4 Good Reasons You Should Re-Think HR Outsourcing

As far as the new trend of outsourcing professional work goes, I’m not a big fan.

I don’t believe HR should outsource strategic work such as compensation/benefits design, learning/development, succession planning, sourcing/recruitment of key talent (not core or support talent), branding, workforce planning, etc. These are key responsibilities of HR to insure all “people” programs are in sync with company strategy and that the workforce is aligned as well.

We’ve all heard the “hype” that says outsourcing frees up HR to do “strategic” work. What is more strategic than the above functions?

How can strategic workforce planning be done if not in collaboration with the C-suite that’s developing a business strategy?
Compensation/benefits design? A provider can’t design anything if it doesn’t understand the company’s goals, philosophy, etc.
The same is true with strategic sourcing/recruiting. Outsource employment of support jobs all you want, but keep sourcing/recruiting of key/critical talent in-house. It requires solid knowledge of the business and ongoing and regular discussion with hiring managers.

The growth of RPO

RPO (recruitment process outsourcing) is the fastest growing sector of HR outsourcing. This means transfer of ownership of all or part of recruitment processes or activities on an ongoing basis.

RPOs can’t provide that unless they live on-site and take over the relationships with hiring managers that HR should have.

Here’s a quote from an article touting the virtues of RPOs:

What’s lacking today with some RPOs is workforce planning, employment branding, and creative sourcing with talent communities/social media/mobile, and assessment, particularly on a global level. Solutions that focus on these gaps and maximize existing strengths of RPOs will be the winners.”

Looks like a plan to take over strategic/key talent recruiting if you ask me.

If all of the strategic functions are outsourced, how would it work?

How would services be integrated?
Would the outsourcing firms spend a lot of time with the C-suite being brought up to speed on company strategy?
Would HR have to spend time bringing them up to speed?

4 reasons NOT to outsource professional HR work

The “bringing up to speed” wouldn’t be a one-time thing. It would have to be revisited every time there was a strategic change in the business plan. And in today’s warp-speed business environment, that happens frequently. Now where’s the value-add of outsourcing here?

Here are four reasons not to outsource HR professional work:

Less control — Many times the outsourcing firms are a black box which causes the company to lose control over who’s doing what and the details. Yet HR still has the responsibility (think about NSA’s loss of control with Booz Allen contractors).
Dependency — The more functions the vendor(s) provides, the more dependent HR is on them. It’s a risk if the vendor’s work quality is subpar, it goes out of business or is acquired by another company that decides to shut down that service. If the company has to bring work back in-house, a lot can fall through the cracks.
Lack of integration — Vendors do not collaborate with each other to provide integrated talent management plans. They work in siloes and their recommendations may, in fact, conflict with each other. With outsourcing, HR ends up with disjointed, compartmentalized solutions.
Lost knowledge — Experts are now beginning to realize that outsourcing eventually leads to a knowledge deficit. HR ends up knowing less and less about their own operations because they are not directly involved — they are one step removed from the action.

I didn’t just dream up these up. Other functions that have a longer history with outsourcing than HR have encountered these problems. HR will have the same experiences.

How the HR role would change

HR’s role will change the more professional work is outsourced. But instead of HR’s work becoming more “strategic,” as predicted, it will become less so. If HR is no longer directly involved in strategic sourcing/recruiting, workforce planning, etc., it will be giving up direct control of the functions that bring true strategic value.

HR’s new role will predominantly involve managing the vendor(s). Their responsibilities would be to:

Coordinate all the different outsourced programs and projects;
Understand project overlaps and synergies;
Monitor budgets and financial systems;
Keep outsourcing firms focused on the original goal;
Track project progress and quality;
Recognize and solve problems;
Serve as a liaison to management — communicating progress and addressing areas of concern.

That’s not exactly strategic HR is it? AND, I’ll spell something out for you if you haven’t read between the lines here. If HR is not already doing strategic work, the entire function is seriously in danger of being eliminated.

To sum up, saying “yes” to outsourcing professional level work is like saying “we kept the house but gave away the keys.”

Capiche?