HR outsourcing helps organizations free their internal resources for more strategic priorities and optimize investments in human capital.
The specific processes that are included within any outsourcing arrangement will vary from organization to organization. While some organizations may outsource nearly all of their HR processes, others choose specific components such as training, payroll or recruiting. High performing organizations typically use a combination of outsourcing and in-sourcing in order to gain competitive advantage.
Most organizations outsource various operational elements of delivering HR activities but retain control over general HR strategy and decision-making. These operational elements include: staffing, recruiting, training, and development; monitoring HR goals and strategies; benefits and compensation management; development of employee orientation programs.
In order to create outsourcing strategy, the organization should identify key areas for improvement and assess the scale and type of changes required within the HR function. The benefits of HR outsourcing include: reduced HR cost, increased efficiency, improved HR management information and HR metrics, access to advanced HR IT infrastructure without substantial investments, additional HR expertise, reduced risk, more “strategic” approach to HR management.
Before outsourcing, the organization should assess and analyze its current and future business strategy as well as the potential changes in the business profile by outsourcing provider. The outsourcing agreements are frequently long-term and may provide for five to ten years contracts. The changes of HR processes related to outsourcing usually include HR self-service systems and/ or a provision of HR contact centre for employees and managers. These changes require specific internal HR expertise as well as ongoing leadership and strategic direction.
The outsourcing arrangement requires continuous assessment against a set of specified metrics. Developing HR metrics balanced scorecard is an efficient way to monitor the success of HR outsourcing.
To learn more about HR metrics, see Measuring HR Performance.