How outsourcing creates a skills shortage

Written by
Changeboard Team

27 Sep 2013

27 Sep 2013 • by Changeboard Team

Outsourcing HR

The move towards outsourcing, combined with more HR executives moving into commercial and transformational roles has left a gap. As a result, those who saw themselves as true systems and process professionals have felt somewhat ‘left behind’ as they struggle to find a niche for themselves.

With changes in the market, many organisations have chosen to outsource operational HR activity. That’s meant to create efficiencies and improve service levels for staff and customers alike, but very often it does neither and at the same time our view is that it has created a skills gap among up-and-coming HR professionals.

No longer can junior HR staff see a career path which enables them to work their way up the ranks, from HR adviser to administrator, manager and director. That absence of hands-on experience has led to a lack of talented staff with an appreciation of the real basics of HR, as opposed to the more commercial elements.

Pitfalls of outsourcing

It is ironic then, that what the market is seeing right now is a focus on improving operational HR, creating strong demand for – and indeed a shortage of – individuals who are good at those process and policy roles.

It’s a demand driven by the fact that in many cases, outsourcing simply hasn’t been the solution that many organisations thought it would be.

Everyone often assumes that outsourcing is cheaper and creates greater efficiencies, but organisations are naïve if they think it's the easy answer. You have to own and understand the processes and make sure they work for you and your company.  

It’s important to realise that every business is different, staff need to be communicated with in a variety of complex ways and a template style approach, which is often used by outsource providers, isn’t necessarily the best solution.

Advice for outsourcing

Our advice is don’t try to outsource a problem; if you can’t get it right in-house, then the chances are an outsourced provider won’t be able to do so either. Many organisations are now realising that and turning away from outsourcing.

Trying to fill that skills gap will be tricky. Anyone who has worked in outsourcing may find it difficult to make the transition into the corporate world of HR. On the plus side, those in-house candidates who have stood their ground and been involved with outsourcing programmes from within will be best placed when it comes to sharing their experiences and using them as a springboard for the future.

Case study

Andrew ElvinAndrew Elvin has more than 12 years experience as an interim manager in HR and programme management, working for companies including BSkyB, Dairy Crest and Honeywell. He says the fact that many organisations have chosen to outsource transactional work and retained the more value-added elements, such as business partnering, has led to HR functions being split across two areas and the break in more traditional career paths.

“By taking this approach, the links for natural progression between the two functions have been severed,” he said. “There then becomes a ceiling for those in outsourced HR shared services operations and there is no natural supply for the business partnering function retained by the client company.

“If organisations have outsourced their transactional work, then the traditional route for developing and nurturing talent and the HR business partners of tomorrow, will no longer be there for them.”

Elvin says although insourcing will remove this particular problem, it means the company no longer has the advantage of the specialist expertise and economies of scale that outsourcing can provide.

Another option would be if firms chose to outsource the entire HR operation, removing any career barriers in the same way as if the function had been retained in-house.

One possible intermediate solution, he says, is if both client and outsource provider are able to agree that outsourced staff in a central shared services operation can move back in-house when opportunities arise.

“This enables career paths to be maintained across the two organisations,” he said. “After all, it's in the outsource providers’ interest that their staff go back to client companies, as they take with them the understanding of how the processes operate, rather than lose them to other organisations.”

For those keen to progress their careers and grow their skills across all areas of HR, he says there will always be a need to move companies in order to gain a broad range of experience.