HR Metrics: Outsourcing the Right Processes for Better Efficiencies

HR is still among the most outsourced functions within an organization. But one solution does not fit all. And so HR managers need to be cautious in relying solely on outsourcing for productivity improvements, according to benchmarking firm Best Practices LLC in its research study Achieving HR Administration Excellence--Shared Services, Outsourcing and Cost Reduction.

Data in the report was compiled from surveys and interviews with HR executives at larger companies, including Agilent Technologies, Boeing, Coca-Cola, Convergys, Dell, General Electric, Motorola, Raytheon, Sprint and many more.

Among other key findings:

• 60 percent of larger companies deliver HR services to employees via shared service organizational models. Employee populations are growing increasingly complex due to multiple mergers, geographic distribution and swings in employment cycles. HR organizations are turning to increasingly centralized shared service models to deal with this complexity, but the success of these efforts—in terms of quality and cost—varies greatly from company to company.
  
  
• More than 40 percent of larger companies rely on significant outsourcing for some combination of employee HR documentation services and operations, but none completely outsource all functions. Benchmark findings indicated that processes with strong system dependencies are outsourced far less frequently, and with a much higher level of scrutiny than processes with lower overall system interdependencies. For example, employment verification and award management are outsourced by more than 73 percent and 55 percent of larger companies, respectively.
  
  But even though 73 percent of larger companies outsource employment verification, companies that have internal processes for this HR function far outperformed those with outsourced processes, the study found.

As companies grow and change, functional managers should continually ask themselves the fundamental question: What business do I want to be in? Any task or process that is not core to a functional area's self-proclaimed identity or mission is a strong candidate for outsourcing, according to the report.

However, outsourcing efforts by large companies commonly encounter resistance from operational areas that control core HR data systems and processes, the study indicates.

Another finding: Technology still plays a critical role in determining outsourcing possibilities. Companies in the technology manufacturing and services sectors are pioneering the expansion of outsourcing to new HR processes, such as personnel essential files management, large-scale data update, escalated customer service, and data audits.

In particular, the cost burden of leave of absence benefits and policies can be mitigated through a combination of techniques including outsourcing and automation, the study found.