A glance through the history of the Human Resources Outsourcing industry will provide insight into today’s world of the HRO.  In the 1970’s the industry was created in response to Federal legislation regarding qualified retirement plans.   Over the next four decades the industry molded itself in reaction first to ERISA, then TEFRA and finally the Tax Reform Act of 1986.  The final act essentially eliminated the potential tax advantage of what was then Employee Leasing.   Today’s HRO was born in the late 1980’s, developed slowly during the 1990’s and into the new millennium.

As with many fresh ideas, during that time the industry had not truly found its place in the business world.  Many of the players were searching for the easiest path and attempting to use the power of numbers to provide a significant enough savings to the business owner to warrant what, in many cases was seen as a drastic change in the relationship with their employees.  In fact, in the early days, “you fire them and we will hire them,” was used as an advertising slogan to attract clients. 

In many cases this was proffered as the entire benefit of the product.   Over the past decades there have been several attempts to “aggregate” the numbers by acquiring heterogeneous groups of employees to provide greater numbers for these purposes.  Each of these attempts has failed for various reasons.  We believe that aggregation is doomed to fail and these models will continue to frustrate their implementers.  As with any attempt to aggregate, the organizations that have attempted to accomplish this become so intrigued with the value of the numbers that they lose sight of the problems associated with growt
h through acquisition: 

• Increased exposure without the ability to control the risks
• Inability to combine the organizations or service platforms
• Dichotomy in service delivery models that never get reconciled
• Too broad a geographic and/or industry scope
• The nature of the risks (Workers’ Compensation, Employment, Benefits etc.) are never effectively controlled because contact with the clients is minimized

We believe that the actual volume savings in today’s world is minimal and that the real advantage comes in the ability to provide a true “value-added” service to the clients, and at the same time, create a service delivery model and platform that provides service efficiently, seamlessly and cost effectively.