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HR Ripe for Outsourcing.

January 19 2007 - A recent survey has found that organizations are ripe for human resources (HR) outsourcing as they increasingly seek standardization as part of a re-emphasis on strategic business initiatives. Companies that have already outsourced HR activities tend to be satisfied with the arrangement and are realizing the hoped-for benefits. However, nearly two-thirds of respondents said there are still barriers to HR outsourcing at their organizations.

The survey by Hewitt Associates of nearly 100 large US companies representing 2 million employees found that the top three pressures currently facing HR executives are attracting, retaining and growing talent (67 per cent), being able to better support the business by focusing HR on core capabilities (47 per cent) and supporting business changes (41 per cent).

In an effort to address these issues and make HR more efficient, 91 per cent of companies had sought to improve the internal HR function, such as HR process re-engineering or standardization, within the last two years. Nearly six out of 10 believed HR processes and policies must be standardized before outsourcing proceeded.

Mark Oshima, director of HRO strategy at Hewitt Associates said:

"Companies are realizing that they need to standardize HR processes and policies as a first step in their HR transformation. This is often a precursor to outsourcing, since outsourcing enables both HR and line management to focus on issues vital to the business's strategic initiatives, instead of being burdened with HR administration."

The survey found that organizations considered outsourcing primarily to improve service quality (74 per cent of respondents ranked this 4 or higher on a scale of 1 - 6). Other key motives included gaining access to outside expertise, the opportunity for cost savings and a desire to focus resources on core business (all ranked 4 or higher by at least 60 per cent of respondents).

When considering an HR outsourcing provider, 78 per cent of respondents preferred in-depth HR consulting expertise to provision of broader services to multiple parts of the organization.

Nearly half of respondents (44 per cent) indicated that cost savings was not one of their primary objectives. However, 73 per cent of those who said they were had achieved their cost savings objectives.

Of those companies that have outsourced, 65 per cent reported that they are satisfied or very satisfied with their current arrangement and 70 per cent said their companies had realized hoped-for benefits.

The majority had incorporated service level agreements in their HR outsourcing contracts. Data delivery and transaction accuracy were most common standards included, each cited by more than two-thirds of companies surveyed.

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