Four questions to consider
Nearly all human resources executives have engaged in outsourcing, whether they called it by that name or not.
They’ve called staffing agencies at 8 a.m. for last-minute help with special projects or retained a search firm to comb the country for a CFO with turnaround experience. They’ve made the easy decision to let a retirement administrator handle the headaches of a pension plan, swallowed their pride and brought in a consultant to write their employment policies, acknowledging a lack of in-house communications expertise. HR outsourcing (HRO) is intensifying.
But in the productivity-driven 2000s, the power to outsource comes with a set of mandates to justify its use, to justify the fixed costs of every full-time worker in every quarter and to give top executives a clear view of the value added by scores of vendors and consultants. Today, successful HRO is rolled out as an integrated, strategic program, not merely shaken loose as a patchwork of solutions for a diverse set of HR challenges.
HRO today means connecting each HR activity with the business goals of the enterprise. But where to start? To determine your readiness for HRO, ask yourself the following questions:
Does your company’s core competency fall outside of HR services?
I will venture to say that your answer to this question is yes: HR services are likely not your company’s core offering. Therefore you’re not doing your company any favours by keeping all HR functions in-house, because as nimble as your human resources department may be, some of those activities are little more than distractions from your company’s real mission: aligning employees with strategic business goals.
The objective, then, should be to free managers from spending time on ministerial tasks when they could be tackling more value-added activities, like defining the return on investment for HR services — the metrics of how new positions will contribute to the bottom line. This is especially important when vendors can carry out many routine tasks at least as efficiently and cost effectively as your own HR staff — and sometimes more so. The strategic approach of the 2000s is to outsource activities that increase the quality of work performed while lowering the costs.
Do you need more flexibility to control labour costs?
It doesn’t take many underutilized full-time employees to catch the unwanted attention of the CFO. Yet the mandate to meet maximum production needs with the smallest possible headcount is made all the more difficult by the vagaries of the economy, the seemingly never-ending wave of corporate mergers and restructurings and the resulting quarter-by-quarter fluctuations in staffing needs.
The challenge is figuring out how to strike the right balance to cut fixed labour costs while increasing variable costs and the availability of just-in-time employees. For example, we worked with one client, a financial services company with 1,000 full-time IT employees, and converted 30 per cent of its headcount to temporary workers. That reduced fixed costs and raised variable costs, producing a potential annual savings of up to $42 million.
Can you better match your workforce to the tasks at hand?
Fine-tuning the composition of your workforce transcends budgeting the right number of contingent workers and full-timers in each department. It also means putting extra care into matching skill sets with job requirements, thus avoiding twin vices: paying too much for highly skilled workers to do less-skilled work, and — more importantly — losing the hearts and minds of top performers by failing to challenge them enough.
After performing a workforce assessment for another client, we recommended reconfiguring a workforce of 150 IT contractors that had become top-heavy with high-ticket senior staffers. By swapping in a mix of junior as well as senior workers, the firm optimized its workforce and saved nearly $1,000 per day, per team — and not incidentally provided meaningful challenges to many more workers.
Do you need to streamline the management of HR vendors and consultants?
Many human resources departments incrementally build up their stable of HR service providers and consultants, adding a vendor here when a particular task becomes especially burdensome, hiring a consultant there when he calls to pitch a value-added service.
It all seems to make sense at the time — except that every vendor, every consultant has his own billing rates, his own metrics, his own standards of quality. Managing that ad hoc supplemental workforce becomes a job in itself, crying out for the efficiency of a vendor management system or a managed services provider. Or both. Getting measurable results, in comparable terms, from best-in-class vendors is just one benefit of an HR outsourcing strategy built around quality and efficiency.
HR outsourcing, then, is an opportunity to grow the influence of the organization while narrowing its focus to the global business issues that matter. If you’ve answered “yes” to these four questions, you owe it to your company to explore it.
Vin Cipolla is a member of the board of advisors for Veritude, a provider of strategic human resources. Veritude is a wholly owned subsidiary of Fidelity Investments Company and services clients throughout the United States and Canada. For more information, contact www.veritude.com.
They’ve called staffing agencies at 8 a.m. for last-minute help with special projects or retained a search firm to comb the country for a CFO with turnaround experience. They’ve made the easy decision to let a retirement administrator handle the headaches of a pension plan, swallowed their pride and brought in a consultant to write their employment policies, acknowledging a lack of in-house communications expertise. HR outsourcing (HRO) is intensifying.
But in the productivity-driven 2000s, the power to outsource comes with a set of mandates to justify its use, to justify the fixed costs of every full-time worker in every quarter and to give top executives a clear view of the value added by scores of vendors and consultants. Today, successful HRO is rolled out as an integrated, strategic program, not merely shaken loose as a patchwork of solutions for a diverse set of HR challenges.
HRO today means connecting each HR activity with the business goals of the enterprise. But where to start? To determine your readiness for HRO, ask yourself the following questions:
Does your company’s core competency fall outside of HR services?
I will venture to say that your answer to this question is yes: HR services are likely not your company’s core offering. Therefore you’re not doing your company any favours by keeping all HR functions in-house, because as nimble as your human resources department may be, some of those activities are little more than distractions from your company’s real mission: aligning employees with strategic business goals.
The objective, then, should be to free managers from spending time on ministerial tasks when they could be tackling more value-added activities, like defining the return on investment for HR services — the metrics of how new positions will contribute to the bottom line. This is especially important when vendors can carry out many routine tasks at least as efficiently and cost effectively as your own HR staff — and sometimes more so. The strategic approach of the 2000s is to outsource activities that increase the quality of work performed while lowering the costs.
Do you need more flexibility to control labour costs?
It doesn’t take many underutilized full-time employees to catch the unwanted attention of the CFO. Yet the mandate to meet maximum production needs with the smallest possible headcount is made all the more difficult by the vagaries of the economy, the seemingly never-ending wave of corporate mergers and restructurings and the resulting quarter-by-quarter fluctuations in staffing needs.
The challenge is figuring out how to strike the right balance to cut fixed labour costs while increasing variable costs and the availability of just-in-time employees. For example, we worked with one client, a financial services company with 1,000 full-time IT employees, and converted 30 per cent of its headcount to temporary workers. That reduced fixed costs and raised variable costs, producing a potential annual savings of up to $42 million.
Can you better match your workforce to the tasks at hand?
Fine-tuning the composition of your workforce transcends budgeting the right number of contingent workers and full-timers in each department. It also means putting extra care into matching skill sets with job requirements, thus avoiding twin vices: paying too much for highly skilled workers to do less-skilled work, and — more importantly — losing the hearts and minds of top performers by failing to challenge them enough.
After performing a workforce assessment for another client, we recommended reconfiguring a workforce of 150 IT contractors that had become top-heavy with high-ticket senior staffers. By swapping in a mix of junior as well as senior workers, the firm optimized its workforce and saved nearly $1,000 per day, per team — and not incidentally provided meaningful challenges to many more workers.
Do you need to streamline the management of HR vendors and consultants?
Many human resources departments incrementally build up their stable of HR service providers and consultants, adding a vendor here when a particular task becomes especially burdensome, hiring a consultant there when he calls to pitch a value-added service.
It all seems to make sense at the time — except that every vendor, every consultant has his own billing rates, his own metrics, his own standards of quality. Managing that ad hoc supplemental workforce becomes a job in itself, crying out for the efficiency of a vendor management system or a managed services provider. Or both. Getting measurable results, in comparable terms, from best-in-class vendors is just one benefit of an HR outsourcing strategy built around quality and efficiency.
HR outsourcing, then, is an opportunity to grow the influence of the organization while narrowing its focus to the global business issues that matter. If you’ve answered “yes” to these four questions, you owe it to your company to explore it.
Vin Cipolla is a member of the board of advisors for Veritude, a provider of strategic human resources. Veritude is a wholly owned subsidiary of Fidelity Investments Company and services clients throughout the United States and Canada. For more information, contact www.veritude.com.
