1. Outsourcing Why any business thinks to outsource? Outsourcing HR Functions... 2

Transcription

1 HR OUTSOURCING

2 Contents 1. Outsourcing Why any business thinks to outsource? Outsourcing HR Functions Advantages and disadvantages of Human Resource outsourcing Advantages of Human resource outsourcing Impact good or bad Minimizing risk management for Human resource functions Cost effectiveness for Human resource functions Employee development Regaining primary focus on other functions Return on investment for Human resource functions Disadvantages of Human Resource Function outsourcing Lack of in-house expertise within the organisation Loss of Human Factor Morale loss Confidentiality of the data present in organisation e-hrm Role of e-hrm Client Advice for Outsourcing References... 10

3 1. Outsourcing Outsourcing can be defined in multiple ways but basically it is giving away all the services to any third party for any function. The concepts of outsourcing started with information technology, IT outsourcing has included anything from outsourcing all of the management of Information Technology to an IBM or HP, which starts from outsourcing a very small as easily fabricated service, like data storage to a more complicated service like business continuity management and everything which can be between them. Also, the pointer of outsourcing is mostly used incorrectly as offshoring. Offshoring which can also be referred as accurately with offshore outsourcing is a very important subset of outsourcing as a concept. Offshore outsourcing can be referred as outsourcing services to any of the outsourcing company who is not present in a country where the client company which is giving it work is based, so that it can take the advantage of lowering the labor costs needed to carry out their work. Offshoring is a very controversial option which is exercised by companies as in domestic outsourcing the employees often are not laid off from their jobs and are just transferred to the outsourcer payroll. However in offshore outsourcing, this will also ways result in layoffs(snell, Pedigo, and Krawiec 1995). 1.1 Why any business thinks to outsource? Any business thinks to outsource depending on its situation. The major reason is cost saving but they more than often include one or more of the following: Lowering of labor costs because of economies of scale along with lower labor rates. Having variable capacity of work with them They done have access to specific skills They need to lower their investments to improve internal infrastructure They need access to innovation and thought leadership for specific functions. They don t have in house competencies for the same They want to increase efficiencies for the same. They need increased flexibility so that they can meet changing business as well as commercial conditions required for their business They need to have tighter control over their budget so that their costs are very much predictable They want to focus on core competencies and leave out peripheral ones for other people(buchholz, Todd 2004). 1.2 Outsourcing HR Functions The HR functions which are mostly outsourced are admin works like record keeping, complaint logging and recruitment and selection. Once, we look more deeply into them, there is a huge chunk of tangible

4 benefits in terms of cost savings to outsourcing human resource functions, but the decision to outsource should not be taken lightly. Cost reasons alone are always not the primary drivers which can drive the decision. Once we decide which areas we need to outsource, we also should think about the sizeable change which we are going to and we need to dedicate our HR team which will give in significant time to making this process successful and working for organization s favor. The more initial time is spent by in house consultants for choosing the right functions to be outsourced as well as how to utilize human resources consultants for their organisations, this will pay off to the organisations enormously in the long-term in terms of returns.we also need to consider first the process gaps as well as issues which currently exist and how you use the In house expertise to solve them (Gueutal, and Stone 2005).

5 2. Advantages and disadvantages of Human Resource outsourcing. When anybody looks at the state of the current economic climate in the developed world, every sector of industry and businesses have been forced with the need make crucial budget cuts to save themselves. Human resource function, which is no different from other departments, is also experiencing a decrease in their number of staff members and may have been the case that they have been eliminated altogether from organisation due to Human resource outsourcing. With lesser number of resources, all of the remaining staff members which are present in Human resource department are very much left with the responsibility so that they can manage the workload which is present on them and have been previously borne by many more employees which were present in the human resource function.the Human Resource department is present at the heart of every organization. It is also very much essential that the Human Resource Department needs to run efficiently and effectively, even when they have limited resources. Hence, if the team needs to ensure that their Human Resource department tasks are carried out in the same fashion that was being done earlier, multiple business owners have begun to outsource some or all of their individual departments function so that they can provide Human Resource services and data analytics, which including compensation surveys(forey and Jane 2011). 2.1 Advantages of Human resource outsourcing Impact good or bad In any organisation, if they have any other contractor, human resources consultants will have a significant impact on any organisation, so they need to be sure that they have chosen someone who will invests time in getting to know the employees and their organization so that the impact will be a a positive one which in line with the organisations vision as well as goals in both short and long term Minimizing risk management for Human resource functions When any organisation outsources their human resource function the Outsourced human resources consultants will help their businesses to minimize the risk that they are facing. In any country Employment laws do change regularly and it can be very much difficult for any organisations employers to remain up-to-date with the changes which are happening on these regulations which will be affecting their workplace. It is the job of Human Resource consultants for any organisation to stay aware and on top of these laws so that the organisation doesn t have to save themselves from non-conformance of these laws. They will also make sure that the organisations policies as well as procedures will comply with these laws and that both the employer and the employee will be protected. This will also ensure thatthey will regularly maintain the employee documentation to make sure that the records are continually up-to-date Cost effectiveness for Human resource functions Human resource Outsourcing can also be very much cost effective. For example, with human resources consultants, they can have access to Human Resource professionals which will have more experience as well as specialized knowledge than the hired individual human resource staff. To hire individual human

6 resource employees with this kind of experience will cost them more than hiring a team of outsourced Human Resource consultants (Snell, Pedigo, and Krawiec 1995) Employee development Outsourcing Human Resource functions can help multiple businesses to manage their employee performance as well as professional development. Once desired, the organisations human resources consultants will work on to implement performance management plans so that it can be ensuredthat the organization s employees will comply with company policies as well as procedures and will successfully meet business level goals. These outsourced Human Resource team will help them to then monitor individual employee performance as well as report all of their findings to management. This will reduce the workload of individual managers by minimizing the amount of administrative responsibilities they must have to live with (Snell, Pedigo, and Krawiec 1995) Regaining primary focus on other functions Business leaders of any organisations often get caught up in the day-to-day Human Resource issues by distracting them with their main business focus. Also Outsourced Human Resource consultants will allow them to shift their focus back, so that they can have comfort in knowing that the Human Resource side of things will be taken care of. By working alongside the Human Resource consultants, their staff can learn and grow, as well as being able to focus their efforts in key areas (Gueutal, and Stone 2005) Return on investment for Human resource functions When any organisation had an outsourced Human Resource team assistingany organisation with their long-term strategic management as well as business goals like that of succession planning along with professional development will give them more time which can be invested into all of these areas than which could have been done by in-house Human Resource team. This shift in Human Resource function focus more towards strategy, company policy and decision making will help to bring about a much greater as well as sustainable return rather than making an initial up-front investment in skill development inside the organisation(buchholz, Todd 2004). 2.2 Disadvantages of Human Resource Function outsourcing Lack of in-house expertise within the organisation HR Outsourcing will bring in one more major disadvantage which is required for hiring outsourced human resources consultants is this will develop a void of in-house expertise for human resource management skills. With any type of Human resource consultant, there will always a startup initial period in which learning will be there and they need to spend time so that they can get to know employees and the organization as a whole. If this logical point is missed over, this will risk the complete implementation of changes which will affect the values as well as philosophies of the organisation and harm the organisation in longer term. To avoid any of this, the organisation needs to choose a Human Resource consultant which will invests time to understand employee and the organization, so that they can be sure that any changes will be in line with the values of the organisation. Also, the important Human Resource functions like those of employee training as well as employee development might limit employees so that they can accomplishtheir logical goals(gueutal, and Stone 2005).

7 2.2.2 Loss of Human Factor The biggest loss in face-to-face interaction and a personal touchwill be the biggest disadvantage of outsourcing. To avoid this kind of impersonal feeling, organisations need to make sure that their outsourced Human Resource consultants are not just voices, they visit their offices regularly as well as devote time each week or month to work at office location and meet employees to understand their problems Morale loss The biggest disadvantage which can happen when Human resource function is outsourced can be the lowering of morale of employees when they hear that outsourcing is being brought in as their replacement. These words say that there will be job losses as well as pay cuts. With Lower morale, this can often lead to less employee productivity. If any organisation wants to avoid this, when they are working on choosing your human resources consultants, they should work on to choose a team which will be able to tell them that they are not for replacing them but will integrate with them as employees. This is particularly important as without having employee buy-in, any Human Resource changes which are brought about in an organisation will be short-lived Confidentiality of the data present in organisation Any Human Resource Consultant will always needs to take an oath that they will be providing a confidentiality agreement for them. Whenever the company is hiring outsourced HR, the Human Resource consultant will have access to majority of employee details and the threat will always loom that the data might be leaked(forey and Jane 2011).

8 3. e-hrm 3.1 Role of e-hrm e-hrmis always defined as the planning and implementation of Human Resource functions along with the application of information technology to be used for both network as well as support the Human Resource activities. It can also be defined as a way in which HR strategies can be implemented for employees, employee policies as well as different employment practices in public organizations need to have a focused as well as directed support using of web and technology based approach. In e-hrm we need the application of Information Technology for a specific useso that when it is implemented in their organization and employees are able to stay connected and work on their Human Resource function related activities.. Also,the focus is always on the web based technology which will help in making up a more specific aspect of usage of information technology. As a result, all of these the activities will be internalized by the Human Resource department. When looking at all the above lines, the most specific thing which should be kept in mind is that we need to use e-hrm for moving ahead of the manual file based system to be more effective and efficient. E-HRM plays a very important role in outsourcing the HR function as once Human Resource Management activities which can be done outside are possible, then easily the use of technology is possible. This will allow companies to shift their HR functions to outside organisations who have higher skilled people in this domain. Now the basic point is once those skilled workforce is connected with our company using technology, they are virtually our employees who are working for our payroll but can work from other premises serving all the HR stakeholders and multiple functions like background checks, UPS' expatriates program, 401(k) program, health care, handles employment verifications as well as managing their bonus stock program for managers. If we want to look at examples we can always look at below examples- AT&T: They have signed with Human resource outsourcing which will provide end-to-end human resources administration so that they can have substantial increase in their dollar savings. UPS: They are now outsourcing employee 401(k) management, employee health care administration, theemployee hiring process, employment level verifications, employee relocation services, new-employee hire compliance data, administration of employee retirement plans, and its employee bonus stock program. Duke Energy: They have outsourced multiple Human resource functions so as to handle payroll management, managing employee performance management, and other Human Resource backoffice administrative services, Delta Airlines: They have worked on deals with vendors for Human resource function for updating the human resources technology. They set up the governing team which will monitor Human resource metrics so that all expectations of stake holders are clearly met for Human Resource (Buchholz, Todd 2004).

9 4. Client Advice for Outsourcing Human Resources outsourcing as a trend had been appearing to be on the risewith more number of companiesadopting it with each passing year. The HR outsourcing market is about to reach 1 billion by When we see that the number of companies which are outsourcing their Human Resource functions have increased manifold, we also see that number of those companies who are looking to do this first time. While we have analyzed previously that the prospect of reducing costs as well as saving money is one of the most important motivators which companies begin when they are looking for outsourcing. The employers also are starting to focus on their business metrics which are like employee productivity, employee profitability along with employee satisfaction. At the very end, althoughcost savings is the primarywhich can drive theirorganisations into Human Resourcefunctionoutsourcing (Gueutal, and Stone 2005). When we analyze, the top three reasons which employees of different companies gave were: 1) To let their organisations gain outside skill and expertise, 2) To improve the service quality of their services, and 3) Completely focus on their core business as the one to take care. Other big organisations like Bank of America, Prudential Financial and Motorola have been signing comprehensive human resources outsourcing deals with working on outsourcing incrementally. Some organisations prefer using the mix of in-house resources as well as outsourcing. In doing the same, they often have lower budgets for managing HR function(snell, Pedigo, and Krawiec 1995). They also keep fewer Human Resource staff members when compared to full-time employee than organisations which handle human resources internally as well as work on to primarily outsource their Human Resource functions. UPS's organisation uses a special method of work outsourcing which uses "having multiple vendors" approach to manage HR outsourcing. Some perform background checks. Some manage UPS' expatriates program. Some manage 401(k) program. Some other administers health care. Few others handles employment verifications for new employees. Also some of them manage their bonus stock program for UPS managers. When companies work on doing Human Resource outsourcing, they always link their outsourced Human Resource services with specific defined and measurable objectives. They also work on improving their technology related issuesas well as working on efficiencieswhich will include different metrics which are required for evaluating actual results for HR KPI s. The Human Resource processes of outsourcers are actually more efficient help them to save their money, and help them with technology aspects to improve their business processes (Forey and Jane 2011). Delta Airlines: They have worked on deals with vendors for Human resource function for updating the human resources technology. They set up the governing team which will monitor Human resource metrics so that all expectations of stake holders are clearly met for Human Resource.

10 Duke Energy: They have outsourcedmultiple Human resource functionsso as to handle payroll management, managing employee performance management, and other Human Resource backoffice administrative services, AT&T: They have signed with Human resource outsourcingwhich will provide end-to-end human resources administration so that they can have substantial increase in their dollar savings. UPS: They are now outsourcing employee 401(k) management, employee health care administration, theemployee hiring process, employment level verifications, employee relocation services, new-employee hire compliance data, administration of employee retirement plans, and its employee bonus stock program. Now the logic which should drive any decision for HR outsourcing is which areas are critical in Human Resource to support my business and which are not. We should list them down first and then bring about the Human resource outsourcing juggler in front. Now, we should look at what the outsourcer brings to the table. Just cost savings are not the only thing to look at. Thought Innovation, Skills as well as transforming the HR function should also be in line for choosing the final vendor to which we will be outsourcing our Human Resource Functions. The buck doesn t stops here. They should look at how vendor will take over our Human resource function, what will happen to our present employees and how it will transform my Human resource function in both short and long term (Snell, Pedigo, and Krawiec 1995).

11 5. References 1. Buchholz, Todd G. 2004, Bringing the Jobs Home: How the Left Created the Outsourcing Crisis - and How We Can Fix It. New York: Sentinel, pg Bonasia, J. 2010, Offshoring, for good or ill, comes of age putting India on the map competitive world markets demand outsourcing, but it does drain domestic jobs. Investor s Business Daily. A04. Retrieved from 3. Baldwin, R. 2006, Globalization: the great unbundling(s), Chapter 1, in Globalization Challenges for Europe, Secretariat of the Economic Council, Finnish Prime Minister s Office, Helsinki, Blinder, A. 2006, Offshoring: The Next Industrial Revolution? Foreign Affairs, Vol. 85, No. 2, pp Davies, P. 2004, What's This India Business?: Offshoring, Outsourcing, and the Global Services Revolution. London: Nicholas Brealey International, 6. Easterly, W. 2002, Solow s Surprise: Investment is not the Key to Growth, Ch. 3 in The Elusive Quest for Growth, The MIT Press, Cambridge. 7. Forey, G. and Jane L. 2011, Globalization, Communication and the Workplace: Talking across the World. New York: Continuum, pp Gueutal H. G., and Stone D. L. 2005, The brave new world of ehr: Human resources management in the digital age 9. Here, There and Everywhere. 2013, " The Economist [London] n.d.: n. pag. The Economist. 17 Jan Web. 19 Jan < 10. Hira, R. and Anil H. 2008, Outsourcing America: What's behind Our National Crisis and How We Can Reclaim American Jobs? New York, pg Hunt, Albert R. 2007, "Letter From Washington: As U.S. rich-poor gap grows, so does public outcry" NY Times 12. Jamieson, D. 2013, "Public Interest Group Challenges Privatization Of Local, State Government Services", The Huffington Post. 13. Kavanagh M. J., Thite M. &Johnson R. D. 2011, Human Resource Information Systems: Basics, Applications, and Future Directions Second edition

12 14. Kavanagh M., Gueutal H. G., and Tannenbaum S. 1990, Human resource information systems: Development and application, Boston: Kent Publishing, 1990). 15. Lepak D. P., and Snell S. A. 1998, Virtual HR: Strategic human resource management in the 21st century, Human Resource Management Review, Vol. 8, No. 3, pp Mankiw, G. and Swagel, P The Politics and Economics of Offshore Outsourcing, working paper for the American Enterprise Institute for Public Policy 17. Olive, B. 2004, "Outsourcing Growing, Despite Controversy". Power, Vol. 148, No.4, pp Overby, S 2007, ABC: An Introduction to Outsourcing. CIO.com. 19. Rowthorn, R. and Coutts, K. 2004, Deindustrialization and the balance of payments in advanced economies, UNCTAD Discussion Paper No Snell S. A.,Pedigo P. R., and Krawiec G. M., 1995, Managing the Impact of Information Technology on Human Resource Management Pp in Handbook of Human Resource Management, edited by G. R. Ferris, S. D. Rosen, and D. T. Barnum (Oxford: Blackwell Publishers, 1995) 21. Strohmeier S. 2007, Research in e-hrm: Review and implications, Human Resource Management Review, Vol. 17, pp Walker A. 2001, Web-Based Human Resources, McGraw-Hill, New York