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Strategic HRM and Outsourcing

Outsourcing is primarily about relationships- companies with their employees and managers, HR generalists with their vendors, vendors directly with employees, HR with senior leadership. Those companies that recognize this as well as the seismic culture change that outsourcing represents and then aggressively manage those changes with thoughtful planning, communication, measurement and reporting are the ones that achieve faster and better outsourcing results.

Investing in Human Resources Outsourcing can have a huge impact on your company’s bottomline. There are three basic drivers behind HR outsourcing:

  • Save money(ongoing expenditure)
  • Avoid capital outlay
  • Turn the fixed cost into a variable one

Some of the reasons for investment in HR outsourcing are mentioned below:

Increase in Profit and Productivity: Businesses that do everything in house tend to have a much higher operating expense. The cost structure and economy of scale from an HR outsourcing vendor can give a business the competitive edge it needs.

Reduce Labor Costs: Hiring employees and training them for a number of different projects can be costly and time consuming. HR outsourcing allows you to place resources where you need them the most.

Reduce Risks and Liabilities: Competition, increasing government regulation, and financial conditions are constantly changing. With these changes comes a certain amount of risk for the business owner. Outsourcing manages the complexities and liabilities of employment from negotiating and administering employee benefits to maintaining workplace safety and compliance.

Among the HR functions and services that outsourcers provide include transaction processing, web sites and call centers, vendor management, HR process redesign, services delivery strategy, analytic, staffing and recruitment, designing and building IT Infrastructure.

Payroll and benefits administration are particularly complex in large organizations- a result of multiple union agreements and a conglomeration of funding sources. Many organizations also have multiple workweek start dates and dozens of categories of leave. Learning is probably the big “emerging” discipline among outsourced HR services. Outsourced learning services encompass technology infrastructure, the learning management system as well as administration of the system itself which will be supported through a shared service center.

Since the multi-process HR outsourcing market is still developing, the vendor landscape remains extremely fragmented. In addition to selecting vednors, working out the details of an HR outsourcing contract are a daunting challenge. Some of the problems with these agreements include failure to clearly define the scope of the service, failure to manage the vendor relationship proactively. Structuring the Outsourcing Program involves selecting a vendor and the outsourcing model to be applied depends on timing of outsourcing investments, definition of value and off shoring.

The maturity of internal services delivery and your own motivations are crucial to take into account when considering adoption of HR outsourcing. It is also important to bear in mind the cost of the governance.

HR outsouring is already becoming available for organizations of all sizes- not just the largest. In future, service delivery for the larger organization will start to move away from dedicated client specific service delivery to shared utilities based on integrated service delivery, using a combination of local and near shore personnel. In addition the leading vendors will offer both multi process HR BPO and a wide range of standalone HR services including payroll services, benefits administration, recruitment services, workforce administration services, training administration services and relocation administration services.


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