The Chartered Institute of Personnel and Development (CIPD) has insisted the threat to HR jobs from outsourcing is minimal, despite fresh warnings of a “slow and painful death” for the sector. Will outsourcing kill HR?
Strange to think that outsourcing, in terms of HR input, now seems to have gone the full circle. There was a time where we were supporting line management in their outsourcing activities and bringing to bear all our expertise in matters such as TUPE, internal communications and employment relations. But now, to some extent at least, these key skills are being deployed to address HR outsourcing.
It is important at this juncture to separate out the difference between offshoring and outsourcing. While many customer service functions have been offshored, especially to the Indian sub-continent, few HR activities have followed them. It might be interesting to consider the reasons behind this. Possibly it is the fear of adverse internal reaction to such a move. In this context it has been interesting to see that consumer advertising in some sectors now makes a virtue of a call centre being UK based rather than overseas. It would be interesting to see the reaction if an HR service was offshored. Does anyone know of such an example?
So what about outsourcing? Of course many organisations have outsourced HR activities for years. This may be through payroll (if you count it as an HR activity) or the provision of expert advice on legislation. There are many helpline and advisory services that effectively replace an in-house HR resource. Although the area that has seen much outsourcing is in the provision of HR support to smaller businesses. Possibly driven by the fear of legislation, more and more small businesses are outsourcing HR to either specialist firms or to individual HR consultants. However I suspect this is not the market the CIPD were thinking of in their comments – in reality these arrangements have normally introduced professional HR where there was none previously.
So what of the large scale HR outsourcing arrangements? Need we be concerned in a professional sense? Do they spell the end of HR as we know it? I hardy think so.
In most situations the major driver of HR outsourcing is the cost savings that are forecast. While there are undoubtedly major operational savings to be made, I have my doubts that the savings are properly quantified. Firstly, setting up outsourcing arrangements is very time consuming – if you want to get it right. Properly researching the market, specifying your requirements and making a selection all take time, and senior time at that. Although it is fair to say this is a once-off cost which shouldn’t be repeated, it is nonetheless significant. The second, and to my mind the most and most significant, cost is that of the ongoing impact on internal perception and the ability to identify issues and take pre-emptive action. On many occasions HR professionals have picked up an issue such as a likely grievance or potentially mishandled disciplinary and resolved it before getting to the serious stage. Unfortunately it is difficult, if not impossible, to record the value of these interventions.
However, there are some other aspects of HR outsourcing that should get us thinking. In outsourcing HR work, a key requirement is that the organisation fully documents its processes, policies and activities so that the external provider knows exactly what they need to provide. Frequently this is not as obvious as it seems. The nuances of pay systems, Trade Union agreements and policies for rare events such as overseas transfers are often not documented, but simply handed down from one person to another. Normally this will work satisfactorily, but when this has to be documented and passed externally the challenge is to capture the right data, often from highly fragmented policies and procedures. Of course there is an upside here in that this process can often prompt a form of Business Process Reengineering (BPR) whereby the organisation looks objectively at the way it transactions HR matters and seeks out more efficient ways of doing things.
Taking a longer view of HR outsourcing, I believe a real challenge may come to exist in the reduction in the number of HR roles for those looking for their first step on the HR career ladder. Working within a centralised advisory service certainly has the potential to give a wide range of experience in terms of dealing with different HR issues, but equally experienced gained on the shop-floor not only builds expertise in the HR issues, but also weds them to business reality.
What are your experiences of HR outsourcing? Do you feel it has limited the development of the function or provide greater opportunities? Let’s have your views.
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Quentin Colborn is an independent HR consultant based in Essex who is currently working on a major HR outsourcing project. Quentin can be contacted on 01376 571360 or via [email protected]