BenefitsEngaged Workforce

Is HR a Contender?

A word to the wise: Every duty that HR managers perform can and often should be performed by general managers. Having implemented a multimillion-dollar HR BPO deal, the author reflects on an era in which organizations increasingly rely on external workers.

by Hugh McDonald

HR is not yet down for the count, but it is on the ropes. I realized this a short while ago after I was invited to speak to a class of business students at a local university. After listening politely to my presentation on the evolution of international HR strategy, which even I found a bit dry, we got to the Q&A session. I much preferred this more spirited and two-way exchange of ideas, especially when it spilled over to the pub after class.

One student asked about the future of HR. Being students, they were especially concerned about their potential careers and job prospects.

I stickhandled my way through the usual answer to such a question—some variant of getting a good education, having a goal, and focusing not so much on specific jobs as being flexible and taking advantage of opportunities. Sometimes, however, it takes a question like this (and perhaps a jug of beer) to force all of the ideas in your brain to take a more coherent shape.

That happened to me a couple of days later when I discovered that I was still thinking about the student’s question.

HR BPO is hollowing out the HR divisions of major corporations. I’ve lived this. For the past seven years, I implemented and managed the HR BPO arrangement—a pioneering deal—for a large international financial institution based in Toronto. Like other multinational companies that have embraced HR BPO, we moved the work done by 40 percent of our HR staff to a supplier or a supply chain of specialists and retained what was essentially a team of consultants. These consultants provide advice and counsel often thought to be “core” to a firm’s success and, therefore, could not be
outsourced or eliminated.

That’s just not true. We often forget that neither the function of HR nor the HR professional has any inherent right to exist. As a career HR executive, with 35 years of experience in all areas of the profession, I have never forgotten that it is the job of people managers in the line organization to manage people; it’s not the job of the HR department. In fact, just like the Roman Empire fell when it started to hire mercenary soldiers to defend it, businesses and leaders fail when they abandon their responsibility and insource people management to the HR team. I used to tell my HR consultants that “success is when your clients don’t need you; failure is when they don’t want you.”

I may get drummed out of HR for saying this, but everything done by HR can and often should be done by general managers.

It’s been observed that HR strategy in North America oscillates between a focus on “hard” and “soft” management. The Harvard Business School approach, for example, is often considered to be a “hard” style due to its focus on pursuing excellence through metrics, operations, and project and program management. Some other business schools promote a softer style and focus on individual and social capital issues. We’ve certainly proven over the past decade that the “hard” functions of HR can be successfully outsourced to BPO and other suppliers.

Operational work such as payroll and benefits administration, pension and 401k plan administration, call-center support, and a wide range of HR program and HR technology management are clear-cut candidates for tactical, single-process outsourcing, as well as strategic BPO. It has also become clear that other transactional work, including staffing, occupational health and safety program management, training, and eLearning can also be outsourced. In fact, just about any work that can be documented on a process map can be outsourced.

Increasingly, HR BPO suppliers are even taking on responsibility for project and program results. Traditional service level agreements are evolving to include
commitments to cut turnover, lower hiring costs, or improve the measured competencies and capabilities of staff. It isn’t about HR departments cutting costs
anymore—if it ever was. It’s about strategy and improved business results through better people management.

As for the “softer,” non-transactional side of HR, this is largely concerned with giving people management advice and providing specialized support in areas such as labor and employee relations, talent management, and compensation design.

Don’t get me wrong. Giving advice is an honorable profession. I made a lot of money over the years giving advice. But giving HR advice is not a “core” business for most firms. My HR colleagues and I could just as easily do this as third-party consultants than as employees. Increasingly, many of us do.
On the other hand, assuming that a firm is not a virtual company, managing employees is most definitely a “core” function. It is, in fact, the single most important function of a manager. The individuals who manage them need to be excellent at that task. And, therein lies the rub. Some managers—far too many, sad to say—are not excellent or even good at managing people.

In simple terms, that’s why HR jobs exist: to compensate for poor managers.

Of course, HR doesn’t always make things better. Years ago, I was responsible for providing advice to a large IT division. The managers complained that they had to spend up to 30 percent of their time managing people. On the other hand, their executives measured their performance mostly on their success in managing the scores of projects they were responsible for delivering through these people. In the arrogance of youth, my advice was to split the management job into two jobs. In one, the project manager would focus exclusively on the projects in his or her portfolio. He or she would requisition staff from a central talent pool. The second, a “resource” manager, would manage a portion of this talent pool.

I implemented a pilot project with a talent pool of 200 systems developers and then expanded it to cover 2,000 IT specialists of all kinds. Initially, everyone loved it. The project managers were relieved of the burden of managing people, and the employees had a career manager whose full-time job was dealing with their orientation, training, and performance management. The total number of managers remained the same.

Fast forward a few years. My resource pool solution had become a monster. Matrix management had resulted in higher costs, duplication, and overlapping responsibilities. And the project managers now wanted more control over people as they rediscovered the value of having their own well-trained and motivated team. That 30 percent of their time no longer looked so bad.

Come to think of it, maybe my idea worked after all. Just not in the way I intended.

In an ideal world, managers should be their own HR consultants. Study after study has reported that the No. 1 issue for employees is having (or not having) a supportive manger. If managers complain they don’t have the time, let me suggest that either they have the wrong priorities or your firm has too few
managers. If they complain that they don’t have the skills, try improving their training.

There is a role for HR expertise, but it doesn’t have to be on your payroll. If third-party help is really necessary, especially for large projects or specialized assignments, HR BPO providers are proving that this work can also be outsourced. There really are no surprises here. HR departments have sub-contracted much of this work to specialized partners for years. Staffing, job design and evaluation, salary surveys, pension planning, compensation design, employee surveys, succession planning, instructional design, program evaluation, legal services and policy research, facilitation, special events management, and reference checking can all be done by specialized companies. Increasingly, it is possible to go further and source M&A and change management support, management and executive coaching and development, labor relations work, and even the common sense of a trusted advisor.

In short, firms don’t need HR as much as they need HR sourcing and vendor managers.

For those of us in HR now, and for those students I mentioned earlier, there is a role for HR experts. I believe that we will increasingly work in specialized HR or management consulting firms rather than in traditional HR departments.

When I started my career, most actuaries worked for insurance companies. Now they tend to work for consulting firms. We buy accounting, legal, and management consulting expertise from specialized third-party firms. Why do we still have so many HR departments?

HR, and even HR BPO, may just be a phase, anyway—a temporary phase we pass through on the way to the 21st-century organization. We speak, for example, of HR processes and systems in connection with hiring a new employee. That is, we have to add the new hire to the HR database, make sure they get an employee number, put them on payroll, enroll them in the benefits program, and so on. In truth, this is a very limited view of the actual on-boarding of a new worker. (I say “worker” since increasingly the work performed by the emerging enterprise is done not just by employees but by contract and contingent staff, vendor and outsourced staff, employees of joint venture and strategic alliance partners, and so on; but, that’s another article.)

On-boarding involves more than HR. It involves getting a desk or work location, getting them a phone number and a directory listing, ordering business cards and office supplies, and getting them network access, a PC, and a password. In short, it involves the integration across all of a firm’s processes. HR doesn’t own a hiring or orientation process. Instead, the enterprise owns an administrative process based on horizontal workflows.

So, my advice for the C-suite is this:

  • Move all of your internal administration and operations into a shared services center;
  • Outsource it or parts of it, based on what makes sense for your enterprise;
  • Hire the best vendor and outsourcing management team you can find;
  • Ensure your managers are people managers;
  • If they need help with their people, don’t own your own HR department. Save the money and use it to rent the best HR expertise you can afford.

As for me, I’m taking boxing lessons.

Tags: Benefits, Engaged Workforce

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