Human Capital & Careers

Short-Term Payoff for HR Outsourcing

Survey respondents are dissatisfied, however, with the ability to transform their human-resources function.
Craig SchneiderApril 15, 2004

Outsourcing human-resources processes can save dollars in the short term, but HR’s long-term goals seem more elusive.

A recent survey by Towers Perrin was combined with face-to-face interviews to elicit responses from 32 companies — 26 of them Fortune 500 members — that outsource five or more HR processes. In fact, survey respondents outsource an average of 12 services, such as payroll, time and attendance administration, staffing, retiree services, and health and welfare administration.

More than three-quarters of survey respondents said they met short-term cost-saving goals, and 37 percent cited “complete success” on this objective. However, 56 percent added that it was too soon to determine how BPO would affect ongoing costs.

Specifically, respondents indicated dissatisfaction with transformation of their HR function, with service quality improvements, and with employee and manager behavior change. So, while 59 percent said the ability to eliminate transactional work helped them refocus on more strategic activities, only 11 percent cited full success on this initiative. However, 35 percent of respondents did cite improvements in service quality beyond what they felt they could have achieved on their own.

A key strategy to get the most out of outsourcing HR, noted Towers Perrin, should include turning over either well-designed processes or disorganized processes — but not both.