Benefits of Outsourcing HR in a Recession

Although its generally agreed Canada will weather the economic turmoil centered in the States, companies are still tightening and preparing for the worst.  We have all seen the headlines: companies closing down, having to cut jobs or having to initiate hiring/pay freezes.  At one company we work with, every objective presented at the last quarterly meeting by each department Manager had to be tied directly to a reduction in costs.

In the current business climate the need for businesses to focus on their core business activities has emerged as a clear directive.  And in order to centre attention on core activities companies are exploring outsourcing non-core processes, including management of the Human Resource function.

Most companies recognize they cannot eliminate the HR function altogether.  Even if you feel forced to ‘downsize’ your HR Manager or HR department, the HR requirement will never simply ‘go away’ as long as your doors are open and you employ a person.   Ask your colleagues who do not have a formal HR role and they will tell you that someone is doing the job, and that someone is then distracted from their core business job function.

The most progressive companies, the ones most likely to still be around when the recession is over (and it will end), recognize a number of benefits are associated with outsourcing the HR function, including:

Risk Mitigation/ Knowledge Retention

The sudden loss of a key HR resource (full-time or not) often means the loss of valuable competitive intelligence as well as a temporary plummet in HR service levels across the entire organization.   This can be made worse in a tightening labour market where it may take weeks or months to find, hire and integrate a replacement.   All of this is virtually eliminated with an outsourced HR model, where the provider assumes the responsibly for ensuring service continuity and knowledge transfer for the client organization.  In an era of increased competition and reliance on competitive intelligence and knowledge retention, retaining institutional knowledge can be a leading factor in an organization’s success or failure.

Team Knowledge

Team-based specialty HR Consulting firms can often provide valuable “out-of-the-box” thinking, as well as a wider and deeper pool of HR experiences from which to draw solutions to your HR-related challenges and needs.   Consistent with the old adage “two heads are better than one”; a team of HR professionals collectively bring more current knowledge of legislative and common law development and more problem solving power than one, two or even three in-house resources could ever hope to provide.   Exposure to a broad range of client situations across almost every industry and verticals means the HR team brings a continual source of business insight, creative solutions and best practice advice to run a more efficient and successful organization.

Scalable HR Support

Let’s be honest – outsourcing your HR is not free.  And as times and budgets change it is important to have options.  Try telling your HR Manager that s/he must take a 25% pay cut.  But you can scale down your HR onsite to a help desk model, for example, with no lawsuit or even hard feelings.  We’ll ramp up and down with you, to allow you access to the support you need during tough times.

Focus on Value Add

Unlike most in-house HR departments, which can be seen primarily as a cost-centre, outsourced HR models typically focus on key strategic initiatives that bring business improvement, be it cost-reduction, process efficiency, or talent acquisition, development, motivation and retention, etc.  Little time is wasted on the non-strategic activities that in-house HR personnel so often get caught up in and distracted by.  Furthermore, a professional HR firm will demonstrate to the client some measureable return on their investment, and will course-correct as needed to best serve the clients’ needs.

With all the strategic and practical benefits that an HR model can bring, it is no surprise that more businesses, large and small, are warming up to the idea.  There is no time like a looming recession to provide the extra incentive to investigate any solution to contain costs and provide a competitive advantage.  Many businesses owners and executives will be pleasantly surprised to find out that the benefits of outsourced HR are realized both in tough and prosperous times.

3 thoughts on “Benefits of Outsourcing HR in a Recession”

  1. Cutting cost while retaining the integrity of your business is a crucial part of surviving a recession. Finding a way to eliminate an HR department while also keeping the services that are offered by that department is why outsourcing is becoming so popular right now. You need to find a PEO that offer you quality service a fraction of cost of your current HR department. While that can be tricky all that you need to do is research and ask around among companies that are currently using a PEO and see what they have to say.

  2. Cutting cost while retaining the integrity of your business is a crucial part of surviving a recession. Finding a way to eliminate an HR department while also keeping the services that are offered by that department is why outsourcing is becoming so popular right now. You need to find a PEO that offer you quality service a fraction of cost of your current HR department. While that can be tricky all that you need to do is research and ask around among companies that are currently using a PEO and see what they have to say.

  3. Steffen Westlund

    Informative and unique article. Outsourcing during recession and hiring the virtual staff will help reduce the cost of maintaining non-revenue generating back-office expenses that are not a company’s core competency. A fully functional in-house human resources department requires additional space and highly trained and experienced HR professionals.

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