Take A Load Off! Overwhelmed by heavy HR duties? Try leaving inner-office issues to outside experts.

Kim Dushinski had had enough. A partner in MarketAbility Inc., aGolden, Colorado, book publicity firm, she had spent too many hoursstruggling to fill out personnel forms for the company's fouremployees. "Human resources isn't what I want to do orknow how to do, and it's not how we bring in revenues,"she says.

Then she heard about outsourced human resources, where specialtyconsulting firms take over the HR duties of a business. So the33-year-old entrepreneur contracted with an outside firm to handleMarketAbility's human resources needs--from payroll toadministering a health insurance program and a 401K plan. Themonthly fee Dushinski pays to have this company handle all the HRchores is less than $50 per employee. Although she'd initiallyhesitated to spend that money, nowadays Dushinski says, "Ifeel relieved of a burden and our business is doinggreat!"

Robert McGarvey writes on business, psychology and managementtopics for several national publications. To reach him online withyour questions or comments, e-mail rjm@mcgarvey.net

On the Outside

What entrepreneur hasn't spent long nights calculatingpayroll or pondering the wording to use in a memo reprimanding anemployee for slipshod performance? Now the question that needsasking is this: Should you be doing any of these things in thefirst place? None of it is fun, none of it augments your bottomline, and these reasons alone are why more businesses areoutsourcing at least some of their HR functions, according to EdLawler, director of the Center for Organizations Effective at theUniversity of Southern California (USC).

Why else are companies outsourcing their HR tasks? Two bigdrivers are propelling this trend: Number one, it's oftencheaper to farm out HR to outsiders who already have smoothlyfunctioning systems set up. Do it yourself, and there's thecost of your time. Hand it over as a part-time function to acurrent employee and there's the cost involved in wages and,quite frequently, this part-timer will take much longer to do HRtasks than a fully qualified outsider would.

The other driver: "It's a risk-aversion tactic forsmaller businesses," says John McGlone, a principal with BuckConsultants, a global human resources consulting firm based in NewYork City. Outside consultants who specialize in this field willprobably make fewer mistakes than insiders would--and when they domake errors, they may well be liable for making good on any lossesyou incur (due to employee lawsuits or negative IRS rulings onbenefits plans, for example). That may be a comfort toentrepreneurs, especially since HR has become increasinglycomplex.

Even large corporations have climbed aboard this bandwagon."Close to 100 percent of major companies are now outsourcingat least some HR functions," says McGlone.

Adds Tim Bourgeois, vice president of research at KennedyInformation, a Fitzwilliam, New Hampshire, firm that specializes intracking consulting industry trends, "Companies are focusingon core competencies, and outsourcing other tasks to others who cando them better."

Give It Up

Do you surrender control over your employees when you outsource?That's a large worry of many entrepreneurs, but Dushinski saysit doesn't have to be. "I haven't lost anycontrol," she says. "The outsourcing firm only does whatwe instruct it to do."

More broadly, when outsourcing HR, "You want to retaincontrol over the what; the how becomes the job of theconsultants you hire," says Greg Hammill, COO of Morristown,New Jersey-based Talent Alliance, an organization that specializesin developing career-management solutions for employees ofcorporate clients. "For instance, many companies are nowoutsourcing all of the hiring process. Consultants are running ads,screening applicants and doing background checks, but the hiringdecision is left to the employer."

"In deciding which functions to outsource and which to keepin-house, the key question is: Is this strategic to us?" saysHammill. "When the answer is yes, companies should keep doingthe job themselves."

For a more precise view, USC's Lawler surveyed more than onehundred companies to find out just what HR activities they wereoutsourcing. His findings show 87 percent outsourced benefitsadministration and 63 percent outsourced training, while 2 percentleft other HR concerns including the number of hires and programimplementation to outsiders.

You have to make your own decisions about what should beoutsourced. At MarketAbility, for instance, its outside firmhandles compensation and benefits administration and someemployment issues (including drafting an employee manual, creatingoffer letters for new hires, and offering guidance on interview dosand don'ts). Either way, entrepreneurs should retain controlover functions that are critical to your relationship with youremployees, says Lawler.

Few businesses would outsource decisions regarding merit payincreases for individual employees, for example, but otherdecisions may be best left to the pros. "An outsourcingconsulting firm can provide useful data on salary trends forparticular positions," says Bourgeois. "They have readilyavailable information, whereas it's frequently impossible foran individual business to [easily] compile it."

Be Choosy

Sold on the idea of outsourcing at least some of your humanresources functions? Choose your provider carefully, advisesMcGlone, who indicates that, as demand for outsourcing HR hasgrown, a number of companies have gotten into the field but gottenout just as fast. That's left clients scurrying to fill basicHR functions. The shrewdest way to avoid that mess is to closelyscrutinize candidates, paying close heed both to each company'scurrent client list and how many years it's been inbusiness.

Where should you look for HR consulting firms? Local businessYellow Pages may be a help, but the fastest hunting is done on theInternet. A starting place: Yahoo!'s list of hundreds of firmsthat handle HR chores. Find it by logging on to: http://dir.yahoo.com/Business_and_Economy/Companies/Corporate_Services/Human_Resources/Consulting/Prefer a more tightly edited list? Scan the entries at LookSmart,another search engine (http://www.looksmart.com). Betweenthese two search engines, you can find links to sites forspecialists located just about anywhere in the nation.

Surprisingly, price will probably not be a huge factor in yourchoice of a vendor. "There's less and less variation inbids," says McGlone. He explains that as the industry hasmatured, it's grown smarter about how to price its services,and most established firms will make bids that differ onlymarginally. But not all firms will deliver the same quality work."Be alert to differences in how much your fee is buying,"says McGlone.

That's key, because about half the respondents toLawler's survey had a gripe about the quality of the work doneby their HR outsourcing firm. "Services not as good aspromised," said 53 percent. But, significantly, scarcelyone-quarter reported "negative reaction from employees,"meaning workers won't likely object to an outside HR provider.Indeed, sometimes employees actually welcome the switch if it meansservices are provided more consistently and professionally thanthey had been when HR was, at best, a secondary job duty formanagers in their company.

"HR outsourcing is growing in popularity simply because itworks for client companies and their employees," saysMcGlone.

Dushinski seconds that: "With HR outsourced, we have somuch more time to really service our clients and grow the business.Outsourcing works for our employees, and it definitely works for mycompany."

Next Step

• Outsourcing your HR tasks is a major decision that impacts bothyour costs and your employees. Do your research before making anydecision. A good starting place: Outsourcing Human ResourcesFunctions (Amacom), by HR executive Mary F. Cook. At $75, it'spricey, but it provides such helpful details as a 12-pageoutsourcing plan, tips on how to negotiate a contract and pointerson selecting a vendor.

• Find out still more at The Outsourcing Center (http://www.outsourcing-center.com),a site that features plenty of links to consultants as well asarticles, an outsourcing magazine (Outsourcing Journal), and linksto a library filled with many more books on the topic.

Web Site

http://www.jsc.nasa.gov/bu2/inflation/eci/inflateECI.html

Think your employees are costing you more for wages and benefitsthan they did three years ago? You're right--and now you canknow exactly how much with a quick visit to The Employee Cost IndexInflation Calculator. With a mouse click, you can scroll back, yearby year, and see exactly how fast employee costs have risen. Thegrim news is that $100 paid out in 1981 equals $200.70 today,meaning that inflation has been almost exactly 100 percent over thepast 18 years.

Contact Sources

Buck Consultants,http://www.buckconsultants.com

Kennedy Information,tbourgeois@kennedyinfo.com, http://www.kennedyinfo.com

MarketAbility Inc., (888) 55-TWIST, http://www.marketability.com

Talent Alliance,info@talentalliance.org,http://www.talentalliance.com