HR outsourcing under the microscope

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This week, the Chartered Institute of Personnel and Development has released a report entitled, HR outsourcing and the HR function: Threat or Opportunity, which focuses on approximately 300 UK HR professionals within a variety of organisations, public and private.

HRO has had a mixed reception over recent months; some people believe that the cost savings associated with HRO are over hyped where as others believe that outsourcing is not being used as effectively as it should. The results of the report mimic these industry opinions, with both positive and negative outsourcing experiences.

Every industry has been feeling the pressure over recent years, economic doom and gloom has led to a turbulent and stressful period for all sectors and this is one of the first things that stands out in the CIPD report.

Some 91 percent of respondents felt that they were under pressure to enhance efficiency and a drive for efficiency undoubtedly means that outsourcing will be considered as a possible streamlining strategy, supported by the report highlighting a 20 percent increase in HRO over the last five years.

However, pressurised outsourcing deals very rarely work well. Again, it is not so much about outsourcing but right-sourcing.

Companies may panic-buy a service from a third party in order to quickly shift processes and responsibility, but this will almost always lead to a breakdown in the outsourcing deal as end user expectations will be different to supplier capabilities. This breakdown will not only be bad for the bank balance but will also have an impact on morale.

In spite of the possible increase in rushed outsourcing deals, the report does show a pleasing maturity on the outsourcing decision making process, with the majority of respondents citing access to skills and improvement to quality as the two main drivers behind implementing an outsourcing strategy. Cost reduction is inevitably a close third.

Achievement of these drivers has been promising. The strongest achievements were made in improving quality and accessing knowledge and skills and many felt that cost reductions were also being achieved, however access to new technology has had much less of an impact.

Access to technology should be one of the key selling points for any supplier. End users should expect vendors to have the most up-to-date technology implemented on any outsourced process. If this is not the case, then quite simply the supplier is not up to standard and the relationship should be reviewed. End users should not be afraid to ask for technology credentials, it is as vital as well trained staff.

With virtualisation, remote working, social networking and improved IT security all adding value to outsourcing in recent years, one thing that is inexcusable is a vendor with poor take up of modern technology.

However, regardless of how good a vendor’s technology is, end users should never overlook the knowledge and skill base a vendor can bring to the table; these are as valuable as the latest gadget or software.