Should I outsource my business’s HR? The answer depends on a several items such as project duration, required expertise, confidentiality and future needs. Review your situation against our guidelines to help answer that famous question for your business.
Just a quick definition for those who ask what is the difference between outsourcing and subcontracting? Typically, outsourcing is done offsite at the outsourcer's facility under their management control while subcontracting is done on your site under your management control. Some of the same issues and questions apply to both when deciding whether to go outside or stay in-house. Outsourcing tends to be a longer term decision with the largest loss of control.
To help in your evaluation, start by reviewing the following questions. Your answers will help to determine which direction best suits the circumstances.
1.Is this activity/project a core process (what your company does as a business)?
2. Are specialized skills needed?
3. What is the duration?
4. Will confidential/proprietary information be disclosed?
5. Will the project result in new skills necessary for the ongoing business?
6. Could the project terminate early due to budgets/ other priorities?
7. Do I have the staff now or would I need to hire them?
8. Do I want close management of day-to-day activities?
There are some general guidelines relating to the decision to outsource or keep the activity 'in-house'. Review these guidelines against the answers to the above questions to help with your decision.
Guideline 1: If the activity is a core process to your business, do not outsource. Consider the business of building cars. The assembly-line is core and you would not want to outsource this process, while computer training is not core and you would be able to outsource this without impacting your business integrity.
Guideline 2: If the activity requires highly specialized skills you do not have and would only need for a short duration, do outsource. An example might be if you want to write an employee handbook ensuring all your policies are represented clearly and in legally correct terms. You would be better to outsource this to an experienced HR consulting firm. On the other-hand, if you just installed a new database technology requiring specialized technicians, you would be better to hire the skilled individuals since you will need them for an extended/ multi-year period to work on undetermined/multiple projects.
Guideline 3: If highly sensitive and confidential information will be revealed during the execution of the project, do not outsource. Example: if the project requires access to customer lists and future orders, do not outsource. Whereas revealing office locations or other public information would not compromise your business and could be outsourced.
Guideline 4: If you need the staff once the project is complete, do not outsource. This covers situations such as additional projects to work on or newly learned skills that are needed. However, projects that end with no ongoing need of the staff would require you to terminate employees, creating Human Resource issues, possible severance costs and legal issues. These short-term staff needs would best be outsourced since you can give termination notice (based on contractual agreements) and not have to deal with the outsourcer's personnel.