Report: Gov't HR goes out

The Conference Board

Governments are starting to outsource human resources functions to the private sector, largely because of the cost of the systems that are supporting those tasks, according to a new report.

The same factors that created an environment for HR outsourcing in the corporate world are at play in the public sector, including cost, aging information systems and the need to focus in-house human resources employees on more strategic issues, such as workforce planning and training, according to the report conducted by the Conference Board, a nonprofit organization focused on management practices, and sponsored by Accenture HR Services.

The cost of replacing legacy systems is a large driver. Many of the existing systems are decades old and need to be replaced, but to do so, governments must spend up to $100 million, which is too costly for many state and local agencies.

More than 76 percent of the corporate world outsources at least some part of their human resources, although the move to outsource that function was much slower than other functions, according to the report.

There are many constraints on the public sector that do not exist in industry, particularly legislative barriers. The growing number of laws in the United States against outsourcing outside of a home state or overseas — also known as offshoring — which can "prevent or stall even the most carefully thought-out HR outsourcing effort," the report states.

There is still little formal documentation or statistics for the trend in the public sector, but after discussions with government officials in many countries, Conference Board officials identified several trailblazers, including the Transportation Security Administration; Detroit public schools; the Florida Department of Management Services; and the Texas Health and Human Services Commission in the United States, the State of Victoria, Australia and the city of Copenhagen, Denmark.

However, one person quoted in the report said, "All it takes is for one high-profile initiative to fail or not do well, and everyone can point to it as example of why not to" outsource.