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Outsourcing Human Resources: cause for celebration?

Sadly not

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The rise in importance of the Human Resources (HR) department within the company structure has gone on unchecked for decades. There was a day when it was simply called payroll, but now its influence stretches right to the top, and it busies itself evaluating employee performance, and generally bewildering all with bureaucracy for even the smallest decision within every department...

You can hardly blame those who have struggled to suppress their delight at the rise of HR outsourcing. Surely with the focus on slimming down and cutting costs, the sort of interfering that HR is loathed for should disappear. After all, if HR employees are working for a service organization, they might work out that they are supposed to be providing a service.

It is then, with horror, that we learn that suppliers are not just looking for transactional-based functions such as payroll and pensions administration, but 'full service' HR, which includes almost everything bar telling staff when they can go to the toilet.

While contracts are still being won on price, vendors are now pushing the 'total value' concept - encouraging companies to push more and more important decisions and processes to HR. Business process outsourcing (BPO) advisory firm Everest Group now estimates that a third of such deals involve outsourcing training and development, 28 per cent include performance management and 12 per cent actually include the outsourcing of some elements of HR strategy. The end of the HR autocracy is not imminent.

Within other horizontal BPO areas such as finance and accounting, prospective customers are fearful of outsourcing the higher strategic levels of the department, such as budgeting and management analysis, because they fear the loss of control.

With HR, similar alarm bells should be ringing in clients' ears. HR outsourcing should be restricted to its most basic functions - processing payroll, benefits, updating personnel records, and responding to employee queries. Strategic and higher level functions should be kept within each department as far as is possible, so that they can be made by people who truly understand them, and the needs of the employees concerned.

Removing important decisions - that can have a serious impact on employees' working lives - away from the head of an employee's department to a centralized HR unit has been a morale-sapping own goal scored by most businesses. Outsourcing is an opportunity to restructure the bloated responsibilities of HR, rather than simply moving the decision making process further away from the employees they are meant to serve.

Source: ComputerWire/Datamonitor

Related research: Datamonitor, "MarketWatch: Technology Annual Subscription"

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