HR BPO Cost Savings Most Appealing Feature

May 17, 2005 ( more than half of executives (54%), gaining measurable HR cost savings is the most appealing potential benefit of Human Resources Business Process Outsourcing (HR BPO).

This was followed by shifting the focus to more strategic activities (44%) and leveraging third-party expertise for transformation (38%).

A new survey entitled, “Transforming HR: Realities, Futures and the Role of BPO,” released by EquaTerra, a multi-national outsourcing and insourcing advisory firm and Human Resource Executive magazine and sponsored by Accenture HR Services, shows that the majority of executives are generally satisfied with the current state of their HR organization.

However, the satisfaction of HR people and processes was higher than that of HRIT applications and systems, dissatisfaction that researches attributed to antiquated and underperforming systems combined with aggressive pushes towards self-service. When asked what areas needed improvement in their organization, nearly two thirds (59%) said training and development, something cited by more smaller companies than larger ones, while 53% said HRIT. Payroll and third-party vendor management were areas in which people were highly satisfied, possibly because these areas are already automated and streamlined; only 13% and 11% said those areas needed improvement, respectively.

“HR organizations are under increased pressure to simultaneously reduce costs and improve service levels and capabilities. This bifurcated goal is increasingly encapsulated in the vague yet alluring concept of ‘HR transformation,’ said Stan Lepeak, Managing Director of Research for EquaTerra, in a press release. He also said part of this transformation is to outsource HRIT and HR processes.

However, the outsourcing trend did not appear as prevalent as it has been often been thought to be, as only 17% said they pursued HRO, and only a little less (11%) have looked to HRIT outsourcing. Although HR transformation received a 4.3 on a 5.0 scale, and 43% of those polled cited HR transformation as extremely important, there appears to be significant barriers to transforming the department. However, a majority of those surveyed have attempted to transform aspects of their HR department. Sixty-one percent answered that they have worked on their process improvement/re-engineering efforts, and the same amount have focused on HR self-service functions. Why haven’t they gotten further? The leading barrier, cited by 66% of the surveyed executives was a lack of resources, or the cost of transformation.

EquaTerra conducted the study in March 2005, polling 589 qualified executive management and HR decision makers, 75% of whom were manager level or above.

Results of the survey, published in the May 16, 2005 edition of Human Resource Executive magazine can be found on the HR Executive Web site .