Outsourcing human resources isnt a license to clean out the internal HR department.
To get the most value from a human
resource outsourcing relationship, an organization
needs to retain a high-level internal team as well. The following must-have skills
are essential internal HR capabilities.
HR In-Sourcing Best Practices
The precise line between in-house and outsourced human resource functions may
seem to have been drawn randomly. But experience has yielded a series of
best practices for determining which functions to outsource and which to
retain in-house. Industry analysts and HRO providers suggest retaining the
following functions in-house:
1. Strategy and Policy
Outsourcing empowers companies to focus internal HR resources on those activities
that deliver the most value. Rather than distracting internal employees
with rote HR functions such as payroll, benefits administration, or recruitment
legwork, companies free up internal staff to focus on high-value activities
such as HR strategy and policy development.
Strategic functions cannot
be outsourced effectively, since they rely on
an intimate understanding of the companys mission, specific short- and long-term
goals, and resources. HRO principal Gary Budzinski describes an optimal inside-outsourced
balance: andquot;the buyer organization must retain subject matter expertise,
with experts for strategy, policy, and process redesign within the key functions
that have been outsourced.andquot; In other words, each outsourced function--recruitment,
training, compensation and benefits, etc.--needs a corresponding in-house advocate
to ensure the companys strategic aims are met. Specifically, internal HR should
retain responsibility for creating programs in attracting talent, succession
planning, and performance management.
2. Project Management
In addition, its important for organizations to retain a mid-level project
manager in-house. Budzinski explains: andquot;The buyers retained organization
needs to have contract and project management capabilities to maintain
strategy and formulate policy decisions.andquot;
The project manager implements strategic initiatives by working closely with
the human resource outsourcing provider. Serving as an HR liaison, the project
manager ensures that the HRO provider knows how to deliver the necessary HR
support to help the business achieve particular goals. In addition, the project
manager may create policies to align the incentives of the outsourced workers
and the company--for example, a compensation program tied to business outcomes.
A successful relationship between client and human
resource outsourcing provider
relies on constant communication. HRO analysts suggest that companies entering
into a relationship with an outsourcing partner establish an in-house position
dedicated to liaising with the provider on a day-to-day, operational basis.
While the project manager bridges the gap between internal goals and external
resources, the outsourcing relationship manager facilitates the daily interactions
that make this possible. For example, the outsourcing manager:
- Interprets service level agreements and communicates them to internal employees
- Coaches in-house staff on how to interact with the outsourcing provider
with the HROs account team to offer feedback on performance and manage
- Creates an environment of open communication with the provider
future needs and plan service level upgrades and changes in scope
4. Legal Functions
Finally, the client needs to retain employee relations specialists to handle
legally sensitive issues such as discrimination, unlawful termination, and
sexual harassment complaints. HRO experts also caution businesses with unionized
employees to retain labor relations specialists with collective bargaining
expertise. The rationale is clear: the company must retain ultimate responsibility
on any decision or action with legal implications.
resource outsourcing services stand to reduce a companys HR administrative
costs significantly--but not eliminate them entirely. The best way to realize
the full value of HR outsourcing is to establish a clearly-defined partnership
between internal and external resources.