Outsourcing is an accepted tool of management that helps an organization in doing business through restructuring its business ways. By using outsourcing, an organization gets the challenge of building a more flexible institution whose core business is centered on competency.
The main purpose of outsourcing is to help an organization concentrate on its core activities, which provide better value for money. In essence, outsourcing is an organizations development policy since an organizations non-core aspects are outsourced to a third party. The organization transfers some of its in-house functions to a qualified third party for a given period at a negotiated fee (Weatherly, 2011).
HR outsourcing issues
HR outsourcing is a process whereby an organization sub-contracts its human resource functions to an external third party provider. Outsourcing human resources can be done in several ways. One way is through a business process where an external provider gives an organization management services on the HR activities like recruitment or payroll administration.
Secondly, it can be through a shared service HR outsourcing. This is where an organization only subcontracts the administrative elements of HR activities. Lastly, it can be through application service outsourcing. This majorly deals with the technological infrastructure that supports human resource functions.
A strategic point in outsourcing is by getting a strategic solution that will help cut cost that will seek to unburden shrinking HR resources. Strategically, an organization will tend to concentrate its own resources on core competencies where it can get definable preeminence and provide unique value for customers.
This has varied benefits that it gives to an organization such as, a well-developed core competency provide formidable barriers against present and future competitors that seek to expand into the organizations areas of interest, thus facilitating and protecting the strategic advantages of market share.
Outsourcing HR lays specific concern to employee satisfaction while still ensuring improved performance. Another performance issue that is important in outsourcing HR is getting to know what standard of service level the service provider offers.
In outsourcing HR, an organization should ensure that all employees act in a professional manner and service delivery is fair and is in an impartial way. An organization should also ensure that all employees observe set code of conduct.
Social responsibility issues
A socially responsible outsourcing helps in creating a positive social impact by generating jobs in low-income areas, which has high unemployment rates for the various skilled workers. Another impact the social issues brings in outsourcing is that it reduces brain drain through reducing emigration of skilled-labor from the low-income areas (Smith, 2006).
Addressing HR outsourcing issues
As an HR director, one needs to know how to communicate to his/her employees through a proper communication channel. This is achievable by engaging the employees in the decision-making on how to outsource. Another approach that an HR director can put in use is learning how to manage expectations.
It should not be an assumption that one knows how people feel instead; they can employ use of focus groups to survey how employees feel about certain issues. Another approach is how well one sets the transition after outsourcing. HR director should be able to sell the benefits of outsourcing to the employees so that they have correct information about the whole issue (Enlow & Ertel, 2006).
Strategic benefits of HR outsourcing to organizations growth
HR outsourcing forms an integral part in an organizations strategic growth. HR outsourcing gives HR professionals time for devoting to more strategic roles that are vital to the support and performance of an organization.
Subsequently, HR outsourcing helps an organization in getting access to HR expertise that does not exist within the organization. Another benefit HR outsourcing gives to an organization is that it reduces cost of doing business hence increasing the organizations efficiency. Lastly, HR outsourcing saves time and money in that the organization does not carry out any paper related work (Quinn & Hillmer, 1995).
Cost savings associated with HR outsourcing
HR outsourcing is associated with payroll and human resource information systems costs. The payroll costs is divided into two categories, one being the payroll systems costs and costs associated with non-payment department that are attributed to time collection. The costs associated with human resource information systems include system upgrade costs and maintenance costs (Anonymous, 2007).
Potential areas for outsourcing
Compensation management in outsourcing is a practice that seeks to balance employee work relation by substituting it with monetary or non-monetary benefits. Compensation management helps an organization in motivating employees and improves business efficiency of the organization. In essence, compensation management forms a potential area in outsourcing since a good compensation package will attract the best talents and sustain them for as long as possible.
This is an important part of change management, which is vital in the delivery of successful benefits to an organization. Its main idea is to center on how change will benefit an organization and gives a layout of how to manage the benefits. Benefits management is an important potential area in outsourcing since it provides frameworks that deliver measurable outcomes to an organization (Smith, 2006).
Ethical and corporate social responsibility considerations of HR outsourcing
Ethics are codes of conduct or moral standards that guide people. In outsourcing HR, the ethical considerations an organization should ensure include performance of functions in a professional manner by the employees. Another ethical consideration is ensuring that affected employees of an outsourcing decision are fairly treated. On the other hand, corporate social responsibility is an organizational concept that tries to connect the exclusive worlds of the corporate and the society, which are stakeholders in the firm.
A coherent corporate social responsibility strategy based on sound values offers an organization strong business benefits and helps in achieving extensive reach. Outsourcing HR plays a key role since HR key responsibilities are to promote corporate ethics and helps in building a human capital team. Key competencies of corporate social responsibility are capacity building, enable understanding of a society and evaluate the relationships that exist with the stakeholders (HRM Guide, 2011).
Offshore Outsourcing and inside the US
Offshore outsourcing is whereby a country hires an external organization that is not part of the country, which manufactures a product in order to perform a given business function. Existing organizations often resort to offshore outsourcing since it is an essential revenue and growth strategy avenue.
Offshore outsourcing has some strategic advantages associated with it. One is that it offers flexibility in terms of work off load. This helps an organization in ensuring that the available resources are utilized optimally. Another strategic advantage of offshore outsourcing is that it ensures strategic re-deployment of resources. Successful implementation of offshore outsourcing frees an organization from unnecessary jobs and lets concentration be on personal strategic issues of the organization.
Outsourcing inside the US, although it differs with the meaning of outsourcing, it is an option that an organization might wish to consider. It also refers to in-house; where the organization seeks to perform a service themselves instead of outsourcing to an outside vendor. In-house HR gives organization-varied benefits such as reducing costs associated with HR operations, improved risk management and compliance rate and reduced cycle time for transactions (HRM Guide, 2011).
Other areas relevant to HR outsourcing
One area that is relevant in HR outsourcing is in business process outsourcing (BPO). This involves outsourcing specific business activities to a third party that includes, the operations and responsibilities of the business process. BPO is both back office and front office outsourcing.
In conclusion, an organization should be able to consider the cost benefits related in doing in-house and outsourcing before settling on the idea to outsource its services. Even though outsourcing expands the business market niche it is vital to weigh out the benefits that it brings along (Quinn & Hillmer, 1995).
Anonymous, (2007). Outsourcing and Shared Services Star in Cost Savings, Expertise, and More Time for Strategic HR. HR Focus, 84(4).
Enlow, S., & Ertel, D. (2006). Achieving Outsourcing Success: Effective Relationship Management. Compensation and Benefits Review, 38(3), 50-55.
HRM Guide, (2011). HR Outsourcing. Retrieved November 19, 2011, from http://www.hrmguide.co.uk/strategic_hrm/hr-outsourcing.htm
Quinn, J. B. & Hillmer, F. G. (1995). Strategic Outsourcing. The McKinsey Quarterly, 1. Retrieved November 19, 2011, from http://www.questia.com/googleScholar.qst?docId=5000316545
Smith, A. (2006). United States: Key Issues in HR Outsourcing. Retrieved November 19, 2011, from http://www.mondaq.com/unitedstates/article.asp?articleid=36978
Weatherly, L. A. (2011). Research quarterly; HR outsourcing: reaping strategic value for your organization. Retrieved November 19, 2011, from http://findarticles.com/p/articles/mi_m3495/is_9_50/ai_n15627805/