HR is dead, long live OD – or why organisational development may be all that’s left for in-house HR

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Outsourced HR has often suffered a bad press – and for a variety of reasons.

These have included the complaint that the meter is always running, so any little extra you ask for leads to another bill. There have also been criticisms that the outsourced processes don't work and fail to reflect the needs of the business. Perhaps the application of a little critical thinking (something sadly lacking in many HR teams in the past) can highlight some simple ways of ensuring that out-sourcing HR does deliver the value.

HR's rush to outsource has sometimes been driven by a desire to get rid of broken processes. If you outsource something that didn't work in the first place, it shouldn't be a surprise that it still doesn't work when it is delivered by someone else. Some of the big outsourcers got wise to this a couple of years ago and started to reject outsourcing deals because of the risk in taking on clients' broken processes. So Lesson 1 is: outsource what works, so that it can be delivered even more efficiently and effectively than in-house delivery.

Case Study

Russell Beck, MD at HR outsourcer Carlisle Managed Solutions, describes how its work is enabling its customers to deliver greater HR value through outsourcing.

"As a key outsourcing partner in HR, Carlisle Managed Solutions enables our customers to better plan, attract, select, on-board and engage their talent; in short, to help them in all aspects of their most critical resource: people. The key to any successful outsource is partnership; you can outsource something that is broken, but you have to realise it is broken and the fact that it is, is one of the reasons why you are considering outsourcing in the first place.

"At the simplest level, a good outsourcer removes all the administrative and processing burden of resourcing and recruitment from the business, enabling HR (and indeed hiring managers) to do what they were employed to do in the first place – manage, grow and develop the business. Whether embedded in our customer's organisation or located off-site, a good outsourcer provides a holistic solution delivering temporary, contingent and permanent hires from a single source. Resourcing business partners support and consult with hiring managers through the entire process as a one-stop shop again enabling the managers to focus on their roles, not on recruitment per se.

"Carlisle is a firm believer in looking to make resourcing strategic and not tactical. The more reactive your recruitment, the longer it will take; it will be expensive and it will not produce quality candidates. All too often planning is not useful or indeed not used to enable strategic decisions to be made.

"By linking the business planning to people, by marrying strategic initiatives with attrition data, it is possible to get a view on future hiring and to use that to proactively build talent pools, allowing shorter hiring times, higher quality and reduced costs. Interestingly, the public sector is starting to drive these initiatives by redeploying its internal labour, by initiating demand management and by realising what it needs to be tomorrow and hence the people it needs in that future state. ?But what is value and what price service? This depends on what the organisation wishes to achieve. Success in any outsource should be measured by the value it delivers and ultimately the value is related to Total Cost, not the margins on any specific hire or group of hires.

"Carlisle engages in different ways but increasingly is rewarded on metrics that fall beyond a traditional recruitment business. We are measured (and rewarded) on reducing attrition (note, a recruitment business paid for reducing future hiring needs....!), for demand management (again, a recruitment business rewarded for reducing the number of hires it manages), for introducing Top Talent (better sales people = more sales = more value), for managing pay rates, gain-share models and of course for process efficiencies: consolidated invoicing, reducing the time managers spend in the process, improving the employer brand, redeploying staff etc.

"Carlisle's engagement starts with a customer, then evolves and changes to meet the dynamics of that customer, so that within three years our service can be a step-change from where we started together.

"A lack of commerciality and sophistication in HR has, at times, led to difficulties in working with external suppliers and negotiating both costs and service levels. If you don't know the current resource demands of the services you deliver in-house, it will be hard to out-source and save money.

"Demand for short-term cost saving may lead to a tough negotiating stance with external suppliers, but you will get a correspondingly more basic service. Will this enable you to deliver sustained longer-term value to your organisation? So Lesson 2 is: negotiate for real value, not just quick cost savings.

"The capacity, capability and willingness of line managers to engage in people issues should also play a fundamental part in a decision to outsource (or not). As part of this decision, you have to think about what your organisation really needs from its line managers. (It may not be taking on the transactional load from an HR team that wants to 'be more strategic'!) This will enable you to assess how HR can be most useful to line managers. If you conclude that this can best be achieved by providing the processes, frameworks and tools for line managers to run the human side of their organisation, then a decision to outsource might well be sensible. So Lesson 3 is: be clear about the role of HR in your organisation."

Now what?

Imagine then, your organisation has decided to outsource most of the work that traditionally belonged to HR and that it has achieved this successfully. Now what does HR do? Well, there will still be a need to manage the outsourced contract effectively, so some HR people may end up working inside organisations in this area.

However, this is probably not enough. HR needs to find a way to add value in a much more fundamental way. We believe that the future for HR inside organisations may lie in the more systemic and strategic field of Organisational Development (OD).

OD as a field seeks to focus the organisation on this fundamental question: how can the organisation meet the needs of its stakeholders and deliver on its mission as effectively, healthily and sustainably as possible?

Practitioners of OD come in a variety of guises. Some are involved with initiatives around strategy or change; others are focused on leadership development or people issues. OD initiatives can be 'harder', for example restructures or job design, or 'softer', for example employee engagement or team development. Many successful OD practitioners find themselves in the role of 'trusted advisor' to the board or CEO. They are often the people who 'speak truth to power', or who act to apply a little organisational glue.

How can HR contribute to an organisation's OD agenda? At one level, there is perhaps a natural fit, because so much of OD is about people. The difference is that an OD perspective requires a more organisation-wide and 'systemic' orientation. The OD practitioner needs to analyse where the different bits of the organisation do and do not fit together. For example, does the performance management system encourage individualistic behaviours when the strategy requires more collaboration? Or is the way we roll out a new set of values in keeping with the values themselves?

Successful OD people are able to help line managers and the top team to see the connections between these kinds of question and the delivery of the organisation's overall objectives. This in turn requires a strategic perspective that is steeped in the organisation's business imperatives. It also requires of the practitioner enhanced skills around consultancy, business partnering, relationship building, influencing and working skillfully and constructively with organisational politics.

Of course, we are not the only people arguing that HR should be embracing OD. The CIPD has included OD in its professions map, and many HR and learning and development teams are moving towards OD, bringing in OD specialists and in some cases even being renamed as OD. This is all potentially positive in our view, providing those involved actually have the knowledge, skills and personal qualities to deliver an OD agenda. The risk otherwise is that the shift towards OD becomes a meaningless change of label and the credibility of OD as a field is diminished.

In light of this, our big question is: how can HR people move into OD in a way that builds their own competence and confidence, along with the reputation of the field of OD as a whole? This is a question we are continuing to explore with our clients across a range of sectors.

Ed Griffin is a development partner in the Breathe Partnership, a consultancy specialising in executive development and strategic HR and Martin Saville is co-founder of Mayvin, an OD and leadership consultancy

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