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HR Outsourcing-Part I - HR Outsourcing: Meaning, Need, Types, Forces, Outsourcing HR Services, Benefits,
Management (HRM)
ITM University
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PART I
HR Outsourcing
A company may outsource a few or all of its HR related activities to a single or combination of service provides located in offshore destinations like India, China, Philippines etc. Generally those HR functions, which are not critical and confidential, are outsourced.
Human resource outsourcing is a momentous strategic HR initiative. It helps organization to focus on internal resources towards doing what they do best and simultaneously helps to control the bottom lines.
HR outsourcing helps an organization to gain cost and time efficiencies and provides cutting edge over their human resource strategies and improves services to their employees. HR is an essential partner in developing and executing organizational strategy.
Learn about:-
Introductions and Meaning of HR Outsourcing
Need for HR Outsourcing
Types
Forces for Driving
Outsourcing of HR Services
Benefits
Barriers 8. Future Development.
HR Outsourcing: Meaning, Need, Types, Forces, Outsourcing HR
Services, Benefits, Barriers and Future Development
Contents:
Introduction and Meaning of HR Outsourcing
Need for HR Outsourcing
Types of HR Outsourcing
Forces for Driving HR Outsourcing
Outsourcing of HR Services
Benefits of HR Outsourcing
Barriers of HR Outsourcing
Future Development of HR Outsourcing
HR Outsourcing – Introduction and Meaning
Outsourcing is a force behind the virtual organization movement. Outsourcing is simply obtaining work previously done by employees inside the company from sources outside the company. If someone has specialized in an activity which is not strategically critical to our business – and is able to do that cost effectively, it is better to get it from outside.
The organization gets benefitted in the form of excellent quality, reliable supply, and rock bottom price. It can also focus exclusively on doing what it is good at – thereby enhancing its own competitive advantage.
People are the most important asset of an organization. Leading companies around the world are taking more strategic approach to managing their human resources. They are outsourcing day to day human resource functions so as to focus on strategic HR issues that impact corporate performance and shareholder value.
Human Resource Outsourcing is a process in which a company utilizes the services of the third party to take care of its HR functions. A company may outsource a few or all of its HR related activities to a single or combination of service provides located in offshore destinations like India, China, Philippines etc. Generally those HR functions which are not critical and confidential are outsourced.
Recruitment and selection, payroll and compensation management, staff training, employee benefits and service, job evaluation are examples of such functions. The decision by Unilever, for example in 2006, to outsource its HR activities – mostly transaction oriented such as pay roll administration, applicant tracking, training and development, record keeping, performance appraisal follow up etc. – to Accenture appears to be in the right direction.
These are basically people and effort intensive activities but are routine in nature. Such repetitive work can easily be turned over to a third party specialist-who would be able to deliver excellent results, leading to significant savings in cost and effort. Through standardization of processes the specialist is able to deliver service at unbelievable speed also.
At the same time, the organization should continue to perform transformational HR roles – such as attracting and retaining talent, bringing about strategic change in partnership with line managers, championing employee concerns etc. Across boardrooms and business schools HR is primarily viewed as a powerful tool to attract and retain talent, build workforce capabilities, handle grievances and bring out the best in people.
With high attrition rates still haunting most people intensive industries, an active and vibrant HR can be a key differentiator between mediocre and high performance organization. Seen against this backdrop, it is not surprising to find that routine activities
HR Outsourcing – Need
Many factors will contribute to any organization’s decision to outsource its HR functions.
The following are some of the needs of HR Outsourcing:
i. Enabling businesses to focus on core operations
ii. Delivering cost savings – whether direct or indirect
iii. Helping to create a stable, cost-effective operating platform
iv. Transferring focus from internal processes to achievement of business goals
v. Realizing investment in HR transformation and IT systems
vi. Ensuring compliance with legal, regulatory and best practice requirements, and
vii. Transferring risk and liability for people issues.
HR Outsourcing – 3 Broad Types: Application Service Provider
(ASP), Business Process Outsourcing (BPO) and Total HR
Outsourcing
HR – outsourcing can be broadly divided into three types:
Application Service Provider (ASP)
Business Process Outsourcing (BPO)
Total HR Outsourcing
Type # 1. Application Service Provider:
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A host of companies specialise in providing hardware and software applications to support large organisations, including application vendors like PeopleSoft, Oracle, etc. which have developed application packages (PeopleSoft HRMS, Oracle HRMS), for supporting human resource activities in an organisation.
They install, customise and provide support for running these applications. The major disadvantage with ASP is the costs associated with application software. Secondly, the successful implementation of the application software is doubtful.
Type # 2. Business Process Outsourcing:
The major difference between BPO and ASP is that in BPO, the client is in direct contact with the employees through call centres or support centres. MNCs generally opt for BPO as they operate in many countries and employ a large number of people. While certain firms wish to retain the power to control human resources, others hand over the power to the service providers.
Type # 3. Total HR Outsourcing:
In this type of outsourcing, the entire HR function is run by the service provider. There is no specific HR department in the organisation. The client organisation only has senior HR professionals who are also HR- strategists. A host of non-strategic functions and employee contact is done by the service provider.
HR Outsourcing – 3 Main Forces Driving the Engine of HR
Outsourcing
When management of a company’s employees is entrusted to a third party, they are expected to provide the whole range of human resource services against payment. There are three main forces that are driving the engine of HR outsourcing.
Firstly, high manpower turnover places heavy challenge on the HR department to design HR services that are similar with their competitors. When employees are changing their employer at the drop of a hat, organizational HR practices for customized services give way to standardized services.
The power of unique organizational culture is not that effective to attract people from outside or to retain the existing employees for long if the prospective or the present employees have no interest to know about it. Faced with depleting stock of talents, increasing number of companies are trying to benchmark their HR practices with one or the other competitors to catch up with them both in terms of their expenditure on manpower and in terms of manpower productivity.
More and more HR services are likely to get standardized as employees change their employers more frequently. This has been a matter of concern for technically qualified managerial employees whose development costs are high and time consuming. Though, such imitative HR practices have no effect on employee turnover intention but companies get cost parity for managing their employees.
A second force for HR service standardization is the accumulated research findings in public domain on human behaviour under varieties of contractual and organizational control conditions. Availability of such findings on employee behaviour and expectation
HR Outsourcing-Part I - HR Outsourcing: Meaning, Need, Types, Forces, Outsourcing HR Services, Benefits,
Course: Management (HRM)
University: ITM University
