3 Major Pitfalls for Employee Performance when Outsourcing your HR
During recent years Everest Europe Group, a management-consulting firm specialized in deploying outsourcing processes, has experienced several business function externalizations, and in many cases these are referred to the HR department.
A critical point, often underestimated by companies, is that the process of outsourcing Human Resources needs to be managed even more carefully than other outsourced functions. Indeed, unlike the latter, HR outsourcing entails critical “social effects” that must be monitored and taken into great account by outsourcing leaders.
In order to underline the most relevant aspects that allow an outsourcing process to boost employees’ performances - leaving aside typical benefits for the organization deriving from it - it is worth to focus on the potential troubles that typically derive from such situations. It will be possible to highlight with more clearness the double reward for the company by managing accurately the process, that is to say not only avoiding pitfalls and creating conditions to succeed, but at the same time adopting best practices and making the process more profitable both for the company and employees.
From our experience, we can summarize in three points what are the most critical mistakes related to these operations. They are often linked to one another in a consequential relation and in most cases they derive from the lack of some relevant capabilities characterizing one of the two sides of the operation. These are:
- Focus by the managers only on the economic aspects of the process
- Failing to choose the right supplier
- Lack of effective of poor communication towards the affected employees
1. Focus by the managers only on the economic aspects of the process
Compared to the others in the list, this issue is actually the less frequent mistake made in recent years. Thanks to the increased number of outsourcing processes deployed on the market, more executives today understand not only the strategic relevance of the process, but also the importance of the HR department for the company, thus the need to gain quality from the process beyond cost savings. In this way, also the bias on the administrative nature of the HR function is gradually disappearing.
Unfortunately there are still “old” executives that, pushed by the bad economic climate, keep focusing their attention on the economic aspects of the process, wrongly convinced that the main objective of outsourcing remains the potential cost savings achievable.
The truth is that the outsourcing process affects also human and social aspects of the organization that need to be evaluated when calculating the real cost of the operation. And there are a lot of examples that Everest, as a consulting partner, has experienced. Sometimes employees have perceived outsourcing as a drop in trust from their employer, causing an obvious decrease in the moral level. Other times, the presence of an external part executing ordinary activities caused employees insecurities and worries about job conditions; consequently creating in them a feeling of undervalue of their talents and credibility. Also, employees may experience a loss of identity as they suddenly lose their original position, showing also a decline in commitment and motivation.
For all these reasons and to avoid these bad implications, the individual and the social side of the outsourcing has to be considered when developing the right management approach to the process. Efforts from both sides of the process should be addressed to the variable “People”, overcoming those obstacles (i.e. time pressures, lack of adequate process management expertise) that may drive emphasis only on the financial and legal aspects of the operation, at the expense of the social aspect.
Since the undervaluation of these elements can cause the failure of the whole process, Everest Group always invites and pushes their clients to consider these aspects, even if it is likely this approach will increase the overall estimated cost of the process.
2. Failing to choose the right supplier
All those who analyze and investigate the field of the outsourcing process know that the choice of the right supplier is essential to make the company achieve their pre-set objectives. Unfortunately, a great number of managers keep underestimating the impact of this choice on employee performance.
From our experience, it is important to create a positive impression on employees about the quality and the reputation of the selected provider. Not only in terms of provided service quality, but also for what refers to Knowledge Transfer. Often, the workforce of the company that outsources the service expects the third party to provide global HR expertise and skills. When this transfer does not happen, it is easy to experience conflicts and lack of cooperation between internal and external employees. This will always cause a further decline in commitment by the internal employees with a bad impact on the overall workforce performance.
3. Lack of effective or poor communication towards the affected employees
Communication with the employees about all aspects of the outsourcing process, sharing the reasons that have pushed to outsource and listening to their opinions and concerns about it, is essential to maintain the workforce engaged. This will make them more available to support the process and collaborate both with the organization and the provider. The organization should explain the benefits of the process, reducing the employees’ uncertainty and increasing their understanding in order to improve their involvement. The more knowledge the employees have during the process, the greater the likelihood of success. Their understanding will lead a positive attitude toward the operation and will result in a decrease of the initial emerged stress and confusion characterizing employees feelings.
Proved by our experience on the field, we can say that a proportional relationship between the degree of employees’ involvement and the trust the workforce feels from the employer is key. As said before, if an employee does not trust the employer or the process this will bring reduced commitment, increased job turnover, lack of collaboration and support on the process.
The fact that the outsourcing process affects negatively the employee’s performance represents for us a self-fulfilling prophecy. Planning accurately the process, deploying it efficiently, deeply involving the employees and caring about their concerns will create the conditions to guarantee the company a remarkable increase in the employee performance.