Posted by Tracey Evans on 26 February 2014
Human resources outsourcing has expanded at a rapid rate in the past decade. It’s claimed to be up 227 per cent since 2001, and it’s estimated 50 per cent of organisations now outsource or offshore some or all of their HR functions.
Of course, the idea of outsourcing HR isn’t new. It’s been talked about and practised for decades, gaining further momentum during the global financial crisis when businesses were looking for ways to trim budgets and remain competitive. Technology is also driving the trend through the implementation of concepts such as big data and software as a service (SaaS), as well as on-demand services and communities based on social media platforms.
Originally a cost-effective method of jettisoning non-core functions like payroll and benefits, industrial relations, and legal and compliance, outsourcing has evolved as a driver of innovation, according to Accenture.
Data mining for business insights
For example, outsourcing service providers – under pressure to keep their fees in check but still deliver ever-improving results – are mining their own data and experience gathered over years of client services to discover valuable business insights and strategies that can benefit other clients. It might include ideas for improving speed to market, customer loyalty or talent management, says Accenture.
For decades, HR professionals have debated how to achieve top-down recognition of their worth – to be strategic agents of change with a seat on the board, not the loss-leading department employees run to when things turn sour. They want credit for handling portfolios that span payroll and employee benefits, legal and compliance, recruitment, training and development, bullying and IR. Outsourcing is the way these goals can be achieved, freeing up the HR department to concentrate on strategic ‘core’ functions that will give the organisation a competitive edge – if they have the expertise.
For example, it may be more effective to outsource specialist or big-picture activities like change management, recruitment of key personnel and remuneration/benefits permanently or at least on a case-by-case basis.
From inside out
HR needs to change its focus from “inside a company (employer of choice) to outside the company (employer of choice of employees customers would choose)”, says management guru Dave Ulrich, who has spent more than 25 years studying people management as professor at the University of Michigan’s Ross School of Business.
As a partner at business consulting firm RBL Group, Ulrich and his colleagues have amassed the world’s largest database on HR competencies. HR professionals and businesses alike can access this information to assist in making strategic decisions on outsourcing and defining the skills necessary for HR to contribute to organisational success.
Outsourcing has transformed HR and it is continuing to change the shape of how organisations manage their human capital. In its best form, outsourcing gives the HR department the chance to ‘take a seat at the table’ and participate in the strategy that will guarantee an organisation’s success.