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The Pros and Cons of Outsourcing

April 1, 2001
Related Topics: Outsourcing, Featured Article
Ed Rankin, CEO of People Solutions, Inc., a human capital management companyin Irving, Texas, says about 80 percent of the cost of running an HR departmentis transactional. That's what makes it well suited for outsourcing. "Peopleget confused about the term," Rankin says. "If an HR professionalwants to continue spending their professional career dealing with transactionsand paperwork, then they should worry about outsourcing. But if they are readyto elevate their activities to a strategic level, outsourcing frees them up tofocus on that."

    But there are downsides.

    "Companies that outsource need to really sell the benefits beyondcorporate cost-savings to the employees. Many have established relationshipswith HR professionals within their company, people they know and that they relyon for quick and accurate answers to their questions," says Deb Thobe, CEOof Thobe Group, Inc., a human resources management consulting group inCarrollton, Texas.

    Thobe knows people who've reacted to outsourcing HR with a feeling ofabandonment. She says if a company views its HR department as a true strategicbusiness partner-rather than a department of paper-pushing administrators-it'smuch more likely to keep HR in-house. "When HR is more like 'personnel,'it's also more apt to be outsourced, because the inherent value is notthere."

    She says it's often easier for employees to accept the giving away of numbercrunching and administrative functions as long as the personal functions-likecompensation and benefits-are kept in-house.

    "Ironically, outsourcing compensation activities usually doesn't savemoney," Thobe says. "It just moves the cost to a different part of thebalance sheet. Compensation activities require a realunderstanding of the industry, the company, and the day-to-day and strategicobjectives. It's not just about going to a survey book and getting somenumbers."

    If a company chooses the right resource for its needs, however, it can dropsome dollars to the bottom line. What a company can't measure is the psychiccost, Thobe says. "You won't know the message employees receive when theyno longer have a local resource to turn to."

Workforce, April 2001, p. 53SubscribeNow!

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