Human resources consultants – the advantages and disadvantages of outsourcing
Outsourcing your HR services to human resources consultants can save both time and money. But there may also be disadvantages depending on which functions you choose to outsource, how change is implemented and who you choose to outsource to. It’s important to weigh up all aspects before you decide.
Impact – good or bad
Just like any other contractor, human resources consultants can have a significant impact on your company, so make sure you choose someone who invests time getting to know you and your organization so that the impact they do have is a positive one – one that’s in line with your vision and goals.
How will you know you’ve chosen well? Here are five rules to finding the right HR Consultant.
Outsourcing can be very cost effective. For example, with human resources consultants you often have access to HR professionals who have more experience and specialized knowledge than your own HR staff. To hire individual employees with this experience would cost you more than hiring a team of HR consultants.
For smaller companies, it can also be more cost effective to hire a team of HR Consultants who will do the job well and with efficiency, than it can be to build up an HR department from scratch. For example, recruiting, interviewing, hiring and training HR employees to perform at the level at which human resources consultants perform can cost a great deal of time and money. One approach might be to outsource HR functions first and, as part of your contract with them, have them recruit in-house HR employees who can continue the great work they started.
The extra money you save can be reinvested into the business. You might be able to hire more people or operate more efficiently which could put you a step above your competitors.
Experienced outsourced providers can often deal with HR processes more effectively – especially quite complex HR functions such as recruitment, compensation and benefits administration, employee regulations, employee handbooks and occupational health and safety. This will reduce the time that employers and managers spend on HR-related paperwork and procedures, and more time dedicated to their areas of focus.
Additionally, any changes in administration or company policy they bring about should also improve efficiency further.
Outsourcing HR functions can help businesses manage employee performance and development. If desired, your human resources consultants can implement performance management plans to ensure employees comply with company policies and procedures and successfully meet business goals.
Your outsourced HR team can then monitor employee performance and report findings to management. This reduces the workload of managers by minimizing the amount of administrative responsibilities they must focus on.
Regaining primary focus
Business leaders often get embroiled in the day-to-day HR issues, distracting them from their main business focus. Outsourced HR consultants allow you to shift your focus back, while providing comfort knowing that the HR side of things is being taken care of.
By working alongside the HR consultants, your own HR staff can learn and grow, as well as being able to focus their efforts in key areas.
HR consultants can often be brought in to help create some of the more difficult HR documents such as employee handbooks and employee files, and to help establish best practices. In turn, this documentation contains the answers to many employee questions, ranging from how to book vacation to fire safety procedures. By having the answers at their fingers tips, employees (and employers) get consistent answers to their questions, faster.
Employee satisfaction and decreased turnover
The quality of services your outsourced human resources consultants provide has a direct effect on employee satisfaction (see top five reasons employees choose to leave). Having an HR expert speak honestly with your employees about their work, and then having changes implemented that are fair and that benefit everyone, will lead to greater employee satisfaction, increased productivity and decreased turnover.
Minimizing risk management
Outsourced human resources consultants help businesses minimize risk. Employment laws change regularly and it can be difficult for employers to remain up-to-date on regulations that affect the workplace. It is the job of HR consultants to stay on top of these laws so that you don’t have to. They will make sure your policies and procedures comply with these laws and that both the employer and the employee are protected. They may also regularly maintain your documentation to make sure you are continually up-to-date.
Return on investment
Having an outsourced HR team assist with your long-term strategic management and goals such as succession planning and professional development allows more time to be invested into these areas than you or your in-house HR team may have. This shift in HR focus towards strategy, policy and decision making will bring about a much greater, sustainable return that the initial up-front investment in outsourcing.
The biggest disadvantage can be the morale of employees who hear that an “outsourced consultant” is being brought in. These loaded words brings connotations of job losses and pay cuts. Lower morale, can often lead to less productivity. (You may find employees asking why the business would spend money on consultants and not offer bonuses.)
To help avoid this, when choosing your human resources consultants, choose a team who are able to clearly demonstrate how they will integrate with your employees and bring them onboard. Because without employee buy-in, any HR changes they bring about will be short-lived.
Lack of in-house expertise
Another disadvantage to hiring outsourced human resources consultants is a lack of in-house expertise. With any type of consultant, there is always an initial period of learning where they will need to spend time getting to know you and your organization. If this important piece is skipped over, they risk implementing changes that don’t adhere to your values and philosophies, and ultimately set you back. To avoid this, make sure you choose an HR consultant who invests time in understanding you and your organization, and making sure that any changes are in line with your values.
Additionally, outsourcing important HR functions such as employee training and development might prohibit your HR employees from accomplishing their career goals. For example, hiring a third-party to conduct safety or compliance training could prevent an HR training professional from learning something new and challenging.
Any HR Consultant worth talking to will insist on providing a confidentiality agreement. In their role as your outsourced HR, the consultant will be privy to many (if not all) employee details and it’s vital that your data remains safe. Insist on this or walk away.
Loss of Human Factor
According to a 2008 SHRM study, the loss of face-to-face interaction is the biggest disadvantage of outsourcing. Employees want a familiar face when they have HR issues; replacing a human with someone on the end of a phone is not always a positive exchange. For example, when answering questions of a personal nature, most people would feel more comfortable talking face-to-face. Employees want to feel secure with their personal information and decisions.
To avoid the impersonal feeling, you may wish to have your outsourced HR consultants visit the office regularly or devote time each week or month to work at your location.
There are many tangible benefits to outsourcing human resource functions, but the decision to outsource should not be taken lightly. Cost reasons alone are not sufficient to drive the decision. It will not be right for all. If you are deciding whether or not to outsource, consider first the gaps and issues that currently exist, and whether or not you have the expertise in-house to solve them.
Outsourcing your HR and introducing new processes can also present sizeable change and it’s important to find an HR team that will devote significant time to this process. The initial time spent choosing the right outsourced human resources consultants for you and your organization will pay off enormously in the long-term.