The trend of outsourcing HR activities is becoming more prevalent as its economic benefits are too attractive to ignore .However, if appropriate analyses of the consequences of outsourcing do not precede the outsourcing decision; results could be disappointing and dangerous. Firms frequently find themselves examining the build and buy option. An outsourcing decision of any firm lies within these two options. Over the last two decades, increased competitive pressures have forced many companies to outsource major portion of their HR functions. Many companies are outsourcing their non core activities in spite of all the nervousness about “loosing jobs to overseas providers”. Companies that see outsourcing as a short term, cost cutting opportunity are almost always disappointed with the result. But companies that approaches outsourcing as one element of an overall business strategy are applying some specific best practices to reach their goals more quickly and with fewer roadblocks.
Definition
It is an activity wherein a firm enters into an agreement with a provider (vender) to perform an activity that was previously performed by the firm.
Why outsourcing?
- Cost reduction/cost saving- The primary benefit of outsourcing is cost saving. Depending upon the work processes outsourced some organization save up to 60 percent in content development cost alone.
- Quality improvement- Many organizations haven’t built the competencies in providing quality service or quality product for which they go for the option of outsourcing.
- Overcoming resource shortage- Outsourcing is often used to overcome resource shortages. Countries like India and Ireland have significant English speaking Human Resource that can be utilized in design and development of learning and training content. Such countries provide access to highly skilled individuals in the areas of linguistics, IT and Engineering.
- Time saving.
- Focusing on strategic and core issues.
Key Consideration in Making HR outsourcing decision
1. What to outsource- Outsourcing the key and critical HR activities or understanding which HR activity to be outsourced is important. It creates a strong dependency on the performance of the venders.
2. What expertise or specialized knowledge required- Assessing skills and technical efficiency of venders in handling outsourced activities to ensure proper control and marinating quality is necessary.
3. How much to change- How much you are outsourcing or how much you are dependent on the vender and taking the risk is also considered. Keeping a balance in dependency and the risk that comes with the decision to outsource make the outsourcing successful.
4. Whom to trust- Though legal contracts are done, mangers should assess the previous track records and history of the potential venders before any commitment.
5. Time duration of relationship- Though outsourcing can lead to tremendous cost saving, but it takes time. Cost saving in the early part of outsourcing or in one time relationship is not remarkable. It is gained as the relationship between the organization and the vender matures. Also benefit lies in the medium to large contracts.
6. Maturity makes it easy- Organizations with a clear definition og output, well aligned resource, responsibilities have been shown to outsource more effectively than those without a reliable and consistent work plan.
Image Processing through HR outsourcing
Over the last ten years, the business landscape has undergone a drastic change from personal stage to full-fledged market ownership. Accordingly, the ownership composition and social, legal environment in which the firms operate underwent drastic transformation. As a potential outcome of this trend we notice perceptible changes in HR functions impacting employees’ attitude, towards hierarchy, managerial responsibility of decision making. This naturally modified the working patterns in most of the corporate undertakings across the world by giving rise to new HR perspective with alternative methods of functions. This so called increasing competition, globalization of investment, production and international trade has redefined the governance leading towards outsourcing of HR functions. The growing awareness of outsourcing phenomenon as a cost benefit strategy among the companies has made this a big business event.
Ø The strategy roles performed by HR professional in the name of payroll strategy, payroll management, pension benefit management, health benefit management and stock options administrations have been found to be inadequate in contributing to the growth of the firms.
Ø As such they are termed as accounting function and are not different from traditional personnel administration.
Ø On the other hand, the potential benefits from outsourcing are reduced cost, improved expertise and quality service by the outside firm.
Ø HR is able to concentrate more on strategic issues by deviating from non core Ares of work.
Ø The projection of economic benefits through outsourcing strategy also demands more value based format for the image makeover or image build up of firm.
Ø The quality consciousness people sitting at market wants quality service and product leading to demand of new skills and technology.
Conclusion
The growing pace of the outsourcing phenomenon in the context of HR services has no doubt triggered the boom for BPO industries in countries like India by opening doors for further advancement and the organizational front. HR outsourcing is found to be a path breaking development towards achieving optimum levels in the business performance. After surveying the phenomenal development in the context of HR outsourcing, the next step is to establish the need of ‘image processing’ upon which the firm’s growth depends.