HR outsourcing expectations are unrealistic

Many HR functions expect too much too quickly from outsourcing and are not getting involved in the decision-making process so their objectives are neglected, experts have warned.

This week a report into the outsourcing of HR functions by the Chartered Institute of Personnel and Development (CIPD) found only 7% of those who outsourced felt it was an overall success, while only 10% said it had helped them become more strategic.

Vanessa Robinson, head of HR practice development at the CIPD, told Personnel Today HR was looking for multiple outcomes from outsourcing, some of which were not achievable at the early stages.

She said: “Expectations can be higher than what’s actually achievable. Many functions are looking for outsourcing to do a lot of things but some of those can’t be delivered in the early stages. Cost savings for example can take longer to realise.”

Robinson added HR was often not involved alongside procurement and finance in making the decisions about outsourcing, so their objectives “might not be given equal importance” and “could become confused” with those of other functions.

The survey found over a third of HR functions had no involvement at any stage of the outsourcing process.

She said: “HR needs to fight strongly to make sure it gets involved at as early a stage as possible to make sure everyone understands the objectives of outsourcing.”

Robinson said one reason for HR not being involved in outsource planning was because it was not perceived to be strategic enough or to have the necessary relationship management skills.

Chris Stirling, director of the organisation and change consulting team at business service provider Deloitte, said another reason for HR’s lack of success with outsourcing was because it was often outsourced alongside other functions including IT, finance and facilities. He said this form of outsourcing led to a less bespoke service being offered.

“Big deals are created across a variety of services but then you have the case that the provider might not excel in all those areas. HR outsourcing is probably one of the harder of the outsourcings to get right.”

With only 10% of functions reporting that outsourcing had helped them to become more strategic, Stirling insisted HR must realise that outsourcing was not the only necessary step.

He said: “Outsourcing is one of the tools to help HR become more strategic, but if they are seeing it as a panacea then they will struggle with that.

“If you are going to outsource you need to look at what you retain and whether you have the right capabilities to become more strategic. We have seen many functions keep some people in place and expect them to take on new ways of working but without helping them to do that.”

The report found 50% of private sector companies now outsource their HR compared to only a quarter of public sector organisations. Francis Maude, shadow Cabinet Office minister, told Personnel Today he would increase outsourcing in Whitehall if the Conservatives win the next general election.

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