HR outsourcing - Gaining momentum

There have been innumerable suggestions over the last decade on how to fix the HR function. Given HR's mantra of "earning a seat at the table," and the erratic progress made, there are few who question why HR outsourcing continues to gain momentum. Several high profile publications have recently suggested that the HR function of people management might be better served by non-HR departments in an organization. But this suggestion, while probably meant more to incite controversy than anything else, does little to address the real problem.

The central problem is that HR has not explained to its clients the true importance of its mandate. The conventional thinking about HR reflects the paradox facing line managers. If people are the 'most important asset', why is the HR function often thought of as an administrative overhead? For the most part, this perspective has been justified by the role that HR has played in the past, emphasizing administrative efficiency and compliance. The term "HR police" has not been unjustly earned. The narrow-minded view of "climbing up the pyramid of value" strategy attends to the desire of HR professionals to work on something significant within their organizations, but it fails to address the critical need that companies have to improve the effectiveness of their workforce - a need that HR is uniquely qualified to address. A strategy that continues to focus on the details of administration - even though, in this case, it emphasizes "freeing" HR from the details of administration - aims in the wrong direction and will only continue to reinforce the belief that HR people in general just don't understand or have the capacity to address the real business of the organization. This strategy of fixing/focusing on HR is doomed to fail because it addresses only a small part of a larger opportunity, and attempts to deliver only a small portion of the solution.

Though HR owns most people-related functions, it is rarely true that HR is given real responsibility for the effectiveness of the company's people and the company. HR typically has responsibility for people governance, but rarely for results of the workforce, and they are almost never an active driver in creating or improving the effectiveness of people's actual work. Instead it fulfills the role of passive provider of an infrastructure for the business to source, select, reward and deploy its workforce.

That said, HR is the only function within a company that is reasonably positioned to improve the way people work. HR owns and manages all of the data about workers and work: their jobs, expertise, organizations, backgrounds, skills, requirements, and compensation structure. HR as a discipline - not the department - has a matchless understanding of the factors that govern worker productivity: competencies, management processes, relationships, rewards, collaboration, learning, job structures, partnership models, and more. Every action a worker takes can potentially be improved by the data HR has about them and their work, or by the expertise HR has about how to productively organize the workforce and the work. HR's attention and influence are usually restricted to administrative duties, not improving the performance of "real" work, and should be a reflection of HR's priorities. It should be obvious that, while HR's strategy of improvement through self-service, competency-analyses and historical turnover reporting may be marginally useful, it is usually the case that higher value work improvements need to be addressed first, and should be HR's focus. No other function within the organization is able to address this critical need. Information Technology (IT) often inherits this role simply because technology is everywhere, and is a key enabling resource in getting work done. However, IT typically does not have the skill set to improve the efficiency and effectiveness of work processes, implement consistent policies, or deliver a work environment that takes full advantage of relevant knowledge, resources, and tools. IT is accountable for the efficiency of the architecture from a systems perspective, which is why so many promising initiatives have such surprisingly inefficient long-term results. Most fail to achieve what they promise because they are not effectively integrated to support work processes. Only HR is responsible for knowing and managing how the workforce should work.

HR must diagnose, prescribe and then facilitate a mix of training, development, outsourcing, partnering, and acquisition programs to get work done faster, better, and at higher quality, and to enable growth into new areas. And to have the time and money to take on these tasks, HR must move aggressively into a new mode for providing administrative services.

If HR needs a new focus and eventually a new service delivery model, one would think the obvious answer is outsourcing. After all, the rapid growth and development over the last few years of the HR outsourcing industry has removed the economic and technical barriers to outsourcing every traditional HR function. Payroll, benefits administration and processing, recruiting, compensation analysis, training, and even employee relations can now be intelligently distributed across a range of high-quality providers. Today, HR outsourcing goes beyond just handling payroll and benefits.

Yet the promise of outsourcing eludes most HR departments. Most HR groups have managed to take the liberating promise of outsourcing and convert it to the new problem on which HR can focus instead of rising to the opportunity that demographics, the economy, business conditions and the evolution of the workplace have created. It may be hard to admit that outsourcing organizations may actually offer significant improvements in expertise and execution ability over any internal organization due to their scope, dedication, professional resources and economies of scales. Yet outsourcing just may be the vehicle or mechanism that HR needs to make the transformation from administrative processor to workforce optimizer. That is the first step - use the compelling marketplace data to make the case for implementing the right technological solutions, those that will enable HR to emerge from its transaction-focused past. Close behind; follow up with a second step of demonstrating the unique impact HR can have on workers, on the organization overall and subsequently on shareholder value.

These two steps aren't necessarily simple, but neither are they out of the reach of most HR groups. More importantly, they are key to taking down the wall that isolates HR from its potentially significant impact on the business in which it operates - and that elusive "seat at the table."

To learn more about NelsonHall please contact matt.gennone@nelson-hall.com or visit www.nelson-hall.com 
Source: Alsbridge