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Four Common Mistakes When Outsourcing Human Resources (HR) Functions

For many small and even some midsize employers, keeping up with the regulatory and administrative functions of HR is not easy.

Sometimes most or all the work is assigned to an office manager who is not specifically trained to handle HR and may inadvertently make costly slipups. And even if the organization manages to stay in compliance, the ‘service’ aspects of HR (helping employees complete paperwork, timely answering questions, and so on) get short shrift — frustrating and potentially driving away good workers.

If all this sounds familiar, the answer may be outsourcing. There is likely a variety of providers in your area that offer a full menu of options and expertise to fulfill your HR needs. But you would be surprised how many organizations dive headlong and unprepared into HR outsourcing arrangements and end up spending much more money than they had anticipated. Here are four common mistakes to avoid:

  1. Not having goals or a strategy. Many organizations approach HR outsourcing like a hungry person at a grocery store — they want everything. But this often leads them to commit a substantial portion of their budget without a clear idea of what ‘everything’ is. Approach the arrangement like a major strategic initiative (which it is). Identify specific objectives and how much you can reasonably spend.
  2. Not conducting a detailed analysis of vendors. HR outsourcing and consulting is big business and, as mentioned, there are probably several competing providers in your area. Although it may seem easiest to pick one out of a hat, especially if your organization wants to move quickly on this, a careful selection process is necessary. Look at factors such as how long a firm has existed, if it is involved in any legal actions, and whether it offers any special expertise in your type of organization.
  3. Not adequately communicating new HR service information to staff. Do not forget the ‘humans’ who will be the subject of these ‘resources’ — your employees. Depending on which services you choose, their payroll, benefits, and most sensitive personal information will be in the provider’s hands. So, give staff plenty of warning that you have decided to outsource some or all HR functions, who the provider is, and precisely how the transition process will work.
  4. Not setting up measurement standards once the service begins. Employers can overpay for HR outsourcing with little return on investment for years and not realize it. Choose and track metrics that will provide insight on whether the arrangement is working. These might include project time — HR projects and tasks should be completed much more quickly and efficiently when outsourced. You could also survey employees and create data points associated with their satisfaction and engagement.

The preparation process may seem time-consuming and overly detailed, but the effort you expend at this stage should save you aggravation and money in the long run. Contact us for further information and assistance.

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