Outsourcing HR may not deliver the quick cost-cutting that people imagine, according to experts speaking at a recent People Management round table.
Philip Vernon, of Mercer Human Resource Consulting, said he warned HR directors asking about outsourcing: If you want to save 20 per cent this year, outsourcing may not be the quickest and best way to get there.
In a large organization, HR may represent only three per cent of total costs. If you are talking about saving 20 per cent of three per cent, with the risks involved, there may be better prizes to be had for the chief executive and finance director, he added.
Marika Whitfield, from Northgate HR Outsourcing, told the round table, on HR outsourcing, that potential clients were more interested in value-added nowadays, rather than cost saving. And Debbie Sallis, HR director for Combat Air Defence Systems, BAE Systems, said her company's support for outsourcing, through a joint venture with Xchanging, was now about effectiveness rather than efficiency, although cost drove the business agenda at the start.
I can tell my board the skills changes we are planning up to 2020. No-one wants to know how I'm going to cut costs, she said.
But Vernon said he felt cost-cutting was still the main reason underlying organizations interest in outsourcing. People were talking about service quality only because expected savings hadn't materialized.
The debate reflects a recent survey by the Shared Services and Business Process Outsourcing Association that showed cost saving was no longer given as the main reason for outsourcing HR.
For more information and a full report on the round table, see PM's Guide to HR Outsourcing :
Source : HROA Europe, 26 février 2006