Ultimate Performance: Measuring Human Resources at Work

Know Your Business—and Know Outsourcing

So, what do decision-makers need to do when facing a choice over the right route to HR transformation? Clearly, HR transformation can be achieved via either HRO or in-house development, with the key differences being issues of asset ownership, investment, and control. First of all management must develop an all around view of what each of these two options would mean for the organization in financial, managerial, cultural, and value terms. This involves taking a long, hard look at the organization’s managerial and financial resources, at what it will need to deliver its commercial strategy, and at the role that either an HRO or in-house solution might play in meeting those requirements.

In conducting this feasibility study, management can draw some valuable object lessons, both from recent successes and from the failure of a number of earlier HR BPO projects. Prior practical experience of HRO is also valuable—and an organization with a successful track record of HRO in other functions such as IT or finance is likely to be better placed to implement HRO successfully. However, of all types of outsourcing, HR is probably the most difficult and sensitive because of HR’s combination of transactional and advisory processes, its pervasive role, and its potential impact on staff morale and performance.

This consideration underlines the central fact about deciding whether to outsource HR: It is not a choice that should be made purely on grounds of ...