Some HR functions should never be outsourced

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: There is an increasing trend of outsourcing HR functions the worldover, though its efficacy is not yet proven beyond doubt. Recent studies show that HR outsourcing is too complex to be managed effectively. So Unilever’s award of one of the world’s most extensive HR outsourcing contract to Accenture has renewed the debate on the wisdom of HR outsourcing. The contract, worth approximately £1 billion to manage over 200,000 employees, covers HR administration and learning services.

HR activities in organisations can be classified into four types: administrative and regulatory (like pay-roll administration, healthcare, pension and other benefits, administration of training), developmental, advisory and change management. Among them, regulatory decisions are rules and procedure bound and require intense documentation. As the scope for individual discretion in such decisions is low, the complete procedures can be easily automated with the help of computers. It is also easy to outsource them.

Outsourcing of regulatory and administrative activities also helps companies cope with the increasing workload and scarce competent HR managers. It enables HR managers to devote time to other HR activities. It is the regulatoryand administrative activities that are primarily outsourced. It is expected that HR/ pay-roll processes and travel expense reimbursement will see the fastest increase in the BPO sector.

It is extremely risky to outsource other HR activities. Development of people enables organisations to develop long-term competencies to compete effectively in a dynamic business environment. Hence, careful consideration of design and delivery of training to match future strategies and available competencies of people is essential. Outsourced agencies are likely to find themselves ill-prepared to provide such linkages. Hence, organisations would be risking their future by outsourcing developmental activities.

HR managers provide constant advise to senior managers on different issues of internal management of the organisation. Effective execution of this role requires continued understanding of the business environment-organisational priorities-HR system linkages. Very few outsiders would be able to establish such linkages on a sustained basis. Outsourcing agencies, at best, can suggest interventions that are problem-specific. The outsourcing of advisory role will generate increasing dependence on external agencies which is likely to prove expensive and less effective.