Platt Perspective on Business and Technology

When and if it might make sense to outsource Human Resources 7

Posted in HR and personnel, outsourcing and globalization by Timothy Platt on February 14, 2013

This is my seventh 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 1-6.)

An auto manufacturer builds cars; a retail business sells the products and services that it offers and maintains: for its products as it has them in inventory and for its services through support staff availability. An online service provider offers web hosting or web site development expertise, or online security or any of a wide range of other services that it has built its business around. All of them and more generally have at least something of a Human Resources service or department in place. But few businesses see that as their mission or as the reason behind their being the business they are. HR is more usually seen as a necessary but largely incidental support capability and as part of the background business infrastructure – when it is thought of at all. And I add, for most businesses HR does not usually come to the direct and focused attention of a business’ executive officers unless something has in some way gone wrong. Here, I am not writing about in-house or outsourced or about finding hybrid combinations of those approaches where certain HR functions are kept in-house and some are farmed out. I am simply writing about Human Resources in general.

I have been touching in this series on a range of issues that come up and that need to be addressed when making an in-house or outsource decision here, but there are some core areas that I have left unstated, at least for their operationally significant details. My goal in this posting is to note and at least begin to address a few of them. And I begin that by focusing in on precisely what I mean when I refer to Human Resources as playing an essential due diligence and risk remediation role. And I will continue that with a discussion of really seeing and evaluating HR systems and processes in place and before the wheels leave the road and problems have already arisen and to the level where senior management would be apprised. These considerations, I content, have to be thought through and strategically planned for if a valid in-house versus outsourcing decision is to even be considered, let alone decided upon. And I begin this posting and ground all of this intended discussion in terms of due diligence and risk remediation.

• Human Resources and its Personnel staff manage the personnel files of individual employees. They also participate in hiring and onboarding processes and managing benefits for current employees, and separation processes of whatever type that might be called for on a case by case basis. And this is just a broad outline description with multiple gaps as there are a wide range of contingency processes that they enter into and even manage, and certainly insofar as the processes involved would be standardized across all employees.
• For purposes of this discussion if nothing else, I would divide the due diligence and risk remediation implications of all of this into two broad areas, both of which have already been briefly noted.
1. Overall consistency requirements: Managing HR and Personnel functions and processes according to a systematically and consistently followed pattern means that all employees across the range of a business and its table of organization are treated consistently. Ad hoc and one-off in how a business critically performance reviews and rewards its employees, to cite one area of possible examples, create differences that can quickly lead to a perception of bias and discrimination, and if not along lines such as race or religion that are legally protected in many countries, then in how employees in different offices or functional areas are treated. So consistency and uniformity might not mean everyone or even anyone is completely satisfied with their terms of employment and in how they are managed as an employee through these processes – but everyone knows they are being treated equally fairly and that no one is being offered undue advantage. (I am going to explicitly discuss an intentional and common exception to this rule in my next series installment, but for most HR processes this is considered central.)
2. Specifically risk remediating processes: Human Resources also specifically and explicitly manages a series of directly due diligence and risk remediation processes and challenges, and developing and managing consistent and effectively available workplace discrimination and harassment identification and remediation processes are only one part of this side to Human Resources systems.
• Even the most diligently planned out and executed response to and management of the issues and processes of those numbered points do not mean all employees are managed and rewarded identically. To cite an area where consistency and transparency is vital, one employee who has worked at the business more than some minimum set number of years might be awarded extra annual vacation time over that afforded to a newer arrival employee, and a first year employee might only get legal weekday holidays off until they hit that one year mark as a very real world type of example. But any employee who has hit that five, for example, year mark of employment would get that extra week of paid vacation time off. And every new employee would become eligible for the basic paid vacation time package after their first year. Consistency of pattern with an understandable rationale is what matters here.
• To further clarify this point of consistency, sales personnel and others who travel for the business and are away from home for periods of time as a result might be allowed to personally keep rewards points offered by the airlines used for their business trips. This is a type of benefit that would only accrue to some employees who happen to do business travel for the company. But a fair and consistent policy here would militate against any claims that some employees are offered special benefits. And as long as business travel opportunity was not being determined along discriminatory lines that would not be an issue.

Capacity to readily monitor systems and processes in place, and not just as a matter of written and intended policy but as they are carried out in practice is essential. And this is where the potential challenges of in-house versus outsourced enter this story, and within the in-house paradigm locally distributed versus distant and centralized in-house. And managing this as a due diligence matter means maintaining positive operational control based on a clear understanding of what is being done and how and for whom, everywhere in the business’ organizational systems and for all of its personnel. And this brings me to the second, closely connected set of issues that I proposed as topic for discussion at the top of this posting: monitoring and tracking HR performance itself as a due diligence and risk remediation exercise.

I am going to end this posting here and continue there in a next installment. Meanwhile, you can find this and related postings at HR and Personnel and also at Outsourcing and Globalization.

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