How much should you outsource?

It was Wallis Simpson, the Duchess of Windsor, who is credited with saying “you can never be too rich or too thing”, but in the world of outsourcing, can you really reach a point where you can trim off too much fat and be left the poorer for it? This is the question outsourcing suppliers and buyers do not always want to ask. In theory, outsourcing makes perfect sense: HR directors reduce costs and – in theory – offload the more procedural, often distracting work to enable them to focus on top-level strategic planning.

But how far should outsourcing really be taken? Is there a point at which HR risks debasing its standing in business and diminishing the strength of its voices because of the reduction in what remains in-house?

The problem with coming up with an answer is while it is received wisdom outsourcing allows HR directors to concentrate on more strategic matters, the reality is not always so clear-cut. Recent CIPD/Leeds University Business School research found outsourcing frequently fails to relieve pressure on the internal HR team, with 43% of respondents citing the process as a failure in this regard. Worryingly, the same research showed only 7% of respondents declared outsourcing to be an ‘all-round success’ with almost as many (5%) going so far as to slam outsourcing as delivering no success at all.

There is also a degree of disparity between anticipated cost-cutting and the actual savings made once outsourcing has been implemented. Talent management company, Ochre House conducted research that found companies expect outsourced savings of 37% but they actually only save 18%.

Ochre House’s managing director, Sue Brooks, believes in the current economic climate there are a lot of organisations that view outsourcing as a magic bullet that can help solve their financial problems overnight. As a result they end up being disappointed.

“At present too many HR departments still think in terms of letting control of important areas go outside the organisation,” says Brooks. “However, if external suppliers can be brought into true strategic partnerships the opposite is true. The value of HR moves from an operational cost centre to a strategic business partner, able to impact on the enterprise in the form of revenue uplift, market share, etc.”

Source: Human Resources Magazine

Posted by Human Resources Magazine