Outsourcing the HR Function or its Components

Most companies that have outsourced in the past like what they're getting and are coming back for more. The most telling statistic to support this is the fact that 90 percent of the current outsourcing projects that are being planned are from companies that are currently outsourcing. And By 2001, it is estimated that $319 billion in corporate resources will lie outside of corporate boundaries. This could only be possible with a boost from business process outsourcing (BPO), which is gaining ground on information technology outsourcing.

The staffing and human resource (HR) outsourcing side of BPO is something that is fairly new, given all of the functions that can be outsourced. The longest HR outsourcing arrangements are about five years old, according to Terry Terhark of Aon Consulting HR Outsourcing. Lately there has been a huge increase in the number of companies that are outsourcing staffing and HR functions. And this will likely increase in the coming years.

The Full Spectrum of Hiring Services

Aon HR Outsourcing delivers a full spectrum of hiring services: hourly and exempt hiring, university recruiting, resume management, test administration, screening of candidates, benefits administration, sourcing and more. First, it helps companies understand what is strategic about the organization's HR function. Then after the firms decide to outsource, they outsource those tactical functions to Aon. These tactical things are functions within HR that either a company doesn't have the core competencies to perform or would rather they be performed by outside experts. So Aon steps in and handle those functions for them.

"We are able to bring expertise and infrastructure to companies that either can't afford to build an infrastructure or don't want to build one," Terhark says. "For example, the employment marketplace over the last several years has been very robust, and the labor markets are pretty tight. Most companies are doing significant amounts of hiring, much more so than what they have done in the past. In order for them to hire quality individuals and to get a good pipeline of candidates, they can either build an internal staff or they can outsource to a company like Aon that has proven techniques to help them with their staffing process. So the client benefits from expertise, typically a lower cost per hire, and an improved cycle time - the amount of time it takes to hire a candidate."

Short-Term and Long-Term Benefits of Outsourcing

Many companies just look at the short-term effects of outsourcing. There are some advantages to the short-term, but clearly a company should make long-term strategic decisions. "Organizations are more successful when they look at the long-term benefits or impact that outsourcing will have," he says. "Some of our clients will outsource a project that is short term, though, because they have an immediate need and we recognize that success as well."

Depending on what the company's specific needs are, it may not be required to look at the long-term impact. For example, if a company wanted to hire 100 sales people and they didn't have the resources available to perform the procedure and also be able to continue to focus on core competencies, it could outsource to a company like Aon. The supplier could come in, apply resources to the process, and then go away when the project is done, he says.

Prepping for Outsourcing

Preparation is critical when outsourcing any portion of the staffing because it is a very big change, Terhark says. Companies are used to doing things themselves or their way and an outsourcing supplier will come in with better or different outsourcing models. "So a company needs to prepare in terms of what the new process is going to be," he says. "They need to be very clear on who is accountable for what and also very clear on how the vendor will be measured. This change process is challenging, and getting used to a new hiring or HR system is very difficult for employees."

Terhark recommends using a disciplined process in not only identifying what the company wants to outsource, but also identifying the vendor. There should be a fairly regimented process that is used to determine the best potential bidder.