Study Finds Outsourcing Effectively Transforms HR
The results of an independently conducted study on outsourcing trends in the public sector show that shared services and outsourcing are effective tools for HR transformation and improvement in public sector agencies, yet these services have traditionally been overlooked or underutilized.
According to the study, conducted by the International Public Management Association for Human Resources (IPMA-HR) and advisory firm EquaTerra, outsourcing is beginning to gain ground in the public sector. Fifty-five percent of survey respondents reported using full or partial shared services solutions, and 17 percent now outsource some HR-related functions. ADP serves as a corporate sponsor for IPMA-HR and supports its ongoing research efforts.
“While this is positive momentum, public sector HR professionals still face hurdles in marshaling the internal resources and organizational support to build a case for change,” said Regina Lee, president, ADP National Account Services, part of ADP Employer Services Division of Automatic Data Processing, Inc.“Many HR departments are straining to overcome burdens caused by legacy systems, paper-based processes and recruitment challenges. This research shows that outsourcing could allow HR staff to move away from transactional activities to manage long-term planning, performance monitoring, innovation and improvement in taxpayer services.”
Glenn Davidson, managing director of EquaTerra’s public sector division, encourages government and other not-for-profit organizations’ HR decision makers to make the time and effort to understand the comparative benefits of alternative service delivery models. “Because of the extraordinary budgetary and staffing challenges facing public sector organizations today, HR professionals should take a serious look at shared services and outsourcing, especially given the benefits and improvements being reported by organizations already employing these models.”
Current Satisfaction Levels
The study provides feedback from senior-level HR officials in federal, state and local U.S. public sector agencies on usage trends and their satisfaction level with HR outsourcing.
In total, 94 percent of responding organizations that have outsourced HR functions were satisfied with the results. In addition, 53 percent said that the transition process for moving to outsourcing was relatively easy for the organization. Similarly, 53 percent of organizations indicated that they are likely to outsource additional functions in the future. Workers compensation is currently the most common HR function to be outsourced, followed by retirement plan management and benefits programs.
“Given the many challenges facing public sector HR departments and the increased emphasis on demonstrating HR’s added value to organizations, it is important that consideration be given to alternate HR service delivery methods such as outsourcing,” said Neil E. Reichenberg, IPMA-HR executive director. “There may be advantages that can be derived from alternate approaches.”
EquaTerra conducted this research via an online survey during June and July 2006. More than 100 public sector HR executives responded to the survey. Among all of the respondents, 57 percent identified themselves as the primary decision maker for their organization’s HR department. Seventy-seven percent of respondents were local government, municipality, city, county or town/township. Other respondents included federal and state entities, not-for-profits, school or special districts and other public organizations. Seventy-two percent of responding organizations serve between 10,000 and 499,999 constituents.
A copy of the report is available on the ADP Web site: www.nas.adp.com.
Automatic Data Processing, Inc. (NYSE: ADP), with nearly $9 billion in revenues and more than 570,000 clients worldwide, is one of the largest providers of a broad range of premier, mission-critical, cost-effective transaction processing and information-based business solutions. Employer Services (ES), a division of ADP, offers the widest range of HR, payroll, and benefits administration solutions from a single source, to meet the extensive needs of employers worldwide. Built with more than 50 years of industry experience, ADP ES’ cost-effective, easy-to-use solutions provide superior value to organizations of all sizes. Approximately 540,000 organizations rely on ADP ES for unparalleled service and compliance expertise, allowing them to focus on other core activities. For more information about ADP ES or to contact a local ADP sales office, reach us at 1.800.225.5237 or visit the company’s Web site at www.ADP.com.
The International Public Management Association for Human Resources is an organization that represents the interests of human resource professionals at the Federal, State and Local levels of government. IPMA-HR members include all levels of public sector HR professionals. Our goal is to provide information and assistance to help HR professionals increase their job performance and overall agency function by providing cost effective products, services and educational opportunities. www.ipma-hr.org/.
EquaTerra sourcing advisors help clients achieve sustainable value in their business processes. With an average of more than 20 years of industry experience in over 600 global transformation and outsourcing projects, our advisors offer unmatched industry expertise. EquaTerra has deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes with advisors throughout North America, Europe and Asia Pacific. We help clients achieve significant cost savings and process improvement with outsourcing, internal transformation and shared services solutions. On the Web at: www.equaterra.com. For additional information on EquaTerra’s public sector capabilities, please contact Glenn Davidson, 1.202.904.2310 or [email protected]