Implementing Benefits Outsourcing

Realizing the full advantages of outsourcing requires careful planning and execution spanning vendor selection, transition, change management and ongoing governance. 

Developing a strong business case 

Like any strategic sourcing initiative, quantifying the business case for benefits outsourcing is crucial to secure stakeholder commitment. Key steps include: 

1. Conduct cost-benefit analysis – Profile all current costs of in-house benefits administration, then project outsourcing costs based on vendor research and proposals. Model different outsourcing scenarios to demonstrate potential savings. 
2. Define strategic goals – Articulate clear objectives around improved efficiency, technology upgrade, higher compliance, better reporting and other goals that providers can help you achieve. 
3. Assess HR workload impact – Quantify current hours spent on benefits administration and how outsourcing could relieve this burden to focus on core talent initiatives. 
4. Highlight risks – Document compliance gaps, outdated systems, data security concerns, manual processes and other risks that outsourcing can mitigate. 
5. Seek employee input – Survey benefits experience and identify areas for improvement outsourcing could address such as technology, communication and support. 

Combining these data points clearly demonstrates the case for outsourcing and provides criteria to evaluate provider options. 

Selecting a provider 

Not all benefits outsourcing vendors are created equal. Rigorous selection across a few providers is far better than cursory reviews of many. Key steps include: 

1. Define selection criteria – Determine your must-have capabilities, sourcing goals, implementation requirements, cultural fit, and ideal pricing models as you begin your selection process. 
2. Request proposals – Require responses that address all selection criteria in a consistent manner to allow side-by-side comparison. 
3. Interview finalists – Conduct detailed discussions to assess soft factors around expertise, communication styles, vision and any other credentials you have deemed necessary. 
4. Verify capabilities – Tour technology platforms, review service examples, validate reporting samples and audit security practices to substantiate provider responses. 
5. Check references thoroughly – Speak to current clients about overall satisfaction, capability strengths and gaps, vendor culture and governance tips. 
6. Compare total value – Weigh benefits, capabilities, risks and pricing holistically across top vendors to identify the optimal match. 

This process will help you determine the provider best aligned to your company’s outsourcing objectives and culture. 

Transitioning smoothly 

Once a vendor is selected, the transition process is the critical next step to drive user adoption and program success. Best practices include: 

• Proactive change management – Mitigate internal resistance through ongoing communication on goals, timelines, impacts, and governance model to reinforce HR’s ongoing central role. 
• Data validation – Scrub data with the vendor early to confirm content and formats required to integrate systems and execute outsourced processes. 
• Knowledge transfer – Document current benefits processes thoroughly to educate the vendor team. Conduct workshops to convey key internal knowledge your vendor needs to be aware of. 
• Training rollout – Require and verify comprehensive training across the vendor team to instill expertise in the company’s unique benefits programs. 
• Testing – Perform end-to-end scenario testing of key functions with the provider before go-live to confirm performance and manage issues proactively. 
• Limited initial scope – Outsource non-critical functions first to gain experience before transitioning more strategic activities. Many companies start with benefits call centers or billing. 

With vigilant change management and knowledge transfer, companies can minimize disruptions and speed time-to-value in outsourcing benefits. 

Ongoing governance 

To sustain long-term value, benefits outsourcing requires robust ongoing governance by the company. Leading practices include: 

• Performance monitoring – Track service levels, program metrics, milestones, customer satisfaction and costs versus plan frequently. Require prompt self-reporting of vendor issues. 
• Technology oversight – Review provider technology roadmaps regularly and align to the company’s benefits systems strategy. Monitor data security closely. 
• Contract management – Periodically review agreements regarding pricing, scope and performance requirements. Be sure to revise as needed to meet changing needs. 
• Vendor reviews – Conduct formal periodic reviews of overall vendor performance, relationship and strategic fit. Adjust scope and service levels accordingly. 
• Contingency planning – Maintain provider-independent transition plans to bring outsourced functions in-house or change vendors if warranted. Test contingency procedures. 

Consistent governance helps maximize the ongoing value of outsourcing and keeps providers aligned strategically.