Outsourcing may be the catalyst for HR transformation.
A recent article that appeared in a well-read business magazine focused on general prejudices and perceptions held against HR. While the author is critical of HR professionals, the central problem is that HR has not explained to its clients the true importance of its mandate.
The conventional thinking about HR reflects the paradox facing line managers. If people are the “most important asset,” why is the HR function often thought of as an administrative overhead? For the most part, this perspective has been justified by the role that HR has played in the past, emphasizing administrative efficiency and compliance.
The narrow-minded view of “climbing up the pyramid of value” strategy attends to the desire of HR professionals to work on something significant within their organizations, but it fails to address the critical need that companies have to improve the workforce effectiveness —a need that HR is qualified to address.
A strategy that continues to focus on the details of administration (even though in this case it emphasizes “freeing” HR from the details of administration) aims in the wrong direction and will only continue to reinforce the belief that HR people in general just don’t understand or have the capacity to address the real business of the organization. This strategy of fixing/focusing on HR is doomed to fail because it addresses only a small part of a larger opportunity and attempts to deliver only a small portion of the solution.
Though HR owns most people-related functions, it is rarely given real responsibility for employee and company effectiveness. HR is typically responsible for people governance but not for results. They are almost never an active driver in creating or improving the effectiveness of people’s work. Instead, it fulfills the role of passive provider.
That said, HR is the only function within a company reasonably positioned to improve the way people work. HR owns and manages all data about workers and work: their jobs, expertise, organizations, backgrounds, skills, requirements, and compensation structure. HR as a discipline—not the department—has a matchless understanding of productivity: competencies, management processes, relationships, rewards, collaboration, learning, job structures, partnership models, and more. Every action a worker takes can potentially be improved with the data HR has, or by its expertise on how to productively organize the workforce and the work.
Information technology often inherits this role simply because technology is everywhere. However, IT typically does not have the skill set to improve the efficiency and effectiveness of work processes, implement consistent policies, or deliver a work environment that takes full advantage of relevant knowledge, resources, and tools. Only HR is responsible for knowing and managing how the workforce should work.
HR must diagnose, prescribe, and then facilitate a mix of training, development, outsourcing, partnering, and acquisition programs to get work done more quickly, with higher quality, and enable growth into new areas.
If HR needs a new focus and eventually a new service delivery model, one would think the obvious answer is outsourcing. Payroll, benefits administration and processing, recruiting, compensation analysis, training, and even employee relations can now be intelligently distributed across a range of high-quality providers. Today, HR outsourcing goes beyond just handling payroll and benefits.
Yet the promise of outsourcing eludes most HR departments. Most HR groups have managed to take the liberating promise of outsourcing and convert it to the new problem on which HR can focus, instead of rising to the opportunity that demographics, the economy, business conditions, and the evolution of the workplace have created. It may be hard to admit that outsourcing organizations may actually offer significant improvements in expertise and execution ability over any internal organization due to their scope, dedication, professional resources, and economies of scales. Yet outsourcing just may be the vehicle or mechanism that HR needs to make the transformation from administrative processor to workforce optimizer. Use compelling marketplace data to make the case for implementing the right technological solutions to enable HR to emerge from its transaction-focused past. Follow up with a second step of demonstrating the unique impact HR can have on workers, the organization overall, and shareholder value.
These two steps aren’t necessarily simple, but they are not out of the reach of most HR groups. More importantly, they are key to taking down the wall that isolates HR from its potential and from its potentially significant impact on the business in which it operates.
