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When looking to obtain competitive advantage, focus generally falls upon the work of the sales force, customer services and/or distribution department. Human Resources is rarely seen as a department that can add significant benefit – it is seen as a necessary, but peripheral part of today’s businesses. However, HR is a crucial factor for business success, for a number of simple reasons. The ability to recruit suitable and capable staff, develop their skills and ability, and retain people investment is vital and this underpins the work of the sales force, customer services and distribution department.

To add more value to an organisation, the HR operation should focus on recruiting, developing and retaining its staff to ensure the organisation grows and helps impact the bottom line. With the hard work and commitment of such staff, the HR operation can highlight its growing importance to its board members. However, few HR departments have the luxury as the demand for payroll and administrative tasks increases. Complex and time-consuming functions, such as coping with new legislation here and abroad, ensuring correct tax codes are being used, and policies for freelancers and home-workers, highlight the argument – ‘could outsourcing your HR and payroll give you a business advantage?’ This results in a shift in focus, which stops the HR department adding the highest level of value to the business operation.

This dilemma, traditionally faced by the HR director alone, is now becoming an increasing issue of discussion amongst financial directors. By outsourcing HR and payroll it will allow a shift in focus to more beneficial issues for the HR team. Recent Chartered Institute of Personnel Development (CIPD) research, has highlighted the increasing fact that people do impact on the bottom line. A mammoth report entitled Impact of People Management Practice on Business Performance, sponsored by the CIPD, showed that 19 per cent of increases in profitability and 18 per cent of increases in productivity, amongst those surveyed, are explained by HR practice. There is also the need for a greater understanding of HR, for example, how much productivity is lost due to absenteeism? The Kingsmill Report focuses on people accounting and underlines the need to educate organisations on the changing face of human capital. Financial directors have responsibility for budgets and have to manage them through difficult economies and increasing competitiveness.
 
Many companies have adopted different approaches to tackle day-to-day administration and payroll services by outsourcing part or all the functions of their HR processes. By doing so, these companies gain further expertise in driving down costs and reducing risks. HR directors have been able to focus on strategic issues and raise profiles with the senior members of the board. This strengthens the argument for adopting an outsourcing approach as it can reduce administration tasks and operational costs.

In a recent report by analyst house Meta Group, called Outsourcing Desk Reference[1] over 70 per cent of companies surveyed are already using some form of outsourcing, with the majority expecting to embrace the model by 2006.

So how can outsourcing give your company a competitive edge?

There are several benefits including:

• Removal of risk – using an outsourcing specialist who has access to the latest status on employee legislation is advantageous. By doing so, this will reduce the possibility of facing expensive industrial tribunals. A popular issue of concern for organisations is data security. Outsourcing organisations will offer its clients a highly secure back-up facility in comparison to company’s own system.
• Added value to the business – management time will be available to focus on strategic issues. The use of outsourcing services will also provide the HR management team with access to high-level advice. This source of advice will allow for the collaboration of ideas, which will prove beneficial to any organisation.
• Cost and time-savings – these can be significant. The review of current systems, which often cause duplication in data and time, can be assessed independently.

One company who has seen the benefits of outsourcing their HR and payroll function to specialist firm RebusHR is Novo Nordisk.
 

Novo Nordisk case study

Novo Nordisk is a focused healthcare company and a world leader in diabetes care. It also manufactures pharmaceutical products for areas such as growth and hormone therapy, hormone replacement therapy and haemostasis management. Based in Denmark, Novo Nordisk employs over 18,000 people located in 68 countries.

RebusHR was brought in to advise and select a solution for Novo Nordisk. A reorganisation of the company and the creation of a new ‘Europe North’ business area meant that an immediate review of its HR operation for the UK and Ireland was necessary.

Henrik Juuel, operations and finance director, Novo Nordisk Europe North, stated, “From my perspective, the value of the relationship with RebusHR is twofold. Firstly, we have managed to reduce the spend on HR quite significantly and, secondly, we have access to a very professional service.”

Since the autumn of 2002, RebusHR has become the UK and Irish ‘HR department’ for Novo Nordisk. This relationship includes the provision of all HR support services and administration, which employees can benefit from to drive their career with the company.

Jueel said, “It is increasingly hard for internal resources to keep up with ever-changing employment law. Outsourcing is one way of dealing with this hurdle. It is also another way of getting professionals to deal the administrative side of HR so that our own HR staff have more time to deal with strategy that directly benefits and impacts the business. This has lead to great cost savings, without forsaking efficiency and quality, whilst minimising risk. One example of this is that we no longer require additional legal support to help with employment legislation. All of this makes outsourcing your HR and payroll functions a prime proposition to any organisation that wishes to operate to the best of its ability.

“We have deployed some of RebusHR’s facilities and retained our HR team, so that they may focus on primary issues, such as training, development and performance issues.”

By outsourcing the HR function in the UK and Ireland, Novo Nordisk believes it has gained access to a wide range of professional services that alternatively would have required a large and expensive internal department.

1. Outsourcing Desk Reference – Outsourcing & Service Provider Strategies, Service Management Strategies, Research Reports – June 30, 2003 by the META Group.

(This article was originally published in Director of Finance 2004 edition)