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Human Resources, Inside and Outsourced

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.

3. Governance
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
  • Partners with the HROs account team to offer feedback on performance and manage service issues
  • Creates an environment of open communication with the provider
  • Communicates 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.

Human 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.


Outsourcing Best Practices

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