Our Mission

The mission of IES is to be a resource to our clients and employees, treating both with respect, and to ensure they are confident in our ability to provide accurate and timely payroll, invoicing, and benefits administration as the employer of record.

Sara Jensen

< Back to Articles

Afraid of Outsourcing?

By William S. Frank

Outsourcing is the buzzword of the early-2000’s, not just in human resources, but in many other corporate departments. Outsourcing essentially means subcontracting, letting someone outside the corporate umbrella perform work that might previously have been done inside. The argument for outsourcing is that it is more cost-effective, and requires less management time and effort than work done inside.

Should we welcome, or fear outsourcing? We should welcome it because it allows us to get to the strategic work at hand. We might fear it because we think it might cost us our full-time jobs.

As a career strategy, it’s probably smart to develop sufficient HR skills to work either inside a corporation, as a full-time employee, or outside a company, as a consultant, project manager, or part-time employee. That means developing better sales, marketing, and people skills, as well.

How far can outsourcing go? One Senior VP of Human Resources in a Colorado company was recently asked to leave her organization, take her department, and set up a separate Human Resources Management corporation offsite–thus outsourcing the entire function.

When I interviewed several Human Resources experts around the state, their ideas about outsourcing were remarkably similar. None of them appear to fear outsourcing. All of them think we should prepare for, and take advantage of it, at the appropriate time. Here’s what they had to say:

1. Paul Shaddock
Director of Human Resources
United Technologies Microelectronics Center

Outsourcing is the wave of the future as companies focus on core competencies. We outsource hiring to a local search firm, because we get a concentrated effort and negotiate a flat fee. This allows me to use my budget more effectively. The downside is that when the vendor isn’t recruiting I’m still paying a fee. There’s not as much flexibility. For example, I can’t use him for training. When I had a generalist recruiter on staff, I could also use her in training and employee relations.

You can almost outsource the entire HR function: 1) recruiting, 2) outplacement, 3) delivery of training, 4) benefits design, 5) compensation design, and 6) affirmative action, for example. We keep compensation and benefits administration and employee relations issues inside.

HR should never be completely outsourced. If HR brings value to creating or maintaining the culture, then it has to be resident in the company. I believe business will outsource too much, then realize we’ve lost the personal touch. When we’re dealing only with outside people for issues that need inside support, the pendulum will swing back the other way.

2. Darla Siemer
Director, Human Resources
Western Mobile, Inc.

Most organizations are extra lean right now. If you’re going to align HR with strategic business objectives, you have to decide where you can have the most impact–issues that relate to the business plan. Then you can consider outsourcing functions that might interfere with your ability to drive the business forward.

We outsource 1) recruitment, 2) outplacement, 3) EAP’s (random drug testing, counseling), 4) some benefits issues, 5) some training needs, and 6) some employment functions, like background and reference checks.

In hiring interviews I ask HR candidates, ‘What’s the most strategic thing you’ve done?’ And I get answers that scare me to death: ‘I put together an employee handbook.’ It’s important to make certain HR has a business focus, not a personnel focus. We have to earn our rightful place at the senior management table. We have to link HR to the business plan.

3. Phil McNichols
VP Human Resources
Storage Technology Corporation

Every company faces outsourcing as a challenge. Some back-room operations never receive the funding and expertise they need. That’s someone else’s front-room. Eighty percent of your budget is headcount. Each year you give pay increases, and you have to get comparable productivity increases. If not, you become non-competitive.

We outsourced medical plan problem resolution, and our vendor answers 6,000 calls per month. Their software is designed for medical plans–we could never duplicate it. Our employees get the same answer every time. This frees our HR department for design and analysis.

Every service we offer inside is also offered outside: 1) EEOC, 2) affirmative action, 3) college recruiting, 4) hiring of temporary employees. We outsourced temporary hiring to outside agencies, and the employees actually work for them. That (assembly) was one of our highest turnover areas. 

Yet there are HR functions that couldn’t or shouldn’t be outsourced. For example, we keep employee relations and organization development in-house. Ask yourself, ‘What are our key value-added activities?’ Perhaps they shouldn’t be outsourced. Figure out your centers of excellence, then see what you can purchase outside. But cost isn’t the only consideration. You want to enhance your efficiency so you can focus on your core business. Then outsourcing may be the right thing.

In the age of outsourcing, there are several ways to protect your career. Stay current, continue learning, keep an active network, don’t be too specialized, and enhance your computer skills.

© 2003 William S. Frank. All Rights Reserved. Excerpted from www.careerlab.com.