Platt Perspective on Business and Technology

When and if it might make sense to outsource Human Resources 1

Posted in HR and personnel, outsourcing and globalization by Timothy Platt on January 3, 2013

A great many and even most businesses outsource, and this is certainly true for businesses with any type of online presence. Even if they chose not to outsource anything else, it is likely they at the very least outsource the hosting of their web sites, with that managed off-site and by a professional web hosting service. So businesses outsource and sometimes without thinking about how that is what they are doing. They simply bring in the services of third party providers for one or two or perhaps more specialized purposes, where it would not be cost-effective for them to manage those operational details entirely in-house.

• For a big ticket retail operation such as an auto dealership this might mean hiring the service of professional, third party leads providers to help bring in new business. They would have their own active Sales department that works to bring in and engage foot traffic from the street, and convert visits to the show room to completed sales however potential customers reach their doors. But to widen their reach they might actively buy third party leads too, to increase the traffic flow to their doors and preferably with people more inclined to buy.
• Their Marketing department would draft and send out advertising and marketing copy, and through a wide range of channels that their information sources suggest are frequented by their target market audiences. But they might still buy third party-developed and commoditized marketing intelligence to help them make better decisions as to where to focus those marketing efforts. And if they want to engage in online marketing, and certainly if that includes specialized marketing efforts such as paid search engine placement and the purchase of key words in paid search campaigns, expert, third party service providers can be invaluable. Managing key word selections and bidding across complex search term portfolios calls for third party expertise if marketing campaigns based upon that are to work, and cost-effectively so.
• Many auto dealerships offer on-site access to insurance coverage for customers buying cars or trucks, and who suddenly need new policies. But few provide this service strictly on their own. They almost always partner with established insurance companies in this and offer their products. They then take a cut of the fees accrued from this additional business for helping those third party insurance providers access to what for them are new markets. And I add that offering a more one-stop shopping experience makes their storefront more attractive place to buy from so this creates win-win opportunities for all parties concerned.
• Their auto maintenance and repair shop may be involved in third party provider relationships too, and certainly for providing specific services where for whatever reason, it would be more cost-effective to do that.
• And such a dealership might still identify itself as, and consider itself to be a completely separate and independent business. It is – it is just that it taps into systems of third party providers for help with services and functionalities that might be important, but that are not part of their core capability requirements that they really need to keep in-house.
• And I add as a final point here, that I have based this discussion of mixing in-house with third party provider-outsourced, on a very real and very specific business that I have worked with. And one area of their operations that they did not even consider outsourcing was their small Human Resources office which they kept busy and entirely in-house.

And this brings me directly to the topic of this posting. If collaborative partnerships with third party outsourced providers can make sense, and at least under appropriate circumstances for internal and infrastructure systems and capabilities, and also for more directly customer-facing services, how do you best decide where this approach would or would not make sense? And what might make Human Resources acceptable or unacceptable for consideration for farming out to third party providers? With that background and its concluding questions, I bring this posting into focus.

As a starting point in addressing the two questions raised in the last paragraph, above, I turn to the first and most fundamental step that would have to be taken here:

• You need to know precisely what overall services you might outsource or keep in-house and what they are operationally comprised of, in detail. This means taking an inventory of all of the processes and activities that are directly carried through upon and completed as a part of a service under consideration. This means knowing precisely what other processes and activities are contributed to, for example in different parts of the organization, and certainly where this contribution of effort or results is crucial. This is both a matter of functionality and of processes in place, and of cost-effectiveness where alternatives would be readily available.
• What of this process flow would be disrupted if this service were outsourced, and at what costs to remediate and restore ongoing business operations?
• This includes information security and a host of other due diligence and risk management considerations that might arise if in-house information would have to be shipped out to an outside provider.

Tanking this out of the abstract, I would begin with a simple and clear-cut reference example: web site outsourcing as cited at the very beginning of this posting. An inventory of processes covered under “web site hosting” would include a range of security and continuity of services issues that might be immediately obvious (e.g. keeping a company web site live 24/7 under normal and normative circumstances.) But this would also include rapid recovery and technical support capabilities, and generally on a 24/7 basis that might not be as quickly anticipated, at least in detail. And it would include issues such as load balancing across hosting servers to maintain rapid web site availability and quickly responsive functionality in times of unusually high site visitor activity. That is one that might very well not come to mind until the people involved have seen their site go down, in effect from too much success in bringing in actively engaged web site traffic – or from something like a denial of service attack. All of these process examples, in fact, serve to make outsourcing web hosting a more attractive option.

With that I turn to Human Resources services as noted at the end of my bullet point list above. I could select any major activity area that HR is responsible for as a more focused example here, but will keep this simple with a service area that I have been discussing in my series: Onboarding New Employees (see HR and Personnel, postings 119 and following for this series as a whole, and particularly its Part 12: cultural diversity and awareness, and avoiding discrimination pitfalls.)

Just considering the processes and steps that would be included in that part of the overall onboarding process where non-discrimination and harassment policies are presented, and resources explained:

• One part of this might be to offer a presentation with video clips and other standardized information resources as to what workplace discrimination and harassment are, and about how they cannot and will not be tolerated. This means developing and making use of high production quality, expertly legally vetted informational resources. A well-chosen third party expert provider might in fact be the preferred approach for developing these resources as that approach can both help reduce costs involved in obtaining quality products, and it can insure that these materials meet all necessary standards for thoroughness and approach to topic.
• A second part of this would be in establishing and presenting HR and/or other personnel who could be turned to if an employee feels themselves to be discriminated against or if they are being harassed. On the one hand, it is very important that these be people who are there, and consistently available, and certainly where sensitive issues are going to be discussed. Face to face meetings can really help and in ways that phone conversations with someone unknown and unseen do not, to reassure this employee that they are being listened to and that they will be receiving help. Local and face to face can help in clarifying and resolving issues, and if there is real discrimination or harassment that needs to be addressed, meeting directly with a business representative who takes an employee advocate role and who comes across as being on their side can limit the chances that the business itself become principle defendant in any court actions.
• But continuing with that example, an in-house advisor might be seen as biased against the needs and interests of the employee who is making accusations. Instead of being seen as sympathetic to the needs and situation of the employee, they might come across as only being there to serve the interests of the employer. So if it can be helpful to have people there and in-house who an employee can turn to, it can be at least as important to involve otherwise disinterested third party advisors too – provided they can be actively engaged and where an individual advisor can follow through with any case file and employee who they initially engage with.

So some parts of Human Resources might be effective areas to outsource to third parties, and some might at the very least be more problematical for that. I am going to continue this discussion in a second installment where I will consider the way different businesses assign different ranges of responsibility to their HR department, and how their determination as to what Human Resources should be doing and responsible for can determine if it would make sense to outsource some or all of it – and if some, which some.

You can find this and related postings at HR and Personnel and also at Outsourcing and Globalization.

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