OUTSOURCING - HR and Procurement Working Together

The human resources department is the first place that new employees of a company go when they find out that they get hired.  It is where they go when they have questions about payroll or sick days.  After all the stress of planning a wedding, a newly married employee can finally bring his or her marriage certificate to human resources and announce the marriage so that the employee’s spouse can be added to the employee’s health insurance plan.  Another joyous occasion involving HR is when the employee can ask for an employment verification letter to present to the loan officer when buying a home and applying for a home mortgage.

It is important to note, though, that all of the above situations involve employees officially employed by the company, the ones who receive a W-2 instead of a 1099.  Such employees are becoming a smaller and smaller part of daily operations at many large companies and institutions.  Companies are outsourcing more and more of the jobs that keep the company running, from food service to cleaning to insurance billing.  The department that deals with the workers who provide these services is the procurement department, not human resources.

This means that procurement and human resources often work parallel to each other, approaching similar issues from different perspectives.  For example, if the procurement department makes a contract with a cleaning company, they will need to know more than just how much the company’s services will cost.  They will need to figure out a sick leave policy for the employees of the cleaning company with whom the big firm has made s contract.  They need to decide what to do if the cleaning company goes out of business.  They could really use the help of human resources in dealing with these matters.

These days, it only makes sense for the human resources and procurement (also called purchasing) departments to work together and join forces.  This is because the cost-effective trend of hiring independent contractors is only getting stronger.  It also means that there needs to be a framework put in place for meeting the needs of the independent contractors who provide their work to big companies on a contract basis.  Procurement departments were developed to buy products rather than to manage the hiring and payment of independent contract workers.  They are in need of human resources expertise.  For example, what happens if the cleaning staff, the maintenance staff, and the cafeteria staff do not get paid on time?  To whom should they raise the issue of their late payment?  If there is nowhere for them to go to make sure that they get paid, they will stop working at that company.

Ideally, the procurement department will still be in charge of finding and managing contracts with vendors, but the human resources department will be in charge of recruiting the employees of those vendors, who will be working as independent contractors at the company.  The human resources department will be in charge of their payment and benefits and any questions they may have regarding those matters.

In many companies, the procurement department and the human resources department operate as though they live in two different worlds.  Procurement deals with vendors and tries to get the best prices on supplies so that the company can reduce its expenses and maximize its profits. Meanwhile, the human resources office deals with recruitment and payment of employees and termination if their employment when they retire or move to another job.  It is easy for the two departments to distrust each other, for human resources to think of procurement as only caring about the bottom line, and for procurement to think of human resources as being bureaucrats who will still have their cushy jobs whether the company succeeds or fails.  If the procurement and human resources departments cooperate with each other, then the procurement department can help the human resources department see the big picture about the company’s supply chain, and the human resources department can ensure that the independent contractors chosen by the procurement department get paid on time and that they understand their rights as independent contractors and feel like part of the community at the big company.

These days, the trend is moving toward less bureaucracy and toward companies trying to function according to a “leaner and meaner” model, which means hiring fewer permanent full-time employees and more independent contractors, even if those independent contractors end up having a long relationship with the company.  If the procurement department and the human resources department do not cooperate with each other, it will make for a disorganized and unproductive work environment.  If they do work together as a team, it will make the company more profitable and also make for a more comfortable work environment for the independent contractors who work there.