HR Outsourcing and the One Thing You Need to Understand

Venn Diagram of people for HR outsourcingHR outsourcing is a complex issue. On the one hand, it seems advisable to divest your company of the related costs and associated compliance headaches, none of which appear on the surface to add profits or relate to your core competency. On the other, it seems completely unacceptable to relinquish control to the biggest differentiator of your business: your people.

Given that talent is expected to be somewhat of a rare commodity in the next few years, telling your employees not to come to you with payroll disputes or benefit questions is not going to do much to help your talent retention efforts. Nor will the subsequent delays in resolution endear them to your company.

Good luck in asking your employees for additional effort such as working overtime or taking on additional responsibilities after you hand them a URL or a toll free number to plow through on their own to resolve pay problems.

Loyalty goes both ways, you know; your right to ask is perceived as diminished if you can’t answer when asked in return. But you can’t answer if you turned everything over to a third party either because either you won’t know the answer or you will no longer be allowed to answer.

“Our research shows nearly every major business is challenged with shifting talent and business towards emerging markets, while grappling with talent shortages globally – all while improving the engagement, retention and development of their workforces,” said Josh Bersin, principal and founder, Bersin by Deloitte in a statement to the press.

In the final analysis, the one thing you need to understand about HR outsourcing is that you will likely relinquish control over things such as employee engagement, problem resolution, policy development, training, and possibly even internal promotions, all of which heavily influence your ability to retain and attract talented employees.

There really is no need for you sacrifice so much for so little considering many HR functions can be automated in-house cheaper than outsourcing anyway. Cheaper still if you use services in the cloud.

Even so, Global Industry Analyst predicts HR outsourcing could grow to $162 billion by 2015 just as other firms also predict an uptick. Still, there is evidence that the practice may be showing some dents from the battering it takes in real-world use and from disruptors such as cloud-based HR systems.

For example, RBC Bank heavily outsourced recruitment but subsequently brought it back in-house.

“RBC was hiring about 20,000 people per year — but about 60 per cent of those hires were internal and it found the outsourcing firm couldn’t properly evaluate employees already on the payroll,” reports Todd Humber in his article “Has the shine come off HR outsourcing?” in Canadian HR Reporter. Humber cites a list of similar incidences and even notes how Canadian HR Reporter is finding fewer and fewer HR outsourcing deals to cover.  If big HR outsourcing deals are indeed dwindling, where is the momentum to back analysts’ predictions?

“It would be naive — and wrong, at least from these quarters — to say HR should be completely untouchable from an outsourcing standpoint,” writes Humber. “There are plenty of tasks that can often be done better and cheaper by external experts.”

“But we’re writing less frequently in Canadian HR Reporter about outsourcing deals and more about the importance — and huge benefits — of getting HR right,” he added.

And that’s the bottom line right there: getting HR right. Because if you don’t, there will be fewer to no human resources to manage after the competition lures them away with promises of trouble-free and immediate aid from an on-premises HR department.

Pam Baker

Pam Baker is the author of eight books and hundreds of technology articles published daily in leading online and print publications. She is a member of the National Press Club (NPC) and the Internet Press Guild (IPG). You can reach her or follow her on Twitter and on Google+.

Tags: Business,Business Management,Uncategorized
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