“A lot of organizations believe that human capital will be the most important basis for competitive advantage and if that is true, the department that is going to be most responsible for creating competitive advantage will be HR,” said Ed McMahon of Watson Wyatt. “I think it will be very difficult for HR departments to come to terms with pressure to become strategic partners if they are mired in transactional issues.”
He believes, as do many other strategic HR experts, that HR will only do this through outsourcing — or strategic sourcing, as McMahon prefers — or utilizing technology to automate transactional activities.
Here too, the survey revealed Canadian HR professionals are not exactly rushing to jump on board.
Asked how outsourcing had changed for the HR function in the past 12 months, nearly 70 per cent said they aren’t using outsourcing any more this year than last year. Another eight per cent said outsourcing for HR had decreased (see chart).
“It does surprise me in the context of what is going on,” said McMahon. Canadian HR managers appear to be slightly more apprehensive about outsourcing because they can’t make distinctions about what is strategic and what is transactional. “All they hear is, ‘we’re going to outsource this and I’m going to lose my job.’”
For the most part outsourcing has been widely misunderstood, said McMahon.
People associate outsourcing with the handing over of an entire function to another organization. Not true at all, he said. HR functions can be broken into components: some are strategic and some are not. Companies need to figure out what is what at their organization before they hand over responsibilities to external partners.
Horror stories about outsourcing typically stem from companies not doing appropriate analysis to figure out what they need to hold on to and what they can hand over, he said.
Training for instance. At many organizations with dispersed workforces it has become prohibitively expensive to bring people together for training. Figuring out what training people need is strategic — that is job and competency alignment and is something that probably should be kept in-house. But the act of delivering the training can be can be delivered by an organization that specializes in delivering that type of training.
This slow uptake of outsourcing should not be interpreted as backwards thinking, he stressed. Many HR professionals recognize the potential of technology and outsourcing, it is just very new and it is taking a while to understand both how it works and how HR can use it. That too is changing.
“HR people are coming up the education curve to understand what it means to outsource.”
As for e-HR, the main thing that is stopping companies from making a switch — utilizing technology to reduce workload — is the lack of a robust and well thought out business case for it, said McMahon.
Many HR people feel it is difficult to make the business case but they absolutely have to if they want to play a strategic role. “If they know what some of the processes cost, it is very easy to ask ‘can we introduce technologically to improve it?’” he said.
“Business people make decisions on the basis of ROI, HR absolutely has to it as well. It is the language of business.”
It is possible to put a number on anything, he said. HR has to learn to quantify everything they so that they can make informed, strategic decisions about how and where technology can benefit them.
He cites recruitment as one area where HR departments can easily determine costs.
It should be relatively easy for companies to look at their turnover rate, figure out how many employees are hired each year and how many people spend how much time filtering out candidates by reviewing resumes, to come up with a cost in hours of work. Then by considering software that screens resumes to look for key words, it is possible to cut that first screening process in half.
By becoming more efficient in such a way, HR reduces the time it spends on transactional activity and can spend more on strategic value added initiatives. That is how HR adds value, said McMahon.
He believes, as do many other strategic HR experts, that HR will only do this through outsourcing — or strategic sourcing, as McMahon prefers — or utilizing technology to automate transactional activities.
Here too, the survey revealed Canadian HR professionals are not exactly rushing to jump on board.
Asked how outsourcing had changed for the HR function in the past 12 months, nearly 70 per cent said they aren’t using outsourcing any more this year than last year. Another eight per cent said outsourcing for HR had decreased (see chart).
“It does surprise me in the context of what is going on,” said McMahon. Canadian HR managers appear to be slightly more apprehensive about outsourcing because they can’t make distinctions about what is strategic and what is transactional. “All they hear is, ‘we’re going to outsource this and I’m going to lose my job.’”
For the most part outsourcing has been widely misunderstood, said McMahon.
People associate outsourcing with the handing over of an entire function to another organization. Not true at all, he said. HR functions can be broken into components: some are strategic and some are not. Companies need to figure out what is what at their organization before they hand over responsibilities to external partners.
Horror stories about outsourcing typically stem from companies not doing appropriate analysis to figure out what they need to hold on to and what they can hand over, he said.
Training for instance. At many organizations with dispersed workforces it has become prohibitively expensive to bring people together for training. Figuring out what training people need is strategic — that is job and competency alignment and is something that probably should be kept in-house. But the act of delivering the training can be can be delivered by an organization that specializes in delivering that type of training.
This slow uptake of outsourcing should not be interpreted as backwards thinking, he stressed. Many HR professionals recognize the potential of technology and outsourcing, it is just very new and it is taking a while to understand both how it works and how HR can use it. That too is changing.
“HR people are coming up the education curve to understand what it means to outsource.”
As for e-HR, the main thing that is stopping companies from making a switch — utilizing technology to reduce workload — is the lack of a robust and well thought out business case for it, said McMahon.
Many HR people feel it is difficult to make the business case but they absolutely have to if they want to play a strategic role. “If they know what some of the processes cost, it is very easy to ask ‘can we introduce technologically to improve it?’” he said.
“Business people make decisions on the basis of ROI, HR absolutely has to it as well. It is the language of business.”
It is possible to put a number on anything, he said. HR has to learn to quantify everything they so that they can make informed, strategic decisions about how and where technology can benefit them.
He cites recruitment as one area where HR departments can easily determine costs.
It should be relatively easy for companies to look at their turnover rate, figure out how many employees are hired each year and how many people spend how much time filtering out candidates by reviewing resumes, to come up with a cost in hours of work. Then by considering software that screens resumes to look for key words, it is possible to cut that first screening process in half.
By becoming more efficient in such a way, HR reduces the time it spends on transactional activity and can spend more on strategic value added initiatives. That is how HR adds value, said McMahon.
