Research on Risks and Strategies of Enterprise s HR Management Outsourcing

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1 Research on Risks and Strategies of Enterprise s HR Management Outsourcing LI Huiyan,2, WANG Shuen 2 School of Management, Shenyang University of Technology, P.R.China, 24 2 School of Management, Tianjin University, P.R.China, 372 Abstract In the background of the economic globalization, the competitive pressure making enterprise focus its core ability, HR management is the strategic choice of enterprise for adapting to external diversification. This article first defined HR management, then discussed the solution of enterprise s HR management from necessity and procedure of HR management. At the same time, the article mainly analyzed the risks of enterprise s HR management and put forward the strategies to evade the risks. Key words HR management, Outsourcing, Risks, Strategies Introduction The famous management master in America Peter Drucker has ever said:" Within -5 years, any in enterprise that only support background but not create sales amount should all be. And any that not supplies the opportunity or activity to senior development should also adopt the form." Under the background of the economic globalization, the technology development and the knowledge renewal changed with each passing day, making the competition of the enterprises become that of speed and time. For this, many enterprises outsourced their weakness and non-core tache to the other professional organizations to increase efficiency, HR management has come into vogue gradually as one form of it. HR management means the enterprise relegate the es which originally undertake by internal HR department such as job application, wage distribution, salary project design, insurance welfare management and employee training and development ect. to the professional service company by public bidding, accordingly obtain the professional HR service, decrease HR management cost and strengthen the core competencies of the enterprise. In fact, the level of HR management in a nation should be reflected by the HR management level of enterprise in it. However, because of the restriction of the scale and funds, the numerous enterprises in our country have not establish the HR department specially, having no systematic personnel system, can t supply advanced material benefits and training opportunity for employee, have no strategic HR programming yet, so they can hardly invite the high diathesis employee, also causing the high flow rate of key personnel and low employee s satisfaction. Therefore, this puzzle of enterprise should be the problem that requires the academic worker and actual HR manager treat earnestly. If the enterprise can utilize the external resources to make up its scarcity, it will increase HR management level greatly and contest resources in the talent market with large enterprises. 2 The role and procedure of enterprise HR management The scale of some enterprises is not very large, the personnel constitution of it is simple and lacking professional HR management. But it also needs scientific, professional and effective operation, HR management can not only save cost, but improve efficiency and supply professional HR management service for enterprise, it has displayed more and more importance as a new kind of management tool. 2. In favor of focusing core competencies The enterprise can outsource those like and procedure affairs in HR management, establishing cooperative relationship with the professional company. The 76

2 company will provide more comprehensive, professional and optimized HR management, insuring the prominence of operation emphases and the elevation of performance of enterprise. 2.2 In favor of retaining the excellent employee The outstanding professional company can build up a complete set of integrated professional knowledge, skill and experience that can be widespread applied to many enterprises, and doing the HR management works more effectively for them. These external company comprehend the employee s demand and can increasing the employee s general treatment, sequentially retained the talent in the enterprise. 2.3 In favor of consummating HR management system To consummate HR management system has realistic meaning particularly to the enterprise which resources shortage relatively. The development and application of the information technology, especially the applied software of HR management, has made the HR management mode change revolutionary. The advanced HR management information system can undertake like and procedure affairs, but the high investment of it will aggravate funds burden of enterprises. Therefore, the enterprise can recur to professional consultation company to establish clear job illumination and criterion, pigeonhole employee s examination note in time, manage employee s turnover note, set up HR management information system, ect. 2.4 In favor of constituting win-win strategic cooperative relationship On one hand, the enterprise can import new management ideas and methods through cooperate with service company; On the other hand, the company can accumulate better industry background and extend its scale and strength. This can raise both part efficiency and share the benefit of the scale economy, at the same time it can lower the operation risks of the enterprises, thereby become a harmonious and organic integer to realize win-win. The procedure of enterprise HR management is shown in the following figure. management and consultant company HR management diagnose to determine demand determine service type choose service type and sign the contract implement, manage and supervise the contract Figure Procedure of enterprise HR management 3. The risks of enterprise HR management At present, there has no corresponding and perfect law and statute to normalize the industry, so the risks of HR management are obvious. Therefore, before the enterprise implement HR management, it firstly needs to consider the risk problems. In general, these 76

3 risks include the following four aspects: 3. The risk of enterprise deficient competence The enterprise competence includes decision ability, adaptability to market, negotiation ability with the service company, ability to manage and actualize contract efficiently. Because the limited competence of enterprise, it sometimes faces the risks of losing control in HR management activities and leads to be defeated. 3.2 The risk of choosing the service company Choosing appropriate service company is the key for successful HR, but because of the dissymmetry of information, the enterprise is hard to understand the achievement, social report, development status, cost structure and other information of the service company which is closely linked with the enterprise s benefit. Thus, the enterprise should spend much time and fund to compare, analyze and choose the service company and then put up negotiation and sign the contract. On the other hand, because many of the HR management counseling institution developed in recent years, their stuff is irregular and specialization level is not very high. On the account of information dissymmetry and immature market, the enterprise must be caution when choosing the service company. 3.3 The risk of operation safety While, the information leakage is inevitable in the cooperative process between the enterprise and contractor. For example, in the process of training, those items which possess strategic meaning such as CIS and team construction, production technology innovation, management ideas, and basic circs of competitor, market needs and development trends based on investigation, etc. If these contents which concerned with secrecy and characteristic once divulgated in training, it will bring prodigious risks to enterprise production and operation. In addition, on condition that the contractor closed down because of ill management, and the legality rights and interests of enterprise will not be protected, this also bring risks to its production and management. 3.4 The risk of multi-culture communication The risk of multi-culture communication is one of the maximal obstacles in HR management. Each enterprise has its unique culture and value concept which are decided by enterprise history and leading manner of the enterprise initiator. Due to the shortage understanding of the service company to the enterprise culture background, value idea, behavior mode and idea to employ persons, it is hard to avoid communication obstacles and even lead to failure. 4. The risk evadable strategies of enterprise HR management 4. Choosing appropriate service company Firstly, it is important to consider the price of the service company. One of the R R objectives is to save the cost, the enterprise should be only when. R, C C C represent the income and cost when the enterprise is not, R, C represent that of the enterprise when it is. Secondly, for eliminating reverse choosing caused by information dissymmetry, the enterprise should establish the reasonable flow to choose the service company, such as the following figure 2 shown. The enterprise can impose different weight to different index, then grade the given service company synthetically, finally sign the contract with the company which has the highest grade. Thirdly, to decrease the moral risk, the enterprise can supply proper inducement in the contract, give some prompting measure to the company, and reinforce supervision after to restrain the opportunism activity of the service company. However, it is incapable to low the risks efficiently only by credit standing of supplying high quality service with low cost, the enterprise must restrict the behavior of service company with which possesses force adeffect. The contract is the cooperative basic of both sides and credible warrant to preserve their right 762

4 and obligation, and it is the requirement of successful. Simultaneously, the enterprise need to draw out exit mechanism and standby project for conversing the service company or managing itself while the service has not been developed. identify enterprise HR relative predominance relative inferior determine company choosing index grade given service company impose weight determine on different index choose the based on service company Ⅱ and sign the contract Ⅲ Ⅰ Figure 2 Flow of choosing HR management service company 4.2 Determine the concrete HR management items earnestly To resist the risks from operational safety, the enterprise should determine the concrete items earnestly. According to the model of human capital employment founded by American professor David Le Park and Scolt Snell, the items of HR management can be divided based on strategic value and inimitable feature. The strategic value concerned with the enterprise core competition advantage and capability, and the inimitable feature concerned with the public relationship skill. The decision model of Ⅳ HR management is shown in the figure 3. Ⅱ weak strong inimitable feature Figure 3 The decision model of HR management The inimitable feature of the es in area is very strong and the strategic value of it very high at the same time. This means the activities that possess strong thumbprint and closely interrelated with the enterprise long-term development. This kind of is not prone to extend widely and reach the scale economy, must lead to the higher cost. In, the inimitable feature is weak and the strategic value is high. This means to implement these strategic value high low 763

5 ⅣⅢ activities need not very high level public relationship skill, many of them are the like and procedure affairs; High strategic vale means that the es can affect the enterprise s competence to push competition strategy directly. This kind of HR management activity can be standardization gradually through HR management software or database, so they are adapt to. The activities in can not affect the realization of competition strategy directly, and their inimitable feature is weak. To these activities, the standard service in external market is enough to satisfy the market needs, will be more effective than doing by the enterprise itself. The activities in have lower influence on competition strategy, but possesses higher inimitable feature. It requires higher public skills, such as fire consultation, ect. Therefore, it is best to execute inside the enterprise. 4.3 Make effective communication in time The enterprise should communicate with the service company nearly, settle the problems in time, adjust measures to local conditions and manage HR elastically. At the same time, the enterprise should pay attention to the culture of the chosen service company and minimize the risks which aroused by different culture. Outsourcing is a transform of the enterprise original HR management flow and the employee has different reaction while faced it. The enterprise should dispose according to practical circumstance. In the enterprise HR management team, some people is accustomed to deal with like affairs, they usually resist because may make them lose job or relative profit. But others prefer strategic ponder and implement, they usually are the propellent of. To the former, the enterprise should allocate them in other department which has like affairs and layout their development direction in future, minding the appropriate opportunities. To the later, they will have more time and energy to regress core strategic activities after and can offer suggestion for the enterprise s decision. 5. Conclusion In general, the selective HR management can liberate the HR manager from daily affairs and turn to the strategic role. With the swift development and prevalence of Internet, some professional companies have appeared. HR management has become a certain trend and choice for exalting HR competition. The enterprise should utilize well as its characteristic to gain professional HR management service. It is necessary to point out that the does neither mean any HR management activity is not important nor clean the slate of HR manager. The enterprise needs to manage the correlative relation after, and then can obtain the profit from authentically. Further more, the enterprise should regard as a learning process, absorbing new HR management method and theory from the service company and fostering the HR management professional adapt to its development. Reference [] Brain. S. Klass, John. A. McClendon and Thomas W Gainey. Outsourcing HR: The Impact of Organizational Characteristics. Human Resource Management, 24(6): 73~8 [2] Denise Pelham. Is It Time to Outsource HR? Training, 24(4): 5~54 [3] How the Economy Affects HR/Comp. Priorities and Your Future. IOMA s Pay for Performance Report, New York, 23(9): 24~35 [4] Jo Ann Davy. Managing Manpower in the New Millennium. Managing Office Technology, 23(3): 46~58 [5] Scott Lever. An Analysis of Managerial Motivation Behind Outsourcing Practices in Human Resources. Human Resources Planning, 24: 89~92 The author can be contacted from 764

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