How to manage outsourcing partnerships

Richard Houghton, managing director of Xchanging HR Services, explains why an outsourcing partnership could be just what you're looking for.

Over the past couple of years, there has been a fair amount of disagreement about the benefits of outsourcing the HR function.

Some in the HR community are resistant to hand over their 'bread and butter' to a third party. However, many organisations taking the outsourcing option have seen greater innovation, reduced costs and tighter controls.

It all seems far too difficult to me. Why should I bother?

Three reasons: cost, service and strategy. The pressures on companies to reduce costs and keep reducing them are growing day by day. This is being matched by a greater demand for improvement in service levels and technology.

Add to this the need for HR to become more involved in strategy, to take a proactive role in planning what skills are needed, to maximise its use of resources, and to support senior management in their attempts to attract, develop and retain top talent, and you have a challenging environment.

Why is outsourcing a solution?

Placing the management of utility tasks in the hands of outsourcing professionals means that HR managers can focus on strategic challenges.

The most effective outsourcing relationship is a partnership, with the partner shouldering some of the financial risk by sharing costs. An outsourcing partner will inject key skills and manage implementation, provide state-of-the-art technology and be fully accountable for top class service provision.

Is there an alternative?

Do-it-yourself. But it's not all plain sailing. You want to make radical improvements to the service you provide to staff - which means you need to make fundamental changes to your HR procedures and the people that manage them.

Typically, you'll encounter resistance and dissent from those you work with day in, day out. Change is more acceptable when introduced from outside; DIY falters when there is no party with an external vantage point to manage change effectively and for the long-term.

As service providers themselves, the outsourcers instil a service mentality among the HR workforce, a key factor in creating a 'best in class' function. Plus, there's someone to bear the cost of technological investment and skills enhancement.

Where do I start?

Be honest: About your HR operation's current capabilities and the issues your organisation is facing. Remember, firms of any size can benefit from the expertise of an outsourcing service.

Be realistic: The transactional parts of the HR function can be managed in new, smarter ways. But some benefits will take longer to come through than others. Don't saddle yourself with unrealistic expectations.

Do your research: Speak to your peers, professional bodies and other business contacts, and read the HR press to find out who has the best reputation for excellent outsource service provision. Talk to their clients to find out how the relationship works in practice.

Focus on the future: Set out what you want to achieve in the long-term as a business and as a department. Choose a partner who can meet and adapt to your needs as they change over time.

Build the business case: Any outsourcer worth their salt will help you build the business case to get the support of both senior management and your own workforce. They should also work with you on a joint definition of key performance criteria and service levels.

Commit to good management, co-operation and interdependence from day one, and you'll reap the rewards.