Once upon a time, most HR departments provided one-stop shopping for employees with questions or concerns about benefits, hiring, training, complaints, colleagues, etc. For leaders, HR was the place to go for recruitment, retention and terminations. HR is a critical function and most companies handled it in-house. That’s all changing very rapidly. Today an estimated 58 percent of large companies outsource all or part of their HR needs.
Is this a good thing or a bad thing? Neither. Like everything else in business and talent management, a one size culture fits no one. The key is to develop a strategy and solution that works for your organization.
Here are the 5 top reasons so many companies are turning HR over to outsourced experts:
1) It frees them to concentrate on core competencies. HR does not produce a product, yet it can eat up a lot of an organization’s time and energy. A great HR department demands resources and continual oversight and innovation. Many organizations would rather focus on their core strengths and/or moneymakers by outsourcing HR.
2) It saves money. Running an effective HR department costs bucks, sometimes big bucks. Many organizations do the math and just decide it’s not worth it. It also allows organizations to hire world-class specialists they could never afford to bring on-board permanently. This kind of virtual workforce will continue to find momentum.
3) It improves compliance. There are a whole lot of regulations out there these days. There is the constant threat of lawsuits for sexual harassment, wrongful termination, safety violations, etc. When you hire a compliance specialist, these headaches become theirs.
4) It improves recruitment. Recruiting top talent is an art (and a science) and a lot of HR departments are the equivalent of weekend painters. Many organizations would rather turn this critical function over a company that does nothing but recruit talent.
5) It provides access to the latest tools and technology. The most innovative HR-services supplier will be up on the very latest technology, including big-data mining, analytics, virtual workforce leadership, cloud technology and social media, and will know how to exploit them to meet an organization’s specific needs.
Those are some of the advantages to outsourcing. But it carries some very real risks. First of all, you’re turning an integral part of your organization’s success over to outsiders. They have a different – and at times even conflicting – agenda than you do. Service providers have their own bottom lines, and sometimes the service they provide can be shoddy. I’ve seen more than one organization get saddled (at least for the length of the contact) with outsourced talent that is a bad fit. Finding the right partners is absolutely critical. Do your due diligence here – and then repeat it! Never be penny-wise and pound-foolish – you get what you pay for. And watch out for too many bells and whistles in any sales presentation. Know what you need and don’t buy anything more. I recommend that every organization retain a healthy HR department, even if it’s small and many of its functions are outsourced. Some consultants will not always care about your people as passionately as you do so it’s important to find talent who cares about your unique culture. In addition, when tough decisions on hiring and firing are being made, you want in-house expertise to help handle things. It’s still often the case that core strategy should be kept in house unless you have the right expertise and best fit.
Outsourcing has the potential to make your organization leaner, more adaptive, smarter and more profitable. However, it must be done with foresight, savvy and a secure understanding of what it will mean. Take your time and really think it through. And only hire the best fit for outsourced talent.
A version of this was first posted on Forbes.