2008 Trend 5: Sourcing
The extent in which HR is accepted as strategic partner, is based on the credibility of the HR department. If HR operates in a professional manner, it has to ensure that the HR department is run in a professional manner. Too often the operational tasks of the HR department influence their capability to operate on a strategic and tactical level. HR must keep its tasks under control, and ensure that the department is organized for maximum efficiency and effectiveness. The insight that HR is handling its budget in a responsible manner is an important contributor to the acceptation of HR as a strategic and tactical partner.
The execution of a sourcing strategy means that every HR service (or HR process) is evaluated based on certain criteria, amongst which the highest quality, the best execution, the lowest costs and the most added value. The HR service is then executed by internal (or external) workers that offer the best value for money. The range of services and suppliers that thus comes to light is sometimes called the sourcing mix. Mix is the key word here: it is a misunderstanding that outsourcing is the only option. It is important to determine which services you want to provide, and who best provides the services.
In a NorthgateArinso survey performed in 2005 , we concluded that 81% of respondents use external parties for HR services. From this we established that the internal focus is on transactional processes, whilst external expertise is consulted in matters such as personnel-policy, training, recruitment & selection and career path advice: exactly the services that HR professionals in the new, more strategic role want to spend more time on. As HR is now hiring external experts to carry out these tasks, the question arises if this is due to a lack of time, or due to a lack of internal expertise. In most countries, the supply of small services specializing in HR is constantly growing.
The success of sourcing depends largely on good vendor management. In our research we concluded that only 16% of contracts are subject to an SLA. This creates a problem, as without an SLA HR cannot adequately evaluate the service the vendor offers. This means that HR loses its grip on the quality and the execution of the HR service. This also entails that HR does not have enough insight into the service, and cannot adapt itself to the growth or downsizing of the company. A good vendor management practice ensures that HR understands what is expected, but more importantly, that the vendor understands how the company is changing, and how their services should be adapted to this. Knowledge acquired like this can then be applied by the HR department within the company to benefit sourcing strategies in other company areas.