HR outsourcing 'may not cut costs'

10 February 2006
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10 February 2006 | Jane Pickard

Outsourcing HR may not deliver the predicted savings, concluded experts at a roundtable organised by SM's sister publication People Management.

Philip Vernon, principal at Mercer Human Resource Consulting, described how he warned HR directors: "If you want to save 20 per cent this year, outsourcing may not be the quickest and best way to get there."

In a large organisation, HR may represent only three per cent of total costs. "If you are talking about saving 20 per cent of three per cent, with the risks involved, there may be better prizes to be had for the chief executive and finance director," he added.

Marika Whitfield, HR outsourcing business manager at Northgate HR Outsourcing, told the roundtable that potential clients are now more interested in measures that add value rather than those saving costs.

And Debbie Sallis, HR director for Combat Air Defence Systems at BAE Systems, said her company's support for outsourcing, through a joint venture with business process outsourcing company Xchanging, was now about effectiveness rather than efficiency, although cost drove the business agenda at the start.

"I can tell my board the skills changes we are planning up to 2020. No one wants to know how I'm going to cut costs," she said.

But Vernon said he felt cost-cutting was still the main reason why organisations were interested in outsourcing. People were talking about service quality only because expected savings hadn't materialised, he said.

The debate reflects a recent survey by the Shared Services and Business Process Outsourcing Association that showed cost saving was no longer given as the main reason for outsourcing HR.



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