The volatile business environment has pressured Human Resources and other business functions to pursue substantial cost reduction without sacrificing service quality. In this context, many organizations have turned to HR outsourcing as a means to “do more with less.” While businesses have long used HR outsourcing for specific activities such as payroll and benefits administration, recent years have seen HR outsourcing occupy a broader role in the operations and strategic plans of leading companies. For enterprises undertaking or considering HR outsourcing, the critical question is how to get the most benefit from the initiative in terms of efficiency, savings, and service delivery quality.
HR outsourcing best practices
The Hackett Group®, a leading global strategy and operations consulting firm, has closely studied the HR outsourcing practices of HR organizations that excel in operational efficiency and effectiveness. From the experience and successes of these world-class organizations, a number of HR outsourcing best practices clearly emerge. For example:
- HR outsourcing should be viewed not as a stand-alone project but rather as part of a broader program of HR process transformation and optimization. Before, during, and after an HR outsourcing initiative, world-class organizations streamline, standardize, and automate their HR processes to the greatest extent possible.
- Create a realistic, comprehensive business plan for the HR outsourcing program – and then execute against the plan.
- Design and budget for an effective governance structure to manage the outsourcing relationship, including clearly defined roles and responsibilities and mechanisms for issue resolution. Ensure that those charged with managing the outsourcing relationship have the necessary skill set to do so.
- Regard the outsourcing provider as a business partner and leverage their expertise – particularly when it comes to process design. The provider should also participate in the development of a set of results-oriented Service Level Agreements (SLAs).
- Adjust the roles of retained HR staff in a manner that best takes advantage of the outsourcing program. For instance, HR generalists who used to have responsibility for the outsourced tasks can be redirected to higher value activities.
- To gauge performance and progress, use process metrics that capture full end-to-end processes, including both outsourced and retained activities.
The Hackett Group delivers superior HR outsourcing support
For enterprises undertaking HR outsourcing initiatives, The Hackett Group provides valuable support services including business benchmarking, transformation consulting, and advisory programs specifically tailored to HR executives. We offer deep expertise and hands-on experience in a range of critical HR concerns such as talent management, HR delivery strategy, outsourcing and offshoring, and the design and implementation of global business services strategies.