The economic downturn continues to cause unrest in the business world as
pressures grow to turn falling profits around. With increased sales and revenue
targets getting tougher, the focus turns to increasing company and individual
employee performance while, at the same time, reducing operating costs.
The HR team is at the core in helping companies develop and reward a
performance culture, attracting and developing the right talent to run a high
performing business. But what about the HR function? To have credibility, HR
must be able to practice what it preaches, but attracting talent into HR is not
always easy, especially while it retains its administrative roots.
Many companies have begun to re-organise into shared services, pooling
employees and resources in an attempt to standardise processes and maximise the
use of technology to improve efficiencies. Others have looked for an
outsourcing partnership to speed up the transition and get access to external
investment, skills and technology. This can help HR move administration away
from the business partners, creating more strategic roles to attract high
And yet there is another area of hidden value, within the sphere of
influence of HR, that is often overlooked – procurement.
Although the cost of an HR department often only represents around 1 per
cent of the operating cost, the associated indirect spend on categories such as
recruitment, training, benefits, cars, healthcare, permanent, temporary and
contract labour can amount to three or four times that of internal HR costs.
Lack of focus on HR-related spend has a double-negative impact on HR’s
performance in the business. If HR does not understand the whole supply chain,
it will never be able to deliver a quality, seamless service to its internal
customers. Take a recruitment service, for example. This often relies on a
number of external providers such as advertising agencies and recruitment
HR needs to integrate its own internal processes with suppliers’ to create a
seamless service. Clearly an in-depth understanding of the recruitment market
is required as well as ability to manage relationships with these suppliers. It
can be done, and these suppliers often welcome an ‘intelligent customer’ to
Then there is cost. HR can make a significant contribution to the overall
reduction in operating costs as there are potentially large savings to be had
from indirect procurement. But it is not easy. It is very rare to be able to
attract top talent to manage indirect spend in organisations. Processes are
often fragmented across businesses and in HR, local procurement arrangements
normally take preference to any pan-company arrangements.
However, there are organisations out there that can help. Don’t ignore
procurement, it gives HR an excellent opportunity to be seen to add real value.
By Alan Bailey, Head of HR business process outsourcing, Xchanging