Exactly 100 years ago my local newspaper reported that: “a radical change which the Twickenham District Council has effected to the benefit of the people it governs has been the collection of rubbish by the men of the council themselves, instead of as heretofore letting the work out to contract”. This proves there’s nothing new about outsourcing – or the controversy that surrounds it – with the contemporary growth in offshoring adding a nationalistic piquancy to the debate.
A number of recent surveys, mostly by suppliers, have predicted a huge increase in the outsourcing and offshoring of HR activities. Major cases, such as Centrica and Unilever, add weight to the claims and the fears of domestic HR professionals at the effects on their livelihoods of the twin impact of information and communications technology and globalisation.
But there’s nothing new in the application of IT to HR activities. Payroll systems were some of the earliest large-scale industrial applications of mainframe computers in the post-war era, and more than half of that market in the UK today is managed by external suppliers.
In other areas, such as training and recruitment, most in HR have grown up using outside agencies and consultancies, not just to save time and costs, but also to add specialist knowledge and expertise. About a fifth of CIPD members work for such organisations.
The CIPD’s latest survey found that only a fifth of 600 UK organisations had moved any business activity overseas in the last five years, with only 7% offshoring HR activity. We found three times as many organisations were planning to bring HR activities back in-house than to outsource.
The challenges with major outsourcing relationships, such as those at BP, may not make the headlines, but are real nonetheless. HR processes are undoubtedly ‘stickier’, more emotion- and value-laden and tougher to relocate than accounts or IT support.
However, the outsourcing debate obscures two more fundamental questions that are critical to the future of HR.
First, how do we continually improve the efficiency of the administrative and transactional services we deliver, as an important part of the shift to a more strategic and influential future for HR?
Gas company BOC saved £500,000 through the introduction of a new e-recruitment system. Transport for London improved HR service levels and switched the 70% administrative/30% strategy work mix of its HR business partners by implementing an in-house shared service centre.
Large-scale outsourcing is just one of a range of alternative routes to using technology to improve HR services. The key is to select, implement and manage the best mix of provision to achieve your goals.
Second, how can HR professionals ensure that the benefits of new technology are harnessed to improve people’s working lives and performance? Our research has found that the use of new technology in HR not only produces cost efficiencies, but also creates better communications and employee engagement. This is evident through intranets and self-service systems at BSkyB improving job design to facilitate flexible and homeworking at IBM and supporting what one HR director called “the most important people management relationship: between the immediate line manager and their staff” at Norwich Union.
In the 1940s, in the newly nationalised UK coal industry, the introduction of new coal-cutting equipment was supposed to increase productivity. In fact, production declined, as the new machines disrupted the team-based organisation of workers, resulting in worsening employee relations and increased absenteeism.
History shows that the use and exploitation of new technology is a social process in which the human dimension is rarely given sufficient prominence. The success of outsourcing and offshoring activity itself is dependent on effective people management: in building relationships and trust and recruiting, retraining, transferring and redeploying staff effectively, and so on.
In our ever more rapidly changing era, the potential impact of HR professionals who understand how new technology can best be harnessed to realise high performance through people is greater than ever.
By Duncan Brown, deputy director-general, CIPD