My second prediction – in this series of five predictions for where HR is moving (se #1 here) – I predict that HR will outsource a lot more in the future. A lot more.
There are three primary drivers for this:
- Technology will make new solutions possible by vendors. Technology will be a major driver for productivity, service quality and efficiency within HR for many years to come. Thus, it will in many cases be more cost effective and better from a service quality point of view to let vendors who specialize in this area to do the job for two reasons; firstly because it is more cost effective
- The need for more specialized knowledge and services. It will require significantly more specialists to deliver HR in the future. Many companies will not find it possible to attract those profiles or find it cost effective if they can. So they will instead hire from the growing support of specialist consultants to help them with those specific projects. This is for most companies the best way to deliver service excellence in the most cost effective way.
- The continued focus on driving costs lower. If you are in HR you will have noticed the relentless focus of top management on your costs. You may secretly hope that this is just an adjustment period and that the good times (like 2006) will return. They won’t. In many ways, that’s a good thing. HR will therefore continuously need to focus on how to drive cost down. Outsourcing will be an obvious way.
Whenever it comes to outsourcing, the trend starts in US, then UK, later Asia then then finally Europe. This is true for IT, Facilities Management, Business Processes and other areas where US is 5-8 years ahed of Europe (where I am located). My experience is that this prediction therefore is not a surprise in US where outsourcing has been on the agenda for many years and where vendors and suppliers are aggressively pushing for this to happen (surprise). Here in Europe this prediction is still greeted with some skepticism.
What will this mean for HR going forward? I see three impacts:
Firstly, HR will need to fully understand what is core and what can be outsourced. The easy answer is to outsource all the transactional and operational stuff such as recruitment for simple replacements, payroll, surveys, basic reporting, IT to support most processes, most training and the kind. However, in reality it is more complex than this. Much of the tactical stuff such as some performance management processes, talent processes, leadership training and more are also candidates for outsourcing whereas some of the tactical stuff may be considered to be out-of-scope. It will vary from company to company. But HR must ask itself, what is my core business and what can I outsource?
Secondly, because what will be left (which is still a lot) will be what I call ‘an intelligent client’, the composition of who works in HR will be different. They will be required to have a more strategic and business focused mindset to a much larger degree than today. Much more. More people from business schools and fewer with “I am in HR because I like to work with people” profile. Hopefully there will be plenty of room for both profiles, but relatively more will be of the former profile.
Thirdly, the in-house HR will need to articulate much clearer why the top management team shouldn’t outsource the whole HR department. I don’t think they ever should, but there will be vendors who at some point will offer that to the CEO. HR must then respond with a clear business case of why this shouldn’t be done.