Are You Ready to Outsource Staffing

Real benefits can result from outsourcing part or all of the staffing function – but only if you clarify your needs up front and only if you select vendors that fit your organization’s culture and goals.

Today’s HR departments are outsourcing everything from background checks toexit interviews. Though it isn’t new for these types of services to be handedto outside firms on an as-needed basis, what is new is that more HRadministrators are taking a macroscopic view of staffing.

They’re figuring out what can — and should — be done in-house versus whatcan — and should — be done more effectively outside the organization.Realizing that much of the staffing function is not the core HR competency itonce was years ago, many senior HR professionals are no longer keeping suchactivities as résumé management and candidate sourcing under their dailyscrutiny.

“What we had seen in the past is that companies would outsource aportion of their hiring process — like reference checking or testing,”says Terry Terhark, senior vice president of Chicago-based Aon Consulting Corp.’sHR outsourcing practice. “What we’re seeing more of today is [thatcompanies are] outsourcing the entire process.” He adds: “Staffingoutsourcing is continuing to grow at a faster pace than what it was.” AndTerhark thinks this trend will continue to pick up speed in the coming years. By2001, it’s estimated that $319 billion in corporate resources will lie outsideof corporate boundaries.

Human resources represented 16 percent of all outsourcing expenditures in1997 (the most recent figures available), according to “The OutsourcingIndex,” compiled by Murray Hill, New Jersey-based Dun & BradstreetCorp. and The Outsourcing Institute, a professional association and executivenetwork. Although it isn’t known exactly how much of the HR outsourcing piegoes to staffing activities, anecdotal evidence suggests that it’s a largechunk.

HR has also turned to outsourcing because staffing — especially recruitment– has become more complicated. “In the past 12 months, the recruitmenthorizon has changed more than in the previous 10 years,” says Kim Shepherd,president and CEO of Decision Toolbox, a multi-service recruitment,Internet-based applications technology, and advertising agency based in LongBeach, California. “Every time you turn around there’s a new searchengine, and HR’s trying to figure out which one to use and how to keepup.” It seems much easier to pass the function along to someone else.

However, it’s important for human resources leaders not to get caught up inthe outsourcing trend without taking a serious look at their staffingobjectives. Now, more than ever, employees are companies’ most valuableassets, and staffing an organization is a strategic HR function. Becauserecruitment is so critical in today’s tight labor market, it’s important toask: Should your staffing function be performed outside the organization? Has itdrifted far enough away from HR that it can be considered “non-core”?And whom can you trust to fulfill your staffing needs?

What’s core? What isn’t?

Overseeing the staffing function is key. However, carrying out the day-to-dayelements of it, as in the case of in-house recruitment, may not be.”Recruitment capability is core,” says Edward Ferris, “but notin-house — at least not when your staffing needs are high or cyclical.”

Ferris spent many years as a senior human resources professional in a varietyof organizations before becoming a management consultant and president of PlusUltra Inc., a management-consulting firm based in Doylestown, Pennsylvania.Drawing from his many experiences in outsourcing the recruitment part ofstaffing, Ferris thinks the following competencies are key:

  • Research capability to fill the candidate funnel
  • Qualifying to reduce the funnel to those with a good fit
  • Recruitment to convince good candidates to consider new opportunities
  • Pre-selection to make sure job candidates are a good fit with client needs
  • Process methodology to manage candidate inventory
  • Having good scripts
  • Having good data collection capability, reports generation, performancemetrics, and technology.

In addition, it’s important to have seamless communication links, datamanagement and knowledge repositories. “Few companies can, and should, pullall this off in-house,” says Ferris, but he admits: “Outsourcing ofrecruitment isn’t for everyone or all situations or companies. It certainlyhas worked for me. But it all hinges on finding the right partner who has theright mind-set, methodologies, and technologies.”

That’s exactly the position that Sue Hagen, vice president of humanresources for Dole Foods Inc., has taken on the issue of outsourcing thestaffing function. She has outsourced some recruitment tasks to DecisionToolbox, which has helped her with needs such as developing recruitment ad copy,recommending a recruitment ad strategy, placing ads, doing a first screen ofnetted résumés, and even making initial phone contact with potential jobcandidates.

In addition to outsourcing those services, Hagen says she prefers to usecontract recruiters for certain searches. “They’re helping not only toscreen and interview, but in some cases, flush through the job requirements withmanagers,” she says. And Dole also employs recruiters in-house. Right now,the balance between recruiters on staff and on contract is working well at Dole’sWestlake Village, California, headquarters.

But Hagen isn’t interested in outsourcing the entire staffing function.”We would keep open to looking at [doing that], but we consider people oneof the very strategic parts of our business,” she says. Dole, which employs53,500 people worldwide, hires approximately 30 to 50 new people at the company’sheadquarters each year. Adds Hagen: “I would be reluctant to [completely]outsource what I think is a very strategic part of running a business.”

Because the people on Hagen’s HR staff have lots of tenure with Dole, herteam has a good sense of what the open jobs entail, and what the Dole culture islike. “We wouldn’t necessarily be able to transfer that knowledge as wellto a third party if we were to completely outsource the function,” shesays. “I think if the demographics in my own department were such that wehad a lot of new people in HR, it would be a different situation.”

Which part of staffing should you outsource?

When deciding to outsource staffing functions, you should think about whichparts of the function are strategic, operational, or maintenance-oriented. Thendecide, of those pieces, whether you need to outsource the entire function orjust pieces of it, or to keep it all in-house.

The processes that most HR managers are tending toward outsourcing these daysare the more tactical ones, rather than the more strategic ones, such asworkforce planning. For example, activities such as résumé management andoffer-letter generation are tasks that don’t necessarily require internalexpertise to accomplish, and can be prime staffing-administration candidates foroutsourcing.

That’s exactly the tack that NCR Corp. has taken with regard to variousaspects of the staffing function. The Dayton, Ohio-based AT&T spin-offcompany, which deals with diversified computer products employs approximately33,000 employees, and hires about 3,000 to 4,000 new people each year worldwide.Because NCR has been transitioning to shared-services centers for the pastseveral years, the firm’s senior management team has recognized the benefitsof centralizing services. By gaining economies of scale, the firm can funnelresources — especially human resources — into other core business functions.

“Our decision to utilize an outsource vendor was linked to the fact that– and this is an across-the-company effort — we’ve taken a look at theactivities, processes, and functions that we have to perform inside the company,and we’ve decided which ones are core to our business and which ones we reallydon’t need to handle directly, that we could have an outsource vendor do forus,” says Dan Delano, director of HR operations for NCR. Delano manages NCR’sshared-services center in the United States. The center takes care of NCRpayroll, HR data management, and staffing administration.

Before NCR’s staffing function moved into the shared-services center, NCR’sHR staffing organization took care of all staffing activities. “It wasreally an issue of: How do we best utilize the resources that we have inside thecompany? We want to align the resources that we have as closely as we can tocustomer-facing, value-added roles around our core business,” Delanoexplains.

Now, NCR employs the Aon team to perform a variety of tasks: posting jobs toNCR’s internal job-posting board or externally through various Web sites,selecting good Web sites on which to post job requisitions, and managing theinflow of résumés from NCR’s recruiting activity with a Resumix system atits headquarters in Findlay, Ohio. Then, onsite at NCR, Aon manages theextraction of the résumés that are appropriate for the various job openingsand presents them electronically to the hiring managers. The managers take itfrom there.

But once a manager makes a hiring decision and wants to make an offer, theAon team gets involved again to generate the offer letter and coordinates allthe post-offer activity once the candidate accepts the job, such as initiatingdrug screening and background checks (which is taken care of by other vendors)and notifying the relation vendor if a relocation is necessary. They alsoprepare all the documentation required to put the new hire on NCR’s payroll.In addition, the Aon team sends out a welcome packet of information about thecompany. Aon also is responsible for responding to any unsolicited résumésthat come in over the Internet or by mail.

Although NCR has had this model in place for a few years, Delano says his HRteam is looking to update it. “In the staffing area, it’s very expensiveand in many cases inefficient to be looking to external recruiters. What we’relooking at in the future is perhaps redesigning our staffing model to havein-house recruiters and would also do a lot to automate the whole process. Forinstance, we’re looking at a lot of Web-based tools for recruitment in termsof résumé management and, in effect, moving away from paper-based résumés.As part of that process, we want to be able to implement a pre-assessment toolsthat would allow applicants online to assess themselves against the various jobsthat we have and determine whether or not they are right for the job.

“So, between the automation of the process, putting a lot of focus onthe Web and Web-based tools, and adding pre-assessment capabilities and in-houserecruiters, we can make the process a lot more efficient.” In addition,Delano says they would still look to outsourcing vendors for the kind of supportthey’re already using.

Finding the right vendor “fit” is critical.

Once you’ve decided which parts to outsource, perhaps the most importantdecision you’ll have to make is picking a vendor.

Here’s the ultimate nightmare: Your in-house recruiters or referencecheckers don’t understand the culture of the organization they represent,namely yours. “This happens all the time and can be very dysfunctional fromboth a process and an image point of view,” says Ferris of Plus Ultra.”It’s also one of the reasons that argues for outsourcing of staffing,because in outsourcing, by design, you’re creating an alliance and apartnership that builds closeness of understanding and relationship, andminimizes these issues. You collaboratively agree on standards and scripts andthe outsourcing company should act as your ambassador to the marketplace.”

The single most important aspect of the outsourcing vendor-selection processis finding a partner who intimately understands a company’s culture and itsgoals. In a word, the partner must fit with your company’s goals and culture.But first, you have to understand what your staffing and outsourcing goals are.

“We’ve learned some hard lessons in the past from some of our vendoroutsourcing, whether it’s staffing or other areas,” says NCR’s Delano.”You have to have a clear strategy of what you’re trying to accomplishand how you want to go about doing it. If you yourself don’t know what you’retrying to accomplish, whether it’s with an outsourcer or with in-houseresources, then you really are diminishing your potential for success.”

From there, figure out the processes that are needed to support those goals.”You can’t go out and ask a vendor to provide that support for youwithout a clear understanding of how it should be done,” Delano says. Thevendor also should be able to provide the customer with leadership around how toimprove the client’s processes. “The [vendor should] understand industrytrends and best practices and help the customer transition from a process they’vehad in place to a more effective outsource relationship,” says Delano.”We try to look at our vendors as partners — and when I say that, I meanwe’re looking for a two-way relationship.”

It’s just as important to find the right staffing outsourcing partners, asit is to finding the right employees. Here’s the skinny from consultants onhow to get the fit right. Do all of the following: establish clear criteria, setup a rigorous selection process, and involve line and staff in making thedecision based upon capability, systems methodologies, track record, financialstability, and culture.

Experts and HR managers who’ve been through the process suggest that HRmanagers put together an outsourcing “selection team” that comprises:

  1. procurement officers who qualify major suppliers
  2. subject matter experts to assure technical competence and quality
  3. customers who check out the suppliers’ track records, references, andpersonnel.

“We’ve typically established a long list, [of vendors] which may be asmany as 30 to 40 companies, and quickly shrunk it to a four to six that weinterview. Then we narrow it down to two or three finalists,” says Ferris.Visit the companies’ sites, talk to their people, and call their references.

Once you’ve made your decision, it’s important to be clear with thevendor what services they’re going to provide, what their performance levelsare and how they’re going to be measured, and what technology they’rebringing to the table.

In other words, clearly define the critical components that define therelationship, and put them in writing in a well-outlined contract. “If thatisn’t defined on the front end, you will suffer a lot of pain later,”says Delano.

Staffing an organization is a serious endeavor in today’s tight labormarket. Having good outsourcing partners can help HR with either tactical orstrategic workforce staffing activities. Knowing how to choose these vendorswisely can make all the difference between success and failure.

Workforce, April 2000, Vol. 79, No. 4, pp. 56-60Subscribenow!