HR Cost Take Out: Outsourcing Assessment
In economically turbulent times, virtually all companies must considerably intensify their current cost cutting programs: Fast and noticeable effects are needed. All func-tions within the company must do their part, including HR. In the course of this, HR Business Process Outsourcing (HR BPO) is experiencing a renaissance as a pana-cea for more efficiency.
However, on closer examination, HR BPO is seldom effective in the short term. The experience of Baumgartner & Partner in impartial outsourcing assessments shows that, overall, positive business cases are the exception rather than the rule and that the payback periods of these positive business cases generally last longer than 24 months. Even outsourcing providers only confirm the medium-term cost effect of BPO. Here, the danger for HR managers lies in taking action too quickly and, as a result, only achieving a presumed cost reduction and tying up valuable resources in elaborate outsourcing projects. At the same time, if planned properly, HR BPO can also present an opportunity for the HR function in the company. HR BPO “with good judgement” can speed up and boost the transformation of HR from a classic, reactive service organisation to a foresighted, proactive business partner. There is more good news: Well designed HR BPO that leads to a noteworthy cost reduction in the company even in the short term does exist and indeed represents a significant contribution of the HR department toward the company’s efforts to increase efficiency in turbulent times.
Baumgartner describes its management consulting expertise in HR outsourcing as “cost take out” consulting. The outsourcing goals are always evaluated in comparison with alternatives that do not employ outsourcing. This means that the evaluation consists not only of different outsourcing scenarios but also always includes a comparison with scenario 0 (forward projection of the current situation) and scenario “0 opt.”, which represents an optimised scenario without outsourcing. This approach arose from the knowledge gained in recent years that HR BPO business cases did not always deliver a reliable short-term cost reduction solution but that an internal optimisation carried out with full force (under outsourcing pressure) makes more reliable and faster results possible.
As a result of its outsourcing market price comparison, Baumgartner has a unique and neutral partnership-based relationship with nearly all leading providers of out-sourcing in Germany. Consequently, Baumgartner & Partner know the possibilities and opportunities the collaboration with different outsourcing providers can bring. For a company that is engaged in concrete “cost take out” deliberations, this knowledge is a project accelerator: Concrete, current solutions offered by the providers can be incorporated into the deliberations about the “right” outsourcing scenario.
Example: If the goal is a short-term “cost take out”, the initial costs of the outsourcing, which in part significantly affect the payback period, can be financed with the help of the provider. Outsourcing providers frequently offer these financing options as market entry or market intensification program to reach strategic growth targets. Due to the knowledge of the respective current market situation and the strategic goals of outsourcing providers, better results can be achieved.
Baumgartner & Partner Unternehmensberatung GmbH
Kurze Mühren 13
D-20095 Hamburg
Tel: +49 (40) 28 41 64 – 0
Fax: +49 (40) 28 41 64 – 11
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