AAIM was created by manufacturing companies in 1898 for the purpose of sharing services. Nowadays, the term is “outsourcing,” and includes such business services as accounting, computer programming, tax compliance, payroll and the manufacturing of components.
Today, AAIM has noticed a surge in the outsourcing of various operations within human resources departments as employer-members increasingly take advantage of outside experts to handle day-to-day HR operations and specific projects within their companies. Such outsourcing can include engaging consultants known to be excellent generalists in the field, or consultants with specialized expertise to assist a company in areas such as compensation analysis, safety and even interim executive HR leadership.
For example, Jewish Federation of St. Louis is the Jewish community’s central philanthropic, planning and community-building organization and one of the Midwest’s largest and oldest nonprofit organizations. “An on-site HR service was just what we needed when our organization found itself without an in-house HR professional,” says Sonia Dobinsky, the federation’s senior planning associate. “After assessing our needs, everyone from our CEO to our support staff could not have been more pleased with our consultant’s skill, knowledge and ability to go up the learning curve of our complex organization.”
For other companies, the HR consultant who is placed is a specialist. EnviroPAK, a manufacturer of molded pulp packaging materials made from recycled newspaper, recently engaged a consultant in auditing its safety program so the company could drive its best practices strategy. “Safety is vitally important to us,” says Chris Miget, company president, “and we were pleased to make certain we were 100-percent compliant and beyond with industry practices, including our own interest to exceed expectations in this area.”
In today’s environment, outsourcing some aspects of HR is a necessary business practice. It’s an opportunity to apply the right level of expertise to drive the best strategies and ensure effective outcomes without having to maintain a wide range of experts on the company’s payroll. Outsourcing often allows improved objectivity for making unbiased decisions, as an impartial third party can stay true to the mission of providing accurate services in those areas in which the company faces compliance requirements.
While there is no question the professional employer organization (PEO) model can provide efficiencies for smaller organizations, the latest movement appears to be toward tailored outsourcing driven by business strategy.
In outsourcing decisions going forward, HR must go beyond capturing obvious cost reductions to maximizing overall ROI. For example, a company may save $10,000 a year by outsourcing an administrative function, but may incur $80,000 a year in “bad hire” and turnover costs by not outsourcing recruitment for key roles. It is critical to outline the potential risk and revenue of all HR processes, particularly around key business drivers, and to make tailored outsourcing decisions.
For both small and large organizations, a key to business strength is flexibility through HRO because it allows for the tailoring of solutions across the employee life-cycle. HRO allows strategies to be defined, but driven in such a way that modification can occur as their business and the market changes. iBi