| HR leaders must know how to thread their way | | | | afford more? |
| through the ins and outs of outsourcing before their | | | | Have a competitive or strategic advantage in a |
| organizations can build an effective HR solution. | | | | particular function. If an organization does something |
| Although HR professionals have been using | | | | particularly well, it has little to gain and much to lose by |
| outsourcing in one way or another for many years, the | | | | outsourcing it. |
| trend continues to gather steam. A growing number of | | | | Fear losing control. While it is true that some control |
| organizations are outsourcing at least some of their | | | | must be surrendered in any outsourcing relationship, |
| HR functions. | | | | processes can be established to ensure the |
| Some point to increasing cost pressures or the need | | | | organization has all the control it needs. Nevertheless, |
| to relieve staff of their administrative burden. Others | | | | some HR departments prefer to play their cards close |
| say they are looking to improve their focus, access | | | | to the vest. |
| first-rate capabilities, share risks and rewards, keep up | | | | Already have the investment, infrastructure and |
| with rapidly evolving technology, deal with increasing | | | | expertise in place to perform these duties. The |
| regulatory and compliance requirements and/or to | | | | organization may have already made a large capital |
| better manage continuous change. | | | | expenditure in people, process and/or technology and |
| This article looks at the current state of outsourcing -- | | | | has costs to recover. |
| what HR is outsourcing now and why. | | | | Believe their internal staff and systems are not ready. |
| Why Organizations Outsource: The Fact and the | | | | This is often a cultural issue. Some HR departments |
| Fiction | | | | are not prepared for this kind of change. |
| Most HR departments have many common | | | | Do not have the resources and skills they need to |
| expectations and perceptions about outsourcing -- not | | | | manage external vendors. They have HR practitioners, |
| all of which are true. | | | | but outsourcing calls for relationship managers -- a |
| When viewed objectively, Sibson, a strategic HR | | | | different skill set. |
| consulting division of The Segal Co., has observed that | | | | Think outsourcing would be culturally unacceptable. In |
| outsourcing actually does: | | | | many cases, organizations have never outsourced |
| Increase efficiency. It allows organizations to take | | | | because it conflicts with their practiced business |
| advantage of what others have learned. They already | | | | policies. |
| have found ways to improve efficiency and have | | | | Cannot find "suitable" outsourcers. Although in some |
| solved many of the problems that other companies | | | | cases this is just an excuse, some organizations are |
| are now experiencing. | | | | looking for something that does not exist. For instance, |
| Free internal resources and allow HR practitioners to | | | | they may want to outsource the distribution of |
| be more strategic. Instead of entering data, crunching | | | | electronic files for data exchange and nothing else, |
| numbers and pushing paper, HR can focus on core | | | | which is not possible. |
| non-administrative functions. Offloading the | | | | Have unusually high security requirements. This is |
| administrative work maximizes the organization's | | | | largely a matter of perception. Most outsourcers have |
| resources. | | | | very high standards in place and pass multiple audits. |
| Offer access to expertise. Organizations that | | | | Yet HR information is very sensitive and some |
| outsource gain access to know-how they probably do | | | | organizations still believe they have stronger firewalls |
| not possess. They tap into a broad network of | | | | than anybody else. In short, they do not want anyone |
| experienced people and best practices. | | | | else managing their data. |
| There are, however, some common misconceptions | | | | What Are Organizations Outsourcing? |
| about outsourcing, including the belief that it can and will | | | | HR departments can outsource their technology, their |
| in every situation: | | | | people and/or their processes. The most common |
| Cut costs. Although outsourcing will provide cost | | | | approach for mid-sized organizations is to outsource |
| savings for some organizations (mostly those that are | | | | their technology and a part of their processes. As |
| very large and extremely inefficient), in most cases, it is | | | | shows, the most popular process to outsource is |
| dollar-for-dollar cost neutral. | | | | 401(k) plan management, followed by pensions and |
| Take an organization with hundreds of people in HR: If | | | | benefits. |
| it can save just 5 percent of the $100 million dollars it | | | | What the Data Shows |
| spends on HR, it will save $5 million. But a company | | | | How do organizations like insourcing vs. outsourcing? |
| with only 10 people in HR is not going to pay for the | | | | Some of the findings are surprising. As demonstrates, |
| service by shifting the work off one or two | | | | when it comes to HR solutions (technology, people and |
| employees. What will happen is that the department | | | | process), HR departments that outsource say it has |
| will gain an increase in benefits or services -- more | | | | allowed them to avoid new information technology |
| bang for the buck. | | | | capital expenditures and reduce software |
| Keep up with the latest technology. Many HR | | | | implementation times. |
| departments are stuck with old technology and find it | | | | Those that use in-house solutions say it has improved |
| difficult and expensive to upgrade. Outsourcers, | | | | employee productivity and made it easy to integrate |
| however, are expected to keep up with technology | | | | new services. |
| and provide the service at a reasonable cost. | | | | The employee productivity example is particularly |
| This is true for some vendors, but not all. It is up to the | | | | interesting because it is contrary to what most HR |
| organization to check and manage the relationship | | | | professionals think: that outsourcing will improve |
| correctly. | | | | productivity. In this instance, the portion of organizations |
| Provide improved and additional services. As with | | | | with in-house solutions that say productivity has |
| technology, this is true to some extent. While the | | | | improved is actually 20 percentage points higher than |
| organization can get improved services, it will have to | | | | those that have outsourced. |
| negotiate for them and they will come at a cost. | | | | Conclusion |
| Share risk. Although it is somewhat true that risk is | | | | HR has evolved a great deal in recent years, moving |
| shared between the HR department and the | | | | away from administrative work to become a |
| outsourcer, this is typically mitigated by the contract, | | | | respected function and a partner in the organization's |
| and that is what determines where risk stops and | | | | business. Now, it is becoming a business leader that is |
| starts, particularly around compliance efforts. In almost | | | | ROI-focused and technology savvy. |
| all cases, the risk stays with the organization. | | | | Outsourcing is one of the levers HR has used to |
| Why Some Organizations Choose Not to Outsource | | | | move along this path. Although the reasons to insource |
| In our experience, some HR departments prefer not to | | | | or outsource HR processes, technology or people |
| outsource because they: | | | | continue to vary from organization to organization, |
| Cannot justify the outsourcing fees. Outsourcing may | | | | outsourcing remains a popular approach for delivering |
| cost more, but the organization will get more. The | | | | HR services. |
| question is, what does the organization need, and can it | | | | |