4 Common HR Outsourcing Challenges and Their Solutions
HR outsourcing is becoming an increasingly popular way for growing companies to manage costs. But in our decade of experience as an HR Outsourcing company, we know that problems happen, particularly when an organization first engages in outsourcing practices.
n this post, we’ll share what our HR consultants say are the 4 top benefits to outsourcing your HR and the 4 keys to a successful outcome:
What Is HR Outsourcing?
Businesses now, more than ever, need to focus on their core competencies and look to outsource those functions that don’t make up that core. Market factors like the pace of technology, product parity and resource constraints, mean companies have to make the most of their available resources and avoid spreading themselves too thin.
This is where outsourcing to outside firms comes into play.
HR outsourcing relates to contracting a third party to handle the Human Resource activities necessary to run a company.
What areas of HR are outsourced?
For startups that can’t afford a full-time HR person that might mean handling every HR function including setting up HR processes from the ground up.
For medium or large companies experiencing growth that can mean augmenting their team (hence our name) with seasoned, HR professionals. It can be any HR activity but often includes areas such as:
- Hiring
- Onboarding
- Compensation
- Terminations
- HR Strategy and many more HR Services
What Are The Pros Of HR Outsourcing?
Whether you are a small, medium or large company, there is always a need for some type of HR support. The benefits of outsourcing to a credible outsourced HR firm include:
- Reduced Costs: Why pay a headcount for HR 100% of the time when you only need them 10% of the time? Most companies don’t have the need for a full-time HR person until they hit 50-100 employees. For example, with about 25 employees did the Scranton Branch of Dunder Mifflin really need a full-time HR person?
- More Experienced HR Talent: As companies grow, their needs change and evolve. While initially, they may have someone in an admin role handling standard HR functions such as payroll, over time they likely need the guidance of a fully experienced HR professional to manage all HR activities, without having to invest in the headcount.
- More Flexible: Do you need a payroll manager, a compliance expert or someone to recruit talent? As a company changes so do their HR needs. By outsourcing HR you can pick & choose the expertise you need.
- Greater Focus: Do you really want to spend your or your company’s energies on keeping up with the latest employee legislation? Outsourcing HR lets your company put more energy and focus into what makes them great.
There can be an adjustment phase when entering an agreement with any new outsourcing service provider. It’s a new way of doing business, a new approach and it’s the same when outsourcing HR. While HR outsourcing problems do occur, there are ways to overcome them. Based on their decades of experience, here’s what our
HR consultants have to say are the 4 keys to successfully outsourcing HR:
1. Expectations
Many companies have certain expectations of how things will work in theory. Often, they do not work out as smoothly in practice. Adding an HR outsourcing company or HR solutions provider is meant to help your company improve a function, but this doesn’t always happen right away. Time is needed for both parties to adjust to each other and identify the best ways to work together.
To overcome this hiccup,
expect a learning curve and a few rough patches.
Build this into your timeline and consider it when setting business objectives.
2. Organizational culture
Outsourcing your HR will undoubtedly have an impact on your organizational culture. What many companies overlook is potential clashes between the HR consulting company culture and their own.
You can overcome this issue by spending the time to understand the HR outsourcing company’s culture and approach to doing business. This will help you identify policies or values that could interfere with your working relationship. And the HR consultant has to spend time to get to know your culture. Both sides will have to give a little to find the right flow.
3. Process adjustments
Once you agree to terms with an HR service provider, many companies are not prepared to actually start working together right away. This causes workflows to stop, services are not initiated right away, and objectives are not met.
To avoid this issue, it’s important to start putting new processes, people, and workflows in place as soon as possible to minimize the ramp-up period.
4. Decision rights and authority
Who makes the decisions is a common source of contention. Internal employees often assume they have the authority and decision rights when, frequently, some authority is transferred to the HR solutions provider as part of the HR outsourcing agreement.
To overcome this issue, companies and HR outsourcers need to
come to a clear understanding of who has the authority and decision-making power for the affected business functions. Write this into the service contract and make everyone involved aware of the terms.
For more insights from our Toronto HR Consultants, check these out.
Interested in a quote on outsourcing your HR? AugmentHR is one of Toronto’s top HR consulting firms. HR veteran and Director of Client Experience, Jeff Mignault, can be reached at 416-593-7999.
