Sarah Jenkins sat across from her CFO with a familiar knot in her stomach. “I know our outsourced HR services are delivering value,” she said, sliding a spreadsheet across the table.
However, this HR director at a mid-sized manufacturing company was struggling to say exactly how much value. “We’re saving on headcount—but I’m not sure it’s enough to justify the investment?”
The CFO’s response was predictable.
“If we can’t measure it, how do we know it’s working?”
Unfortunately for Sarah (a composite based on Corban OneSource customers, like other names mentioned in this article) and her peers, this scenario plays out far too often.
The fact is, HR leaders struggle to articulate the true value of investments in outsourced HR. While 70% of companies now outsource at least one HR function, many still don’t have a robust framework for measuring the overall value that outsourcing delivers.
This is important—because whether you’re considering outsourcing for the first time or you’re trying to improve an existing arrangement, understanding how to measure the impact of outsourcing is critical.
This article will walk you through creating a measurement framework that captures the benefits of outsourced HR—so you can make the financial case and, ultimately, show the strategic value of your decision to embrace HR outsourcing.
Outsourced HR: From Cost-Cutter to Strategic Advantage
The conversation around measuring success with HR outsourcing has changed a lot over the past decade. What used to be a simple exercise in cost reduction has become an assessment of strategic value.
“Ten years ago, the only metric anyone cared about was cost,” says Michael Rodriguez, an HR leader who has managed multiple outsourcing transitions. “Today, executives understand cost matters, sure. But they also know the strategic value of outsourced HR services goes way beyond the bottom line.”
This mirrors the evolution of HR itself. As human resources has moved from an administrative function to a business partner, the metrics used to measure outsourcing services have evolved too.
Current stats show this shift in perspective. While cost is still important, most organizations now see additional value:
- 45% of companies cite access to specialized expertise as their number one reason for outsourcing HR functions.
- 60% report improved compliance after making HR outsourcing arrangements, as well as a 50% reduction in administrative workload
These measures matter—to both HR and finance leaders.
For HR executives like our fictional Sarah, a good measurement framework gives them confidence that their outsourcing decisions are delivering real value.
For CFOs, these frameworks give them assurance that their investment in outsourced HR services is generating returns across multiple dimensions.
KPIs That Count
Developing a measurement framework starts with choosing the right key performance indicators (KPIs). There’s no one-size-fits-all approach, but certain metrics demonstrate value no matter what your organization prioritizes.
Service Delivery
Your HR outsourcing company’s effectiveness is important, both to your employee experience and your own organizational efficiency.
A study of 120 HR executives found the most important aspects of service delivery quality:
- Consistency (rated important by 83% of respondents)
- Accuracy (rated important by 79%)
- Speed resolving problems (rated important by 66%)
- Process efficiency (rated important by 61%)
Lisa Chen, a benefits manager at a healthcare organization, shares her experience. “When we outsourced benefits administration, our most important metric became accuracy. One mistake in benefits enrollment could impact an employee’s ability to get healthcare. We measure accuracy monthly and expect 99% or better.”
Compliance and Risk
One of the main reasons organizations outsource HR is to improve compliance and reduce risk, especially when operating across multiple states.
Good metrics in this category include:
- Decrease in compliance violations
- Time to resolve audit findings
- Percentage of processes with documented compliance controls
- Number of on-time regulatory filings
Frank Williams, CFO at a retail chain, emphasizes the importance of these metrics. “A single ACA violation could cost us $350,000. When our HR outsourcing company showed a 95% reduction in compliance issues, that translated to real dollar value in risk mitigation.”
Financial Impact
While cost isn’t the only reason you should outsource, financial metrics are still a good measure of value. Organizations typically see 15% savings, with top performers seeing up to 40%.
But beyond direct cost savings, your organization should also measure:
- Cost per employee for HR services
- Productivity gains from internal resources
- Overtime reductions due to improved scheduling
- The value of strategic projects enabled by outsourcing
The best measurement approaches combine these metrics into a balanced scorecard that captures efficiency gains and strategic value creation.
The Human Element: Measuring Employee Impact
While spreadsheets and dollar signs matter, the true test of whether outsourced HR is worth it is its impact on employees. After all, HR functions exist to support your workforce.
Fortunately, according to Deloitte, companies investing in robust HR outsourcing models see a 30% improvement in employee satisfaction ratings. Businesses that monitor turnover and retention also see a 20% decrease in attrition rates.
James Peterson, HR Director at a technology firm, implemented quarterly pulse surveys to measure exactly that kind of employee satisfaction with outsourced HR services.
“We ask specifically about responsiveness,” he says. “This helps us make sure our employees are getting the support they need.”
However, beyond satisfaction, companies should also measure whether outsourcing makes their managers more productive. When administrative tasks are handled by an HR outsourcing partner, managers can often refocus on strategic leadership and employee development.
Rachel Martinez, department head at a manufacturing company, tracked her time spent on HR activities before and after outsourcing. “I was spending almost 10 hours a week on HR paperwork and questions. After we outsourced, that dropped to probably 2 hours. That’s another 8 hours a week I can spend on coaching my team.”
To measure the human element, consider tracking:
- Employee satisfaction with HR services
- Manager time savings
- Time to resolve HR inquiries
You can even look at an Employee Net Promoter Score (eNPS) for HR support.
One manufacturing company reported that by implementing employee-focused metrics for their outsourced HR functions, they reduced turnover costs by $1 million annually. That’s a financial case that’s hard to argue with.
Building a Measurement System
Creating a measurement system doesn’t happen overnight. The most successful organizations follow a structured approach.
Step 1: Set Up Baselines
Before transitioning to outsourced HR services, document your current state:
- Cost per employee for HR services
- Time spent on admin tasks
- Error rates in payroll and benefits administration
- Compliance violations and their associated costs
- Employee satisfaction with HR support
These baselines will provide you with a foundation for measuring improvement—and without them, you’ll struggle to demonstrate the value of your investment.
Step 2: Define Objectives
Different organizations outsource HR for different reasons. Your measurement framework should reflect your specific objectives.
“We outsourced primarily to improve compliance and reduce risk,” says Thomas Wilson, CFO of a multi-state retail operation. “So our metrics heavily weight audit readiness and whether violations go down.”
By contrast, Jennifer Thompson, HR Director at a technology startup, had different priorities: “Growth was drowning our small HR team. We needed to maintain service quality while scaling, so we’ve been measuring responsiveness and employee satisfaction above all else.”
Step 3: Create a Balanced Scorecard
In our experience, the most effective measurement approach is a balanced scorecard that captures multiple value dimensions:
- Financial Metrics: Cost savings, ROI, productivity improvements
- Service Quality Metrics: Accuracy, timeliness, resolution rates
- Compliance Metrics: Reduction in violations, audit readiness
- Employee Impact Metrics: Satisfaction, time savings, strategic refocus
- Relationship Quality Metrics: Partnership effectiveness, innovation, problem-solving
For each category, select 2-3 specific KPIs that align with your objectives, creating a balanced approach that will help you capture the full spectrum of outsourced HR value.
Step 4: Establish Governance
Determine who will review metrics, how often they’ll be looked at, and what actions will come from what you find. Here’s what governance typically looks like:
- Monthly operational reviews of service metrics
- Quarterly strategic reviews of overall performance
- An annual overall scorecard
- A clear process for escalating issues
Michael Davis, Operations Director at a healthcare company, says: “Regular reviews keep everyone accountable. When the metrics show issues, we address them immediately without letting problems fester.”
Step 5: Put Technology in Place
Modern HR outsourcing services often come with technology platforms that support this kind of measurement. These platforms can collect and report data, provide real-time dashboards, and deliver drill-down analysis.
“Our provider’s analytics dashboard gives us instant visibility into the metrics we want to see,” says Elizabeth Rodriguez, HR Business Partner. “We don’t spend days gathering data—we can get right into analysis and action.”
How to Avoid Common Measurement Mistakes
Even well-intentioned measurement efforts can go wrong. Watch out for these common problems that trip up many companies.
Overemphasising Cost
Cost is important. But focusing only on financial metrics gives a distorted view of value. “We initially measured cost,” says Robert Johnson, CFO, “but we missed significant value. Once we expanded our metrics, we were able to capture improvements in compliance and employee satisfaction.”
Holding Unrealistic Expectations
Outsourced HR delivers value, but seeing that value takes time. “We expected immediate transformation,” says Jennifer Williams, HR leader. “In reality, it took about six months to see significant improvements in our metrics. Setting realistic timelines prevents disappointment.”
Neglecting the Partnership
The quality of your relationship with your HR outsourcing company can have a major impact on outcomes. “The best metrics in the world won’t matter if your relationship is dysfunctional,” says Thomas Heller, operations executive. Make sure to include relationship quality in your measurement framework.
“Setting and Forgetting” Your Metrics
As your organization evolves, so should your metrics. “What we measured in year one looked very different from year three,” explains Sarah Thompson, HR Director at a chemical company. “As we grew, we shifted from operational metrics to strategic value indicators. We found that very interesting, but it was exactly what was needed.”
Case Study: Measuring Success in Action
A mid-sized manufacturing company with 650 employees and multiple state operations (again, a composite based on Corban OneSource customers) was struggling with HR compliance and rising admin costs. Their CFO wanted measurable results before she approved outsourced HR services.
“We knew we needed help but couldn’t proceed without a clear way to measure success,” says their HR Director. So they developed a comprehensive measurement framework before making the transition to an HR outsourcing company.
Their approach included:
- Detailed baseline numbers around current costs, compliance, and employee satisfaction
- A balanced scorecard with five metrics
- Quarterly reviews with HR and finance stakeholders
- An employee feedback mechanism for continuous improvement
Their diligence paid off. Within the first year, they achieved:
- A nearly 20% reduction in overall HR costs
- $0 in compliance penalties (down from $42,000 the previous year)
- An 87% reduction in compliance errors
- 20% more time to focus on strategic initiatives
- Improved employee satisfaction with HR services
“The measurement framework not only justified our investment but helped us optimize the partnership,” says their CFO. “We could see where we were getting value and where we needed to adjust.”
They are now refining their metrics, and they recently added new measures as they broaden their relationship with their outsourcing partner.
The Takeaway
Measuring the true value of outsourced HR goes beyond simple cost calculations to capture the multiple benefits that these kinds of arrangements can deliver.
By having a measurement framework in place ahead of time, you can show ROI across financial, operational, compliance, and employee impact dimensions. Realizing and quantifying the benefits depends on intentional measurement and performance management.
About Corban OneSource
Ready to have a conversation about measurable, high-impact HR outsourcing? For nearly 30 years, we’ve helped companies reduce compliance risk, save time, and simplify HR processes—providing expert HR outsourcing services for organizations with 75-6,000 employees.
For a complimentary consultation, including free advice about your current HR metrics, Contact Corban OneSource today.
