HR outsourcing is on the increase but companies are failing to reap the full benefits because they are not tying it to business strategy, a major report has found.
Four out of 10 European companies have increased their use of external suppliers in the last three years, the research by Cranfield School of Management and HR consultancy William M Mercer shows.
Training and development are most commonly outsourced, with 77 per cent now using external providers. Nearly six in 10 outsource recruitment and selection, and three in 10 pay and benefits.
But the report’s authors say there is little connection between HR outsourcing and business strategy. And no link could be drawn between outsourcing and HR benchmarking, cost reduction or service delivery.
Philip Vernon, European partner at William M Mercer and one of the authors, said no particular model of outsourcing is being followed and no best practice has yet emerged. “Logically, a strategic approach would be more effective in achieving organisational goals and efficiencies than the ad-hoc resourcing that is common practice,” he said.
He added that only the largest employers who have outsourced the entire function, such as BP Amoco and Cisco, have taken a strategic approach.
Jos Vanommeren, senior researcher at Cranfield, said the relatively small cost saving to the whole business means top management are not giving HR outsourcing enough consideration.
“Often they are not willing and have no time to take a strategic view. But they are potentially missing an opportunity to get a better service for the business.”
The study, which covered nearly 4,000 large and medium-sized companies across Europe, found Belgium, France and Holland are most likely to use service providers, with the UK taking fifth place.
In Belgium, 65 per cent outsource three or more services compared with only three in 10 in the UK.
• European Trends in HR Outsourcing, price £25, available from William M Mercer, tel: 020-7802 3709