Does Outsourcing Place HR Survival in Jeopardy?


By Peter Weddle

The human-resources profession is in the fight of its life. A growing chorus of voices -- both inside and outside organizations -- are questioning whether HR plays a principal role in modern business. These attacks can be found in business-magazine editorials and op-ed pieces, marketing literature of business-process-outsourcing and consulting companies, and in the private conversations of business leaders. If HR professionals fail to defend against these assaults, the profession will be in jeopardy.

These attacks are different from what HR has experienced in the past. Today's resource-constrained corporations no longer have the means to support all HR activities. Global competition and a cautious business environment have forced many to make hard choices among their products, markets and operations. No unit wants to be excluded, so a conflict has erupted to determine which will survive. It's a corporate civil war that pits every unit against one another. The current attacks represent the opening shots in that struggle.

In many cases, they've begun to harm the profession's standing within organizations. A 2002 survey by the Discovery Group, a consulting firm based in Sharon, Mass., polled 425 HR professionals and found that just 48% believe their profession has the respect of company leaders. In other words, fewer than one out of two organizations are led by those who think HR has a place at the leadership table. Equally as bad, only 54% of the survey respondents believe that HR has the decision-making authority it needs to do its job.

Sadly, there's considerable evidence that many organizations are on the verge of diminishing the role of HR. During the go-go days of the 1990s, CEOs proclaimed the critical role of HR in marshalling employees for success in the global marketplace. Human capital became the mantra of the corner office -- until the economy went south. Then the grandiose pronouncements were dumped, and company after company reverted to a time-honored distain for HR and a minimalist approach to supporting it.

Ironically, the verbal investments that CEOs had made in human capital never translated into greater financial support for HR functions. According to the Bureau of National Affairs Inc., a. publisher of general business-advisory information in Washington, D.C., HR-department budgets represented less than 1% of total annual corporate operating costs between 1997 and 2000. In 2003, they were still a paltry 0.9% of the total money companies spent to operate their businesses. The perceived value of HR management at U.S. companies never really rose. It was all talk; nothing more.

Many corporations now outsource HR activities that aren't deemed a "core competency" -- critical to creating and sustaining business success. Vendors typically promise cost savings and improved customer service. It's an attractive combination: The company sheds an operation it doesn't value while saving money.

The Future of HR

Given the low esteem that corporate leaders have for HR, it should come as no surprise that the function is increasingly viewed as a candidate for business-process outsourcing, or BPO. According to Michael F. Corbett & Assoc. Ltd., an HR consultancy in LaGrangeville, N.Y., HR BPO is likely to be a $30- to $60-billion market. It's different, however, from traditional HR outsourcing, which is typically limited to the execution of such administrative tasks as pay-and-benefits administration. Indeed, the proponents of and vendors for HR BPO seek to outsource virtually all HR functions.

Although HR professionals can reassure themselves that this shift is beneficial because it frees them up "to be more strategic" and "to become a business partner," the reality is something else altogether. There's nothing wrong with outsourcing per se, but its use for most or all of HR's key responsibilities begs the question: Why bother with HR at all? The counter argument by outsourcing advocates -- that the HR department retains strategic oversight of its work -- is self-serving and misguided. If HR is already weakened from internal attacks and indifference, then outsourcing is more likely to be its death knell than its song of liberation. In effect, such extensive outsourcing leaves the profession with an imprecise mission -- or, more likely, without any mission whatsoever.

The fight for relevancy poses an enormous challenge with huge risks for HR professionals. We must wage a battle to make sure we continue to make contributions to our organizations that will be valued and recognized.

-- Mr. Weddle is author of "Generalship: HR Leadership in a Time of War," from which this article has been excerpted (Weddles, 2004).

http://www.careerjournal.com/hrcente...18-weddle.html

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