David Rodeck

HR Outsourcing, Part III: Measuring the Success of Your New Relationship

After a thorough search, you’ve found and onboarded your HR outsourcing partner. Now you can spend more time on your business and let the outsourcing firm handle HR administration. But even if things are going well, don’t get too complacent. “Set it and forget it” doesn’t work with outsourcing.

Right from the start, you should be measuring the success of your new relationship to make sure it’s going properly. Here’s why — and how to do it.

Why You Need to Pay Attention

The goal of HR is to develop a workplace environment and culture your employees can succeed in. When you outsource part of your HR efforts, it’s easy to lose track of this important work, and you might not realize something is off until it’s too late and key employees start quitting.

Even if you’re working with a highly rated and professional firm, you should still watch any new developments carefully. Not only does this prevent some of the problems that can come with small business outsourcing, it also ensures that you continue to have a say in the process. For instance, a standard job posting template used by an outsourcing partner might be too generic, and you’ll have a better idea than anyone outside of the company of what makes your openings a unique opportunity for candidates. Knowing where both parties bring value to your overarching goals is crucial to success, and paying attention along the way helps you find ways to get the most out of your partnership.

Track Performance Metrics Beyond Cost Savings

Part of what makes HR outsourcing so attractive is the savings it delivers compared to keeping everything in-house. But as happy as saving money may make you, it’s not the only measurement of a successful relationship. Think back to your original goal for outsourcing and the main pain points you were trying to solve. Were you trying to:

  • Speed up hiring?
  • Add workplace benefit options while paying less?
  • Protect yourself against compliance risk?
  • Create a better employee handbook?

Depending on the scope of your HR outsourcing contract, the firm could start tackling a wide range of issues at once. But your goals and priorities should heavily influence the work they do. Some of the metrics that show the effectiveness of your HR system include:

  • Cost per new hire.
  • Employee satisfaction, including benefits satisfaction.
  • Employee turnover and absenteeism rates.
  • Employee training completion and satisfaction.
  • Retention and success rates of new hires.

Track the metrics you think are the most important going forward and compare them against your original performance. If your HR outsourcing firm is doing a good job, you should notice improvements in these areas on top of reducing your costs.

Making Adjustments

If you start seeing red flags — think larger issues like a dip in employee morale across the office or a lack of progress on your top priority — reach out to your HR outsourcing firm with your concerns. The firm should be motivated to do better, especially if you have a flexible contract that allows you to leave at will.

Try to figure out whether it’s a problem with the firm itself or if you outsourced a job that should have been handled internally. For example, could your hiring be off because it’s more effective when you give candidates a firsthand understanding of your culture? This is why completely shutting down your in-house HR efforts isn’t always a good idea, even if the switch saves money on paper. If the outsourcing relationship hits a bump, consider shifting some responsibilities back to your department.

Now, what if you don’t notice any issues? Even if things are going perfectly, still ask for updates from the outsourcing firm at least once a quarter, and continue surveying employees for their ongoing satisfaction when it comes to HR-focused tasks like benefits administration and training. In the end, outsourcing HR is meant to make your life simpler — but that doesn’t mean you can put HR entirely out of your mind. Measuring the success of your outsourcing efforts will ensure that your business runs smoothly, both in your own workplace and from your outsourced partner’s.

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