Partnerships based on trust are the key to outsourcing success

A recent Canberra Times article, “Outsourcing failures expose weaknesses in both government and business”, has some valuable lessons for risk managers, CFOs and procurement executives.

The Business Process Outsourcing (BPO) industry was predicted to produce revenue of $31.4 billion in 2016/17, according to market research firm IBISWorld. The BPO industry provides a variety of back- and front-office services to business, such as call centre operations, IT services, debt collection and recruitment. Additionally, there are consultants who handle many other functions, including claims administration and self-insurance services, public relations, lobbying, accounting, legal services and research. 

While many companies can perform these tasks with their internal headcount, specialist consultants can usually do so more proficiently and at a lower cost due to their greater experience, expertise and economies of scale. In practice, outsourcing should enable firms to focus on the higher-value activities they do best.

Clear objectives lead to stronger results

A common complaint against outsourcing is that the use of contractors causes agencies “to run down their in-house expertise and technical resources”, contends the Canberra Times article. I’m in full agreement. I also agree that many commercial consultants seem more concerned with profit than providing valuable service. It’s been my experience over a 25-year corporate career that some large international companies have been guiltier of this than domestic firms.

Over the past two decades, using external consultants has been an efficient model when there are clear objectives that are easily monitored, as the Canberra Times noted. Contracting-out also adds significant value when there is a competitive market of consultants pitching for a firm’s business. Outsourcing produces results when it’s used for more complex services, and it works best when a consultancy is never allowed to become complacent or manipulative.

Lessons for commercial sector outsourcing

While the Canberra Times article focusses mostly on government outsourcing models, many of its arguments and observations could be extended to commercial contracts awarded by private enterprises. The challenges and success methodologies are the same whether a consultant is providing services to the public or private sector.

The HIMS Group provides world-class innovative workforce solutions to government and private clients. Our team thrives on helping organisations better navigate their approach to business strategy through their existing headcount. In addition, we recognise the value of building long-term partnerships underpinned by honesty, transparency and trust. We also take pride in delivering our clients “no surprises”.

It’s my experience that if consultants don’t pursue a similar long-term approach, outsourced services have a short lifespan and are quickly returned to in-house functions. The right approach must be set in stone from the time the service level agreements (SLAs) are signed. The SLAs create checks and balances and should be outcomes focused, not merely performance measures that are linked to compliance.

The clear-cut reasons to use outsourcing are financial predictability, improved productivity, greater experience, better governance and the opportunity for continuous improvement. To ensure consulting success, these five benefits must be embedded in the performance measures.

Finally, I believe preference should be given to Australian owned and operated suppliers that employ locally and have lower overheads, as this usually leads to more competitive pricing. The barrier for local companies working with public sector customers can be the contracts developed by state and federal governments, which tend to preclude their participation due to the cost of compliance.

On behalf of the staff and management team of the HIMS Group we wish to thank the industry and regulators for their support since we launched the business in 2016.

Over the past year, the HIMS Group has partnered with a range of employers and worked closely with regulators in five jurisdictions. We have recently opened our Melbourne office, headed by Branch Manager Graeme Munro, and we are looking at expansion into two or more states over the next year.

To find out more about the HIMS Group, call us on 02 8378 2127 or email team@himsgroup.com.au

The benefit of self-insurance for employers

A question on the minds of an increasing number of organisations is whether they would benefit from switching to a self-insurance model for workers insurance. Some of this interest can be attributed to major changes that took place almost two years ago in the management of workers compensation premiums and claims in Australia’s most populous state, New South Wales.

In 2015, the functions of WorkCover NSW were broken up between three distinct organisations: SafeWork NSW, the State Insurance Regulatory Authority (SIRA) and Insurance & Care NSW (iCare). Currently, premiums and claims are shared by insurers CGU, Alliance, GIO, QBE and EML. But as part of the new regulatory environment, from 1 January 2018, EML will be the last one standing. It will be the sole insurer in NSW managing workers compensation claims, and iCare will take charge of premiums.

With an absence of workers insurance choices, deteriorating levels of service are likely to result. This is refocusing larger companies, councils and employer industry groups on whether self-insurance is a better way to go.

Why switch to self-insurance? 

If managed well, self-insurance lets an organisation control its liabilities and workers compensation costs in a more predictable way than participating in a scheme and instead of paying a premium each year costs are incurred over time. 

Additionally, as a self-insurer, an organisation can manage its claims more effectively and efficiently, as it’s closer to its workers than an insurance agent would be. For instance, if an employee is injured, the organisation will be better placed than an insurance agent to offer suitable duties because claims and injury management services are integrated in the business. 

Weekly benefit payments to injured personnel should be lower than if the organisation had a policy through a conventional workers compensation scheme because claims development have shorter durations. With self-insurance, you’re less at the whim of regulators, who are predisposed to changing insurance premiums on a seemingly annual basis. In combination, these factors enable organisations with self-insurance to more successfully forecast their compensation budget and improve cashflow.. 

Better outcomes for workers

A self-insurer can determine outcomes more rapidly and efficiently than an insurance agent. This means it’s likely an organisation with a self-insurance program will have a more contented and productive workforce. Employees may take the view, “Hey, we’re self-insured now – they care more about us because they’re taking more of an interest in our health and wellbeing and getting injured people back to work.” 

By using a self-insurance approach, an organisation can also reduce the possible tension points for injured workers. No longer will they need to deal with a myriad of parties, including your HR department, their direct managers, sundry claims managers and those exasperating insurance company representatives who fail to respond to their compensation inquiries. With self-insurance, your employees will be collaborating with people, potentially co-workers, who are actively looking after them and expediting their claims.

Barriers to self-insurance

In NSW, barriers to establishing or withdrawing from a self-insurance arrangement were lowered, but unless you have 500 employees or more, you won’t be able to apply for a self-insurance license for your firm. Queensland requires a minimum of 2,000 employees unless you operate two or more licenses in other jursidictions. The multiple OHS and workers compensation acts and ordinances across Australia confuse the issue, Comcare, which looks after the Commonwealth workers compensation scheme is available to new entrants, that can demonstrate competition with current or former government entities, such as Australia Post. Legislation is in the wings that may open up the jurisdiction to National employers however the current government does not have the number to pass the proposed 2014 SRC Act amendment bill.

Do the numbers stack up?

It’s all well and good that self-insurance provides your workers with a positive experience, but it’s crucial to do your research and make sure the business case stacks up for your organisation. 

If you’re weighing whether to apply for a self-insurance license, it could be worthwhile to take advantage of the expertise of a design and implementation specialist such as the HIMS Group. We can conduct feasibility studies to assess whether a self-insurance program will be financially viable for you. The HIMS Group is an Australian-based company, we’re owned and operated by a team of dedicated workforce risk specialists who are focused on client partnerships, and delivering high-quality services and financial predictability.

We look at the financials, corporate structure and past safety performance to determine the feasibility of self-insurance against a conventional workers compensation programme – or even a Loss Prevention and Recovery programme, which is a halfway point between self-insurance and a conventional scheme.

If the best choice for your organisation is self-insurance, we map out the compliance processes for you, coordinate the project with the regulators, and manage the application process and compliance. Once we’ve established a self-insurance program with you, HIMS can also manage the claims processes though our claims departments in New South Wales and Victoria and regional Australia.

To find out more about transitioning to an outsourced workers compensation solution, contact HIMS Group on 02 8378 2127. Email: team@HimsGroup.com.au