What are your objectives over the next five years?

· What's your appetite for risk? ·

How quickly do you expect to see a return? They're the kind of questions you'd expect to hear from your financial advisor.

But if you're an executive thinking about outsourcing HR functions, expect to hear some very similar questions from your potential suppliers.

That's because, just as you have a particular risk profile for investing, you can probably categorise yourself as aggressive, balanced or conservative when it comes to HR outsourcing.

Understanding your risk profile at the start of your outsourcing journey can save you and your company a lot of time, money and potential issues. So why should you care about business process outsourcing (BPO)?

Because a recent survey of 200 C-Suite executives by Forbes Insights in association with Infosys found that six out of 10 respondents recognise the very important role BPO currently plays in supporting their business, with the majority expecting this to intensify over the coming three years.

To prepare yourself for the journey, read on to determine what type of outsourcer you might be.

A conservative approach

Many companies just getting started on the HR outsourcing path understandably begin with a conservative approach, and are hoping for a quick win.

A conservative outsourcer is likely looking to take a current process, and find an outsource partner who can take over that work, exactly how it's done today, delivering cost savings as well as some reduced challenges for management.

It's a straightforward approach often referred to in the industry as 'your mess for less', and carries relatively lower risk as well as lower return. Typically, the emphasis is on cutting costs by shifting work from your current staff to that of your outsourcing partners, while the processes within the business remain the same.

The gains come from the outsourcer's lower labour costs and the economies of scale this delivers, as well as productivity improvements through re-engineering and automation.

Given how significant labour costs are to business, it's unsurprising this arbitrage can deliver impressive savings - often about 30-40% on the baseline. Payment to your outsourcing supplier is usually a function of how many full time equivalent positions are redirected to the outsourcer.

The low level of process re-engineering in this 'your mess for less' approach means the complexity (and therefore the risk) is low. With knowledge transfer and integration relatively straight-forward, expect to see positive ROI within 12 months, or even less depending on the scope of work.

Keep in mind that there are limits to what HR processes can be outsourced this way. Functions with highly standardised, mature and systems-driven processes such as HR administration and payroll can be transitioned out of the business relatively easily.

Outsourcing processes with an explanatory or advisory component are possible but more challenging such as advising staff on salary packaging options or resource planning. Don't expect the tier two and three outsourcing companies to be able to deliver this kind of work.

And while the labour cost arbitrage route will deliver a reduction in costs, it is a one-time play. If you're looking for further improvements, you'll need to consider additional levers.

Balancing your options

If you're a balanced outsourcer, you're slightly more ambitious. Certainly you want to cut costs, but you're also looking to improve the way you do things. You may feel constrained by the way things are done today within the limitations of your current systems, facilities and talent pool. You won't be satisfied with merely replicating existing HR processes, but want a designed-for-purpose infrastructure.

A common aspiration for the balanced HR outsourcer is to have one system that can smoothly integrate the management of the whole employee lifecycle from hiring right through to retirement, including superannuation. To do this, you'll need some expert help in deconstructing, analysing and re-engineering those processes to become more efficient and flexible, therefore positioning the business to jump ahead of the competition. Be aware that this analysis will mean your project - and the resulting returns to the business - will take longer.

Expect the transition to take at least 12 months. However, the business change is also more substantial, which should lead to greater gains if well-executed. The operating model is often transaction-based i.e. the supplier is paid not on the number of hours worked, but on the units of work completed such as payslips processed or new employees and leavers processed. In essence, this means your outsourcing partner is wearing some of the risk involved in ensuring a more efficient approach to your processes.

Taking the balanced approach requires strong commitment and support of the company's leadership team to ensure a successful re-engineering of processes. Advanced accountability measures must be in place informed by the business case for the project.

Looking for aggressive growth

A growth outsourcer is likely to have serious business transformation in mind. You're looking to liberate internal HR staff to do breakthrough work by outsourcing less traditional functions such as facilitating succession planning.

Or you are looking for new ways to variabilise HR costs, building the agility to seamlessly ramp up or down the function in response to demand. For example, Infosys recently partnered with the Australian and New Zealand arm of a global staffing solutions organisation that was facing a number of challenges.

The company had multiple ageing HR systems to manage contractors and contractor billing. Given the highly cyclical nature of the recruitment industry, the client needed a solution that could rapidly scale up or down as required, and wanted to avoid large future capital investments in HR systems now and into the future. Infosys helped migrate several HR functions across multiple sub-brands of the business onto a single platform.

The solution, which includes not only technology support but also process re-engineering and outsourcing on a cloud-based software platform, allows the client to 'pay as you go'. Instead of investing capital in a data centre and costly software licences, the company simply pays Infosys by the processed transaction, so costs are lower when volume is low.

Having a single provider for the technology, consulting and process outsourcing also delivers 'one throat to choke' accountability. However, as the example shows, this won't be a traditional customer-supplier relationship; your outsourcing partner will need to become deeply integrated into the heart of your business.

Remember that accountability in this model will need to run both ways, and make sure that there is a strong cultural fit between the organisations. You will expect this partner to put some real 'skin in the game' - for example, tying its reward to achieving particular outcomes for your business.

Do not skimp on your change management budget - it will be critical to bringing your entire organisation along for the journey. The potential prize is significant. However, you don't achieve this kind of transformation overnight.

You'll choose your outsourcing partner even more carefully, realising that it may take as much as two to three years for complete transformation and stabilisation, and that you can almost certainly expect to hit a few speed bumps on the way, particularly if you're doing something that's never been done before in your market or region. A phased approach is probably a good way to test as you go.

Getting started

Intuitively, you probably now recognise the type of outsourcer you and your company are. The task is to test and validate this position, and then look to make the business case to other stakeholders in your organisation. Clearly, this is a significant undertaking and - like an investor - you'll want to seek strong independent advice.

Here is a great place to start. Think about the '3 Ps': understand your pain, purpose and plan. First establish what is really hurting the business. Then isolate the key business objectives, ambitions and constraints (including your organisation's appetite for risk and change).

And finally, assess how the various sourcing approaches match your profile and needs.