By Russ Banham

Companies in the middle market have a choice—do it all or do what you do best. MetroMedia Restaurant Group opted for the latter, focusing its energies on great food, superior service and appropriate ambiance at its 900 restaurants.

As for non-core payroll processes, it outsourced them. "From a strategic standpoint, we didn't want to spend our time and resources consumed with who's working overtime, who quit and who was just hired," explains Steve Bratton, vice president and controller of the Plano, Tx.-based privately-held company.

Tell Us About You First Name Last Name Title Company E-mail Phone Number    (Optional) Which of the following HR functions do you currently outsource? Payroll Benefits Training Recruiting Employment Communications Vendor Management Employee Data Management Drug Screening/Background Checks None of the Above What is the primary objective for your HR department in 2003? Employee Acquisition Employee Retention Cost Savings Improving Quality Hire Standardization and/or Centralization of functions None of the above

With close to 20,000 employees at its Bennigan's, Ponderosa and Steak & Ale restaurants, MetroMedia had trouble keeping up with the ebb and flow of waiters, bartenders and cooks in a business notorious for short-term employment. "All I care about as far as payroll is that people are paid accurately and on time, and that we are current with all laws and taxes," says Bratton. "Outsourcing payroll (to Dallas-based ACS Inc.) helps me focus on the big picture and not the minutiae."

Payroll is just one of 22 functions typically falling to Human Resources staff that is routinely outsourced by middle market companies today. Of all business processes outsourced, HR functions are the most popular, and within HR, payroll administration leads the parade, followed by employee benefits administration.

The top reasons cited for outsourcing these and other HR functions are improved service, lower costs and freedom to focus on core competencies. In other words, companies gain the expertise of outside professionals able to perform HR functions better and at reduced cost than they could internally.

While HR outsourcing is catching on at large corporations--two-thirds of Fortune 1000 companies outsource some HR functions, according to a recent study by The Conference Board--it has become virtually common among midsize companies.

"We've been surprised at the rapid growth rate of HR outsourcing in the middle market, which vastly exceeds that of the large corporate segment," says Prof. Ed Lawler, distinguished professor of business at the Marshall School of Business at the University of Southern California in Los Angeles.

Lawler says outsourcing HR functions (see table) makes for smart business practice in the middle market. "Most midsize companies don't have competency in the administrative and transactional activities that go on in HR," he explains.

"Outsourcing to a company whose specialty is payroll, employee training or benefits administration, one that has state-of-the-art technology and up-to-the-minute awareness of changing laws, process advancements and best practices, is a viable, cost-effective alternative. Midsize companies with mediocre HR departments can ascend to world class HR levels."

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