HR outsourcing: Smart strategy or culture-killer?

January 16, 2009 by
Filed under: In this week's e-newsletter, Latest News & Views, Outsourcing 

To cut costs, many companies outsource certain HR functions. Are they satisfied with the results?

For the most part, the answer is yes. Among the HR departments that outsource, 90% are satisfied with the services provided by the outsourcing vendor, according to a recent poll by the Society for Human Resource Management.

Moreover, about one third of companies plan to increase their HR outsourcing next year, while just 17% plan to decrease.

The key to success: outsourcing only in appropriate areas. Companies get the most out of the arrangement when it’s used for paperwork-intensive administrative tasks, like managing benefits and administering 401(k) plans.

Less satisfaction is found in areas that require in-depth knowledge of a company’s culture, such as recruiting, training and employee development.

At the companies planning to get more outside help, the areas most likely to be outsourced are:

  • background and criminal record checks (65%)
  • flexible spending account (FSA) administration (52%)
  • health benefits administration (46%), and
  • payroll (34%).

The key question: Does outsourcing help companies save money?

Maybe. Just under half (49%) of the companies surveyed said they’d cut costs as a direct result of outsourcing. On the other hand, 28% said costs had increased, while the rest said they’ve remained the same.

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Comments

2 Comments on HR outsourcing: Smart strategy or culture-killer?

  1. Steve on Fri, 16th Jan 2009 11:43 am

    2. Companies that wish to reap the benefits of performing back office and administrative funtions in a low cost environment, should investigate the option offered by Vangtel, Inc. Vangtel provides a nearshoring solutions that companies control:

    http://www.vangtel.com

  2. Andrew Spence on Fri, 23rd Jan 2009 6:10 am

    3. HR Outsourcing can be a smart strategy when delivered as part of the overall organisation strategy, for example to outsource “non-core, transactional processes” but keep those that are “closer to your heart”.

    HR Outsourcing does deliver cost savings, but there are other benefits to consider :-
    - avoiding that large investment in the latest technology
    - introducing more discipline in where your organisation spends its money
    - benefiting from variable costing as your organisation grows or contracts

    But, there are some well documented risks that need to be managed :-
    - be careful outsourcing processes that are currently not working well for you, they probably won’t work for the vendor either
    - will the new vendor fit in with your organisations culture/technology/ethos
    - make sure you have the right skills to manage the new vendors

    You might be interested in my Blog entries about HR Outsourcing
    http://www.glassbeadconsulting.com/category/hr-outsourcing/

    Andy Spence
    Glass Bead Consulting