Potential Risks of HR Outsourcing
The Potential Disadvantages of Outsourcing your HR Function:
As with any major change process, there are risks associated with outsourcing your HR function. As long as you are aware of the pitfalls and more common risks, you will be able to address and combat these issues from the start of your relationship:
- Your company forgets its HR responsibilities - it is very important to remember that despite moving a key business process to an outside provider, you retain overall responsibility for the success of this strategy. Your managers are not absolved from their people management responsibilities.
- You don't clearly understand your chosen outsourced service provider - make sure that you really know your outsourced provider's culture and values. If you are switching your HR function to an outsourced agency, they must share the same goals and values as your own company.
- You lose local knowledge - once again, outsourcing does not absolve your company and managers from all responsibility. This knowledge can be continuously updated if you carry on training your own staff members.
- You align your processes with outsource provider - when moving to an outsourced HR provider, companies often try and fit their processes around the outsourced company. This is the wrong way to do business. Your outsourced HR provider should, as far as possible, align their service delivery your current processes.
- Operations become separate from strategy - your outsourced HR provider should align their service delivery with your company's overriding business objectives and strategy. In an outsourcing relationship, however, day-to-day operations can become separated from strategy. Don't let this happen.
- You don't review the success (or failures) of the outsourcing arrangement - once a relationship is in place, you must continually review the success of your outsourcing strategy. Regular contact with your provider is essential, particularly face-to-face meetings to discuss where things are going well and what could be improved.
- Your remaining internal HR function loses motivation - if your employees see that their job role is being moved away, they may lose interest. You must continually remind them that their job is essential to keep an open dialogue and maintain a good relationship with the outsourced provider. Moreover, they will still be the front line of defence in your company if a personnel problem should arise.
- A change in behaviour is required from internal team - your managers will have to become accustomed to contacting an outside party rather than the in-house team. This can be a difficult change to accommodate.
HR Outsourcing Guide - Quick Links
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