected and hidden resistance against the BPO strategy. Dealing with this sort of resistance often consumes unanticipated levels of the whole organisation’s time, resources, and energy. Our experience tells us that active engagement and pre-planned MoC and TMP actually offer a greater chance of unearthing and grooming the next-gen controller. They also present an opportunity to mitigate the risks of project failure.

Role redefinition is an integral part of the BPO strategy. Consider a typical end-of-period reporting process, where the traditional reporting model requires 80% of a controller / analyst’s time to be spent collating and drafting the background analysis. When such a process is outsourced, all transactional aspects underlying these reports are now created and prepared in advance of the need to engage a controller/analyst.

Under BPO, these individuals now have more time to review their work for completeness / accuracy / data authenticity, etc. More important, they have greater time to work with business leaders to detail the analysis findings and discuss the potential ramifications of those findings on the organisation.

The May 2008 McKinsey Quarterly article, “Why multinationals struggle to manage talent”, highlights the benefits from top-tier investment in globalising an organisation talent. The companies that tend to lead the world are those that encourage experience in multiple business units, link global experience to promotion, and free the talent hidden inside the local silo. By reducing the pool of resources and implementing a global BPO strategy, the new investment in talent is leveraged for greater effect.

Talent transformation after BPO implementation

Change leadership is not confined to the BPO initiative implementation period.

Consider the following:

  • HR practices and recognition programmes place greater reward on hierarchical size and span of control rather than on contributor metrics and value-add contributions
  • Enterprise business leaders may not be ready to utilise cross-functional support elements now available in the retained organisation

After the BPO implementation, the work that demands higher skill levels continues to migrate from the client’s retained organisation into regional centres—and, in time, to lower-cost global shared service centres. This skills migration frees the smaller-sized retained finance organisation to shift its roles and responsibilities to work requiring greater strategic and/or critical review or analysis.

Key to this skills migration and the ensuing role shift is the expectation that workforce expertise in both the retained organisation and the BPO provider will expand to fill the requirements of new roles.

In a planned TMP-enabled BPO project, the initial retained workforce focuses on ‘lifting and shifting’ work to the BPO provider, while that provider focuses on delivering the contracted tasks. The long-term goals are to eliminate transactional work, reduce full-time-equivalent support functions, drive savings, and promote transformation. Achieving these goals requires investment in talent and development of skills in both the retained organisation and the BPO provider pool.

Traditionally, an employee’s compensation and job ranking are often based on a corporate staffing structure, and from taking into consideration the teams the individual heads.

But in an outsourced model, those teams are gone. Retained personnel must now focus on contractual measures and define their business contribution by their proficiency at engaging in traditional non-finance roles such as marketing, sales, and production. It requires a new mindset – and concurrent adjustments in the traditional reward and compensation systems – to entice such behavioral shifts in the retained organisation.

The organisation’s constituents must also change to accommodate the potential leadership contributions that can be made by the realigned finance and accounting (F&A) staff. Business groups must shift to a centralised F&A concept and leverage the high skill levels and strategic resources that are now available within the F&A group.

And the organisation’s shadow and silo F&A teams must be identified and encouraged to join the end-to-end sourcing model.

What’s needed is a change in how contribution and individual worth are measured. In the post-BPO model, the retained F&A personnel will have business leadership skills – including process expertise, understanding of multi-national relationships, strong communication skills, and an attitude of nimble flexibility – that organisations require. Also required is an increased focus on outcomes, along with accountability for those outcomes, and less on transaction details. These are some of the differentiators that help organisations achieve those critical two percentage points and move from average to world-class. Thus, investing in planned Talent Management Programmes is more than a good HR idea – it’s a necessary step in managing the organisational change that comes with BPO.

John Schlueter, Hewlett Packard’s BPO record-to-report service line director.
Table 1. 2007 Fortune 500 talent management investment returns of top versus average performers (Source: The Hackett Group “2007 Book of Numbers Research Series,” Vol. 11; No. 4; Fig. 15).