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Howard Flint


Managing Director

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Outsourced HR: valuable or suffering from performance issues?


The rise of process outsourcing

There has been a boom in recent years within the business process outsourcing (BPO) market, with an increasing number of organisations outsourcing or offshoring functions to specialist agencies in an attempt to drive efficiency during the global economic crisis. For HR departments, administratively burdensome tasks were the first in line to be outsourced, but as staff continue to be squeezed and with outsourcers offering to take care of everything from payroll technology and workforce administration benefits to health and safety and employment law, there is very little today's HR leaders cannot find an external provider for.

This has begged the question: which HR responsibilities can be legitimately outsourced with confidence, and which should remain absolutely sacrosanct? The response will vary depending on who you ask, but the fiercest debate surrounds elements most integral to a company’s identity, such as talent management, training and employee engagement.

Recruitment provides an excellent example of a function that occupies this middle ground, and the manner in which it is currently changing demonstrates the positives and negatives associated with outsourcing. Over the past decade, the recruitment market has changed dramatically and talent has become scarcer; online recruitment has necessitated a shift away from recruitment administration undertaken by HR generalists in favour of multi-channel sourcing, attraction and selection conducted by recruitment specialists. For many, this was the cue for leaders to turn towards outsourcers to support efforts in transforming their workforce, be it into something that could flexibly scale in line with the market's peaks and troughs, to secure the best talent available or simply to reduce costs and time to hire.

Outsourcing: the downsides

As businesses begin to enjoy a strengthening economy, there are calls within some to claim back outsourced core functions and bring them in-house, with long-standing fears that outsourcers do not 'get' an organisation's culture or a creeping anxiety that they cannot be fully trusted or controlled coming to the fore as budget becomes less of a pressing issue. Similar concerns have played a part in the decision-making process within organisations that have elected to retain key HR responsibilities, alongside the fact that many can, and do, conduct these activities admirably.

These worries are, unfortunately from the perspective of an outsourcer, quite well-grounded.

Less than a decade ago, selling a process (such as recruitment) as a transactional commodity was commonplace. Rather than being viewed as an integral business process, recruitment was commonly a ubiquitous service offered by firms lacking a USP or bespoke approach. Few process outsourcers existed then, meaning the phrase in itself was enough to qualify as a specialism in several areas, including recruitment. But this once-rare approach is today claimed as a core skill by numerous agencies and players who, when facing tight margins, market themselves as outsource specialists in order to capitalise on rising demand.

This melee of indistinguishable ‘experts’ is confusing for HR leaders seeking the best providers and, ultimately, is untenable in the long run. Costs may be reduced, but the company's culture and brand are typically ignored in the process – rather than remove the headache of recruitment, outsourcing just provides a different one.  

Strategic partnerships: a positive approach to outsourcing

However, this situation has had a positive effect; in order to differentiate themselves from the saturated outsource market and to offer real value, the outsourcing industry is witnessing the emergence of strategic partners, organisations focusing on the wider impact they can have, rather than merely taking a self-contained HR process and taking care of it.

For recruitment, this means extending influence beyond the traditional process scope, with responsibility encompassing more than just the point of a vacancy arising to the onboarding stage. A strategic recruitment partner would have buy-in and influence at board level and align activities with the business' growth strategy. For instance, at this stage an outsource partner could identify potential talent shortfalls, highlight geographic areas requiring activity and provide an overview of available expertise in specific industries. In this way, they could advise on the feasibility of, and facilitate, entry into new markets and/or locations and new product or service launches, in addition to other strategic initiatives like succession planning and diversifying the workforce. Their influence would stretch past the point of hiring as well to incorporate elements of employee engagement and the tracking of talent exiting the business, in order to provide a more comprehensive overview of talent.

Additionally, the partner would operate under (and have a hand in forming) a strong brand for the client that is well respected, wins and retains new business and attracts the best talent. It is because HR plays a fundamental role in enhancing its company's culture and, by extension, its brand that some leaders are reluctant to entrust central functions to another business. This is why forming outsource partnerships, rather than provider relationships, is critical to creating a more effective model.

Such partnerships demand a proactive approach, and the vendor may well have to enforce deep changes within a client’s organisation structure in order to pave the way for improvements. But if a decision is made to outsource, then this change should be embraced by HR leaders, as trusting such functions to a carefully selected partner with a strategic vision can form mutually beneficial relationships that deliver on key business goals. In the case of recruitment, this means an outsourcer envisioning the process as a business enabler, rather than a transactional commodity. 


Outsourcing is not right for every HR leader, but it is certainly a less attractive proposition when only viewed with a view to reducing costs and improving efficiency, with vendors selected on those criteria alone. Such a decision-making process is more likely to leave HR with the headache of having to micro-manage service providers and has undoubtedly led to some of the negative perceptions of outsource agencies. In every field of HR that can potentially be outsourced, it pays huge dividends to assess partners more holistically, assessing the value they offer, rather than just the savings, and benefiting accordingly.

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Howard Flint

Managing Director

Read more from Howard Flint

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