Has shine come off HR outsourcing? (Editor’s Notes)

We're writing less stories about outsourcing these days, and more about the huge benefits of getting human resources right
By Todd Humber
|Canadian HR Reporter|Last Updated: 02/11/2013

Over the years, Canadian HR Reporter has tackled the issue of HR outsourcing from many different angles.

On June 4, 2001, we ran an article outlining CIBC’s move to outsource nearly all of its HR operations to EDS in a $227-million deal, resulting in the transfer of 200 CIBC HR personnel to EDS.

On June 2, 2003, we detailed BMO’s signing of a 10-year, $750-million deal with Exult to outsource most of its transactional HR work. We also told the stories of companies such as Rogers, Air Canada, Home Depot and Starbucks that went down similar roads.

In the Sept. 22, 2003, issue a headline read “Can you outsource 70 per cent of HR?”

There was so much outsourcing of HR that we even dedicated space to discussions around what skills HR professionals would need in order to land a job with an outsourcing firm, because that was starting to look like the only viable career path for many professionals — especially entry-level ones.

But then cracks and dissent started to show in the outsourcing wall. RBC, which at one point outsourced recruitment, brought it back in-house. In the early 2000s, RBC was hiring about 20,000 people per year — but about 60 per cent of those hires were internal and it found the outsourcing firm couldn’t properly evaluate employees already on the payroll.

Other concerns began to arise, such as privacy. In 2004, British Columbia introduced legislation to prevent personal data from landing in the hands of foreign governments. It made the move after the B.C. Government and Service Employees’ Union (BCGEU) raised concerns about the outsourcing of the Medical Services Plan to a company in the United States, governed by the USA Patriot Act.

Ontario’s eHealth debacle also gave outsiders a black eye. In 2009, the province’s program to move health records online had 30 full-time employees and 300 consultants on the payroll. It wasn’t exactly a textbook lesson on the benefits of outsourcing work. (Though it’s a great business case for the benefits of full-time staff.)

The HR outsourcing train seems to have lost plenty of steam over the last decade.

Yes, firms are still outsourcing HR work. Less than two years ago, Air Canada inked an eight-year, $80-million deal to outsource its HR contact centre, employee data management, employee travel support, recruiting services, benefits administration, leave management and payroll to IBM, which does similar work for American Airlines.

But the tone of the conversation around outsourcing seems to have shifted.

As I write this, I’m back in the office for the first time in nearly a week. I had the opportunity to attend the Human Resources Professionals Association (HRPA) annual conference in Toronto.

I enjoy conferences for a number of reasons but first and foremost is the chance to talk to professionals I wouldn’t ordinarily have the opportunity to meet — the ones who are on the front lines of their organizations every day.

One conversation I had focused on outsourcing. I asked this woman, a mid-level professional at a financial institution, what part of HR she would consider outsourcing. I wasn’t taking notes during our conversation but, to paraphrase her, she said: “None of it.”

Not payroll, not benefits administration, not HR call centres? The answer came back, adamantly and repeatedly: “No.”

The gist of her argument was HR is simply too important to shovel off to outsiders. HR departments need to be robust, not skeleton-staffed, for various reasons — prime among them is building knowledge of the business and grooming the next generation of HR leadership.

It’s an interesting point. It would be naive — and wrong, at least from these quarters — to say HR should be completely untouchable from an outsourcing standpoint. There are plenty of tasks that can often be done better and cheaper by external experts.

But we’re writing less frequently in Canadian HR Reporter about outsourcing deals and more about the importance — and huge benefits — of getting HR right.

For both employers and HR professionals, this can only be seen as good news.

New feature: The Weird Workplace

Right below this column you’ll notice a new feature in Canadian HR Reporter.

Titled “The Weird Workplace,” it takes a quick look at some of the quirky, unusual and entertaining stories that cross our desks. It’s designed to be a fun, quick diversion. We hope you like it.

If you encounter any bizarre workplace stories, please send them our way at todd.humber@thomsonreuters.com.

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