Rise in HR outsourcing, from a low base, offers opportunity for more strategic HR role

With HR outsourcing on the rise, HR needs to be more assertive in influencing and leading decisions to go down this route, and more confident in seizing the consequent opportunity to adopt more strategic roles, according to new research from the CIPD.

The research report, written by Alison Lewis of Leeds University Business School, is based on a survey of 315 organisations. Just under a third (29%) are currently making use of HR outsourcing.

Key findings:

Of employers using HR outsourcing, 20% report a significant increase in the last five years, and 44% report a slight increase.

Experience of HR outsourcing to date has been mixed, with just under a half (47%) saying it has been successful in some areas but not others, while only 7% say it has been an all round success story.

Where HR has been outsourced, there is a recognition of the opportunity for HR to play a more strategic role, but this has only been realised to a great extent in 11% of firms that have already outsourced, and to a limited extent in a further 54% of firms.

The research uncovers some concerns that HR is not sufficiently involved in the outsourcing process, with room for greater involvement particularly identified in: Facilitating long-term partnership working with external providers; Focusing on cultural fit during the selection of a provider; Increase in focus on quality; Developing a greater emphasis on trust in relationships with providers.

Vanessa Robinson, Head of HR practice at the Chartered Institute of Personnel and Development, said:

ìOutsourcing of HR functions is still, relatively speaking, a minority interest. While the vast majority of employers (89%) use outsourcing in at least some parts of their business, under a third (29%) of employers outsource any part of the HR function – including popular candidates for outsourcing such as payroll, pensions advice and recruitment.

ìThese figures are set to rise, with outsourcing already on the up in the private sector, and highly likely to rise in the public sector with both Government reviews and Opposition policy statements indicating they intend to outsource civil service HR.

ìThe rise in HR outsourcing offers a real opportunity for HR professionals to fulfil a more strategic role. However, our research finds that in only one in ten cases is this opportunity currently realised to a great extent, and only just over a half of cases is it realised to a limited extent. With HR outsourcing certain to be a growing reality, the profession needs to ensure it has the skills, capabilities and self-belief to adopt a more strategic role.î