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How to decide if HR will help or hinder your firm
Keywords:
Human resource planning, Cost minimization, Contracting out, Organizational
In December 1999 BP gave away $600 million and responsibility for its global human resources administration and management. The seven-year contract, with then startup firm Exult, is the biggest HR outsourcing deal on record, and some would say it is a sign of the times.
HR is a constantly growing area, which has to be constantly aware of the changing business world which relies more heavily on freelancers, advancements in technology and new specialist skills. As a result, companies of all sizes are now considering HR outsourcing as a viable option, and it is a big business. In 2000, revenues amassed to almost $22 billion, claiming more than 8 percent of the total amount spend on HR that year, and figures are predicted to rise. But that is not to say it is right for you. There are as many staunch critics of HR outsourcing as there are advocates, and though both arguments can be persuasive, there appear to be several major factors that any firm should seriously consider before signing a deal.
Case study: BP and Exult
BP decided HR outsourcing may be right for them after a fast succession of takeovers, which brought them 100,000 new employees spread all over the world and a number of conflicting HR strategies. The organization was interested in saving money and increasing efficiency, and soon realized that an HR vendor may be able to cut their in-house HR costs and coordinate the systems in place. Exult, based in California, looks at companies that spread over at least five countries and have over 25,000 bringing in revenue of over $10 billion a year. They say they can cut costs between 10 percent and 20 percent per year. After some debate, it was decided that the firms were mutually attractive.
The subsequent deal made Exult in charge of running most of BP's HR processes, leaving BP with "only the things that would require judgment and policy". That was the first wise move: Exult brought their time and expertise to all administration issues, recruitment, development, training and relocation but ultimately BP maintained control. The second was both firms'...