Outsourcing the HR Function: Possibilities and Pitfalls -- Summary

Outsourcing the HR Function: Possibilities and Pitfalls, published by the Corporate Research Form, is one of the most important and independent reviews of the outsourcing market for human resources functions.

The Corporate Research Forum is a center of expertise in organization development and performance, with more than 100 large organizations as members. Sponsors of Corporate Research Forum have no control over the content. This particular report is sponsored by Accenture.

"In HR Outsourcing, there are complex people and performance issues which HR professionals need to understand. They must understand not just the importance of good HRO metrics—but how HR can contribute to business performance."—Dr. Anthony Hesketh.

The increasing focus on HR's contribution to the performance of the wider business has led to more emphasis on cost reduction. Human resources outsourcing (HRO) has grown out of this debate—from re-engineering and cost reduction on the one hand, to a potential transformational capability to the other.

HRO is an evolving industry. It is also a strategic tool aimed primarily at chief executives. Although organizations' strategies and performance models may differ, HRO will nearly always have some relevance, for example in order to:

• Improve or acquire higher HR capability.
• Achieve economies of scale in delivering HR services to large organizations.
• Stay up-to-date with HR service technology without incurring massive costs.

There are ongoing strategic debates among users, organizations and providers around the issues relating to HRO.

Some of these issues include:

• The future purpose and contribution of HR because of possibilities of functions being transformed, or partially outsourced, through HRO deals.  
• The strategic and management complexities of HRO deals. 
• Deciding what is "core" and "non-core" in HR.
• The difficulty that HR has in assuming more strategic or value-adding roles after implementing HRO. 
• The position of offshoring, including job losses and redeployment. 
• The challenges of trying to manage HR process delivery on a global scale and across different cultures.

Some organizations believe the HR function is an integral business success factor, but others view HR as over-resourced, inefficient and thus vulnerable to the cost reduction possibilities of HRO.