Outsourcing human resources: pushing beyond the boundary

It would appear that among human resource chiefs the jury is still out on the merits of outsourcing.

A survey of 168 HR directors, carried out by recruitment process outsourcing company hy-phen at the recent Chartered Institute of Personnel and Development annual conference in Harrogate, found many remain unconvinced about the benefits of farming out HR processes.

A majority (56%) of respondents said they feel outsourcing of HR functions to an external third party increases organisational risk, while almost half (49%) said they think outsourcing either brings no value or erodes the value of a function.

But how is this reticence explained?

Loss of empire

At HR outsourcing specialist Hays Resource Management director of operations Graham Snuggs believes the primary reason many HR professionals don’t consider outsourcing is because they fear it will lead to a ‘loss of empire’.

But, in many cases, he says, a large proportion of this ’empire’ consists of high-volume, transactional tasks, such as payroll, recruitment, and induction training, which bogs HR down and prevents it from getting its teeth into the real strategic work.

“HR spends a lot of time dealing with low-level work and sometimes can’t see the wood from the trees,” says Snuggs, a former regional HR manager for financial services company Prudential.

“But by outsourcing some of these elements they would have more time to concentrate their efforts on reaching strategic goals in areas such as people strategy and talent management .”

But in some cases HR outsourcing can go further.

For example, Snuggs oversaw an outsourcing deal with friendly society Liverpool Victoria, which was regarded as something of a groundbreaking arrangement when it was set up in 2001. Not only were transactional processes such as IT, administration and training outsourced, but so were elements of the HR business partner roles, such as interfacing with line managers on strategy.

Snuggs says: “I was able to go to the marketplace and recruit the best people for these roles – people with vision and influencing skills.

“We were also set up to make a profit, which means we operate more efficiently and help HR move away from being regarded as cost centre.”

Cost centre

Reducing overheads and, therefore, costs is a main driver for outsourcing and Neil Jones, managing director of hy-phen, says he has seen a trend towards HR adopting some of the discipline of the procurement department when purchasing outsourcing services.

He says: “There’s a dynamic where HR and procurement departments are meeting in the middle. Increasingly, HR has savings are on its agenda while procurement professionals are broadening their remit and using things like performance metrics to work out the value of a proposition.”

This has led, says Jones, to a number of organisations setting up strategic sourcing departments that combine both HR and procurement people – where cost and value are equally weighed up.

Leigh Hunt, group head of resourcing at UK technology firm Kingston Communications, is in no doubt of the savings that can be made from outsourcing.

She hired recruitment process outsourcer Independent RPO last August to manage the bulk of the company’s recruitment. Since then, she says, the time to hire candidates has been reduced from 30 days to 20 and the cost per hire has been trimmed by about £1,000 – mainly because of the reduced use of recruitment agencies.

“We were on a recruitment drive but lacked the expertise to run it efficiently in-house and were spending a great deal on recruitment agencies,” she says.

Independent RPO chief executive officer, Phil Clarke, say this situation is particularly prevalent in mid-sized companies employing anywhere between 2,000 and 10,000 employees.

“There is a lot of recruitment going on in these organisations but many won’t have adequate sourcing expertise in-house,” he says.

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