I was asked by a former professor to write a review of Peter Drucker’s “They’re not employees; they’re people” article to provide as an example to his class…I hope its a good example and not a bad one. I thought I’d share it here for others to read.
The main theme of this article is that an organization must be mindful of the fact that employee relations should remain in focus even while the organization is outsourcing their human resources function.
In recent years, outsourcing has become a widely accepted and implemented method of cost control. Organizations are outsourcing their human resource (HR) functions for various reasons, but the main driver seems to be to cut costs and to offload the headache of the “growing burden of rules and regulations” (Drucker, p. 73).
According to Drucker, a study performed in 1997 by the consulting group McKinsey & Company shows that a large organization can decrease labor costs by 25% to 33% by outsourcing human resource functions (Drucker, p. 74). The cost savings argument for outsourcing seems to be an easy argument to make for any organization; however, an organization must seriously consider whether they are willing to save money at the risk of losing control over one of the most important assets within the organization, which are the people within that organization.
Another argument that has been used in the past for outsourcing HR functions is that outsourcing non-core functions can help an organizations’ HR team to remain focused on the core (i.e., strategic) functions of the organization. This argument makes sense and is one that Drucker fails to address in his article, although it seems as though his focus was the effect on the people within the organization than on the actual outsourcing. To follow up on the thought of outsourcing non-core HR functions, author Davidson (1998) writes:
Most experts agree the outsourcing option for human resources continues to be a viable long-term solution. The key is figuring out what human resources activities are core, and which are noncore. If HR professionals focus their outsourcing strategy from a strategic-partner perspective, their plans will not conflict with efforts to support high-performance HR systems, but will in fact, support those efforts by leaving human resources to do what is most important, managing and supporting the organization’s most valuable capital – its human assets (Davidson, 1998, p. 40).
Davidson and Drucker both reiterate that human assets are an organization’s most important capital and that outsourcing HR functions can create (or destroy) strategic advantage for an organization depending on how the organization handles the outsourcing.
The article does a very good job of describing the outsourcing of HR functions and the reasons that this outsourcing has become so popular. The article also does a very good job of outlining the need of an organization to think of their human assets not as just “employees”, but as people who can bring a great deal of advantage to the organization.
The last line of the article does a very good job of summing up the entire argument: “Employees may be our greatest liability, but people are our greatest opportunity“ (Drucker, 2002, p. 77).
- Davidson, L. (1998, January). Cut away noncore HR. Workforce, 77(1), 40-45.
- Drucker, P. F. (2002, February). They’re not employees; they’re people. Harvard Business Review, 80(2), 70-77.
[tags] Peter Drucker, Strategic use of Human Resources, Outsourcing [/tags]