HR Outsourcing-A comparative study between IT and Pharmaceutical Sectors

Transcription

1 HR Outsourcing-A comparative study between and ceutical Sectors Dr. T.S. Poornachandrika Sr.Asst.Professor,SMS,CB, Telangana,Hyd-75. ABSTRACT To survive in a competitive global market and to accomplish long term growth, organizations need to develop and focus on their core competencies. Organizations need careful planning and strategy implementation to increase productivity levels and to change the beliefs, attitudes and values of employees.this is important as employees be in a better position to adapt to new technologies and future challenges. Practice in business and economic activities are ever changing. Most industries have transformed completely from manual processes to, automated and computerized technologies Revelations indicate that manufacturing industries have come up with sophisticated products that require man power with special skills Moreover, information communication technology usage and faster information flows have revolutionized way of life and the way businesses operate. The needs and demands of consumers are forcing organizations to change and restructure to ensure that they keep up with market demands. All of these factors are facilitating organizations to change in order to survive, and it is clearly evident that only the competent organizations succeed. To do that, organizations need to focus on main and core competencies while contracting noncore and repetitive functions to an external service provider who will carry out that function as one of their core activities. This outsourcing strategy can allow organizations to focus on their core competencies to increase efficiency without spending time to invest in people and technology. This production strategy facilitates the organizations to become increasingly profitable, and better be able to cater to local and international customer base. Outsourcing can be defined as an organization delegating their non-core functions to an external organization that provides a particular service, function or product. Market changes reveal that outsourcing is no longer confined to information technology () services, but has expanded to financial services, banking services, engineering services, creative services, data management services, hospitality and clinical laboratories or laboratory medicine, and human resource management (HRM) Outsourcing the Human Resource (HR) function is one of many ways to improve an organization. Key words: Outsourcing, core competencies, Human resources functions outsourcing INTRODUCTION Outsourcing is simply getting work from the external sources, which is done previously inside the organization. If external organizations or business entities have specialized in an activity which is not strategically important to business-and is able to do it cost effectively, it is recommended to get it done outside specialists. Organizations get benefitted from excellent quality, reliable supply and cost effectiveness. Organizations can focus exclusively on the core competencies which can enhance their competitive advantage. Sourcing is the procurement of resources whether from internal or external sources to accomplish business objectives. Sourcing purely from the external sources is known as Outsourcing. Outsourcing is synonymous to global sourcing. In addition, the functions that are performed by the third party can be performed on-site or off-site. The most common model of outsourcing that is in the news today refers to jobs that are being sent overseas to countries like India or China. This is more commonly called off shoring. Examples include telephone call centers, tech-support and computer programming. Outsourcing is the process by which a company contracts another company to provide particular services. These services or functions would be otherwise performed in-house, by the company s own employees. Outsourcing is becoming more and more popular in today s business environment, and most companies outsource some function or other. Human resources outsourcing: Human Resource Outsourcing (HRO) is the process of transferring functions of an organization s human resources management functions or activities to a service provider external to the organization. Many organizations outsource all or some HR activities because they cannot afford to employ talented part-time or full time employees across all areas of the organization s operations. Other human resources activities being commonly outsourced include recruitment and selection, remuneration, industrial relations (IR), and occupational health and safety. However, the decision whether to 57

2 outsource the HR functions or retain depends on the benefits and costs of HR outsourcing and centers around HR needs versus creating internal strengths. There are both advantages and disadvantages of outsourcing HR activities. The concept of outsourcing HR has been increasing, with many organizations choosing to outsource some or all of their HR activities. Human Resource outsourcing functions are categorized into three aspects: 1. Professional Employers Organization (PEO) 2. Application Service Provider (ASP) 3. Business Process Outsourcing (BPO) Professional Employers Organization (PEO S)have a responsibility of managing a company s human resources, take charge of employee s legal issues and undertake basic human Resource functions as recruitment and selection including performance appraisal. In most cases professional employers organization form partnership with other suppliers. They concentrate on the human resource aspect of the business, the company on the other hand handles the other aspect. Sometimes because of the nature of human resource, the company may decide to enter into strategic alliance or joint venture to have some level of control over the human resource management. Within the context of human resource outsourcing, organizations specific needs, requirements and processes differ. An organization's human resources department is responsible for a variety of functions such as policy development and implementation, recruitment and selection.hr department conducts background checks of the employees, Human resource departments monitor employee payroll and tax filing as well as employee benefit and health administration. Human resources also manage legal compliance, maintain files and records monitor performance management systems and oversee training and development. Human resources department also handles employee assistance and counseling process, employment relocation process, grievances handling and expatriate administration. Human resources department is in charge of human resources information system in the organization. Human resources department has a major role in dealing with strategic business planning which helps to anticipate the future vacancies in an organization. Human resources department assists the employee in retirement planning and pension benefits administration. For many businesses, the various functions of the HR department are too comprehensive and complex to maintain in-house. The organizations that outsource HR functions receive several advantages that support the organization s business Core Functions of human resources management are outsourced by the organizations. Need of the study The overall purpose of the study is to explore and explain HR outsourcing by the select organizations. The primary purpose of this research is to test this concept of human resources outsourcing in the organizational environment. The research hypothesis and the objectives were made to study the overall reasons, benefits, performance and achievement of individual and organizational objectives. The information gained from the study may aid in knowing the important areas of human resourcing areas, identify the reasons and possible benefits of HR outsourcing and consider all the factors which make HR outsourcing, a considerable and a viable option, especially for the information technology industry and the pharmaceutical industry. The empirical findings of this study would help in describing the pivotal role of human resources outsourcing on the needs, reasons, benefits and performance and objectives parameters of the employee and the organization). Significance of the study Modern organizations strive for the number one position in the era of global hyper completion. For this, the organizations need to concentrate on their core competencies and strategic business rather on wasting the time on the routine, respective administrative burden hampering the productivity. The study attempts to find out the facet of various dimensions behind human resources outsourcing process. The present study takes into account intrinsic and extrinsic factors affecting the HR outsourcing parameters of the selected organizations. 58

3 The study is needed to gain information as to the factors that affect HR outsourcing process in the selected organizations of Information technology and industries. The study will add to the existing information to find out the gaps between existing and new trends with respect to HR outsourcing. Thus, the study will facilitate the HR outsourcing a considerable option by many organizations in the future. The world is interconnected in all major respects. People, goods information and capital are exchanged around the globe at a rapid pace. The trade barriers among the nations have disappeared and the world has become a borderless market place because of the advent of multinational enterprises. Adapting to the requirements of global markets, the human resource managers in the organizations have more complicated roles to play that is, to align with changes in the domestic as well as global economies-keeping in track of the global changes and competition. In the era of hyper global competition the human resource managers of the organizations has to play key and challenging roles to create a competitive advantage for the organization through good HR practices. Research methodology: The research starts with four topics: Which objectives to be studied, what information is relevant, what type of data is to be collected and how to analyze the results. A diligent, systematic, patient study and meticulous research is done to establish the facts and to get the accurate findings. This research utilizes acceptable structured methodology to study the set objectives and gain new insights into various areas.scientific methods consists of systematic observation, classification and interpretation of data to find out cause and effect relations. The type of this research is initially descriptive in nature i.e. being focused on what is happening. Then it leads to exploratory type of research design which has its primary objective of provision of insights into and comprehension of the problem situation confronting the researcher. The research process is flexible and unstructured in order to deeply explore the research problem to its grass root level. This is also qualitative research, which is carried out in unstructured methodology based on small samples that provides insights and preliminary understanding of the problem setting. Formulating the research problem to find out that after a prolonged study observation, discussion and interaction with experts, the researcher has identified HR Outsourcing has become very important phenomenon in the corporate environment. Defining the problem is the consequence of the efforts of made by the researcher in a systematic manner? Further, the selection of the broader problem of the research problem is formulated into: Industry- employees Industry- employees. It makes the researcher more interested to find out that subjective factors of HR outsourcing in companies and companies had the differential impact on the individual employees and the organizations. The effect of HR outsourcing functions in both the industries depends upon the nature of various affecting factors in both the industries. Finally, the research problem was formulated on the basis of practical observation of the contemporary issues in industry and the Industry because of their present relevance. Sample size Employees and HR Managers of and industries located in Hyderabad and Secunderabad are taken as sample size. SAMPLE DESCRIPTION Type Frequency Percent Employees 47 Employees 53 Sources of data:- Primary data was collected from employees and employees through structured questionnaire method, followed by interviews and interactions with employees in both the selected industries. Secondary data was collected from textbooks, journals, magazines, periodicals, and websites. 59

4 Sampling technique: Simple Random Sample is the most effective method used to collect data from the respondents of the two select industries. Use of statistical tools: The nature of the study is descriptive where the universe and population is workforce of and industries from Hyderabad city. The samples are collected from both employees. The sampling technique used is convenient sampling. The instrument used for obtaining the data is a structured questionnaire. The sample size of employees for and are and respectively. The scaling technique used for the sample variables is likert scale ranging from 1 to 5 points. Period of study is The statistical techniques and tool used in the study are KMO Bartlett test, Scale reliability testing, factor analysis, mean, standard deviation, correlation, t-test and ANOVA test and software used is IBM SPSSv 20. Objectives of the study 1. To assess the levels of familiarity of HR outsourcing functions in the selected industries of and 2. To understand the important areas of Human resources outsourcing functions in the selected industries. Hypothesis is formulated in the form of null hypothesis and alternate hypothesis (Ho and Ha). Hypothesis is formulated in employee perspective and Manager s perspective. H o : There are no important areas of HR outsourcing in the selected industries. H a : There are important areas of HR outsourcing in the selected industries. HR Outsourcing is becoming more and more popular in today s business environment, and organizations outsource some HR Function or other. Employees are tested on their Familiarity of Human resources outsourcing in the select organizations. Variable Table 1.1: Showing familiarity of HR outsourcing between and industry Employee perspective Familiarity with outsourcing Equal variances assumed T-Test for equality of Means t df 60 P value Mean Difference Equal variances not assumed Ho: There is no significant difference in the opinion about familiarity of HR outsourcing between and industry. Ha: There is a significant difference in the opinion about familiarity of HR outsourcing between and industry. For testing hypotheses independent t- test is employed and the test results are furnished in the table 1. It is clear from the table that the opinion of employees about familiarity of HR outsourcing between two select industries is interpreted with statistical values. The t test results shows t-statistic of with 318 degree of freedom. The corresponding two-tailed p-value is 0.000, which is less than Therefore, it can be reject the null hypotheses at 5% level of significance, which means that the familiarity of outsourcing between two select industry is different from each other i.e. the opinion of employees do not the same between the two select industry. Therefore, it has been inferred that there is a significant difference of opinion about the familiarity of HR outsourcing between two select industries. By seeing at the mean difference, it can be

5 understood that the employees of industry are more familiar about the HR outsourcing process than the Industry. Here the relation between HR functions and their respective outsourcing has been analyzed in two ways in terms of employees perspectives namely mean degree of outsourcing and variations in the extent of outsourcing. The mean degree of outsourcing between and has been processed and the results of the same were furnished in the table. Whereas the variations in outsourcing between two select industry has been investigated with the help of analysis of variance (ANOVA) and the results of the same were furnished in the table. Mean degree of HR outsourcing and it s variance among HR Functions Recruitment and selection Back ground checks Training and development Performance appraisal Employee assistance and counseling executive development and coaching Compensation management Employee relocation Process Union relations Process Employee grievance Handling Expatriate administration Health care benefits Administration Human Resource information System Strategic HR Planning Risk management process Retirement planning Pension benefits Administration Source: Calculations using IBM SPSSv20 Recruitment and Selection: The degree of outsourcing between and can be understood with the mean and standard deviation. By examining the said statistical mean and standard deviation in recruitment and selection function for select industry, the mean and SD for are 1.72 and , and the mean and SD for industry are and which indicates that there is partial outsourcing of recruitment and selection function in the industry and there is complete outsourcing of recruitment and selection function in the Industry. Back ground checks: The degree of outsourcing with respect to background checks between pharma and can be understood with the mean and standard deviation. The mean and SD for are and where as the mean and SD for industry are and which indicates that there is

6 complete outsourcing of background checks in the industry and there is partial outsourcing of background checks in the Industry. Training and development: The degree of outsourcing with respect to training and development between and can be understood with the mean and standard deviation. The mean and SD for are and and the mean and SD for industry are and respectively. The statistical values indicate that there is partial outsourcing of Training and development function in both the and industries. Performance appraisal: The magnitude with respect to performance appraisal between pharma and can be well assimilated with the mean and standard deviation. By examining the said statistical mean and standard deviation SD in performance appraisal function for select industry, the mean and SD for are and and the mean and SD for industry are and respectively which infers that there is partial outsourcing of Performance appraisal in the industry and there is complete outsourcing of performance appraisal function in the Industry. Employee assistance and counseling: The range with respect to employee assistance and counseling outsourcing between and can be understood with the mean and standard deviation. By examining the said statistical mean and SD in employee assistance and counseling function for select industry, the mean and SD for are and and the mean and SD for industry are and respectively which infers the fact that there is partial outsourcing of employee assistance and counseling function in industry and there is complete outsourcing of employee assistance and counseling in the industry. Executive development and coaching: The degree of outsourcing between and cy can be understood with the mean and standard deviation. By examining the said statistical mean and SD in Executive development and coaching function for select industry, the mean and SD for cy are 1.68 and and the mean and SD for industry are and respectively which indicates that there is partial outsourcing of executive development in the industry and there is complete outsourcing of executive development and coaching in the industry. Compensation management: The magnitude of outsourcing between and can be understood with the mean and standard deviation. The mean and SD for are and and the mean and SD for industry are and respectively which indicates that there is partial outsourcing of compensation Management in the industry and there is complete outsourcing of compensation Management of in the industry. Employee relocation process: The density with respect to employee relocation process outsourcing between and can be evaluated with the mean and standard deviation. By examining the said statistical mean and SD in employee relocation function for select industry, the mean and SD for are and and the mean and SD for industry are and respectively which indicates that there is partial outsourcing of Employee Relocation process in the industry and there is complete outsourcing of employee relocation process in the industry. Union relations process: The degree of outsourcing between and can be understood with the mean and standard deviation. By examining the said statistical mean and SD in union relations function for select industry, the mean and SD for are and and the mean and SD for industry are and respectively which reveals that there is partial outsourcing of union relations process in the industry and there is complete outsourcing of union relations process in the industry. Employee grievance handling: The magnitude with respect to employee grievance handling outsourcing between and can be understood with the mean and standard deviation. By examining the said statistical mean and SD in employee grievance Handling function for select industry, the mean and SD for are and and the mean and SD for industry are and respectively which reveals that there is partial outsourcing of employee grievance handling process in the industry and there is partial outsourcing of grievance handling in the industry. Expatriate administration: The degree of outsourcing between and can be understood with the mean and standard deviation. The mean and SD for are and and the mean and SD for industry are and respectively which reveals that there is partial outsourcing of expatriate 62

7 administration process in the industry and there is partial outsourcing of expatriate administration process in the industry. Health care benefits administration: The degree of outsourcing with respect to health care benefits administration between pharma and can be understood with the mean and standard deviation. The mean and SD for are and and the mean and SD for industry are and respectively which reveals that there is partial outsourcing of health care benefits administration process in the industry and there is partial outsourcing of health care benefits administration process in the industry. Strategic business planning: The degree of outsourcing with respect to strategic business planning between and can be assessed with the mean and standard deviation. The mean and SD for are and and the mean and SD for industry are and respectively which reveals that there is partial outsourcing of strategic business planning process in the industry and there is complete outsourcing of strategic business planning in the industry. Risk management process: The range with respect to risk management outsourcing between pharma and can be described with the mean and standard deviation. The mean and SD for are and and the mean and SD for industry are and respectively which reveals that there is partial outsourcing of risk management process in the industry and there is partial outsourcing of expatriate administration process in the industry. Retirement planning: The range of outsourcing with respect to retirement planning between and can be understood with the mean and standard deviation. By examining the said statistical mean and SD in expatriate administration function for select industry, the mean and SD for are and and the mean and SD for industry are 2 and respectively which reveals that there is partial outsourcing of retirement planning process in the pharma industry and there is partial outsourcing of retirement planning in the industry. Pension and benefits administration: The degree of outsourcing between and can be analyzed with the mean and standard deviation. The mean and SD for are 1.6 and and the mean and SD for industry are and respectively which reveals that there is partial outsourcing of pension and benefits administration in the industry and there is a complete outsourcing of pension and benefits administration process in the industry. FINDINGS AND RECOMMENDATIONS Important areas of HR outsourcing Nature of Familiarity between the Select Industries There is a significant difference in the opinion about familiarity of HR outsourcing between and industry. According to the analyzed data, the respondents of both the industries are Familiar about HR Outsourcing process, but the employees in Industry are much more familiar than the employees in the cy industry. Various HR Functions have been studied in the two industries, edited data about the level of outsourcing in each HR Function and the same has been interpreted with ANOVA. By observing the value of HR outsourcing in the two industries from the table, the table values reveal that there are two degrees of HR Outsourcing which can be observed namely partial outsourcing and complete outsourcing and there are no HR Functions which remained un outsourced in the two selected industries. Recruitment and selection: Which indicates that there is partial outsourcing of recruitment and selection function in the industry and there is complete outsourcing of recruitment & selection function in the Industry. Back ground checks: Indicates that there is complete outsourcing of background checks in the industry and there is partial outsourcing of background checks in the Industry. Training and development: Values indicate that there is partial outsourcing of training and development function in both the and industries. Performance appraisal: That there is partial outsourcing of performance appraisal in the pharma industry and there is complete outsourcing of performance appraisal function in the Industry. 63

8 Employee assistance and counseling: Identifies the fact that there is partial outsourcing of employee assistance and counseling function in industry and there is complete outsourcing of employee assistance and counseling in the industry. Compensation management: From the investigation it is found that there is partial outsourcing of compensation management in the pharma industry where as in the industry there is complete outsourcing of compensation management. Employee relocation process: From the analyzed information that there is partial outsourcing of employee relocation process in the pharma industry and with respect the industry there is complete outsourcing of the same. Union relations process: There is inverse relationship between two industries about union relation process. This means there is partial outsourcing in the pharma industry and complete outsourcing in the industry. Employee grievance handling: The processed results reveal that there is partial outsourcing of employee grievance handling process in both the industries. Expatriate administration: The processed results reveal that there is partial outsourcing of expatriate administration in both the industries. This means that there is same pattern of outsourcing. Health care benefits administration: From the processed information, it is found that the outsourcing with respect to health care benefits is partial in both the select industries. Risk management process: From the processed information, it is also found that the outsourcing with respect to risk management process is partial in both the select industries. Retirement Planning: From the investigated information, it is found that the outsourcing with respect to retirement planning is partial in both the select industries. Pension benefits administration: From the analyzed information, it has been found that there is partial outsourcing about pension benefits administration in both the industries. The above stated findings of HR outsourcing functions in the employee perspective can also be well assimilated from the given outsourcing matrix. Partially Outsourced Completely Outsourced 1. Training and development 2. Employee grievance handling 3. Expatriate administration 4. Health care benefits Administration Both Industries of & 5. Risk management process NIL 6. Retirement planning 7. Pension benefits administration 1. Recruitment and selection 2. Back ground checks 3. Performance appraisal 4. Employee assistance and counseling 5. Compensation management 6. Employee relocation process 7. Union relations process NIL REVIEW OF LERATURE Sarode,Sheetal Gade1 (2012) high light the factors which need to be considered before a company goes for outsourcing of human Resource. The findings of the research indirectly point out that human resources functions outsourcing is contingent upon factors like flexibility, availability of adequate resources, affordability, and acceptability. The research also suggests a systematic process, requisites and proper planning which successfully execute human resources outsourcing in the organizations. Kernohan, Paul2(2008), technology outsourcing brings benefits and efficiencies to human resources. Human resources functions gains are assured once the steps are planned systematically and good ervice providers are selected. 64

9 Ganesh, ShivGanesh3(2007), study that a large number of U.S. companies have outsourced work to countries such as India, it was found that outsourcing raises class issues and ethnic tensions, It gives the relation between outsourcing and globalization. Yu, Tai-Yi4(2014), on information systems (IS) outsourcing indicate that public sector decides to outsource information technology () services because private vendors offer more cost advantages. This research explores government sectors of outsourcing and focus on the role of relationship for IS-service provider in information sharing and providing which are contributing factors to successful outsourcing in long-term partnerships and is affected by the level of trust that each has in the outsourcing relation. Vaniessa Robinson5 (2009), reports on research by Leeds university business school for the Chartered Institute of Personnel and Development (CIPD) on outsourcing opportunities for human resources (HR). 315 organizations were surveyed, 29% were outsourcing HR, with 7% opinion was human resources functions outsourcing is a success. Chandrakant Ghabak6(2012) revealed with this study that globalization to the Indian industry is both a threat and opportunity. unique human resources practices has great influence the growth of the and ES sector, retaining talented work force is the need of the hour. A model of 3C, viz, cost effective training, conducive working environment and continuous skill improvement was proposed. The Indian success story has made India's attractiveness as an investment destination. Sheigren, Diane7 (2004) human resources outsourcing is the world s fastest growing field.the research proved that there is high level of satisfaction in the executives,whose organizations have outsourced their HR Functions. KVS Jawahar Babu;G Githanjali Jain8(2012) opined human resource management is a process of bringing people and organizations together so that their mutual goals are met To combat competition, Human Resource (HR) department should evolve itself with the transformation. The companies human resources activities should ensure in overcoming this type of crisis. To tackle this situation new human resources issues and initiatives should be practiced in the organization. human resources outsourcing is one such activity. Weatherly, LeslieA9 (2005), Companies and the industries are outsourcing their human resources business processes numbers to effect improvements in efficiency, service and cost. vendors are promising quality service, reduced costs to the organizations. With this mutual state of things human resources outsourcing has become very successful globally. CONCLUSION Human resources outsourcing has become the driving force for the virtual organizational movement. Technology, goods, services, people,processes and good HR practices steer the organizational development. The world has become small and interconnected in all major respects. People, goods, information technology and capital are exchanged around the globe at a rapid pace. The barriers among the nations have disappeared and the world has become a borderless market place because of the advent of multinational enterprises. Falling in line with the global markets, the human resources managers in the organizations have more complicated roles to play that is, to align with changes in the domestic as well as global economies-keeping in track of the global changes and competition. In the era of hyper global competition the human resources managers of the organizations has to play challenging roles and create a competitive advantage for the organization through HR good practices. With high degree of attrition rates in the the organizations, a vibrant human resources can be a key differentiator between underperforming and high performing organizations. The shifts in globalization and international business have been at an increasing pace after 1990 s.the external environment factors have been contributing significantly for the remarkable changes in the global business. Human resources outsourcing is changing the way human resources departments operate technology makes it easy to outsource human resources activities to specialist service providers, by allowing the service providers real time internet based access to the employers human resource information database. Companies are outsourcing more human resources functions because the transactional functions could be handed over to an expert service provider This option is considered so that the company can concentrate on the strategic acquisition, motivation and retention of talent which is more required for business success. 65

10 REFERENCES 1. AP Sarode,Sheetalade source(2012), An analysis of factors affecting outsourcing of human resource Journal of commerce and management thought ;vol 3 no 1.Kernohan, Pau(2008), Outsourcing brings interdean to the technology forefront Strategic HR review, vol. 7 issue 2, p p. 2. Ganesh, Shiv(2007), Outsourcing as symptomatic: class visibility and ethnic scapegoating in the US sector. Journal of communication management. 2007, vol.11 issue 1, p p 3. Yu, Tai-Yi(2014), An empirical study of collaborative partnering among enterprises and government organizations for information system outsourcing Applied economics.jan 2014, vol. 46 issue 3, p Vaniessa Robinson of CIPD(2009). HR 'should wake up to outsourcing opportunities.'.people Management. 7/2/2009, vol. 15 issue 14, p9-9. 1/6p. 5. Chandrakant Ghabak (2012), Human resource management practices in and ES sector in Mumbai Journal of commerce and management thought ; vol 3 No 2,Apr2012; pp: Sheigren, Diane(2004), Why HR Outsourcing Continues to Expand. Employment Relations Today (Wiley). Summer2004, vol. 31 issue 2, p p. 7. K V S n Jawahar Babu, G Githanjali Jain(2012), Recent trends in human resource management practices academicia : An international multidisciplinary research Journal ;vol 2 no 12, Dec 2012 pp: Weatherly, Leslie A(2005), HR outsourcing: Reaping strategic value for your organization. Sep 2005, vol. 50 issue 9, special section p p. 66