In or Out?

A burgeoning amount of companies are considering outsourcing their HR departments. Sue Brooks looks at the pros and cons.

In recent years the trend towards outsourcing the more process driven aspects of human resources, such as recruitment, has gathered pace. In simple terms this has allowed employers to devolve their recruitment functions to outside experts who devise, implement and manage talent sourcing, freeing up HR to work more closely with line managers as what are termed ‘business partners’. But is this trend a symptom of ‘herd mentality’ where businesses blindly follow the lead of their peers and competitors and are too many organisations consequently choosing this option for the wrong reasons?

Real terms

A recent survey of over 100 major businesses across Europe commissioned by my own company, the talent management specialist, Ochre House, found that the most common driver behind the decision to outsource recruitment was cost saving. But at the same time the expected levels of saving were often not being met. The problem seems to lie in the fact that many companies, anxious to find a ‘magic bullet’ solution to the financial challenges of the downturn, have developed inflated expectations of what recruitment outsourcing can deliver in hard cash terms.

According to the research, expected level of cost saving averaged at 37 per cent. However savings levels achieved in practice averaged out at 18 per cent. At first sight these results do tend to suggest that something is fundamentally wrong with the whole concept of recruitment outsourcing or the organisations that manage it. But let us delve a bit deeper to get the bigger picture. Across the continent, none of the organisations that rated the outsourcing of their recruitment functions as ‘successful’ or ‘very successful’ marked the cost saving element as ‘very important’ in their decision to outsource. Instead the factors rated most highly by this success group included a desire for more efficient recruitment processes, specialist external expertise and improvements to their employer brand.

As one specialist, Simon Patton, HR director of the supermarket chain, Somerfield, put it: “Price was, of course, a factor when we got to final negotiation stage but it wasn’t the one that got us there in the first place. Yes, you can make cost savings through outsourcing recruitment, but this should never be your major driver.

“Efficiency, simplification and added value are the three areas where you make the real wins and if you are focused purely on the bottom line you risk being disappointed.” And was Simon disappointed? Apparently quite the contrary. “I don’t say this lightly and it certainly wouldn’t be the right move for everyone, but it’s honestly the best decision that I’ve made as an HR director.”

Whole picture

Recruitment outsourcing can bring very specific and tangible benefits to an organisation - external experts embedded to control the recruitment process, better management of sources of talent, more effective targeting, the reduction in time to hire and the saving of core management resources. Those companies ignore these benefits when opting for outsourcing and focus instead on pure cost reduction are likely, as Simon points out, to end up feeling frustrated. But does this mean that substantial cost savings are not achievable and should consequently be downplayed when considering whether to outsource or not?

The simple answer to this is of course, no, but only if outsourcing can cover a much wider agenda than has historically been the norm. In my view recruitment is not, and for that matter never has been, a ‘stand alone’ function. Instead it is part of the complete talent management process, which needs to be addressed as a whole. After all, what is the point of creating an efficient and effective talent sourcing machinery if you do not then get the best out of your recruits by ensuring that they are fully engaged and their training and development is effective or if a significant proportion of them leave before you can derive the maximum benefit from them? Significant reductions in labour costs can be made but only if an outsource provider is able to work with an organisation on a strategic rather than a purely tactical basis. This means being able to address the whole talent management spectrum from recruitment itself through engagement to training and development and retention. This is the true future of outsourcing in the employment arena.

Sue Brooks is a director at talent management specialist, Ochre House

Source: Recruitment Consultant

Posted by Recruitment Consultant