According to a new study, the world’s largest companies were more inclined to outsource HR functions in 2003 than in 2002. And if they weren’t outsourcing at the time of the latest survey, most were thinking about it. Another finding: Those who are outsourcing are, for the most part, happy in their choice. However, while outsourcing increased in many areas, such as 401 K plans and call centers, it decreased slightly in recruiting. In this article, MedZilla interviews the survey’s author and reports on its findings.

For the world’s biggest companies, outsourcing has, for the most part, become a standard practice in human resources departments, according to a new study. Companies are more prone to turn over their 401K programs, call centers, pension programs, health benefits, and other HR functions, but less apt to call on outside recruiters, according to the study, HR Outsourcing: Benefits, Challenges and Trends.

Large companies surveyed
The report’s author David J. Dell, PhD, surveyed 122 companies in North American and European companies—all with annual revenues exceeding $1 billion—about their outsourcing practices and perceptions. He defines outsourcing as having other companies contracted do work for you that you might have had a team of people or your own department doing previously.

Conducting the survey on behalf of the Conference Board, a nonprofit organization sharing best practices of leading corporations, Dr. Dell compared this latest 2003 survey results with a similar study he did in 2002. The outsourced functions he looked at range from benefits management, payroll, call centers, IT function for HR, training and learning management and employee communications to recruiting.

Outsourcing is a trend, in most HR functions
The survey found that most companies are outsourcing or thinking about it. At least 76% of respondents currently outsource one or more major HR functions. Only 9% of the large companies surveyed in the most recent report have ruled out the practice of outsourcing HR functions entirely, while 23% of companies ruled it out in 2002. “In the U.S., that figure is only 4%. In other words, more than 95% of U.S. companies are outsourcing something,” he says.

Dr. Dell attributes the change to momentum. He says there weren’t many choices a few years ago but today vendors have gotten “quite good.” The economy might also have had something to do with the up tick, he says. “Obviously many companies had a tremendous cash squeeze over the last couple of years and there wasn’t very much money to invest in the kinds of things that would make HR more productive so the outsourcing alternative got more and more attractive.”

While outsourcing in areas such as 401K programs rose from last year, with 53% of companies saying they fully outsource the function, recruiting feel. In 2002, Dr. Dell reported that 3% of companies fully outsourced their recruiting function and 41% partially outsourced it. In 2003, only 1% of companies fully outsourced the function and 37% partially outsourced it. Dr. Dell asked companies in the most recent survey if they planned to outsource and, when it came to recruiting, 7% said they planned to turn to outside help.

“Recruiting has to be an anomaly. Certainly outside of the health area, most companies cut way back on hiring the last couple of years; so it’s hard to tell how much outsourcing they’ll be doing when they ... staff up,” he says.

Frank Heasley, PhD, president and CEO of MedZilla.com, a leading Internet recruitment and professional community that serves biotechnology, pharmaceuticals, healthcare and science, agrees with the finding that the outsourcing of recruiters had dipped somewhat. He says these “recessionary times” are largely to blame, but adds there has been a slight up tick of late.

“It depends on supply and demand,” Dr. Heasley says. “When you have candidates lined up at your door, you’re less likely to seek outside assistance. But when you’re hiring in a very specialized area or in a field like nursing—where there are not enough candidates to satisfy the demand—you're more likely to retain a recruiter. The problem for recruiters is that areas like nursing, pharmacy and radiologic technology tend to be infertile grounds because there are so few of these professionals looking for jobs.”

During recessions, Dr. Heasley says, recruiting tends to take a “double hit” because not only are more people are looking for jobs, creating less need for outside recruiters, but there are more recruiters competing against one another for the contracts.

“Quite a few recruiters got started when they were laid off,” he says.

There’s more…
Dr. Dell found that the companies surveyed are for the most part happy with outsourcing the functions that they do. None plan to take outsourced functions back in house, according to the report.

“It confirms the findings. That’s one reason why there is growth—people keep adding things and nothing is coming back,” Dr. Dell says.

According to the survey, 80% of respondents would outsource again based on their current experience. In addition, those who do outsource are more satisfied with their current practice than those who do not. “That tells us that people are at least as happy if they outsource, if not more so, and they’d do it again,” Dr. Dell says.

Other findings include:
Just over half of the companies that outsource employ consultants and only 33% hire outside counsel to structure and manage outsourcing transitions.

There are signs of resistance to outsourcing within HR departments. HR representatives tend to be more concerned than top management about using outsourcing to improve service, and not just as a tool for cost reduction, according to the survey. “Obviously right now, a lot of the reason that people will go through the effort and transition to move to outsourcing is that they believe that it will be worthwhile economically. What many HR departments are saying is that you might be able to save money but let’s make sure that we’re getting at least as good practices as we are, if not better,” Dr. Dell says.

The successful use of outside HR resources requires a lot of in-house education and involvement, Dr. Heasley says. “It’s one thing to outsource more; it’s quite another to get the most out of these vendors.

“The best outsourced recruiters are those that have solid relationships with HR and management and understand the business. The most successful recruiting relationships are built on communication and understanding of each other’s roles. In other words, the HR team has done its research on the most experienced recruiters in specific career fields, it understands what the recruiter does and why, and it uses that recruiter’s expertise completely.”

Becoming good at outsourcing is well worth the effort. The basic message, Dr. Dell says, is “outsourcing is here to stay, and there is plenty of it.”

About MedZilla.com
Established in mid 1994, MedZilla is the original web site to serve career and hiring needs for professionals and employers in biotechnology, pharmaceuticals, medicine, science and healthcare. MedZilla databases contain about 10,000 open positions, 13,000 resumes from candidates actively seeking new positions and 71,000 archived resumes.

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