When the H.R. Office Leaves the Building

WHAT ever happened to the human resources department?

It used to be that H.R. was a single, physical place that workers could visit — to pick up a form, ask a question, seek advice, lodge a complaint. Now if a company still has a stand-alone H.R. office, it’s probably much smaller than it used to be. If workers need help, they may have to call an “800” number, consult a Web portal or use a software program.

The outsourcing of H.R. has accelerated over the last decade and will continue to do so, said Lisa Rowan, a research vice president at IDC, the market research firm. While some companies may entrust their H.R. needs to a single outside firm, it’s more common to parcel out functions to a range of outside providers, she said.

Outsourcing allows companies to offload work that isn’t part of their core business. It also saves money. But some H.R. experts are concerned that the trend has gone too far, to the point that employees are suffering in areas like training and career development, and that employers are losing crucial business opportunities.

If you look at the wide-ranging traditional duties of human resources, it’s no wonder that companies are seeking outside help. “H.R. is supposed to be responsible for finding, developing, retaining and training the best people,” Suzanne Lucas, author of a blog called the Evil HR Lady, said in an e-mail. It can also be responsible for benefits, compensation, employee and labor relations, business partners, data collection and legal issues.

Outsourcing firms can take up various tasks, from payroll to benefits to recruiting, to free up a client to focus on its strengths, said Don Weinstein, senior vice president for product management at ADP, a large H.R. outsourcing firm. The new health care reform legislation, for example, will have a big impact on employers, some of whom may be overwhelmed by its complexities. Firms like ADP have expertise in areas like this, and thus relieve a big burden, Mr. Weinstein said.

In the last 10 years, the focus of human resources has shifted toward legal compliance and data collection, said Ms. Lucas, who now lives in Switzerland but has 10 years of H.R. experience in the United States. At a company that doesn’t have the means to hire specialists, she said, outsourcing can allow it to “gain vast resources for a relatively small amount of money.”

Problems arise if outside vendors are concerned mainly with maximizing their income and lowering their costs, resulting in “low flexibility and poor service,” Ms. Lucas said. It’s in the best interest of employees at this kind of vendor “to provide as little service as possible,” she said. And at such a vendor’s call center, she said, “I don’t even have to care about morale at your site, because it doesn’t affect my day.”

(Mr. Weinstein asserted that ADP is able to maintain high-quality, individualized service through its call centers.)

MS. LUCAS said that if human-resources professionals work for the same company as the employees they serve, their interests are more closely aligned. If your performance is good, “the company will make more money,” she explained. “A better-performing company means a better bonus for me, a happier workplace, and fewer problems all around.”

But many internal H.R. functions have been “cut to the bone,” said Peter Cappelli, a management professor and director of the Center for Human Resources at the Wharton School of the University of Pennsylvania.

Therefore, the idea that companies will be more strategic about human resources after they outsource “requires some heroic assumptions,” said Professor Cappelli, author of “Why Good People Can’t Get Jobs.” Supervisors may be able to take over some important roles, but many of the people who were experts at recruiting, training and career development have been laid off, he said. So is it any surprise, he added, that companies complain that they can’t find good people?

“The world has moved toward self-service,” he said, and that puts the emphasis on technology, and on information over advice. Sometimes, he said, “there’s literally no one to talk to.”

Other times, there’s the call center. There, Ms. Lucas said, you may find someone who is reading from a script — and often that’s enough. But when your problem is complex, it can be hard or downright impossible to have it solved, she said.

“The best outsourcing leaves some competent H.R. staff as employees,” she said. “When the call center can’t answer a question, they can refer you to the in-house person. It saves money and still provides individualized expertise for employees.”