Multi-process HRSourcing

Freakonomics–The Outsourcing Version

The publisher of HRO Today explains why Freakonomics and morality never meet.

by Jay Whitehead

For those of you who have not gone to and purchased your very own copy of economist Steven Leavitts new book Freakonomics, I encourage you to do it soon. But I know you. You would rather that I just summarize it so you can save time and money while still learning enough to spout off something smart at the next cocktail party. Fair enough. I am here to help you (even if you are unmentionably lazy). 

So here is the shocking essence of the Freakonomists newest book: Morality does not enter into economic analysis. Economics is not the study of what should happen but what actually happens. 

The author cites a vivid morality-free example. You may find it offensive. I am warning you in advance. Leavitt stared into the depths of a steep drop in violent crime in the 1990s. He searched the data for correlation or causation. Was it caused by the building of more prisons? No. Was it community policing? No. Was it President Clintons enlightened governance? No. Better schools? Nope. It was the huge jump in the number of legal abortions. Data correct? Yes. Politically correct? No. 

Another example is Leavitts answer to the question of the impact of parenting on kids school performance. The common wisdom is that parents who attend PTA meetings and read to their children at night and go to museums are accelerating their development. The Freakonomist finds, however, that the only difference parents really make is their genes, whether the mother is 30 years of age or older at time of delivery, and if there are books in the house. Imagine that parental impact is limited to genetic material, reading material, and being older. Leavitt also ventures into the emotionally-charged topic of naming kids with ethnic names and whether a name impacts a kids school performance. Without spoiling the punchline, I will tell you that names do matter. Go buy the book to find out how much.




Unfortunately, the Freakonomist fails to take on the political third-rail issue we know as outsourcing. If he did, however, here is surely what his morality-free argument would be. For starters, he would data mine for a correlation/causality between boosting BPO or BPO use and a business short-term and long-term competitive advantage. He would quote a boatload of studies confirming that BPO works. Then he would report that BPO, whether onshore or offshore, results in short-term worker discomfort. Big surprise. 

What would be surprising, though, would be the Freakonomic impact of the worker discomfort. Where are the jobs going? For those who lose the jobs, what is happening to them? Is CNNs Lou Dobbs right about BPO leaving death and economic destruction in its wake? Well, simply, no. The actual morality-free Freakonomic impact of HRO and BPO is nowhere near as apocalyptic. 

As it turns out, we at HRO Today have been quite fine Freakonomists for a couple of years now. We predicted in 2003 that by 2008, 50 percent of in-house HR pros would be working for HRO providers. As of May 2005, 10 percent of all HR pros that were employed in-house in late 2002/early 2003 had actually moved to an HRO providers payroll. We are one fifth of the way to the prediction. Yet SHRM membership remains rather steady from 2003 to today, which means that HR people still consider themselves part of the profession, even if they are serving multiple clients. Yes, in HR, job shift is happening. Mass dislocation is not. In HR, Lou Dobbs Apocalypse HR is just a figment of his Emmyaddled mind. 

So Freakonomists we remain. We will continue to predict job shift from in-house to providers. For the moment, we will stick with our 50-percent-by-2008 prediction. The shift will really accelerate when sub-10,000-employee companies start to take a cotton to HRO in bigger numbers late this year and early in 2006. Yes, some HR professionals will inevitably leave the job when the big number shifts start. But because we are Freakonomists, we will avoid assigning ethical values to these dislocations. On the topic of job shift from HR to HRO, this magazine remains a morality-free zone.  

Tags: Multi-Processed HR, Sourcing

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