by Robin Throckmorton, MA, SPHR
“Business changes come as waves gathering shape, gaining energy and momentum, then crash across the companies that find themselves in their path. Those companies that anticipate and respond quickly to these waves of change can often rise with the tide; those that don’t are often crushed on impact.”
– Michael F. Corbett with Corbett & Associates, Ltd.
This quote from Michael Corbett really hits home for most of us as we deal with different business changes each day. I know there are many days that I feel like the guy standing one step ahead of the wave ready to crash. The key is we need to stay one step ahead (more would be better) in order to succeed and thrive in the business world. We have to be ready to embrace change and always be charging forward as proactively as possible.
In this article, I want to help you evaluate a specific business issue that many organizations large and small are considering – human resources outsourcing. Truly, HR outsourcing is nothing new. We’ve been outsourcing benefits administration, payroll, and retirement plans for years. But the outsourcing wave is “gathering shape, gaining energy and momentum” to include much more.
Why…what’s driving this change? Is it a fad or the future? According to Accenture, the increase in HR outsourcing is the result of increased pressure to reduce costs, improve employee service, and maximize resource availability while becoming a strategic partner. We can’t be everything to everyone but we need to meet these demands. As a result, SHRM has found in the last five years the US market for HR outsourcing has doubled. And, The Yankee Group predicts the global market for HR outsourced services will be $80 billion by 2008 with the US accounting for half of this.
Now, I’m not saying that HR outsourcing is a solution for everyone. Nor, am I even elaborating on exactly what you could outsource. As with most HR decisions, this depends. But, let me share some facts with you so you can make a fair decision on whether you should consider outsourcing. Outsourcing could be a solution for you if it…
- Increases your focus on strategy
- Reduces operating costs
- Limits your legal risks
- Helps you tap into talent / expertise that doesn’t exist in your organization
- Increases your focus on your core business / competencies
- Reduces your investment costs in technology
- Provides you with staff flexibility to expand and retract as the business necessitates
This list could go on and on…Another way to think about whether outsourcing is a solution for you is to look at the actual makeup of your HR function. According Karen Roberts with Aon Consulting, most organizations spend 10% of their cost and efforts on strategic issues, 30% on HR services (i.e. recruitment, succession planning, performance management), and 60% on administrative (i.e. record keeping, compliance, paperwork). If this mirrors your organization, would you be much more proactive and successful if you could outsource some of the 60% of administrative tasks and focus more effort and dollars on the strategic and HR services? Absolutely!!!!
But with anything, you need to look at both the pros, cons and costs. You need to consider and overcome a variety of obstacles if you decide to outsource any or all of your HR function. How will outsourcing:
- Impact the customer service to your employees?
- Limit your opportunity to develop the expertise and skills of your employees in anticipation of pending skill shortage by 2010?
- Be accepted or rejected by employees and even others in HR?
- Impact the organization’s culture
- Increase the amount of your time required managing vendors / projects?
- Increase potential costs you haven’t considered?
Now, you have thought it through and have decided that outsourcing some or all of your HR function MAY be a solution for you. Let’s discuss a general process you could follow to further explore the feasibility of outsourcing in your organization and how to implement it if you decide to go forward.
Step 1: Create a Team
Yes another team, but this isn’t a decision that should be made in a silo. You need decision makers and stakeholders involved to ensure you are considering all angles and options. Begin by creating a project plan by completing the following:
- Desired results: what does this team hope to accomplish?
- Potential barriers / obstacles: what is going to prevent this team from reaching this result?
- Supports: what resources, people, or organizations could help the team?
- Plan: what are the steps the team needs to take? (hint: steps 2 – 5)
- Evaluation: how will the team know it has reached it’s goal?
Step 2: Conduct a Process Review
To get a clear idea of what could be outsourced, the team will need to start by mapping all the HR processes from A-Z (i.e. recruitment, payroll, benefits, performance management, etc.) Determine what is done, by who, and for how long. Just going through this process should identify some potential inefficiencies that could be addressed through outsourcing or simple improvements that will streamline your HR functions.
Step 3: Review Strategic Plan
Once you’ve mapped your HR processes, compare those processes to the company strategic plan. What activities support the plan? What activities need to be done but do not have a direct connection to the plan? What else can human resources do to help support the company strategic plan that may not even be identified yet? Addressing the answer to these three questions will help you begin to make a link between HR and the business plan.
Step 4: Identify Core Areas
Based on your findings in Step 2 & Step 3, you need to identify the core areas HR needs to focus on because of in-house expertise. To determine your core areas, ask yourself these two questions:
- What expertise does your current staff possess that should be capitalized on internally?
- What efforts can or should only be done internally?
Your answers should help you identify your core areas that you should be focusing on performing internally.
Step 5: Decide What to Outsource
The team needs to use all the information gathered during steps 1 – 4 to decide whether or not AND what to outsource. Remember, the advantages and obstacles we discussed earlier in this article, these will be critical issues to consider in deciding to outsource and evaluating what to outsource.
These first five steps will help you determine if and what you may want to outsource. If you decide you want to outsource anything, you’ll want to read our article next month that will cover Steps 6 – 10 on facilitating the outsourcing process.
To be continued…
Robin Throckmorton, MA, SPHR, a Senior Human Resources Management Consultant is President of Strategic Human Resources, Inc. (www.strategicHRinc.com). If you have any questions or wish to share your comments with Robin, you can contact her at Robin@strategicHRinc.com.