In-Sourcing Human Resources Services

Opportunity or Devastation?

Due to the tight economic times, the Board of Directors finally decided that the Human Resources Department (HRD), which staff have loyally served for the past 10 years, is to be downsized in an organizational restructuring with some of the core HR services to be outsourced.

Sally (HR Director), when breaking the news to the department gathering of staff on Monday morning informed them that: “We have been given a month to decide if we wish to stay in the down-sized department (and take our chances in the selection process) and three months to find another job if we choose to leave. Those who decide to stay, but are not re-appointed, will be retrenched. Those who are retained may be re-appointed at lower salaries. The Board is open to suggestions about different options that must reduce HR costs”.

When exploring the options in the meeting, Sally asked for suggestions. Jake opened the conversation with the following statement: “Maybe we should create an HR consultancy. Some have suggested this before. Starting up an internal HR consultancy would appeal to me. Many here like the idea of working for ourselves but are not sure what type of business to start-up.”

The HR team seems to be heading toward recommending a HR consulting service of some type – either internal or external. Jennifer added: “I like this idea. We all enjoy HR and have served this corporation for so long. I think that running a HR consultancy would provide great flexibility in work commitments and allow us to work flexible hours – and maybe for only six months of the year. It will allow us to enjoy more family time and more travel in the down times”.

After the initial shock of the Board announcement, the HR team suddenly started to feel invigorated and excited by the freedom that such an opportunity would give.

The Challenge

The immediate challenge is to identify the specific opportunity that best appeals to the HR team and then test and develop the idea into a workable business plan. Javier chimed in: “Has anyone ever conducted an evaluation of a business opportunity like this and then developed a business plan? Maybe we need some outside help!”

Quiet Li suddenly jumped into the conversation: “Maybe, just maybe, we develop our business plan and ask the corporation to fund it. We could also build a business around helping others do the same”.

The minds in the room were racing ahead full of exciting opportunities.

What do we need to know?

Sally, energized by the up swell of enthusiasm in the room, went to the whiteboard and started focusing the conversation on mapping the concept – and what to do next. “Well, first we need to know what to put in the business plan. Once we have done that then decide how to take it forward to the Board. I agree with Li, maybe they will see we can help others do the same for a fee and then charge them less here”.

Sally wrote the following headings on the whiteboard:

a) ‘Product’ description;
b) Business direction;
c) Product and market analysis (market plan);
d) Financial highlights;
e) Operational plan, and;
f) Funding requirements.

“What have we missed?” She added.

Taking the Idea Forward

Comments and ideas erupted in the room:

* Let’s conduct a 2 day workshop on the idea
* What do we need to put in the business plan? I got a friend who can help with this!
* We need about $5 million to get this going!
* Man, I could spend a lot of quality travel time!
* I always wanted to be President of my own company
* With the longest service here, I think I should be the President of the (HR) company
* What if I don’t get a job here? I got family!
* What will be my salary and will we receive retirement benefits in this?
* Hell, the Deputy President ain’t going to like this!
* We could all get fired!

What do you suggest the HR team do – and why?


Why not send this mini-case to your friends and have them write some thoughts and post them.

If there are enough responses we will produce a catalogue of the responses and send it to you. If the respondent includes their area of responsibility we can categorise them by how different organizational functions think about strategic issues. Please feel free to use this mini-case in a workshop (with attribution to Strategic Outcomes Group).

7 thoughts on “In-Sourcing Human Resources Services

  • Ted,
    You may well be right, however, after 30 years of consulting I suspect the external consultant has an equally difficult time grasping the fine nuances of the internal perspective (and culture). Notwithstanding the external should be well-practiced in getting to grips with it in short time.

    Comment from: Strategic Outcomes

  • In my experience, internal consultants lack external perspective. Internal consultants don’t have the perspective of working with other customers. They can’t bring the best practices of other corporations to their consulting roles.

    Comment from: Ted Christian

  • Regina,
    The first thing I would want to know from the President, is this a ‘cleanout’ of the HR department or a genuine cost-reduction decision. If the former, then forget creating an internal consulting business. Of the current HR team, who is made of the ‘right stuff(?)’ (drive, energy, interpersonal style, and economic security to weather a short-term downturn in income) to make it work. Note in the latter comments from the HR team, some are indicating second thoughts about the idea (mostly about personal financial security) and others have unrealistic expectations of a decreased workload. If all the signs are good, then conduct an exhaustive assessment of the opportunity (e.g., how much capital required, and the source of capital) as well as, strategies for exploiting the opportunity including the exit strategy for the business (e.g., build and sell via an IPO or a direct trade sale or the like).
    These are my thoughts.

    Comment from: Strategic Outcomes

  • No idea! What should they do?

    Comment from: Regina Cooper

  • I think it depends on whether the internal team can master the interpersonal and cultural dynamics that occur in virtually every consulting project.

    Four of these constants include:
    1. Resistance to change.
    2. Process versus content.
    3. The role of culture.
    4. We’ve heard every objection.

    Comment from: Regina Cooper

  • Reg,
    Spot on!

    Comment from: Strategic Outcomes

  • Good question.

    Internal Consultants are being used across the organization from corporate planning/business development to various human resources and other support/service functions.

    The growth of internal consulting has been due in part to organizations trying to get more value from their overall “consulting spend.” This includes focusing more on implementation and continuous improvement in addition to more effectively transferring technology from external consultants to the organization. ICs are also often involved in negotiating external consulting contracts, teaming with external consultants on large projects and maintaining a roster of qualified consulting suppliers who can supplement their services in times of heavy or specialized demand.

    Comment from: Reg Santori

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