Magazine article Personnel Journal

Are You Throwing Money Away by Outsourcing?

Magazine article Personnel Journal

Are You Throwing Money Away by Outsourcing?

Article excerpt

For years, HR managers have relied on service bureaus for payroll and HRMS functions. Now many are trading in their dependence for more flexibility and lower costs. Learn why from someone who has worked on both sides of the fence.

You're not alone. Throughout the 1980s, thousands of companies seeking greater convenience outsourced their payroll and human resources management systems (HRMS) to service bureaus. That phenomenon was indeed a lucrative trend for the service-bureau industry that reaped big profits for its shareholders.

At the time, it also seemed like a favorable trend for the customers of those service bureaus. Customers freed themselves from the high cost and frustration of maintaining their payroll/HRMS function in house on antiquated mainframe systems. Faced with government rules and regulations that rendered information access difficult on such systems, HR managers were joyous at the prospect of outsourcing the task.

Unfortunately, that convenience came with a steep price. Customers had to relinquish control and responsibility of their payroll/HRMS and learn to accept costly and often inflexible solutions doled out by the service bureaus. I know because I served eight years as a senior executive for one of the nation's largest providers.

Today, I'm on the other side, and I see the tide turning. Judging by the actions of hundreds of growing companies nationwide, we're witnessing a shift in the opposite direction as payroll and human resources managers seek to regain control of their systems. What makes this shift possible is a technological revolution that enables the development of payroll/HRMS software systems based on flexible PC and PC network platforms. With the advent of these inexpensive platforms, more and more users feel empowered to overcome misconceptions about the cost and complexity of implementing and maintaining in-house payroll/HRMS software.

Companies are proving that in-house solutions provide quick access to information, high levels of control and flexibility, and affordable long-term costsattributes not typically associated with a service-bureau environment. Bringing payroll services back home has benefits. Hundreds of companies that have made the transition from outsourced to in-house systems are reporting levels of efficiency and satisfaction they never knew existed. For example, after 13 years of rapid growth solidifying its position as one of the nation's leading home builders, Red Bank, New Jerseybased Hovnanian Enterprises Inc. (known as K. Hovnanian) recently embarked on a formal program to increase profits by examining and challenging its business practices. Because K. Hovnanian's workforce had expanded to 1,100, it's easy to understand why payroll processing-and the company's 12-year-old relationship with a payroll/HRMS service bureauwere among the first to undergo scrutiny.

K. Hovnanian's payroll supervisor, Pat Nazarro, says that making the transition from a service bureau to an in-house system impacted the very foundation of her department. "When we used the service bureau, I thought it was the best way to handle payroll," says Nazarro. "Now I realize I really didn't know payroll when we were using the service bureau. It controlled everything. I never learned anything because all I did was input data."

She recalls the total lack of control over payroll and scheduling. "Because of the service bureau's limited time frames, we were constantly bending over backward to send payroll data out to [the provider]. There was no flexibility in the bureau's schedule, so we didn't have time to check or question our output. That resulted in a significant number of errors and rework, such as manual and void checks," says Nazarro. Now that the company has more flexibility in entering and reviewing its payrolland the tools to immediately fix errorsHR rarely has to rework its computations.

Working and reporting in realtime. If you think it's tough maintaining a leadership position in the real estate industry, consider the pressures facing manufacturers of another high-demand product-telephone directories. …

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