In a surprise move, Nevada’s fourth most populous city is looking at outsourcing its human resources department.
Financially fraught North Las Vegas met this week to analyze the vendors who have offered to take on the city’s human resources responsibilities, prompting a walkout by the North Las Vegas Police Officers Association.
The move is intended to be a money-saver for the city that’s battling a long-term deficit of $78 million.
But outsourcing human resources is more common for small businesses, not cities with more than 200,000 residents to serve.
Jettisoning the human resources department might cut costs, but it also lessens the city’s control over such things as recruiting top talent, keeping important personnel information confidential and fostering a creative culture, experts say.
Mike Yarter, president of the North Las Vegas Police Officers Association, said walking out wasn’t meant to be a dramatic statement. The organization thought the meeting would be to debate the newly announced idea of outsourcing employee matters and instead it was to pick a vendor, he said. Yarter said participating in the process would have been an endorsement of the move.
“We’d prefer to keep it in house with people that we know,” Yarter said. “You lose a lot of control. The HR department is pretty important for the employees.”
Yarter said his organization had concerns about entrusting an outside company with confidential police information, such as names of those who work in specialized, undercover units. As it stands, while the current department might be too small for his tastes — six employees with two vacant positions — important information is guarded by people who know the city and have worked there for years, he said.
“It’s hard to outsource commitment,” said Stan Gully, professor of human resource management at Pennsylvania State University. “If this decision is made on a cost basis alone and ignores the potential positive impact of all the people, not just the HR department but all the people who are influenced by the HR department, then the decision is an incomplete decision.”
The decision to outsource follows a strange hiring move by the city.
The city chose to forgo typical city hiring practices when it hired Cass Palmer, former president and CEO of United Way of Southern Nevada, as director of neighborhood and leisure services. Palmer indicated he wanted to work in North Las Vegas, and City Manager Qiong Liu said she found him a space. He has no experience in parks and recreation.
Jean Phillips, a professor of human resource management at Pennsylvania State University, said the move — finding a role for someone who wanted a job — sounded like the reverse of what’s typical in human resources: Figuring the position that’s needed, drafting a criteria and hiring based on who fits that need.
“It’s not professional HR,” Phillips said. “There is a reason human resources is a profession. We don’t just do payroll anymore. That’s not really HR.”
The move puts a lot of power in the vendor’s hands and the city manager’s hands, as the vendor will be motivated to do whatever is needed to keep the decision maker happy so they can keep their contract, Gully said.
Gully and Phillips found the move even stranger considering the city has said numerous times that it is looking to create an innovative and creative culture. Getting rid of the in-house human resources department signals culture isn’t a priority, they said.
Creative city culture is so important to Mayor John Lee that he made up a new word just to drive the point home during his State of the City address at the beginning of the year.
Grownomics — which he defined as “the simple principle of growing, not cutting, ourselves out of problems.”
“Although it was difficult for many to break the molds forged by the past, a new group of leaders, led by our new city manager, Dr. Qiong Liu, stepped up and got to work changing the city’s culture,” Lee said during his address. “Grownomics takes patience, but it will provide a firm foundation for our city and region’s future. We have put together a strong plan to repair our City and we are executing on it.”
To Adam Levine, an attorney for two North Las Vegas human resources employees, the move isn’t just stupid, it’s sinister.
“From a public policy standpoint it is a really bad idea and is going to make my job, and the job of other employment lawyers, a lot easier,” said Levine. “It also happens to be blatant retaliation at Bachera Washington and Tammy Bonner.”
Washington and Bonner have weathered multiple administrations in North Las Vegas. Bonner has been with the city 13 years, Washington 20.
Last year the two employees filed labor complaints with the city, alleging discrimination. When asked what happened with the complaints and if any settlement money was paid, Levine would only say he was not allowed to discuss that subject.
Non-disclosure agreements are typical in settlements.
City spokesman Mitch Fox said the lawsuit involving Bonner and Washington was settled last year and had nothing to do with the evaluation of the entire department.
The human resources department has a budget of about $1.27 million for personnel, though with the two vacancies, the current cost is likely somewhere between $700,000 and $800,000, according to Liu.
The two companies the city is evaluating — Tempe, Ariz.-based Elite InSource and Henderson-based Prism Global Management Group — both pitched a much lower number. Elite InSource said it could handle the workload for $490,000. Prism offered to do it for $420,000.
Liu has attributed inspiration for the idea to outsource human resources to the city of Reno. However Reno has not outsourced its entire department, but does outsource functions such as workers’ compensation, a function North Las Vegas already outsources.
Fox attributed Liu’s statement to the fact that Reno had gone through a similar evaluation and as a result outsourced some functions.
North Las Vegas does not outsource its payroll, which is commonly outsourced.
“It’s too early in the process to determine what, if any action management will advise Council to take,” said Fox in an email.
“We are at a critical juncture with our small and overwhelmed HR division and management is exploring whether we can meet the City’s needs by hiring more employees in HR or if there are taxpayer-saving opportunities to provide better service to our staff through outside firms.”
Contact Bethany Barnes at email@example.com or 702-477-3861. Find her on Twitter: @betsbarnes.