Platt Perspective on Business and Technology

When and if it might make sense to outsource Human Resources 6

Posted in HR and personnel, outsourcing and globalization by Timothy Platt on February 7, 2013

This is my sixth installment in a series in which I discuss issues and considerations that would go into determining whether Human Resources functions and processes should be retained in-house, or whether they should be outsourced to third party providers – and if so for which services (see HR and Personnel, postings 134 and loosely following for Parts 1-5.)

I began a more detailed discussion of in-house and outsourced Human Resources for a multinational company in Part 5 and I continue that here, turning to consider performance metrics and monitoring and business effectiveness in that, and the due diligence issues of accountability and responsiveness.

• Ultimately, effective business performance metrics all connect into and inform that business’ financial performance. And collectively the suite of business metrics in place should all meaningfully enter into and form a performance model that maps out a business’ strength and competitive position and in its immediate here and now and for moving forward.
• One measure of the effectiveness of a proposed or implemented metric is the clarity and directness in which its values measured can be correlated with direct measures of financial and cash flow position. That I add can be difficult to do for many functionally important types of metrics. But whether a given directly measured and quantified metric immediately maps onto a monetary measure, or this mapping is more indirect, the best metrics are objective and independent measurements of them would yield similar results.
• This consistency is vital, as even measures that look to directly map to cash flow and financial strength, but that are subjective and loosely scaled are going to offer little real value.
• Human Resources metrics are in many cases less easily directly correlated with a business’ financial metrics. But they can and should be considered significant and certainly as overall due diligence and risk remediation measures, and for determining the valuation of specific employee’s work performance. The goal here should be in taking the arbitrary and subjective out of them, as much as possible.
• Arbitrary and subjective there, translate directly into increased risk through the creation of inconsistency and perceivable and even legally provable bias.

This, up to here applies to businesses in general and their HR performance metrics. And I add one more piece to this general discussion here that would go into more specifically discussing in-house and outsourced HR in a widely distributed and multinational context:

• Metrics that measure work performance at the individual employee level may be developed and maintained primarily by Human Resources as a service, and personnel files that collectively contain that performance data might be held by HR for all official records copies in employee personnel files, but actual performance data that is gathered according to these metrics is usually collected by those employees’ managers – who are not in Human Resources and who in many cases have only a vague understanding of HR and its processes.
• So clarity and ease of consistent use and without specialized knowledge or training are vital if these metrics are to work in practice and without those problems of arbitrary or subjective inconsistency and bias.

Actually meeting these functional due diligence constraints and goals can be difficult and require effective ongoing monitoring and manager training, even when the entire business and all of its departments and functional areas are located under one roof. This becomes more of a challenge where a business is distributed across multiple, distantly located offices. And maintaining this type of system calls for focused expertise when offices are located across a range of cultures and languages, and when they have to work in several or even many legal contexts as well.

• Even when the business itself resides in its entirety under one roof, this type and level of complexity and this international challenge can apply when HR is outsourced, and certainly when that outsourcing is to an off-shore service provider.
• That is why third party customer and employee support services located in countries such as India, that work with businesses in places like the United States and Europe look for help desk and support employees who are fluent in the languages that they would need for their work. And many of these businesses go further and proactively train their customer-facing employees in the cultural details and nuances of their target customers – making sure for example that support personnel who would work with Americans speak American English, and those who would work with clients from the UK, speak British English. I have even seen these businesses, and particularly in India train their customer-facing personnel in target country small talk. They might never need to know professionally, the name of the home stadium for Manchester United (in the United Kingdom) or the Mets (in the United States) but cultural awareness involves familiarity in a sea of details as well as in general patterns and principles.

A key to success here, and for either in-house but distantly located Human Resources, or for outsourced services is in building the connections and bridges needed to keep the metrics gathered relevant and consistently objective – and understandable in a consistent manner to all involved stakeholders so this can be possible.

And this means making these and related issues both understood and relevant to a business’ strategic planners and operational leadership. And that calls for ongoing due diligence reviews of Human Resources as a service as well as by Human Resources.

I am going to turn from discussion of what Human Resources tracks and measures, to one of performance tracking those HR services themselves in my next series installment – an operational and strategic process that is too rarely effectively carried through upon and even as it has become a real due diligence requirement. Meanwhile, you can find this and related postings at HR and Personnel and also at Outsourcing and Globalization.

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