March 4, 2005

More companies starting to outsource some HR functions

How do I ensure my employees are being paid competitively? How do I meet the new staffing directives from my management team? Where do I find training for our marketing department? Try human resources outsourcing as your solution.

To quote the Nike ad ? ?Just do it.? More and more companies are using human resources outsourcing vendors and consultants as an answer to their human resource challenges, ongoing issues and just plain extra HR work.

The benefit to the employer is incurring one-time only controlled costs, versus hiring full-time employees with salary and benefit expenses, as well as training and development investment. Additionally, companies may have only a one-time need for an area of human resources expertise, and hiring an expert for a short bubble of work is actually less expensive and is more efficient.
So what exactly is human resources outsourcing?

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HR outsourcing is the channeling of various HR functions to outside resources such as HR consultants, staffing agencies, recruiters, payroll administrators or other applicable vendors.
According to the Society for Human Resources Management July 2004 research study titled Human Resource Outsourcing Survey Report, ?more than one-half of human resource professionals indicated that their organizations partially outsourced an HR function ?? (This research was compiled from a sample of 298 companies.)

Just a sample of some of the HR functions now being outsourced are: background checks; employee assistance/counseling (widely known as EAPs ? employee assistance programs); flexible spending account administration; temporary staffing; professional/technical recruitment; outplacement; employee handbook/policy development; retirement plan administration (such as 401(k) or profit-sharing); payroll administration, compensation studies and/or incentive plans; executive coaching; team building; employee/company communications, performance management design; training; and overall HR generalist support.

In fact, some companies are forging new territory by outsourcing the entire HR function, although most companies still maintain an HR department for at least some HR functions.

The key to consider when outsourcing parts of the HR function is what makes sense for your company from both a staffing and expense perspective? Oftentimes, the payroll function can be extremely time-consuming and laborious for companies, and outsourcing this function with appropriate oversight at the company is just good business. Specialists can perform this function more efficiently using best practices and the latest technological solutions. Additionally, there are also functions that cannot be performed as well with in-house talent. There can be a perception that the HR professionals in-house, though fully capable of performing functions such as compensation studies and executive coaching, are too close to the subject at hand, and a qualified outside expert is preferred by the employee base.

So how should you go about selecting the right outsourcing group or HR consultant for your organization? First of all, selecting the right resource requires a thorough vendor interview process.
You will want to do some of your own research through various Web sites and professional associations, but also ask some of your peers and professional network if they have recommendations. Once you have selected the vendors you would like to include in your bid process, now it is time to find out if their services and level of expertise matches your company needs.

Ask questions like:

? How long has your company been in business?
? What percentage of your business makes up the service we are looking at?
? What do your customers like about your services? What would they like to be improved?
? What are the benefits of your service on both a time and cost basis for our size of organization? This is particularly valuable for temporary staffing services. Ask for a projected cost analysis.
? What flexibility do we have to modify the contract if our business environment changes?
? Do you have any service guarantees? Example: Recruiters often provide 60- to 90-day replacement guarantees for professional placements ? barring unforeseen company layoffs, restructuring, etc.
? What is your fee structure? If you have several options, what is the best option for a company of our size?
? What information do you need from us to get started? Going forward what type of interaction will be required of us?
? Can you provide references of companies that you have worked for that are similar to our size, employee population and industry? Can you provide references of companies that you have supplied the service or project we are requesting?
? Who will be our main contact from your organization?

Once you have settled on your consultant or vendor of choice, be sure to start on the right track. Introduce your consultant or outsourcing group to the team they will be working with, and ensure both the company and consultant have the necessary access and resources they need from each other. These preliminary introductions and orientation can set the stage for a beautiful outsourcing relationship.

Jean Imbler is president of Strategic HR Solutions, a human resources consultancy based in Boulder. She can be reached at (303) 247-9500 or via e-mail at jimbler@shrsnet.com.

How do I ensure my employees are being paid competitively? How do I meet the new staffing directives from my management team? Where do I find training for our marketing department? Try human resources outsourcing as your solution.

To quote the Nike ad ? ?Just do it.? More and more companies are using human resources outsourcing vendors and consultants as an answer to their human resource challenges, ongoing issues and just plain extra HR work.

The benefit to the employer is incurring one-time only controlled costs, versus hiring full-time employees with salary and benefit expenses, as well as training and development investment.…

Christopher Wood
Christopher Wood is editor and publisher of BizWest, a regional business journal covering Boulder, Broomfield, Larimer and Weld counties. Wood co-founded the Northern Colorado Business Report in 1995 and served as publisher of the Boulder County Business Report until the two publications were merged to form BizWest in 2014. From 1990 to 1995, Wood served as reporter and managing editor of the Denver Business Journal. He is a Marine Corps veteran and a graduate of the University of Colorado Boulder. He has won numerous awards from the Colorado Press Association, Society of Professional Journalists and the Alliance of Area Business Publishers.
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