The Official Blog of Benifys HR Solutions

The concept of outsourcing the Human Resources function, whether partially or completely, has been doing the rounds of corporate circles for long, or at least a reasonably long time now. Given the obvious advantages that it brings, what prevents it from becoming a rage? Why are organisations not pursuing this option with any kind of aggressiveness? Why would they continue to look the other way when something as clear as this stares them in the face every single day of their working lives?

The reason for HR Outsourcing not catching the fancy of organisations is one, or more, of these three:

• Mindset issues: There are perceived problems related to individual insecurity, control, data security, sensitive information that others are privy to, hesitation in adopting change, and so on and so forth,

• Ignorance: Organisations have not heard of HR Outsourcing and/or are not clear how it will work. This is an education issue, and can be handled through relentless campaigns in various media and reach-out programmes, and

• Wrong implementation: Many organisations stop short of deriving the maximum benefits out of outsourcing, for want of a true understanding of what HR Outsourcing can truly accomplish. Like the erstwhile IT Outsourcing models, organisations are confused as to what is the finish line, often considering the race to be over half way through the track. This, to our mind, is the most serious issue plaguing the world of HR Outsourcing. We’ll take a little time to dwell on this aspect.

A report called "Getting Full Business Value from HR Outsourcing With Strategies for Retained HR and Change" was published by Buck Consultants. This report was a result of a multi organisation survey and an accompanying case study and was recently featured on the HROA (HRO Association) website. The report intended to distinguish between organisations achieving "HR efficiency" as opposed to "True HR transformation." While attaining HR efficiency means the careful optimization of HR systems and processes from a perfect combination of both in-house resources and outsourced services, HR transformation is the next step wherein the HR organisation is geared up to drive business performance.

The case study demonstrated how probable it is to be working to achieve transformation but falling short on target to ’settle’ for efficiency instead. The concept of outsourcing the HR function (single or multi process) has been around for some time now and this is now resulting in a clear track record of what does and does not work. What is surprising is that some organisations have been able to achieve far better business impact as compared to others while implementing HR transformation measures.

Going through the survey findings, one thing that stands out is that high performance organisations take a distinctly different approach towards handling change in the retained HR organisation and do not shy away from investing more in change management and communication practices. Needless to say, the overall perceived effectiveness of the program was far higher in high performance organisations as compared to their counterparts. Another aspect in which the change process in the high performance organisations differs is the way they planned and executed the retained HR changes itself. While for the high performance organisations the retained HR changes were part of the overall HR strategy and drove the scope and scale of outsourcing, this wasn’t the case for other organisations. The latter saw the two steps, i.e., outsourcing and managing change, as separate activities not to be mixed with each other, and as a result outsourced first and managed change later. Even in instances where both the activities ran parallel to each other, there was little inter-relation between the two.

Another thing to consider here is how the retained generalist HR organisation is utilized post HRO implementation. Demand dictates the output here; some could be moved under the shared services umbrella while others could be used to form centers of excellence to support the core business with consulting and/or business research services. The final shape of the HR organisation will ultimately depend on the specific needs of the business with a focus on providing HR a strategic involvement rather than appointing it as a ‘maintenance’ function, which is only a short term solution at best.

In order to be successful, the HR transformation process must necessarily cover the following process steps:

1. Selecting an HRO vendor and finalizing which functions of HR to outsource
2. Identifying gaps in the projected HR organisation
3. Determining scope for new roles like business research/consulting for the retained HR organisation
4. Assigning new and modified roles to the retained HR organisation
5. Managing the retained HR organisation by means of orientation, communication and training
6. Preparing retained HR organisation for their new roles, processes, tools and relationships
7. Managing change through extensive communication exercises
8. Supporting the outsourced processes till the time that they "run on their own" so that the employees do not feel disruption in HR services
9. Preparing and following exhaustive SLAs for the outsourcing partner
10. Providing every possible data and information source to the outsourcing partner for effective and seamless transition of processes
11. Maintaining audit points for both the retained and the outsourced HR processes
12. Maintaining a close eye on the market and competitive landscape to evolve further outsourcing strategies and practices
13. Engaging the outsourcing partner in frequent dialogue to unearth further areas of possible partnership
14. Above all, trusting the HRO partner and enabling the model to success, rather than setting it up for failure

In the final analysis, every step that the organisation takes towards gaining a competitive advantage will empower the people within the organisation. The organisation gains through a variety of routes, the cost advantage being amongst one of the many benefits that accrue to the organisation. If an organisation is looking at being perceived in a better light than the others in its space, HR outsourcing is an option that must be explored.