Audit personnel before you cast it out

The outsourcing of "non-core" activities continues unabated.
Although it is difficult to argue sensibly that the HR activities of an
organisation are anything other than central to its success, personnel is a
frequent candidate for outsourcing.

The stance we have taken in our benchmarking and strategic HR advisory work
has been neutral when debating the pros and cons surrounding outsourcing in the
function. However, the lessons learned by several who have raced down the
externalisation route have been salutary.

At the very least, it pays to look at the medium- to longer-term
implications when considering a matter of such strategic importance.

– How difficult will it be to reinstate any aspect in-house in the future?

– Will it be possible to have anything approaching a fair and open tendering
process when the current contract expires and activity is checked for
"value for money" in the future?

– Or will existing suppliers have well and truly cornered your market and be
able (whether in your perception or actually) to hold you to ransom?

Decisions on these and at least another 20 questions of long-term viability
and value should be addressed before considering the potential of outsourcing.
Before getting to the stage of even considering such important change, though,
there is a lot of sense in finding out in some detail what is currently being
done, by who and at what cost and comparing the value and effectiveness of
delivery with other HR departments to assess the relative strength of what already
exists in your organisation.

Only by approaching the potential for outsourcing in this analytical and
benchmarked way can you begin to establish what is worth outsourcing, and
whether you are likely to obtain value for money from the service provider selected
to run the function.

A relatively complex manufacturing organisation recently pursued an
identical analytical process – and went a stage further – conducting an audit
of HR service effectiveness. The approach adopted asked customers (largely
middle/senior management and professionals) how they rated the current level of
service across recruitment, health and safety, employee support, training,
appraisal and pay. It then asked whether they preferred the status quo, a more
devolved approach giving them more direct responsibility for dealing with
day-to-day people issues, or a more substantial external sourcing of HR
services. The results came as a surprise.

First, the current HR service was quite highly regarded and, second, the
line managers in particular were quite keen to take on more detailed personnel
activities for their own areas – just so long as there was professional support
and the administration was not dumped on them. They envisaged that this support
should come largely from internal specialist expertise but acknowledging
weaknesses in the areas of training, development and remuneration, they
suggested a degree of outsourcing in these areas.

It appears that these preferences will be met with a three-way balance of
HR/line manager/outsourced specialist to provide a more acceptable and
cost-effective HR solution, rather than the wholesale abrogation of
"people" responsibility to external providers. There must be a lesson
here that it is worth conducting quite detailed structured research before
embarking on potentially irreversible change.

By Derek Burn Partner, MCG Consulting Group

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