In December, one of my forecasts (amongst others) was that an HR outsourcer would go bust this year.
Well - not quite but news that Zeda which is part of Midland HR was put into liquidation on 31 January (as reported) will have raised a number of eyebrows.......
It would also remind all of one of the risks of outsourcing which is namely - supplier financial strength. Outsurcing for the last (almost) two decades has had a clear run in economic benign conditions.
I read the the other day that outsourcing was set to increase due to cost pressures in organisations. Well yes - maybe. But it works both ways. These cost pressures will also be acting on the outsourcers and there is an argument to say that in tougher times organisations may opt for safety and retain certain services in house which were earmarked for outsourcing, due to risk of supplier failure.
Those of you familiar with my blog entries know of my cautious comments about the correct use of outsourcing. HR outsourcing (in its usual guises, payroll, benefits administration, recruitment process and certain training provision) will still happen but I would expect that due diligence will be applied to the strength of the particular outsourcer in question.
On a connected point, we are also witnessing the power of the internet when things don't go right. The highlighted employee reaction in the above scenario also serves as a reminder to the potential reputational risks. I suspect that a number of CEOs who may be engaged in any planned orderly retreat, will be choking on their cashflow forecasts during breakfast ........
As for my 2008 forecasts, they're turning out to be fairly accurate. I may start getting calls for forecasting sporting results at this rate!!
