Viewpoint: HR outsourcing industry fails to dazzle

Japanese tourists love visiting Edinburgh Castle. At precisely 12pm every day, the same painstakingly observed process of positioning, loading and firing of the gun is carried out in a way only the British Army knows how. You can set your watch by it.

As the story goes, when one Japanese tourist asked how the accuracy of the timing was ensured, he was pointed in the direction of the church tower clock, whose quality of time-keeping was equally legendary. When visiting the church and raising the same question over the confidence as to the horologic qualities of the church clock, the tourist was informed that it was checked daily by, yes, you’ve guessed it, synchronisa-tion with the firing of the gun at the castle.

This will be feeling alarmingly familiar to those working in HR outsourcing – customer or provider. Nobody questions the sense underpinning the collection of information to gauge the quality of the performance of business transactions, large or small. But alarm bells should be ringing on reading the latest evidence from the US, which suggests the average manager spends at least two days a week monitoring measures. I am relatively confident HR outsourcing practitioners also spend a large minority of their time ‘metrologising’.

Yes, we all love our scorecards, competency frameworks, service-level agreements (SLAs) and the hallowed metric.

The deification of metrics in outsourcing is bordering on the irrational. The level of faith placed in the ‘metric-makers’ is akin to medieval medicine’s faith in witchdoctors.

I will not be the first person to draw such an analogy with the output of consulting houses. But one question continues to niggle me (indeed, at this year’s HR Outsourcing Europe conference in Brussels, it was positively keeping me awake at night): how do I know good SLA scores are driving my business’ performance?

The conference’s strapline was ‘adding business to your organisation’s bottom line’. I don’t think your average chief financial officer would disagree. The amount of time, resource and sheer emotional energy devoted to HR outsourcing metrics probably adds more to the bottom-line running costs of organisations than many people apparently realise. The irony of such ‘invisible’ costs is seemingly lost on an industry grown in the womb of radical re-engineering.

HR outsourcing’s business case has rested on its ability to give its clients the time and released additional resource to devote to adding value to core business. True, HR outsourcing has been about shaving costs off the bottom line. But in the words of one of the conference papers, it isn’t all about costs. Useful metrics involve a deep understanding of how the processes being analysed drive the business performance of client activities. Understanding how processes drive the top line of businesses, as well as shaving the costs off the bottom, is where the metrologists should start.

It is not simply a process of benchmarking one metric against another. Not everything that can be counted, counts, said Einstein. He had a point. Comparison with other metrics is exactly that: a comparison with other metrics. Useful? Undoubtedly. But a measure of how HR is driving the performance of my business? I think not.

HR outsourcing’s tools and techniques need to move up to a new level of sophistication. Such a level would enable vendors (and their clients) to have an exchange amounting more to ‘if we put in x we get y back’. Of course, how x might influence y is enormously complex and requires a deeper level of understanding.

Am I preaching to the converted? Why, then, does the performance of a multi-billion dollar industry continue to be evaluated in such a superficial way? I’ll bet that HR outsourcing’s failure to adequately understand its performance – and how this drives the performance of its clients – is the primary reason why the HR outsourcing industry isn’t twice its current size.

Offshoring, home and away 

Cost cutting not quality

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