Ultimate Performance: Measuring Human Resources at Work

Metrics Can Play a Pivotal Role in HR Outsourcing Success or Failure

1. Over-optimism among companies looking to outsource HR. Expectations have been pitched unrealistically high, both in terms of cost savings and service improvements, and the speed at which these can be realized. Though cost savings can be front-loaded to bring immediate financial benefit, the process of bedding down the new service and integrating HR technologies may take upwards of 18 months from the start of the contract.

2. Poor knowledge of the baseline. Management is often ill-informed about the direct and indirect costs of existing HR processes and practices, and about how HR costs are embedded within the organization. HR personnel themselves often only have a tenuous grasp on the true end-to-end processes, as line management handles so many people-related activities. These shortcomings have resulted in poorly defined business cases that fail to identify the true costs and true implications of outsourcing.

3. Poor supplier management and performance metrics. Companies have often entrusted HRO to poorly structured “supply management units,” staffed by HR professionals unfamiliar with complex supplier relationships. Frequently the effect is to put the supplier in the driving seat rather than the customer. Performance metrics may also be inappropriate, focusing on a confusing array of operational and cost savings while ignoring value creation goals. Metrics are also often made up on the run when the outsourcing contract ...