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Public-Sector Agencies Look Closer at HRO

More public-sector organizations, which have traditionally been slow to embrace outsourcing, are planning to outsource their HR processes in the coming months, according to a new report.

December 28, 2006
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More public-sector organizations are planning to outsource their HR processes in the coming months, according to a new report by the International Public Management Association for Human Resources and EquaTerra.

Traditionally public-sector organizations have been slow to embrace HR outsourcing. This is largely due to the fact that for many elected officials, outsourcing equates moving jobs offshore—a highly political move in today’s environment, says Elizabeth Newman, an advisor at EquaTerra.

But as more of these institutions struggle with shrinking budgets, they are increasingly looking to outsource more of their HR processes, the study says.

While 17 percent of the public-sector agencies currently outsource some HR-related functions, 53 percent say they are likely to outsource additional functions in the future, according to the study.

“These organizations are being pushed to a new place due to budget limitations,” Newman says.

Also, as the HRO market matures and there are more deals in place, public-sector agencies are realizing the benefits of outsourcing some of their transactional HR work, she says. Ninety-three percent of those organizations that have outsourced HR processes say they are satisfied with how they are being run.

The study, which is based on responses from more than 100 HR executives at public institutions, found that despite common beliefs, politics don’t play a huge role in outsourcing decisions. Fifty-two percent say that politics does not play a role in their outsourcing decisions.

There might not be a flurry of HRO deals in the public sector next year, but there is definitely more exploration among these organizations, Newman says.

Specifically, these agencies are looking for providers that have experience working with the public sector, she says.

“We may start seeing more providers do more to go after this space,” she says.

Jessica Marquez

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