Another Reason Why HR Should Be Totally Outsourced?

Because HRMS is not just an easy “plug and play” software option.

Today’s entry on SystematicHR describes how and why “preparation” is the key to successful implementation. The article concludes that “what you are before implementation is what you will be after implementation.” I agree wholeheartedly with this conclusion. Too often, companies that lack knowledge of their business processes try to compensate for that ignorance by looking to technology. However, the old saying “garbage in, garbage out” still applies.
Unfortunately, it has been my experience that many smaller, more entrepreneurial firms simply lack the Business Process Management know-how to properly to document their processes. This is one of the many reasons why I support the radical outsourcing of the entire HR function.

Most small and mid-sized firms simply cannot justify the expense of having a dedicated general business process consultant on staff, much less one dedicated to HR alone. Furthermore, process management is itself and ongoing process focused on continuous improvement. This makes contracting out the process documentation and management activities a difficult proposition since contracts by nature are more short-term oriented.

Economically, it makes more sense for firms to outsource the total HR package. This way they can take advantage of best-practices in HR process management. The HR outsourcing firm will possess the HR business process mapping skills necessary to handle any transition to new technology. New technology will never ceased to be developed. Firms that fail to take advantage of technology will face disadvantages on several fronts, not the least of which is employee rentention and satisfaction; both of which are directly related to quality and therefore are important to maximizing shareholder value.

Outsourcing can also increase the likelihood of transition to less labor-intensive HR practices because there will be less resistance from those HR bureaucrats fearful of being downsized. Outsourcing firms typically can afford to have more flexible labor policies and are more focused on demonstrating their value through continuous innovation.

All in all, I am doubtful that many small to mid-sized companies have the capacity to complete a successful HRMS transition, simply because they lack the process knowledge to do so. When we dig deeper we find that there is frequently little incentive for the HR departments in these firms to develop the necessary process knowledge base. However, there are large incentives for a Total HR outsourcing firm to develop the process mapping skills necessary to facilitate complete and harmonious HRMS transitions. Their competitive edge in the HRO market depends upon it.

This is especially relevant to spread of homeshoring because homeshoring by its very nature almost always requires a new or updated HRMS to be as successful as possible. The HRMSs at most of the companies I have worked for would do an abysmal job if used with a homeshored workforce.

This is an interesting area that definitely deserves more commentary, but I will end today’s post noting that the main lesson of econ 101 is that “people respond to incentives” and that there is a much greater incentive for a Total HRO firm to successfully manage its processes than their traditional HR department competitors.