As you stare at that mountain of HR paperwork on your desk, from time to time you may ask yourself: Is there a better, cheaper way to get some of this done?
Thousands of HR directors have wondered the same thing, and many have taken the leap to outsourcing. For some, it has proved to be the better way. For instance, in a Conference Board study, 51% of the HR managers who tried outsourcing said they “achieved all objectives.”
You may be looking at that glass as half-empty, and with good reason. The simple math tells us that 49% were unhappy with their outsourcing arrangements.
The differences between the two groups?
The Conference Board study highlighted them, as did Judy Coffey-Hedquist, an outsourcing analyst for Mellon Financial. Here’s what to watch out for, and what worked:
Beware: loss of ‘company culture’
Outsourcing efforts that yielded the least satisfactory results were:
- recruiting
- training and development, and
- employee communications.
Why weren’t those areas good for outsourcing? Too often, the contractor didn’t grasp the company culture and as a result it was a bad marriage between the two.
Recommendations from the study: Unless you decide your recruiting, employee development and communication efforts are in dire need of outside help, try to keep them in your domain.
Areas to consider
Of course, when you’re making an outsourcing decision, your CFO and CEO will be focused on one spot: the bottom line. Fact is, there’s more to be saved by outsourcing in some areas than in others.
The sweet spot for savings: so-called “transaction” tasks, those that involve a lot of that dreaded paperwork and little brainpower. Examples: signing up employees for benefits or making individual changes to meet employees’ benefit-change requests. Work like that is usually time-consuming and, frankly, a waste of HR talent.
Most companies that outsourced successfully to save money and improve services to employees tended to use a contractor for tasks involving:
- retirement programs, such as 401(k)
- administration, and
- management of pension and health benefits.
Narrowing them down
So let’s say you decide to outsource some transaction-heavy tasks. Which ones do you try? How many of them?
Most of the successful companies phased in their outsourcing, starting with one key function, building a success and then looking at another function to outsource.
Warning: Many contractors will try to get you to bundle – by signing up for several services at once. To get you to do that, they’ll try to catch your CFO’s attention by pointing out your company can save by buying a group of services all at once instead of paying for them individually at different stages.
Best bet: Go the phased-in route, outsourcing one function at a time so you’re not in too deep if you realize the idea isn’t working. You can always renegotiate contracts later if you like the contractor and want to do more business.
Note about contract terms: Most contractors will give you a price based on servicing a minimum number of employees. Ask whether they’ll cut the price if you later go below that minimum number.
