THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS
WITH REFERENCE TO IT INDUSTRY Submitted In Partial Fulfillment of the Academic Requirements For the Award of the Degree Of MASTER OF BUSINESS ADMINISTRATION BANGALORE UNIVERSITY Submitted By NIRVAN REG NO: 09SKCMA044 Under the Guidance of Dr. KAVITHA DESAI ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES 1 st. Cross, 1 st. Stage, Peenya Industrial Area, Bangalore-560058 2009 2011 1 DECLARATION I, NIRVAN, hereby declare that this dissertation titled, THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY, is based on original project study conducted by me under the guidance of Dr. KAVITHA DESAI. This has not been submitted earlier for the award of any other Degree / Diploma by Bangalore University or any other University. Place: Bangalore (NIRVAN) Date: 4 th May 2011 REG NO: 09SKCMA044 2 ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES 1st. Cross, 1st. Stage, Peenya Industrial Area, Bangalore-560058 CERTIFICATE FROM THE GUIDE Certified that this dissertation titled THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY is based on an original project study conducted by NIRVAN, of 4 th Semester MBA under my guidance. This dissertation has not formed the basis for the award of any other Degree/Diploma by Bangalore University or any other University. Place: Bangalore Date: 4 th May 2011 (Dr. KAVITHA DESAI) 3 ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES 1st. Cross, 1st. Stage, Peenya Industrial Area, Bangalore-560058 CERTIFICATE FROM THE COLLEGE Certified that this dissertation titled THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY is based on the study conducted by NIRVAN of 4th Semester MBA under the guidance of Dr. KAVITHA DESAI. This dissertation is based on the original project study undergone and has not formed the basis for the award of any other degree/diploma by Bangalore University or any other University. Dr. Kavitha Desai Dr.Kerron G. Reddy PROFESSOR MBA, RESIGTRAR AIMS PRINCIPAL, AIMS Place: Bangalore Place: Bangalore Date: 4 th May 2011 Date: 4 th May 2011 4 CERTIFICATE OF APPROVAL This dissertation report of NIRVAN titled THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY isapproved in quality and form and has been found to be fit for the Partial Fulfilment of the Requirements of Bangalore Universityfor the Award of Degree of Master of Business Administration. INTERNAL GUIDE EXTERNAL EXAMINERS Name: Dr. KAVITHA DESAI 1.Name: Signature: Signature: Date: 4 th May 2011 Date: 2. Name: Signature: Date: 5 ACKNOWLEDGEMENT First of all, I bow my head with full devotion, dedication, faith & gratitude to the omnipotent, omnipresent, omniscient and Almighty God for showering his unconditional blessings upon me as a result of which I am able to complete this project well in time. I would like to convey my deep and profound sense of gratitude, thankfulness and obligation to my learned and self-esteemed guide Dr.Kavitha Desai, Prof. MBA Dept. and Registrar, AIMS,for her untiring help, constant encouragement and learned suggestions. Vocabulary fails to express my feelings, emotions and thoughts towards her greatness & kindness which she expressed towards me. Instead of her extremely busy and exhaustive schedule, she always spared her valuable time and guided me accordingly. She stood like a beacons light to sail in the uncharted sea of my dissertation project. I would like to express my sincere thanks & gratefulness to all my respondents who helped me with their learned, experienced and valuable feedback by answering the questionnaire of my research topic which worked as the foundation stone to build this project. I am extremely thankful to Honourable Prof.Kerron G. Reddy, Principal & CEO AIMS, who has provided me with all the required facilities to carry out the present research work according to the norms of Bangalore University and by nurturing my skills to execute the requirements. I express my sincere regards, respect and thankfulness to Prof. Ranganathan Krishna Rao, Program Director, MBA Department, who always supported me with his fatherly love & affection. I pay my sincere regards and thankfulness to all the respected teachers of MBA Dept. & all the faculty members of AIMS particularly to Prof.Nagarajan & Dr.Bhartha K.Afor their valuable suggestions and blessings. I express my special thanks to our COO, Mr.Priyanandan Reddyfor his effective support, sympathy, love and affection throughout the course of studies at 6 AIMS. I would also like to thank our Librarian Maam & all the library staff for their cooperation while collecting the relevant literature on the subject. I bow my head in the lotus feet of my respected father Prof. (Dr.) Dharm Raj Singh (Gold Medallist), Ex-H.O.D, P.G. Dept. of Kayachikitsa, Lucknow University, Lucknow and my respected & loving mother Dr.Sangeeta Singh(Gold Medallist) Ex-Associate Professor, P.G. Dept. of Kayachikitsa, Lucknow University, Lucknow who always stood with me in my difficult times and always taught me the lesson from a famous quotation, Arise , Awake and stop not till the goal is achieved! by Swami Vivekananda who had been a great saint and visionary. Lastly I bow my head down to earth with full faith, honour & devotion in the lotus feet of my honourable Gurudev H.H Swami Subodhananda Saraswati for his continuous spiritual enlightmentand divine blessings. 7 TABLE OF CONTENTS Sr. No. TITLE Page No. 1 INTRODUCTION 1 14 1.1 INTRODUCTION TO THE RESEARCH TOPIC 1 2 1.2 THE THEORETICAL ASPECTS OF THE RESEARCH TOPIC 3 6 1.3 THE SUBJECT BACKGROUND OF THE RESEARCH TOPIC 6 11 1.4 OUTSOURCING 12 1.4 BE SPECIFIC ABOUT HR OUTSOURCING 12 14 2 RESEARCH METHODOLOGY 15 20 2.1 INTRODUCTION 15 2.2 STATEMENT OF THE PROBLEM 15 2.3 REVIEW OF LITERATURE 15 17 2.4 OBJECTIVES OF THE STUDY 18 2.5 SCOPE OF THE STUDY 18 2.6 RESEARCH DESIGN 18 2.7 SAMPLING PLAN 19 2.8 TOOLS FOR DATA COLLECTION 19 2.9 TOOLS FOR DATA ANALYSIS 19 2.10 LIMITATIONS OF THE STUDY 20 2.11 LAYOUT OF CHAPTERS 20 3 INDUSTRY PROFILE 21 30 3.1 HR OUTSOURCING INDUSTRY 21 23 3.2 THE BPO INDUSTRY 24 26 3.3 INDUSTRY PROFILE OF SOFTWARE & IT INDUSTRY 26 30 4 DATA ANALYSIS & INTERPRETATION 31 58 4.1 Department and Designation Profile of the respondents 31 32 4.2 Years of Work Experience of the respondents 33 34 4.3 Approximate HR strength in the organization 35 4.4 Response of the organizations towards HR outsourcing 36 8 4.5 Approximate no. of people outsourced by various organizations 37 38 4.6 Major HR functions outsourced by various organizations 38 41 4.7 Important reasons for outsourcing HR functions by various organizations 41 43 4.8 Important factors for choosing a third party supplier for HR outsourcing 44 45 4.9 Opinions on different aspects of HR outsourcing in relation to various HR functions. 46 47 4.10 Type of the legal service agreement standard included in HR Outsourcing Contract 47 48 4.11 HR Functions Which Are Not Outsourced Or Being Outsourced Either Partially or Completely 49 52 4.12 Opinion about the impact of HR Outsourcing on various HR attributes 52 53 4.13 Opinion about Outsourcing Options with Reference To organizational HR Policies, Practices & Talent Needs of IT Industry 54 55 4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the Rate of Attrition in IT Organizations 56 4.15 Opinion of HR Managers on how well have your HR outsourced functions fulfilled their objectives 57 58 5 SUMMARY OF FINDINGS 59 62 5.1 Findings about different aspects of HR outsourcing 59 5.2 Findings about important reasons for HR Outsourcing 60 5.3 Findings about important factors responsible towards choosing a third party supplier for HR Outsourcing. 60 5.4 Findings about major HR functions being outsourced in the Indian industry either completely or partially 61 5.5 Findings about the impact of HR outsourcing on various HR functions & on the effectiveness of the HR department. 61 5.6 Findings about the co-relation between HR Outsourcing & IT industry 62 5.7 Findings about the effectiveness of HR function that is being outsourced. 62 6 SUGGESTIONS AND CONCLUSIONS 63 66 BIBLIOGRAPHY 9 9 ANNEXURE 10 10 10 LIST OF TABLES TABLE NO. TITLE OF TABLES PAGE NO. 4.1 Department and Designation Profile of the respondents 31 4.2 Years of Work Experience of the respondents 33 4.3 Approximate HR strength in the organization 35 4.4 Response of the organizations towards HR outsourcing 36 4.5 Approximate no. of people outsourced by various organizations 37 4.6 Major HR functions outsourced by various organizations 38 4.7 Important reasons for outsourcing HR functions by various organizations 41 4.8 Important factors for choosing a third party supplier for HR outsourcing 44 4.9 Opinions on different aspects of HR outsourcing in relation to various HR functions. 46 4.10 Type of the legal service agreement standard included in HR Outsourcing Contract 47 4.11 HR Functions Which Are Not Outsourced Or Being Outsourced Either Partially or Completely 49 4.12 Opinion about the impact of HR Outsourcing on various HR attributes 52 4.13 Opinion about Outsourcing Options with Reference To organizational HR Policies, Practices & Talent Needs of IT Industry 54 4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the Rate of Attrition in IT Organizations 55 4.15 Opinion of HR Managers on how well have your HR outsourced functions fulfilled their objectives 57 11 LIST OF GRAPHS GRAPH NO. TITLE OF GRAPH PAGE NO. 4.1 Department and Designation Profile of the respondents 32 4.2 Years of Work Experience of the respondents 33 4.3 Approximate HR strength in the organization 35 4.4 Response of the organizations towards HR outsourcing 36 4.5 Approximate no. of people outsourced by various organizations 37 4.6 Major HR functions outsourced by various organizations 39 4.7 Important reasons for outsourcing HR functions by various organizations 42 4.8 Important factors for choosing a third party supplier for HR outsourcing 44 4.9 Opinions on different aspects of HR outsourcing in relation to various HR functions. 46 4.10 Type of the legal service agreement standard included in HR Outsourcing Contract 48 4.11 HR Functions Which Are Not Outsourced Or Being Outsourced Either Partially or Completely 50 4.12 Opinion about the impact of HR Outsourcing on various HR attributes 52 4.13 Opinion about Outsourcing Options with Reference To organizational HR Policies, Practices & Talent Needs of IT Industry 54 4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the Rate of Attrition in IT Organizations 56 4.15 Opinion of HR Managers on how well have your HR outsourced functions fulfilled their objectives 57 12 EXECUTIVE SUMMARY This Dissertation titled THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY is based on an original study conducted by me (Nirvan) of 4th semester MBA, student of Acharya Institute of Management & Sciences under the guidance of Dr.Kavitha Desai, Acharya Institute of Management & Sciences Bangalore, Dept. of MBA. HR outsourcing is an accepted managerial tool for re-structuring and re-focusing the way an organization does business. It is proved to be the catalyst for organizations to drive standardization of HR policies and practices. HR outsourcing is a boon for enhancing various organizational capacities and for overall improvement of different HR Functions of different organizations according to their various needs & requirements. It is an excellent tool for completing the different tasks, objectives and needs for which it has been assigned. HR Outsourcing & IT industries are inter-related and both are benefitted by mutual co-ordination & co-operation. The problem of Attrition is very well managed with the help of HR outsourcing in IT industry. Mid-market, or medium-sized, organizations find HRO very attractive because of the economic, strategic, operational, technology and risk management benefits. HRO is a comprehensive solution that impacts process, technology and people. Therefore, HRO requires more thoughtful approaches to managing change, as well as an experienced partner. Navigating through the uncertainty leaves most HR leaders reaching out to providers for help because, in their words, "we don't know what we don't know." Experienced providers are wellpositioned to share their proven expertise and the best practices that will ensure success. HRO has the ability to impact the entire organization - far beyond the HR department - with a reach that is often underestimated. From key stakeholders, such as an executive who can benefit from better information about the workforce, to the hourly worker who will interact with HR in a whole new way, HR's management of the HRO transition process will determine how each of its constituencies responds to a new world of work. Making the decision to outsource human resource processes is a major step for many organizations. Once a company has decided to outsource one or more human resource processes and has selected a vendor, the next major task is to implement an effective outsourcing arrangement. Thus my study helped me to get a clear picture of HR Outsourcing in the Indian Context along with its future and feasibility. 13 CHAPTER-1 Introduction 14 Chapter-1 INTRODUCTION 1.1 INTRODUCTION TO THE RESEARCH TOPIC 1.1.1 Overview of HR Outsourcing HR outsourcing is a process in which a company uses the services of a 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. In this sense the HR outsourcing service providing firms or HR outsourcing company can be divided into four categories depending on the services they offer as, PEOs (professional employer organization), BPOs (business process organization), ASPs (application service providers), or e-services. In these categories the PEOs are the ones that assume full responsibility of a company's HR functions where as others such a BPOs, ASPs and e services provide web based HR solutions like database maintenance, HR data warehousing, maintaining records, developing and maintaining HR software's etc. 1 HR outsourcing is a viable choice for small to mid-sized businesses looking to limit staffing burdens while maintaining high-quality human resources functions. HR is a complex and specialized field that performs necessary services for businesses with employees, but the cost of hiring qualified HR personnel may not always make financial sense. Outsourcing HR functions can provide the services and highly trained professionals that businesses need, often with significant cost savings over hiring full-time HR staff. 1.1.2 Function The primary function of human resources is to manage and provide everyday personnel services. From employee benefits management, payroll and administration, recruiting and hiring, training and organizational development, employment law and regulatory compliance, human resources is a full-time job that requires specialized training and on-going education. HR outsourcing firms provide a full range of vital services to businesses that can't afford a dedicated human resources staff or choose not to maintain HR functions in house. 1.1.3 Benefits 1 Ref.1. Society OF HR Management- Outsourcing Survey Report about HR Outsourcing By Alexey Klementive 15 For business owners and managers attempting to fulfil HR roles, performing human resources functions can take away from running the business. The allure of outsourcing non- core business functions such as HR is that it allows the company to concentrate on its main business goals, leaving other tasks to the specialists. HR outsourcing firms are experienced in implementing the most efficient and cost-effective methods and practices and may be able to provide benefits, payroll and other services at a lower cost than a company would on its own. 1.1.4 Service Levels HR outsourcing companies generally offer different service levels--including a la carte, bundled or all-inclusive services--depending on your particular needs and budget. You can contract human resources outsourcing firms for a specified period of time, use then on an as-needed basis or contract them for specific one-time or occasional projects. Authoring employee handbooks and creating administrative systems and compensation programs are a few examples of projectbased HR outsourcing services. 1.1.5 Cost and Value Aside from staffing, there are costs associated with the setup of an HR department. Software, filing and information-gathering and storage systems, policy and procedure creation, and implementing the HR program itself cost time and money. When you factor in all variables of setting up and maintaining an in-house HR department, there is no guarantee that the department will run effectively. When a business outsources HR services, all the systems, processes and personnel are in place, providing a value-added element to the equation. 1.1.6 Professional Employer Organizations Another outsourcing option that involves handing over the HR duties along with the employees is called a PEO (professional employer organization). In a PEO, the outsourcing firm becomes the legal employer, handling payroll, benefits, insurance and other employee relations; it leases the employees back to the company. Employees generally enjoy better benefits because of group rates, and the scenario allows business owners to concentrate solely on company goals rather than personnel issues. Some companies may also enjoy tax benefits and will save on worker's compensation and unemployment insurance because employees are the responsibility of the PEO. 1.2 THE THEORETICAL ASPECTS OF THE RESEARCH TOPIC 16 1.2.1 Human Resource Outsourcing The increasing focus on HR's contribution to the performance of the wider business has led to more emphasis on cost reduction. HRO has grown out of this debate - from re- engineering and cost reduction on the one hand to a potential transformational capacity on the other. HRO is an evolving industry and can be defined as the purchasing by an organization of on- going HR services from a third-party provider that it would otherwise normally provide for itself. HRO is a strategic tool aimed primarily at chief executives. Though organisations may have different strategies and performance models, all will relate in some way to HRO. These can involve the following: ? Capability: for any organization where there is a need to either improve or acquire HR capability ? Scale: providing for large organisations with 50,000 or more employees well- delivered HR administration and services - and to justify the return on investment. ? Technology: for most organisations where technology can be acquired and leveraged through shared services or outsourcing 2 . 1.2.2 HRO providers While HRO providers may seem to offer little that is different between them, differences do occur in their size, culture, HRO methodology and track record. However, they offer their services in three distinct ways. ? Single-service or transactional solutions for a particular HR activity ? Multiple HR services as part of a large-scale deal ? Transformational deals which radically change the purpose and role of HR Three different types of providers are active in the HRO market - pure HRO specialists, Business / HR transformation firms and HR process technology suppliers. 2 Ref.2. Outsourcing the HR Function- Possibilities & Pitfalls a report by Anthoy Hesketh on behalf of Strategic Dimensions Associate, Corporate Research Forum (CRF) 17 1.2.3 Selling points of HRO HRO providers use these main selling points. ? Increased efficiency of HR with estimated cost savings of up to 50%. ? Increased effectiveness of HR through operational improvements. ? Improved strategic focus from HR on business goals. ? The role of HRO in transforming the performance of HR and the business. While many HRO users can point to improvements in the first two points, evidence is lacking for the impacts on strategic focus and business performance. This is a major problem for the HRO industry. 1.2.4 Strategic debates around HRO These debates are on-going in HR outsourcing among user - or prospective buyer -organizations, providers, HRO advisers and academics. ? The future purpose and contribution of HR because of the possibilities of functions being transformed, or part-outsourced, through HRO deals. ? The strategic and management complexities of HRO deals, especially so-called megadeals. ? Deciding what is core and non-core in HR the critical competencies to be retained versus peripheral activities that might be outsourced. ? The difficulty that HR has in assuming more strategic or value adding roles after implementing HRO. ? The position of offshoring as it affects HRO decisions and raises emotive issues such as job losses and redeployment. ? The challenges of trying to manage HR process delivery on a global scale and across different cultures. The HRO debate ultimately turns on the perceived quality of, and returns from, investments in the HR function. Those organizations under pressure to reduce costs are more likely to consider outsourcing at least part, if not all, of their HR administration. 18 1.2.5 The future of HR HR itself is also locked in a debate over its future. Though some organizations have evidence that the function is an integral part of its capability to deliver business success, many view HR as ? Over-resourced ? Inefficient ? Vulnerable to the cost reduction possibilities of HRO. HR outsourcing raises questions over HRs future skills, capabilities and career paths. Its developments are creating pressures for practitioners to shift from being reactive and administrative problem-solvers to more proactive, value-driven business partners.
1.2.6 Shared services
Research revealed much discussion about the definitions and position of shared services. For our purposes, it is defined as the transfer or insourcing of HR services and their resources to a separate unit within the business - and often with a separate P&L system. Shared services is often adopted by organizations who are against outsourcing as a matter of principle - but still seek some of the transformational and streamlining advantages connected with outsourcing. Alternatively, some organizations use shared services as a halfway house to prepare the specific lines of HR they intend to outsource. 1.2.7 The HRO logic No amount of preparation, however extensive, can safeguard outsourcing deals completely. Leaders need to clarify what their core logic is for creating value by demonstrating the following. ? How HRO can enable the organization to meet the requirements of its stakeholders - be they internal (employees) or external (customers). ? How outsourcing will transform the way the HR function works in a radical and sustainable way. 19 ? Crucially, how transforming the HR function will influence the planning, operations and performance required by the business model. 1.2.8 Managing the transition In some organizations, HRO is akin to changing the engine while the plane is still in the air which is a potentially catastrophic exercise. The consequences of HRO must be thought through - before agreeing a contract. Handing over single, multiple or all HR service processes represents for many organizations their first experience of complex projects - project management is a critical HR capability for HRO to work well. A successful transition minimizes employee angst -but botched handovers could have longstanding repercussions on relationships with providers, employees, other stakeholders and corporate image. 1.2.9 Governance of HRO performance Managing and measuring performance after HR outsourcing is pivotal to the relationship between HRO client and provider. Performance measurement in HRO traditionally concerns the following. ? Efficiency: mainly through cost reductions. ? Effectiveness: through improved service outcomes against criteria in service level agreements (SLAs). ? Transformation: indicators of deeper change at the level of the organization, its employees, systems - and at intangible levels. ? Strategic governance: evaluating the management of performance - including the decision rights, rules and agreed management processes defined with and before providers are engaged. 1.3 THE SUBJECT BACKGROUND OF THE RESEARCH TOPIC 1.3.1 Impact of HR Outsourcing on Business Performance 20 Human resources outsourcing evolved from hiring payroll processing companies in the 1990s to delegating tasks previously performed by human resources assistants and specialists, such as recruiting, coordinating benefits and handling unemployment claims. Some small businesses outsource entire human resources departmental functions; however, many companies outsource singular processes. 1.3.2 Outsourcing HR Processes Small businesses to large corporations decide for one reason or another that outsourcing human resources functions is a way to improve efficiency and minimize staffing costs. Large organizations that employ thousands of people may find it's simpler to outsource a process, such as payroll, rather than employ two to three payroll clerks and purchase sophisticated technology than engage the services of a company that focuses entirely on processing payroll. Small companies might decide that outsourcing human resources processes is more cost- effective and efficient than creating a human resources department while the business is focused on other projects associated with starting a new business. "Inc." magazine contributor Priya Ganapati says data from Everest Research Institute in Dallas suggests a significant percentage of small businesses are finding human resources outsourcing is the answer to avoiding labor costs and expensive technology. "HR outsourcing among small businesses has gone up considerably: Of the 65 HR outsourcing deals between 1998 and mid-2004, that the report analyzed, 37 involved small businesses," Ganapati writes. The growth rate of HR outsourcing is likely to increase as more small businesses focus on their product and service offerings instead of staffing an inhouse human resources department. 3 1.3.3 HRO Effect on Business Performance 3 Ref.3. A Handbook of HR management practices, 8 th edition 2002, by M. Armstrong. 21 Business performance is an important consideration when small business owners weigh the pros and cons of HRO. One school of thought is that a small business can focus its energy and expenditures on developing the product it sells. This enables a small company to allocate its resources to areas that include engineering and research and development, instead of recruiting staff, maintaining personnel files and other human resources tasks. The other school of thought has more to do with human capital and talent--a small business owner may find herself without the talent she needs to build an efficient human resources department. In this case, HRO resolves the dilemma small business owners face during the search for an in-house human resources expert. In the first scenario, a small business directing its focus on product design and sales may determine the expense of HRO can be easily justified by more attention given to product sales. A small business that doesn't have the requisite talent to lead a human resources department can justify the expense of HRO by the confidence in the level of competency HRO companies offer. 1.3.4 Continued Impact on Business Performance When small businesses initially utilize HRO services for transactional processes, the selection of a strategic human resources leader can become a priority. The search for human resources administrative practitioners without expertise in HR strategic management can then take a backseat for now. An HR strategic partner should be the first hired for development of a human resources department. OutsourcingInformationTechnology.com editor Beth Rosenthal observes, "Small-to-medium businesses may have a hard time recruiting highly skilled staffers without the benefits they expect. Outsourcing allows SMBs to offer benefits typically available only at bigger companies." Upon making the decision to outsource HR functions while you build a successful, profitable company, you can resume your search for an HR executive. Once your company carves a position in the market with your product offering, your executive leadership team--including your human resources executive--can then begin to work collaboratively to form a full-service human resources department and bring in-house those previously outsourced functions. Still, you may discover that outsourcing some human resources functions is in the best interest of the company. As your business grows, resources committed to HRO may turn into a wise, long-term decision that improves the services your human resources department can provide to its internal customers, your employees. 1.3.5 Choosing HR Outsourcing Services There are numerous HR outsourcing services that you can consider and it is sometimes very difficult to properly know what to choose. You need to properly understand everything involved 22 and in order to do this it is your responsibility to be informed at all times. We basically have two main types of HR Outsourcing Services: Core Human Resources and Talent Administration. 1.3.6 Core HR Outsourcing Services We are using the term Core human resources because in this case we are talking about those services that are crucial for most companies out there. We are dealing with 4 core HR outsourcing services: ? Payroll Administration This includes everything related to payrolls from filing taxes to managing the payroll of special projects. ? Benefits Administration This is a little more difficult to understand for some owners as most believe there is no need for such a department. Such HR outsourcing services include pensions, share plans and even welfare. Signing a contract is not always enough to handle employee benefits in time ? Workforce Administration These HR outsourcing services are the foundation of a good human resources management plan. We are talking about employee data management, relations, disciplinary services, unemployment administration and a lot more. This is the one core HR service that most people outsource. ? Leave Administration Your employees will take leaves of absence as they are entitled to do so in some cases. On the other hand, there might also be leaves that are not good for the company. A good management of leaves is needed in order to keep a close grasp on human resources and employee satisfaction. 1.3.7 Talent Administration HR Outsourcing Services When it comes to the talent you have on board, you want all people to feel good and always know that they will get compensation for what they do. In this case we have 4 main talent administration HR outsourcing services that you can choose from: 1. Relocation and Handling Assignments HR outsourcing services can manage everything involved from travel assistance to the entire program development. 2. Performance Management and Training Your employees need to be monitored so that you know their performance levels at all times. Also, you do want to know when training is needed and want someone to do it properly. HR outsourcing services can deliver. 3. Recruiting Administration It is usually quite hard to hire new staff. You lose a lot of time going through CVs and handling interviews. This is the one talent administration HR 23 outsourcing service that can really offer benefits. These firms can handle all your hiring needs and you will not lose a second. You can make sure that the best people are always hired and this is something that you really want to have incorporated. Even if you do not use HR outsourcing services for full talent administration, we recommend that you at least consider recruiting administration. 4. Compensation Administration This includes a lot of math. It is needless to say that a lot of time is wasted in monitoring the compensations you would need to pay someone. A good HR outsourcing service will use various methods to keep control of everything from taking surveys to executive administration. HR outsourcing services can bring in a lot of benefits especially when we consider management. It is crucial that human resources are properly handled in every single company out there. A failure to do this can lead to loss of time and money. To make it even worse, an improper management can cause your employees to not work at their full potential. This is exactly why you should use HR outsourcing services if you cannot properly handle this operation. 1.3.8 Benefits of HR Outsourcing HR outsourcing has really become a worldwide phenomenon. We see more companies doing it daily and this can only bring in benefits. The problem is that few people really know what HR outsourcing means. We have seen a lot of company owners that thought that only talking to a company to look for some staff for them was human resources outsourcing. Even this process is not really HR outsourcing in some circumstances. Before you think about the benefits of HR outsourcing you really need to understand what this concept means. Only after that can we properly understand the benefits offered. Through the outsourcing of some or all core human resources functions a company is almost immediately able to cut costs and minimize the time that is needed for them to perform properly. In the last few years we saw that the common HR tasks that are outsourced are payroll administration, attendance tracking, time tracking, tax filing and tax payments. The tricky subject stands in the fact that human resources are now viewed at a much larger scale than they were in the past. Internal human resources departments are bigger and have a more important role in a company. This immediately translates in an increase of costs in maintaining and even implementing HR functions internally. The good news stands in the fact that companies are now available to outsource a part of their HR tasks or even all of them to a specialized HR outsourcing provider. This practice does save both time and costs. We can also say that besides the two benefits of HR outsourcing mentioned above, a company will also have others that they should consider. Through HR outsourcing they can focus their efforts on more business oriented tasks and they can get rid of a lot of activities that are difficult 24 to manage and consume a lot of time. Through HR outsourcing you can be sure that your employees are always receiving the best possible in class human resources services. This includes retirement plans, rewards programs, recognition programs and health benefits. All this is obtained at lower costs than ever before. To make everything even better, HR outsourcing providers also bring in a lot of support and experience when dealing with complex issues that might appear. If a company cannot have its own HR in-house department it should definitely opt for HR outsourcing. 1.3.9 The HR Outsourcing Process Any organization making a significant commitment to HRO is making a decision with farreaching implications-not just for HR, but for the entire organization. For this reason, it is crucial that all stakeholders involved in the HRO process be involved from the outset and that there is clarity in relation to the goals and objectives that the organization expects to achieve. As a starting point, a multi-departmental steering team, consisting of representatives of all potential users of the service provider, should be formed and convened. Ideally, HR will either lead the decision-making process or be crucial to it. Other key members of the steering team should include high-level managers and executives with a vested interest in all aspects of human capital asset management and its return on investment, including operations, information systems technology, finance, accounting and logistics. The goals and expectations of the outsourcing process should be developed and defined in a detailed project plan. 1.3.10 Types of HR Outsourcing In the past, HR outsourcing was thought of as hiring a vendor to provide a service. With the new focus on outsourcing, there is more of an opportunity to partner with the vendor to provide the service on a longer term basis rather than just a one-time vendor contract. HR outsourcing can include: Discrete services:In this instance, one element of a business process or a single set of highvolume repetitive functions is outsourced to a third-party administrator. Examples of discrete services could include the annual open enrollment process, flexible spending accounts or employee background checks. Multi-process services:The complete outsourcing of one or more functional human resource processes would be an example of multi-process outsourcing (also called blended services). As such, the outsourcing of either health and welfare benefits administration or defined retirement 25 plan to a third-party administrator would be an example of multi-process or blended services outsourcing. Total HR outsourcing: Total HR outsourcing represents the transfer of the majority of HR services to a third party, to include recruitment, payroll, HRIS, benefits, compensation and communications, as well as the transition of HR management and staff. However, HR executive management would normally remain in place within the organization, along with strategic planning related to people management and other key HR functions at the discretion of management. 1.4 OUTSOURCING ? The performance by outside parties, on a recurring basis, of tasks that would otherwise be performed in-house. 1.4.1 Other Definitions 1.4.2 In sourcing This refers to when companies look at their pool of employees to find those who may be tapped to do certain needed jobs. They may offer these employees extra training or they may merely find the employees that already possess the skills to take on specialty work. 1.4.3 Off shoring - Off shoring simply means having the outsourced business functions done in another country. Frequently, work is off shored in order to reduce labor expenses. Other times, the reasons for off shoring are strategic -- to enter new markets, to tap talent currently unavailable domestically or to overcome regulations that prevent specific activities domestically. 1.4.4 Co sourcing Co sourcing is where a business function is performed by both internal staff and external resources, such as consultants or outsourcing vendors, with specialized knowledge of the business function. 1.4.5 Out placement- Outplacement is a term used to describe the efforts made by a downsizing company to help its redundant employees through the redundancy transition and help them reorientate to the job market. A consultancy firm usually provides the outplacement services. 26 1.5 BE SPECIFIC ABOUT HR OUTSOURCING Outsourcing contract negotiations require very specific task and service-level descriptions, and defining the why, what, who, where, when and what if can clarify things significantly: 1.5.1 Need for Outsourcing The decision to outsource is based on two business factors: value proposition and market-based outsourcing. The most common value proposition is reducing cost savings. Other value propositions include increasing operational efficiency, improving customer service, improving employee satisfaction, growing revenue or reducing capital expenditures. Market-based outsourcing is a comparison between internal skills and abilities and the capabilities of providers in the marketplace. The decision to outsource is based on whether an external provider can do the job better, cheaper or faster. 1.5.2 Outsourced Functions Customers can determine what to outsource by having a clear idea of the most common performance management functions. Performance management functions can be segmented into user-centric processes and management-centric processes. User-centric processes include individual performance objective management, individual performance evaluation, competency mapping, self-paced e-learning and decision support, and career planning. Management-centric processes include organizational performance management, compensation management, assessment management, learning management and training administration, and succession planning. In general, all of the user-centric performance management processes lend themselves to automation and outsourcing. Management-centric performance management functions also can be outsourced. Learning management and assessment management, in particular, lend themselves to outsourcing. Since vendors specialize in one or more of these functions, customers can map the functions they intend to outsource to the capabilities of the vendor. This makes the vendor selection process relatively straightforward. 4 4 Ref.4. Theory to design successful outsourcing relationships by M.S. Logan (2000) 27 1.5.3 Types of Outsourcing Partners According to a 2004 study by the Gartner Group, there are three types of outsourcing partners: application service providers (ASPs), traditional external service providers and business process outsourcing (BPO) companies. It is common for companies to have all three types of relationships and several outsourcing partners. An ASP hosts the technology and the services appear to employees like an internal function. A traditional external service provider brands the service as its own, but the customer still controls deliverables. A BPO owns the entire business process and has near-complete control, often called end-to-end outsourcing. It also has to be decided that who will manage the outsourcers from the inside. 1.5.4 Work place of the Outsourcer Outsourcers are not always physically located outside your companys facilities. Occasionally companies prefer a representative of the outsourcing firm to be present on-site. But it is far more likely that outsourcers will work outside the buyers physical facility. Many governments have passed or are drafting laws governing the offshoring of business, so it is prudent to check existing regulations prior to engaging an offshore outsourcer. Defining where the outsourced personnel will work is an important legal aspect of the outsourcing agreement. 1.5.5 Duration of the Outsourced Project Specifically defining service milestones is crucial to both the customer and the outsourcer. Business-process cycles are always time-bound, and customers and outsourcers alike are always constrained by time. Defining these time-bound constraints in terms of deliverables and milestones is a strong point of outsourcing firms since milestones map directly to payment cycles. Customers should be willing to ask themselves, What is driving the date? Dates are sometimes set by internal priorities (hard dates), but often dates can be flexible. Being flexible about time constraints allows teams to proactively deal with unanticipated challenges. 1.5.6 Precautions for Possible Future Problems 28 Expect the unexpected is a good motto to have on an outsourcing project. Experienced outsourcers will probably want to put a change management clause in the contract. This is because they know from experience that business needs change and it happens all the time. Answering questions to such problems will result in development of specific goals that can be used to develop measurable performance expectations and contractual obligations. 29 CHAPTER-2 Research Methodology 30 Chapter-2 RESEARCH METHODOLOGY 2.1 INTRODUCTION Outsourcing is an accepted management tool for restructuring and refocusing the way an organization does business. It challenges management to build a more flexible organization centred on the core competencies of the business. In making the determination that a business has more to gain by having certain "non-core" aspects of the business outsourced to a thirdparty service provider, the organization transfers responsibility for one or more activities or functions that would normally be performed in-house to a qualified vendor, for a specified period of time and at a negotiated fee, in accordance with terms stipulated in a service level agreement (SLA). In essence, the organization is making a decision to send certain parts of the business out to a provider whose "core competency" is that part of the business. 2.2 STATEMENT OF THE PROBLEM To study the impact of Human Resource Outsourcing on the effectiveness of the HR functions in Indian industry. Transitioning to an outsourcing arrangement can pose a unique set of risks that must be proactively managed, given the complexities associated with transferring significant operational processes to a vendor while maintaining on- going service to internal customers. 2.3 REVIEW OF LITERATURE Realizing the vision of HRO by Nahapiet, J. and Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage, Academy of Management Abstract "What is our vision for the company five years after HRO implementation, and how do we get there?" The real opportunity exists for those companies that ask themselves these important questions at the outset. Of course, each adopter's vision for the company five years from initial transition will differ. When HR partners with a provider that has deep HR expertise, it is better able to move to transform and focus on strategic, high-return initiatives such as succession plan, organization design, team effectiveness, leadership development, talent management, performance management and development planning. The most successful change management programs enable the HRO adopter to achieve the goals that they set out to achieve - without running the risk of allowing fate to take over. 31 HRO change management: Systematic execution of a strategic decision by Willcocks, L.P., and Kern T. (1997). IT Outsourcing as Strategic Partnering Abstract If leveraged effectively, HRO can prove to be the catalyst for organizations to Drive standardization of HR policies and practices. It Gives HR leaders more capacity to focus on organizational development, change management and executive coaching as underpinnings of how HR and business leaders work together. Increase HR's value to the organization by supporting its focus on strategic opportunities. Ideally, change management begins as early as the presale relationship, when a vendor conducts analysis and due diligence to understand an organization's unique requirements. An experienced vendor will help HR leaders make internal communications around HRO exploration purposeful, productive and tailored to the employer's culture. HR BPO drivers and inhibitors by Bondarouk, T.V., Ruel, H.J.M, The International Journal of Human Resource Management (2009). Abstract The belief that outsourcing can cut costs attracts enterprises to HR BPO like moths to a flame. Like the moths, these enterprises can become enlightened, but they can also get burnt. Enlightenment comes when the enterprise seeking to cut costs discovers other beneficial outcomes that outsourcing can provide, such as the ability to focus on the core business and improve service levels. Companies turn to process outsourcing for a variety of reasons. They include high cost of transactions, too much time spent on daily operations, high cost of upgrading applications, disintegrated processes, difficulty in hiring or retaining process staff and lack of timely or accurate reports. Begin with the end in mind. Determine the capabilities that the enterprise needs to align the workforce with business strategy. Then, build the portfolio of applications to meet this vision. Keep in mind the strategy and direction of the enterprises core integrated HRMS provider when making the niche solution vs. integrated solution decision. Trust, openness, autonomy, strategic collaboration, pro-activity, benchmarking and career development are some other buzzwords prevalent in the field of HR. The main issue according to me is building self-regard. Of late, driving the new economy organizations in frenzy is the growing malaise of the rate of employee turnover, which I felt can be correlated to low selfesteem. It is thus worthwhile to take a deep look into this concept and its implications in both individual and corporate contexts. 32 HRO Change Management: Embrace Systematic Approaches to Transforming HR in the Mid-Market by McFarlan, F.W. and Nolan, R.L. (1995). How to manage an IT outsourcing alliance. Abstract The adoption of end-to-end human resource outsourcing (HRO) is a strategic decision that offers tremendous opportunity for medium-sized organizations. However, it's critical that the organization use systematic approaches to build support for the new direction - approaches that use communication to build momentum and excitement among employees and HR staff, and training to ensure that the solution delivers the desired results. While many HRO adopters say that they view this level of attention to change management as an important option, without the right focus or dedicated resources, change management often falls by the wayside. Thoughtful, disciplined approaches to introducing HRO into the company's existing environment are not something that's just "nice to do." They help focus on the people-related issues of an outsourcing decision and enable employers and their provider partners to build a stronger relationship that helps ensure a successful rollout. As part of an on-going process, they also enable HR to better manage its relationships and interactions with internal customers and stakeholders, and successfully realize the organization's longer-term vision of transformation through HRO. Some Measures to Raise the Motivation Levels of Employees by Kern, T. and Blois, K. (2002). Norm development in outsourcing relationship. Abstract Recognizing the contributions of outstanding achievers will induce others to try hard. Criteria for selecting outstanding achievers should be transparent. Effective HR measures in the areas of training, career development etc. equip the workforce better and also increase their self-esteem and morale. The need of the hour is not only to enable the employees to grow in the learning organizations, the concept of which is fast attaining celebrity status in this age of knowledge economy, but also to take care that the employee has substantial self-esteem. Without this all the retention policies of the organizations will meet a sorry fate. 33 2.4 OBJECTIVES OF THE STUDY ? To study the different aspects of HR outsourcing ? To study the important reasons for HR Outsourcing ? To study the important factors responsible towards choosing a third party supplier for HR Outsourcing ? To study the major HR functions being outsourced in the Indian industry either completely or partially ? To study the impact of HR outsourcing on various HR functions & on the effectiveness of the HR department ? To study the co-relation between HR Outsourcing & IT industry ? To study the effectiveness of HR function that is being outsourced 2.5 SCOPE OF THE STUDY The scope of study includes the following points: ? To explore the different possibilities about HR outsourcing and its various aspects ? To explore the impact of HR outsourcing on various HR functions ? To explore the possibilities of co-relation between HR Outsourcing & IT ? To explore the future possibilities of HR Outsourcing 2.6 RESEARCH DESIGN Research design is a detailed blue print used to guide the research study towards its objectives. Descriptive research has been used for this study. The major purpose of descriptive research is description of the state of affairs, as it exists as present. This means asking questions to people who are believed to possess the desired information. It measures the magnitude of peoples knowledge, attitudes and opinion towards the present research study. 34 Research design simply means a search for facts & answers to questions and solutions to the problems. It is a prospective investigation. Research is a systematic and logical study of an issue or problem through scientific method. 2.7 SAMPLING PLAN Sampling Method Simple random sampling is used which is the simplest method of sampling for social researches. It is used in simple experiments that require a single sample to be taken from a given population or a representative sample frame. The people in the sample frame must all be accessible and available. It is used when the target group is sufficiently large. Sample universe The sample universe is comprised of the HR managers and employees working in IT companies in both services and manufacturing sector in India. Sample size The sample size is restricted to 100 respondents due to time constraint. 2.8 TOOLS FOR DATA COLLECTION Sources Of data collection Primary data is collected through questionnaires and secondary data is collected through enterprise portals and websites related HR outsourcing and also through various journals, magazines and related books. 2.9 TOOLS FOR DATA ANALYSIS Data Analysis has been done with the use of statistical tools and results are presented through tables, charts and graphs. Simple percentage method is used to analyze and interpret the data. The analyzed & interpreted data is presented in the form of tables, charts & graphs. Tables:-Presentation of data in vertical column & horizontal rows. Graphs:-Graph is a pictorial representation of the data. 35 2.10 LIMITATIONS OF THE STUDY ? The sample which we took does not represent the whole population as the numbers of respondents were very less ? The limited experience was another constraint on the quality of the research ? Respondents were from specific areas and did not cover the whole of India ? Sample size is small because of time constraint ? The primary data is based on the questionnaires which can be influenced by personal bias and subjective for individuals 2.11 LAYOUT OF CHAPTERS Chapter 1- INTRODUCTION This chapter includes the theoretical aspect of the study and introduction to the research topic. It also discusses about the subject background of the research which has been carried out. Chapter 2- RESEARCH METHODOLOGY This chapter includes the brief introduction, statement of the problem, review of literature, objectives of the study, scope of the study, research design, sampling plan, Tools for data collection, tools for data analysis, limitations of the study and layout of chapters. Chapter 3- INDUSTRY PROFILE This includes brief introduction about the outsourcing practices and their results in HR sector. Chapter 4- DATA ANALYSIS AND INTERPRETATION It includes Analysis and interpretation of data. Analysis is carried on by preparation of Tables, Graphs and Charts. Chapter 5- FINDINGS AND SUGGESTION 36 It contains the Summary of findings and Suggestion. This chapter gives summary of findings of the study along with the suggestion. Chapter 6- CONCLUSION This chapter gives conclusion of the study. CHAPTER-3 Industry Profile 37 CHAPTER-3 INDUSTRY PROFILE 3.1 HR OUTSOURCING INDUSTRY 3.1.1 REASONS FOR STRONG OUTSOURCING INDUSTRY Nowadays HR outsourcing is really something that is needed for most small to medium sized companies. This is mainly because everybody is doing it and the benefits that are gained from doing this cannot be achieved if it is handled internally. HR outsourcing is really strong at the moment and there is no sign that this will change in the immediate future. The sheer benefits that can be obtained cannot be taken lightly. The main reason for which HR outsourcing is needed at the moment is the fact that most companies cannot do it properly alone. It is very hard to stay up to date with all the regulations that have to be considered and the possible employee benefits that should implemented. Through HR outsourcing we can easily avoid any problem and we can maximize the time we have to dedicate to those business functions that are actually generating us profit. The HR outsourcing industry is useful because it can help to keep the HR functions in control at all the times. If a good HR provider is hired it can basically solve all the problems related to HR. Also, if some problems still appear it is the responsibility of the provider to deal with them. Thus we can basically shift responsibilities to gaining time and money. So there is no reason why the HR outsourcing industry would not continue to be strong in the years to come as long as such benefits exist. 3.1.2SOME FACTS ABOUT HR OUTSOURCING INDUSTRY 38 58% of companies outsource some HR function 91% of companies with $1 billion+ annual revenues are now considering HRO HRO grew 28% from second half of 2004 to first half of 2005 Note: SHRM Human Resource Outsourcing Survey Report: Almost 6 out of 10 organizations practice HR Outsourcing but 1/3 of organizations did not outsource any function of organizations partially outsource an HR function (organization co-manages function with vendor) HRO Market In next 5 years, global spending on HRO will double from $40 billion to $80 billion From 2002 to 2004, 14% increase in large firms that would consider HRO Consulting and Training 3.1.3 FACTORS HAMPERING HRO INDUSTRY Cost factor & Confidentiality The fear of losing jobs Loss of sensitive information to public/competition Ethics and quality of outsourcing vendors Possibility of security breaches Cost-benefit equation not clear Lack of psychological acceptance 3.1.4 DOMINANT TRENDS IN MAIN HR OUTSOURCING INDUSTRY SEGMENTS: 39 Consultants Administrative service providers Technology enablers Customizing imported software products remains an issue: supply oriented rather than demand based customization 3.1.5 HR OUTSOURCING COMPANY SERVICE TYPES An HR outsourcing company can be divided basically into four categories as PEOs, BPOs, ASPs, or e-services based on the type of service it offers. 3.1.6 PEO (PROFESSIONAL EMPLOYER ORGANIZATIONS) A PEO or A Professional Employer Organization is the one that takes full responsibility of your company's human resources management. Another outsourcing option that involves handing over the HR duties along with the employees is called a PEO (professional employer organization). In a PEO, the outsourcing firm becomes the legal employer, handling payroll, benefits, insurance and other employee relations; it leases the employees back to the company. Employees generally enjoy better benefits because of group rates, and the scenario allows business owners to concentrate solely on company goals rather than personnel issues. Some companies may also enjoy tax benefits and will save on worker's compensation and unemployment insurance because employees are the responsibility of the PEO. 3.1.7 BPO (BUSINESS PROCESS OUTSOURCING) The new buzz word 'BPO' seems to be everywhere now a day! Ever wondered what is BPO? Let us explain: BPO has expanded sounds as Business Process Outsourcing and can be aptly defined as the act of utilizing the services of a third party by a company in order to perform its back office operations that might be payroll administration, customer help desks/ call centres, telemarketing, accounting, billing; the list is endless. To put it in simple words a BPO (business process outsourcing) is a process in which a company delegates some of its business processes mainly back office operations to a third party by giving the third party total control over that process. Business process outsourcing otherwise known as BPO is the process of leveraging technology vendors in various third worlds or developing 40 nations for doing a job which was once the responsibility of the enterprise. Or simply put, it is the process of shifting an internal job process to an outside/external company which might have a completely different geographical location. Generally the processes being outsourcing as part of BPO are backend jobs like call/help centres, call centre outsourcing services, medical transcription, billing, payroll processing, data entry and the like. Most of these jobs are outsourcing by first world nations like USA and UK to third world nations like India, Philippines, China, Malaysia and some eastern European countries. These nations have a good pool of English speaking youth who receive accent and job related training before they are inducted at a salary which is much lesser than what their counterparts in first world nations would demand. This allows first world organizations to get higher profits and provide better services by lowering the prices and by recruiting more labour than they could possibly do otherwise. In addition to benefiting the first world nations, business process outsourcing has also benefited third world nations by generating much needed jobs. A BPO or business process outsourcing company is different from a PEO in the sense that it provides various facilities including HR. A BPO can help improve the HR process, provide HR data warehousing and self-access. 3.2 THE BPO INDUSTRY The BPO industry has flourished at a frantic pace in the last few years and companies have ended up with huge savings by being a part of the industry. By outsourcing their back office business processes to cheaper nations like China, India, Philippines, Mexico, South Africa etc. companies can cut costs, better concentrate on their core businesses and strengths, ensure better customer satisfaction and in a way get an edge over their competitors. A report suggests that US firms have saved nearly $8 billion through outsourcing to third world nations like India. 3.2.1 SELECTING THE BPO COMPANIES Selecting on the right BPO vendor is probably the next most important task other than fixing up on a BPO destination. Although there are lots of organizations and agencies dedicated to helping buyers in making the right decision, there are some precautions that the buyer has to maintain. 3.2.2 SELECTING THE BPO VENDORS The key factor before finalizing on a BPO vendor is to scrutinize and analyses his strength and expertise in terms of providing similar services to clients. One good way to find this out would be to follow up with the firm's existing clients regarding the services. The BPO vendor must 41 have proper quality certifications and should be in possession of skilled manpower or must be in a position to offer training facilities. Apart from this the BPO Company should have a strong financial background and should be willing to share risk in the outsourcing contract. It is always good to know the kind of services that the vendor offers and his relationship with other outsourcing suppliers. Most companies decide to outsource their business processes to multiple BPO companies rather than a single one. This by all means is a good practice as the vendors will compete among themselves to provide better service and the company will always be in a position to change vendors in case one doesn't live up to the mark. 3.2.3 BPO COMPANIES IN INDIA As the BPO boom grows relatively unheard offshore outsourcing destinations like Pune and Kolkata in subcontinent India are rising to fame with the state governments starting to spend money in developing the infrastructures and formulating friendlier taxes and other legal norms. Most BPO companies in the Indian Subcontinent are quality certified from leading quality firms like ISO 9000, CMM etc. and have access to high tech technologies and infrastructure. Sure enough companies like IBM, Microsoft, Oracle, Cisco, Prudential, Hewlett Packard, ATT Wireless, Dell and many more consider India to be their first choice as an offshore contact centre outsourcing destination. 3.2.4 GETTING STARTED If you are planning to take a plunge into the BPO wave, you got to formulate an effective plan by understanding your vision along with your long term goals. Deciding on the right BPO destination and more importantly the right BPO vendor can go a long way in ensuring smooth operations with good returns. As of now, India with its easily available English speaking, computer literate, low cost manpower, better infrastructure and quality certified software and BPO venders seems to be a great destination for outsourcing. So take your pick! 3.2.5 BPO INDIA - PRESENT AND FUTURE The BPO boom has helped developing countries like India in a major way by creating quality job opportunities in turn benefiting the Indian economy. So what is it that makes BPO India stand out in the crowd? 3.2.6 THE INDIAN EDGE 42 India in the recent years has shown huge developments in the areas of communication, power and software developments. India exports software to 95 different countries and stands second in the world as far as software exports are concerned. In addition India has ISO 9000, CMM quality certified software firms that have a reputation of providing quality services. India stands out of the rest in terms of better IT and technological infrastructure, low cost, skilled manpower that is readily available, friendly taxation and other laws, a stable government, a fast paced economy and quality certified software firms. 3.2.7 HRO IN INDIA IT city Bangalore seems to be a hot destination for BPOs swiftly followed by similar technologically advanced cities like Chennai, Hyderabad, Mumbai, Delhi, Kolkata and Pune. All these cities in India are technologically advanced and have a good infrastructure with almost 278 quality certified BPO vendors. 3.2.8 HR BUSINESS PROCESS OUTSOURCING HR business process outsourcing is picking up pace as more and more companies feel that back offer HR operations take up lots of their resources. As for IT, India seems to be a major hub for HR outsourcing too. Cities having a good infrastructure like Bangalore, Delhi, Pune, Bombay and Chennai are being seen as a major offshore outsourcing destinations as of now. The Bombay offshore outsourcing industry seems to be picking up really well at present as compared to Chennai and Bangalore, who seem to be calling the shots right now. 3.2.9 ASP (APPLICATION SERVICE PROVIDER) An ASP or application service provider company will host the HR service on the web and rent it to users. EG: PeopleSoft 3.2.10 E-SERVICES (ELECTRONIC SERVICES) E services are those human resource service companies that are web based. Both BPO and ASP's can be referred as e-service companies. A company which has decided to outsource its human resources has to decide as to which type of vendor to go for and which offshore destination to choose for outsourcing its human resource functions. The major destination for outsourcing human resources is seen as India. India has many companies that offer HR services and best of all; most of these companies are quality certified. This makes outsourcing to them a relatively safer option. Apart from this India also have good communications infrastructure, cheaper labour and a stable government. In addition to India some other good sales force outsourcing, research it 43 outsourcing and HR outsourcing services destinations are China and Philippines. In addition the Romania outsourcing industry is also on the bloom and is a good option for UK firms who want to play it safe outsourcing HR function. 3.3.1 INDUSTRY PROFILE OF SOFTWARE & IT INDUSTRY 3.3.2 IT SERVICES OUTSOURCING The IT services outsourcing sector is the fastest growing sector in the outsourcing market and has been growing at a frantic pace with more and more companies planning to take the plunge. According to various estimates the IT services outsourcing market will reach US $ 200 billion by 2004 and will grow even further. As for the IT service outsourcing destinations are concerned, India stands out way ahead of the rest. This is because India has many quality certified software firms, computer savvy workforce and relatively cheaper rates of operation. India also exports software to 19 different countries and has a great infrastructure in terms of communication. 3.3.3 IT OUTSOURCING TO INDIA When it comes to singling out the most popular destination for IT outsourcing, one name very well stands out of the rest India! In all its glory India in the past three years has become the most popular destination for IT outsourcing with more than 230 fortune 1000 companies using its outsourcing services. You can do IT outsourcing and work at home directory from home. So what is it that gives India its popularity? Let's look at some major factors. In India, the software boom started somewhere in the late 1990s. Most of the Indian software companies at that moment offered only limited software services such as the banking and the engineering software. The business software boom started with the emergence of Y2K problem, when a large number of skilled personnel were required to fulfill the mammoth databasecorrection demand in order to cope up with the advent of the new millennium. The profile of the Indian IT Services has been undergoing a change in the last few years, partly as it moves up the value chain and partly as a response to the market dynamics. Ten years ago, most US companies would not even consider outsourcing some of their IT projects to outside vendors. Now, ten years later, a vast majority of US companies use the professional services of Indian Software engineers in some manner, through large, medium or small companies or through individuals recruited directly. 44 The market competition is forcing organizations to cut down on costs of products. The professional IT services on the other hand are becoming increasingly expensive. The offshore software development model is today where onsite professional services were ten years ago. There is a high chance (almost a mathematical certainty), that in less than ten years, the vast majority of IT services (software development being just one of them) from developed countries, will be, one, outsourced and two, outsourced to an offshore vendor. Despite the global economic slowdown, the Indian IT software and services industry is maintaining a steady pace of growth. Software development activity is not confined to a few cities in India. Software development centers, such as Bangalore, Hyderabad, Mumbai, Pune, Chennai, Calcutta, Delhi-Noida-Gurgaon, Vadodara, Bhubaneswar, Ahmedabad, Goa, Chandigarh, and Trivandrum are all developing quickly. All of these places have state-of-the-art software facilities and the presence of a large number of overseas vendors. Indias most prized resource is its readily available technical work force. India has the second largest Englishspeaking scientific professionals in the world, second only to the U.S. It is estimated that India has over 4 million technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. The enormous base of skilled manpower is a major draw for global customers. India provides IT services at one-tenth the price. No wonder more and more companies are basing their operations in India. The industry is in an expansion mode right now, with dozens of new offshore IT services vendors emerging everyday, the industry has a high probability of being subjected to the 80:20 rule in not too distant a future. In perhaps another ten years, 80 percent of all outsourced offshore development work will be done by 20 percent of all vendors, a small number of high qualities, trusted vendors. Only a few selected countries and only the most professional companies in those countries will emerge as winners. India is the country of choice for offshore software development. It has the potential to become and remain the country of choice for all software developments and IT enabled services, second only to the USA. The third choice could be far distant. India is among the three countries that have built supercomputers on their own. The other two are USA and Japan. India is among six countries that launch satellites and do so even for Germany and Belgium. India's INSAT is among the world's largest domestic satellite communication systems. India has the third largest telecommunications network among the emerging economies, and it is among the top ten networks of the world .To become a global leader in the IT industry and retain that position, India needs to constantly keep moving up the 45 value chain, focusing on finished products and solutions, rather than purely on skill sets and resumes. It also needs to be able to package its services as products, rather than offering them as raw material. It needs to be able to recognize and build up on its strengths and work on weaknesses. Another extension of the IT industry is the ITES (Information Technology Enabled Services) which is a sector dependent on IT sector. Information technology consulting (IT consulting or business and technology services) is a field that focuses on advising businesses on how best to use information technology to meet their business objectives. In addition to providing advice, IT consultancies often implement, deploy, and administer IT systems on businesses' behalf. 3.3.4 DELL OUTSOURCING - LATEST NEWS Dell outsourced its computer support operations to India and had set up major call center operations in cities like Bangalore and Chennai. But the company has received many complaints in terms of bad customer service along with rude comments and bad accents. This has lead the Dell outsourcing unit to rethink its strategies regarding utility outsourcing call center. According to a report in the local newspaper Austin-American Statesman, Dell has decided to move back its technical support jobs from India to US. But Dell outsourcing in terms of support for home users is still being outsourced to India in large numbers. Dell outsourcing is a live example of how things can go wrong in an outsourcing contract if things are not planned out properly. Though outsourcing can be beneficial to organizations there are many myths offshore outsourcing IT that needs to be cleared? Firstly outsourcing is in no way the ultimate answer. Many business white papers outsourcing IT have clearly stated that outsourcing can only be beneficial to those who do so analyzing the short as well as long term goals of an organization. Therefore first and foremost organizations should research outsourcing what is it and in which way will it be beneficial to them. IT outsourcing advantages are many, but same is the case with operations failing and organizations backing up. 3.3.5 IBM OUTSOURCING - LATEST DEVELOPMENTS IBM outsourcing jobs to offshore destinations like India and China has met up with large scale opposition by its own employees. IBM in the recent times has outsourced nearly 1000 low end as well as high end jobs to offshore destinations resulting in huge layoffs and has plans to move another 4000 jobs to India, China and other nations. Pools of IBM employees in the USA have formed a union to fight the IBM outsourcing of jobs. 46 The labour union represents a small portion of IBM employees who have plans to take action against the company in case of any more jobs outsourced. They have even decided not to train any replacement workers from third world countries. Through business process outsourcing IBM on the other hand has promised the generation of more and better paying jobs in US as compared to 2003 is a comment seen with much speculation by the IBM employees. IN the recent times many companies are facing similar situations like outsourcing it IBM. The organizations come into two fold pressure in such situations. They have to decide between growth and social implications of their actions. 3.3.6 ATTRITION IN ITS SECTOR & HRO The Word A (Attrition) Is Back In Outsourcing Companies With uncertainty easing attrition, the biggest nightmare for HR managers in IT services and outsourcing companies, is on the horizon while for some firms, it is already here. So just how are the big 3 IT services firms faring on the attrition and hiring front? Consider the following attrition rates. 3.3.7 INFOSYS Attrition at Infosys rose from 10.9% the last quarter to 11.6%. However, a March Wall Street Journal article quoted a CLSA Asia-Pacific report as saying that there are unconfirmed rumors that 4,000-4,200 employees have resigned at Infosys for the month of February alone well beyond the 1,200 employees who should be resigning each month (as of December 31, Infosys had about 109,882 employees). Nevertheless, it was also noted that Infosys had the largest bench strength in the industry at almost 20,000 free resources. 3.3.8 TATA CONSULTANCY SERVICES (TCS) Attrition at TCS has been stable at around 11.5% although company officials expect this rate to rise. However, the Wall Street Journal noted in February that TCS will go on a hiring spree and hire up to 30,000 new employees after the next fiscal year begins on April 1. This is on top of the 11,500 planned hires for the first quarter of 2010. It was also noted that 70% of new hires for the new fiscal year will be fresh graduates and more than 2,000 employees will be recruited from outside India. 3.3.9 WIPRO Wipro had an attrition rate of about 13.4% up from an average of 8.9% over the past three quarters. Hence, the Hindu Business Line noted that they were planning a salary hike for February along with promotions to help prevent attrition from rising further while recruitment 47 initiatives would happen on a demand basis and include a mix of campus hires and science graduates along with experienced talent. Meanwhile, the Hindu Business Line quoted Girish Paranjpe, the Joint-CEO of Wipros IT Services group, as saying that the companys bench strength was around 7,500 to 8,000 on an employee base of about 103,000 while the industry bench strength standard is usually twice that. However, another Hindu Business Line article noted that the brunt of any rise in attrition rates will likely be borne by mid-size software outsourcers who could see attrition rates reach the 15% level. Moreover and since the big players have mostly not been hiring for some time, employees with midsize firms are more likely to consider jumping to larger companies if they are offered the right opportunity. Meanwhile, utilization rates (that is, the number of employees billed per hundred verses those who are on the bench) are also increasing at the big 3 IT services firms. According to the Hindu Business Line, utilization rates rose from 67.3% to 68.8% at Infosys, 73.6% to 77.2% at Tata Consultancy Services (TCS) and 70.8% to 73.2% at Wipro. Nevertheless, as utilization and attrition rates rise, its time for companies to once again think about long-term strategies for retaining employees. As Raman Roy, the chairman and managing director of BPO firm Quattro, noted in the Financial Express, meddling with salary and benefits is a short-term strategy (he chooses to focus on in-house training to create an efficient group of high achievers) while attrition is merely a symptom and not a disease. In other words, its the symptom of an increasingly healthier job market and economy for outsourcing. CHAPTER-4 48 Data Analysis And Interpretation CHAPTER-4 DATA ANALYSIS & INTERPRETATION DATA COLLECTION INSTRUMENT Based on the data collected through a well-structured questionnaire, the opinion of the respondents is analysed. The questionnaire method of data collection is quite popular, so the 49 questions related to the objectives of the study were asked from the respondents. The questionnaire was formulated on the basis of ideas related to the subject after a detailed discussion with the guide. ANALYSIS OF DATA & ITS INTERPRETATION RESPONDENT PROFILE and ORGANIZATION DETAILS Table 4.1 Department and Designation Profile of the respondents Sr. No Designation No. of Respondents Percentage 1 Executive 15 15% 2 Manager 26 26% 3 Practioner 34 34% 4 Assistant Manager 25 25% 5 TOTAL 100 100% 50 Graph 4.1 Department and Designation Profile of the respondents Analysis: It is evident from table and graph no.4.1 that out of 100 respondents, 15 were HR Executives,26 were HR Managers While 34 were working as HR Practioner and other 25% respondents were working on the post of Assistant Managers. Interpretation: Thus it is clear that respondents from various categories took active participation to answer the questionnaire but the maximum no. of participants belonged to the HR Practioner Group who was the youngest among all which is a point of significance as the majority of youngsters were interested in answering the questionnaire. As far as the department is concerned, all the respondents were from the HR Department of different organizations. 51 Table 4.2 Years of Work Experienceof the respondents Sr. No Years Of Work Experience No. of Respondents Percentage 1 3 5 years 45 45% 2 6 10 years 22 22% 3 11 15 years 18 18% 4 16 and above years 15 15% 5 TOTAL 100 100% Graph 4.2 Years of Work Experience of the respondents Analysis: From table and graph no.4.2, it is evident that the maximum no. of respondents were having 3-5 years of work experience (45%) and minimum no. of respondents (15%) were having work experience of 16 years and above. (22%) respondents were having work-experience of 6 to 10 years and the rest (18) % of respondents were having a work experience of 11 - 15 years. Interpretation: Thus it is clear that the respondents belong to almost all the managerial levels but young managers took a keen interest in responding the questionnaire. NAME OF ORGANIZATION / COMPANY 52 The present study titled THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY was planned for purely academic research purpose and the data collected for this study is being analysed and interpreted. For this purpose, a questionnaire was evolved on the basis of which different information was collected from various organizations and companies. The companies which participated in this research project are as follows: 1. IBM India Pvt. Ltd 2. DELL India Pvt. Ltd 3. NOKIA India 4. NOKIA SIEMENS NETWORKS 5. NVIDIA India Pvt. Ltd 6. MICROSOFT India Pvt. Ltd 7. WIPRO India Pvt. Ltd 8. ADVANCED MICRO DEVICES India 9. HEWLETT-PACKARD India Pvt. Ltd 10. INFOSYS India Pvt. Ltd From the above list, it is evident that most of the MNCs now-a-days practice HRO for various HR functions and concentrate more on the core competencies. Table 4.3 Approximate HR strength in the organization 53 Sr. No Approximate No. Of Employees Percentage of employees 1 100 to 500 5% 2 501 to 1000 9% 3 1001 to 5000 12% 4 5001 to 10000 14% 5 10001 and Above 60% 6 TOTAL 100% Graph 4.3 Approximate HR strength in the organization Analysis: From the table and graph no.4.3 it is evident that 60% of the organizations have more than 10000 employees whereas 14% organizations have an employee range of 5001 to 10000. The 3 rd common ranges of employees are in between 1001 to 5000(12%). The next 2 categories fall within the range of 501 to 1000(9%) and 100 to 500(5%) respectively. Interpretation: Thus it is clear that most of the respondents belong to large organizations but small and medium sized enterprises (SMEs) also have a significant representation. 54 Table 4.4 Response of the organizations towards HR outsourcing Sr. No. Response Regarding HR Outsourcing Percentage 1 Yes 74% 2 No 26% 3 TOTAL 100% Graph 4.4 Response of the organizations towards HR outsourcing Analysis: From the table and graph no.4.4 it is evident that 76% organizations practices HRO on a regular basis while the rest 26% do not outsource HR functions. Interpretation: Thus it is clear that majority of HR managers feel that HR functions should be outsourced for various important reasons; e.g. to reduce cost, to focus and improve the core competencies of the business, still there is a significant no. of HR managers who dont agree with HR outsourcing because it weakens the in-house HR department. 55 Table 4.5 Approximate no. of people outsourced by various organizations Sr. No. Approximate No. Of People Outsourced By Different Organizations Percentage 1 100 to 500 14% 2 501 to 1000 16% 3 1001 to 5000 40% 4 5001 and Above 30% 5 TOTAL 100% Graph 4.5 Approximate no. of people outsourced by various organizations Analysis: From the table and graph no4.5 it is evident that the maximum no. of people outsourced by different organizations fall between the range of 1001 to 5000, i.e. 40%. The next common range of human resource outsourced by different organizations is 5001 and above (30%). However some organizations outsource smaller no. of people which come under the range of 501 to 1001. The minimum no. of people outsourced by various organizations range from 100 to 500 (14%). Interpretation: Thus is clear that major MNCs are now practicing heavy HR outsourcing and are focusing more on their core businesses. Most of the organizations are outsourcing a significant no. of 56 manpower which is up to 5000 (40%) and more than 5000 (30%). Thus it is clear that 70% organizations are outsourcing their HR requirements. Even many small and medium size enterprises (SMEs) are also outsourcing a considerable amount of human resource which comes under the range of 100 to 1000 (30%). Table 4.6 Major HR functions outsourced by various organizations 57 58 Sr. No. HR Functions Outsourced Essentially Outsourced % Frequently Outsourced % Sometimes Outsourced % Rarely Outsourced % Never Outsource d% TOTAL 1 Payroll processing 65% 25% 10% 0% 0% 100% 2 Training and Development 57% 23% 20% 0% 0% 100% 3 Recruitment 67% 20% 13% 0% 0% 100% 4 Manpower planning 50% 30% 15% 5% 0% 100% 5 Employment Law and Regulatory Compliance 51% 20% 19% 10% 0% 100% 6 Tax Management 62% 17% 18% 3% 0% 100% 7 Performance Management 51% 26% 19% 4% 0% 100% 8 Conducting Employee Survey 45% 33% 15% 7% 0% 100% 9 Maintenance of Personal Records 52% 24% 18% 6% 0% 100% 10 Outsourcing Entire HR Functions 15% 15% 20% 20% 30% 100% 59 Analysis: From the table and graph no.4.6 it is evident that most of the organizations outsource various HR functions on a regular basis. The most important HR functions outsourced by them are Payroll processing, Training and Development, Recruitment, Manpower planning, Employment Law and Regulatory Compliance, Tax Management, Performance Management, Conducting Employee Survey, Maintenance of Personal Records, etc. The maximum percentage of Essentially Outsourced HR Functions was Recruitment (67%), Payroll Processing (65%) and Tax Management (62%). The minimum incidence of essentially outsourced HR functions was outsourcing entire HR functions (15%) and conducting employee survey (45%). However the other HR functions which were essentially outsourced are Maintenance of Personal Records (52%), Performance Management (51%), Employment Law and Regulatory Compliance (51%) and Manpower Planning (50%) respectively. As far as the percentage of Frequently Outsourced HR Functions is considered, the maximum incidence was of conducting employee survey (33%), Manpower planning (30%), Performance Management (26%), Payroll processing (25%), Maintenance of Personal Records (24%) and training and Development (23%) respectively. However the minimum percentages of HR functions outsourced in this category were of outsourcing entire HR functions (15%), Tax Management (17%), Recruitment (20%) and Employment Law and Regulatory Compliance (20%) respectively. As far as the percentage of Sometimes Outsourced HR functionsis concerned, the maximum no. of incidences were of training and development, Outsourcing Entire HR functions (20% each), followed by performance management and Employment Law and Regulatory Compliance (19% each) along with Tax Management and Maintenance of Personal Records (18% each) followed by Manpower Planning and Conducting Employee Survey (15% each) respectively. However the minimum percentage of HR Functions outsourced in this category were of Payroll Processing (10%) and Recruitment (13%). As far as the percentage of Rarely Outsourced HR functionsis concerned, the maximum no. of incidences were of outsourcing entire HR functions (20%), Employment Law and Regulatory Compliance (10%) followed by conducting employee survey (7%) and Maintenance of Personal Records (6%) respectively. However the minimum percentage of HR Functions outsourced in this category were of Tax Management (3%), Performance Management (4%) and Manpower Planning (5%) respectively. As far as the percentage of Never Outsourced HR functions is concerned, the maximum no. of incidence was of Outsourcing Entire HR functions (30%) and the rest of the outsourced HR functions were nil (0%). Interpretation: Thus it is clear that the most commonly outsourced HR functions by most of the organizations & companies are Recruitment (67%), Payroll Processing (65%) and Tax Management (62%). The next most common category of outsourced HR functions is Training & Development (57%), 60 Maintenance of Personal Records (52%) and Performance Management (51%), Employment Law & Regulatory Compliance (51each%). Thus it is clear that most of the HR functions are outsourced regularly. Thus it is evident that HR Outsourcing is an evolving industry and HRO functions as a strategic tool aimed primarily to assist organisations on their core businesses. Table 4.7 Important reasons for outsourcing HR functions by various organizations 61 Sr. No. Important reasons for outsourcing HR functions Most Important Reason Much Important Reason Important Reason Less Important Reason Least Important Reason TOTAL 1 To Save Cost 77 13 10 0 0 100% 2 To Save Time 75 17 8 0 0 100% 3 To Increase The Capacity of The Organization 57 31 19 3 0 100% 4 To Gain Tax Benefit 60 14 26 0 0 100% 5 To Improve Levels Of Quality & Performance 45 35 15 5 0 100% 6 To Improve Efficiency 38 42 18 2 0 100% 7 To Increase Productivity 64 14 11 9 2 100% 8 To Improve Quality of Service 54 27 13 6 0 100% 9 To Achieve Better ROI 58 19 11 12 0 100% 10 To Gain Expertise Support 56 24 12 8 0 100% 62 Analysis: From the table and graph no.4.7 it is evident that various organizations are outsourcing different HR functions on a regular basis on account of different reasons out of which the most important reasonsare to "save cost"or to reduce costs (77%), to save time(75%), to gain tax benefit (60%), to increase the capacity of organization (57%), to achieve better ROI (Return On Investment) (58%), to increase productivity (64%), to gain expert support (56%), to improve quality of service (54%), to improve level of quality & performance (45%) and to improve efficiency (38%). Thus it is clear that the most important causes of HRO are: To save cost (77%) To save time (75%) To increase productivity (64%) The least important cause is to increase efficiency (38%). However among much important reasons of HRO, to improve efficiency is on the top (42%) followed by to improve level of quality & performance (35%), to improve Quality of service (27%), to increase the capacity of organization (31%) and to gain expertise support (24%) respectively whereas the least important cause in this group is to save cost (13%), followed by tax benefit & increase in productivity(14%each) followed by to save time (17%) and to achieve better ROI (19%). In the important reasons category, the maximum incident is of to gain tax benefit (26%) and minimum is of to save time (8%). In less important reasons group, the maximum incident corelates to achieve better ROI (12%) and the minimum incidence co-relates to improve efficiency (2%). However in least important category, only one factor is identified which corelates with improved productivity. Thus it is clear that increase productivity is a consistent reason for HRO in all the categories. Interpretation: Thus it is clear that: A) The most important reasons for HRO are: (B) the other important reasons for HRO are: To save cost -77% *To achieve better ROI -58% To save time -75% *To increase capacity of organization-57% To increase productivity-64% *To gain expertise support-56% 63 To gain tax benefit-60% *To improve the quality of service-54% Table 4.8 Important factors for choosing a third party supplier for HR outsourcing Analysis: From the table and graph no.4.8, it is evident that the most important factors for choosing a vendor or third party supplier for HROare service quality (75%), existing relationship (66%) 64 Sr. No Important Factors For Choosing A Third Party Supplier For HR Outsourcing Most Important Factors Much Important Factors Important Factors Less Important Factors TOTAL 1 Lowest Cost 65 25 14 6 100% 2 Service Quality 75 19 5 1 100% 3 Existing Relationship 66 24 17 3 100% 4 Strong HR Process Expertise 65 19 15 11 100% 5 Strength In Customized Solution 32 27 33 8 100% & strong HR process expertise (65%). The next common causes in this category are lowest cost (65%) and strength in customized solutions (32%). In the category of much important factorsfor choosing a vendor to provide HRO services, the reasons which have been identified are customized solutions (27%), lowest cost (25%) & existing relationship (24%). However the service quality & strong HR process expertise are also expressed as important reasons. In important factor group strength in customized solutions is on the top (33%) & service quality is at the bottom level (5%). The other factors in this category are existing relationship (17%), strong HR Process Expertise (15%) & lowest cost (14%). As far as theless important & least important reasons are concerned, the maximum incidences are of strong HR process expertise (11%) and strength in customized solutions (8%) followed by lowest cost (6%) & service quality (1%). In least important group, no factor was identified. Interpretation: Thus it is clear that in the opinion of most of the HR managers, the most important reasons to select a vendor or third party supplier are: Service Quality (75%) Existing Relationship (66%) Lowest Cost (65%) Strong HR Process Expertise (65%) However strength in customized solutions (32%) is also seen as an important factor to select the vendor for different services which are being outsourced by the various organizations. In this context, it is very relevant to explain that the factor of lowest cost is not so significant as the quality of service & existing relationship between the two parties. So it is conclude that though the lowest cost is an important factor in choosing the vendor or third party supplier for Outsourcing different HR Functions but the quality of service & existing relationship with the vendor are of great significance. 65 Table 4.9 Opinions on different aspects of HR outsourcing in relation to various HR functions. Graph 4.9 Opinions on different aspects of HR outsourcing in relation to various HR functions Analysis: From the table and graph no.4.9, it is evident that 80% of the HR Managers have completely agreed with the fact that HR Outsourcing is an answer to avoid high labor cost & expensive 66 Sr. No Different aspects of HR outsourcing Opinion Completely agree Mostly agree Agree Partially agree Disagree TOTAL 1. Is HR outsourcing is the answer to avoiding high labour cost & expensive technology? 80 16 4 0 0 100% 2. Is HR outsourcing is a viable choice for small to mid-sized businesses to limit staffing burdens while maintaining high quality HR functions? 60 23 10 7 0 100% 3. Is HR outsourcing can provide services & highly trained professionals that businesses need often with significant cost savings over hiring full time HR staff? 45 27 23 5 0 100% technology. 16% HR Managers Mostly agreedwith the above fact; however 4% did agree that the above fact is true in relation with HR Outsourcing. As far as the statement Is HR outsourcing is a viable choice for small to mid- sized businesses to limit staffing burdens while maintaining high quality HR functions? is concerned, 60% of the HR Managers completely agreed, 23% mostly agreed, 10% just agreed & 7% partially agreed but none of them was against the above fact. As far as the statement Is HR outsourcing can provide services & highly trained professionals that businesses need often with significant cost savings over hiring full time HR staff? is concerned, 45% of the HR Managers completely agreed, 27% mostly agreed, 23% just agreed & 5% partially agreed but none of them was against the above fact. Interpretation: Thus it is clear that all the three facts about HR outsourcing are very relevant & are of great significance because 80%, 60% and 45% HR managers support the above opinions related to HR Outsourcing. Thus it is evident that: HR Outsourcing is the answer to avoid high labour cost HR outsourcing is a viable choice for small to mid-sized businesses HR outsourcing can provide better services & highly trained professionals at comparatively lower cost Table 4.10 Type of the legal service agreement standard included in HR Outsourcing Contract Sr. No. Legal Service Agreement Standard Included In HRO Contract Percentage 1 Employee Satisfaction 30% 2 Issue Resolution 36% 3 Delivery of Data 22% 4 System Availability 12% 5 TOTAL 100% 67 Graph 4.10 Type of the legal service agreement standard included in HR Outsourcing Contract Analysis: From the table and graph no.4.10, it is evident that issue resolution (36%), had been the most important legal service agreement standard of HRO contract, while system availability (12%), was least important reason for this fact. However employee satisfaction (30%) & delivery of data (32%) had also been the important factors of this issue of HR outsourcing. Interpretation: Thus it is clear that issue resolution (36%) must be kept in mind and should be essentially fulfilled in the matter of legal service agreement standard of HR outsourcing, but rest of the factors, i.e., Employee Satisfaction (30%), Delivery of Data (22%) and System Availability (12%) cant be ignored in this respect. 68 Table 4.11 HR Functions Which Are Not Outsourced Or Being Outsourced Either Partially or Completely. Sr. No Major HR Functions Not Outsourced % Partially Outsourced % Completely Outsourced % TOTAL 1 Payroll processing 10% 22% 68% 100% 2 Training & Development 8% 19% 73% 100% 3 Recruitment 11% 12% 77% 100% 4 Manpower planning 20% 45% 35% 100% 5 Employment Law & Regulatory Compliance 30% 55% 15% 100% 6 Tax Management 25% 39% 36% 100% 7 Performance Management 17% 52% 31% 100% 8 Conducting Employee Survey 51% 34% 15% 100% 9 Maintenance of Personal Records 20% 45% 35% 100% 69 70 Analysis: From the table and graph no. 4.11, it is evident that the major HR functions which are completely outsourced by different organizations are recruitment (77%), training & development (73%), payroll processing (68%).Tax management (36%), Maintenance of Personnel Records (35%), Manpower Planning (35%) and Performance Management (31%). The other HR Functions which are completely outsourced are Employment Law & Regulatory Compliance as well as Conducting Employee Survey (15% each). The HR Functions which are Partially Outsourced are Employment Law & Regulatory Compliance (55%), Performance Management (52%), Maintenance of Personal Records (45%), and Manpower Planning (45%). The other partially outsourced HR Functions are Conducting Employee Survey (34%), training & development (19%) and Recruitment (12%). There are some organizations which do not outsource some of their HR Functions like Conducting Employee Survey (51%), Employment Law & Regulatory Compliance (30%), Tax Management (25%), Manpower Planning and Maintenance of Personal Records (20% each). However minimum incidences of HR Functions which are not outsourced by certain organization are Payroll Processing (10%), Training & Development (8%) and Recruitment (11%). Interpretation: Thus it is clear that the Recruitment is the most important HR function which is completely outsourced by 77% of organizations, partially outsourced by 12% and not outsourced by 11% of organizations. Training & Development is the next most important HR Function which is completely outsourced by 73% of organizations while 19% of organizations outsourced it partially but 8% organizations handle it in-house. Payroll processing is another important HR Function which is completely outsourced by 68% organizations, partially outsourced by 22% and not outsourced by 10% of organizations. The next important HR functions which are completely outsourced by 36%, 35%, 31% and 15% of organizations are Tax Management, Maintenance of Personnel records, Performance Management, Conducting Employee Survey and Employment Law & Regulatory Compliance respectively. The other important HR Functions which are partially outsourced by 55%, 52%, 45%, 39% and 34% of the organizations are Employment Law & Regulatory Compliance, Performance Management, Manpower planning , Maintenance of Personnel Records, Tax Management and Conducting Employee Survey. 71 The HR Functions which are not outsourced by 51%, 30%, 25%, 20% and 17% of the organizations are Conducting Employee Survey, Employment Law & Regulatory Compliance Tax Management, Manpower planning, Maintenance of Personnel records and Performance Management respectively. Table 4.12 Opinion about the impact of HR Outsourcing on various HR attributes. Sr. No HR Attributes Excellent Very Good Good Average Poor TOTAL 1 Business performance 60 20 13 7 0 100% 2 Employee & Organization Coordination 53 19 24 4 0 100% 3 Employee Job-Fit 49 23 15 13 0 100% 4 Employee Performance 58 16 22 4 0 100% 5 Employee Development 65 15 9 11 0 100% 6 Employee Moral & Motivation 45 24 13 18 0 100% 7 Employee Satisfaction 52 19 16 13 0 100% 8 Effectiveness of training 67 18 12 3 0 100% Graph 4.12 Opinions about the impact of HR Outsourcing on various HR Analysis: 72 It is evident from the table and graph no.4.12 that HR Outsourcing has an Excellent positive impact on various HR attributes and Functions such as Effectiveness of training (67%), Employee Development (65%), Business Performance (60%), Employee Performance (58%), Employee & Organization Co-Ordination (53%), Employee Job fit (49%) and Employee Moral & Motivation (45%). As far as the Very Good Positive Impactof HR outsourcing on different HR Functions & Attributes is concerned it was found to be 24%, 23%, 20%. 19%, 18%, 16 % & 15% for Employee Moral & Motivation, Employee Job fit, , Employee Satisfaction, Employee & Organization Co-Ordination, Employee Performance and Employee Development respectively. As far as the Good Positive Impact of HR outsourcing on different HR Functions & Attributes is concerned it was found to be 24%, 22%, 16%, 15%, 13%, 12% & 9% for Employee & Organization Co-Ordination, Employee Performance, Employee Satisfaction, Employee Job fit, Employee Moral & Motivation, Effectiveness of Training and Employee Development respectively. As far as the Average Positive Impact of HR outsourcing on different HR Functions & Attributes is concerned it was found to be 18%, 13%, 11%, 7%, 4% & 3% for Employee Moral & Motivation, Employee Job fit & Employee Satisfaction, Employee Development, Business Performance, Employee Performance, Employee & Organization Co-Ordination and Effectiveness of Training respectively. Interpretation: Thus it is clear that HR Outsourcing has an Excellent Positive Impact on Effectiveness of Training (67%), Employee Development (65%) and Business Performance (60%). HR Outsourcing has a Very good Positive Impact on Employee Moral & Motivation (24%), Employee Job fit (23%), Employee Satisfaction (19%), Employee Performance (16%) and Employee & Organization Co-Ordination (19%). Thus it clear that HR Outsourcing is a boon for enhancing various organizational capacities and for overall improvement of different HR functions of different organizations according to their various needs & requirements. 73 Table 4.13 Opinion about Outsourcing Options with Reference To organizational HR Policies, Practices & Talent Needs of IT Industry Sr. No. Response Regarding HR Outsourcing Percentage 1 Yes 76% 2 No 15% 3 Cant Say 9% 4 TOTAL 100% Graph 4.13 Opinion about Outsourcing Options with Reference To organizational HR Policies, Practices & Talent Needs of IT Industry 74 Analysis It is evident from the Table and Graph no. 4.13 that most of the HR Managers (76%) are of the opinion that HR Outsourcing can boost the performance of IT industries; however 15% were of the opinion that it may impact negatively. However 9% HR Managers were indifferent. Interpretation: Thus it is clear majority of HR Managers (76%) are of the opinion that to improve the condition of the IT industries, HR Outsourcing is essential, but while doing so proper care & precaution should be applied so as to ensure the proper implementation of organizational policies & practices. Table 4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the Rate of Attrition in IT Organizations? Sr. No. Opinion of HR Managers on "whether HR Outsourcing may help to reduce the Rate of Attrition in IT Organizations?" Percentage 1 Yes 86% 2 No 08% 3 Cant Say 06% 4 TOTAL 100% Graph 4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the Rate of Attrition in IT Organizations? 75 Analysis It is evident from the above Table and Graph that HR Outsourcing is very effective in controlling the rate of attrition in the IT sector. 86% HR managers supported the above view; however 8% were against it, while 6% were having an indifferent opinion. Interpretation: Thus it is clear that HR Outsourcing can effectively control the Problem Attritionin IT Sector. Attritionis the biggest nightmare for HR Managers in IT services and outsourcing companies. Thus it is clear that both HR outsourcing & IT Industries may be benefitted by mutual cooperation & co-ordination because they are inter-dependent and inter-related as 86% HR Managers agreed with the above fact. Table 4.15 Opinion of HR Managers on how well have your HR outsourced functions fulfilled their objectives? 76 Sr. No. Opinion of HR Managers on How well have your HR outsourced functions fulfilled their objectives Percentage 1 Excellent 78% 2 Very Good 11% 3 Good 7% 4 Average 4% 5 Deteriorated 0% 6 TOTAL 100% Table 4.15 Opinion of HR Managers on how well have your HR outsourced functions fulfilled their objectives? Analysis 77 From the table and graph no. 4.15 it is clear that outsourced HR Functions were excellentin fulfilling the different objectives and needs of the organizations for which they were undertaken. 78% of HR Managers agreed with this fact. However 11%, 7and 4% were of the opinion that the outsourced HR functions were very good, good & average in fulfilling the given objectives. Interpretation Thus it is clear that the concept of HR Outsourcing has proved to be a boon in completing the different tasks, objectives and needs for which they have been assigned. 78% HR Managers have rated its efficiency as Excellent, 11% have rated it as Very Good, 7% have rated it to be good and the rest 4% have rated it as Average in performance. In no case Deterioration was observed. Thus it has been proved that HR outsourcing can provide services & highly trained professionals that businesses need often with significant cost savings over hiring full time employees. 78 CHAPTER-5 SUMMARY OF FINDINGS CHAPTER-5 79 SUMMARY OF FINDINGS The present study titled THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRYis an attempt to understand the pros and cons of HR Outsourcing on various HR functions. Based on the data collected an in-depth analysis has been made and the results are interpreted. The following findings are given based on the analysis of the data obtained through survey. 5.1 To study the different aspects of HR outsourcing To study the different aspects of HR Outsourcing, the questions 1 to 3 & 7 to 8; from the questionnaire have been used to collect the required data and information on the basis of which the following facts have been observed about the different aspects of HR Outsourcing. Most of the respondents belong to large organizations but small & medium enterprises (SMEs) also have a significant representation and the majority of HR Managers feel that HR Functions should be outsourced. Most of the organizations are outsourcing a significant no. of manpower which is up to 5000 and even more than 5000. Small and medium size enterprises (SMEs) are also outsourcing a considerable amount of HR, which comes under the range of 100 to 1000. HR Outsourcing is an answer to avoid high labour cost & expensive technology. HR outsourcing is a viable choice for small to mid-sized businesses to limit staffing burdens while maintaining high quality HR functions. HR outsourcing can provide services & highly trained professionals that businesses need often with significant cost savings over hiring full time HR staff. As far as the legal service agreement standard included in HR Outsourcing contract is concerned, the Issue resolution, had been the most important legal service agreement standard of HRO contract. However employee satisfaction & delivery of data had also been the important factors of this issue of HR outsourcing. 5.2 To study the important reasons for HR Outsourcing 80 To know the important reasons for HR Outsourcing, the question no.5 from the questionnaire has been used to collect the required data and information on the basis of which the following facts have been observed about the important reasons for HR Outsourcing in the order of rating, merit and significance. A) The most important reasons for HRO are: (B) the other important reasons for HRO are: To save cost *To achieve better ROI To save time *To increase capacity of organization To increase productivity *To gain expertise support To gain tax benefit *To improve the quality of service To improve levels of performance *To improve efficiency 5.3 To study the important factors responsible towards choosing a third party supplier for HR Outsourcing. For this purpose question no.6 has been used from the questionnaire to collect the required data and information on the basis of which the following facts have been observed in relation to the important reasons for choosing a third party supplier for HR Outsourcing in the order of rating, merit and significance. Service Quality Existing Relationship Lowest Cost Strong HR Process Expertise Strength In Customized Solution In this reference, a relevant factor was noted that though the lowest cost was considered as an important factor in choosing the vendor or third party supplier for outsourcing different HR Functions but most of the managers gave top priority to the quality of service and their existing relationship with the vendor. 81 5.4 To study the major HR functions being outsourced in the Indian industry either completely or partially For this purpose questions 4 & 9 from the questionnaire have been used to collect the required data and information on the basis of which the following facts have been observed in relation to the major HR functions being outsourced in the Indian industry either completely or partially in the order of rating, merit and significance. The most commonly outsourced HR functions by most of the organizations & companies were Recruitment, Payroll Processing and Tax Management. The next most common category of outsourced HR functions was Training & Development, Maintenance of Personal Records, Performance Management and Employment Law & Regulatory Compliance. The major HR functions which are completely outsourced by different organizations are recruitment, training & development, payroll processing &Tax management The HR Functions which are Partially Outsourced are Employment Law & Regulatory Compliance, Performance Management, Maintenance of Personal Records, and Manpower Planning and Conducting Employee Survey. 5.5 To study the impact of HR outsourcing on various HR functions & on the effectiveness of the HR department. For this purpose question 10 from the questionnaire have been used to collect the required data and information on the basis of which the following facts have been observed in relation to the impact of HR outsourcing on the various HR functions & on the effectiveness of the HR department in the order of rating, merit and significance. HR Outsourcing is a boon for enhancing various organizational capacities and for overall improvement of different HR functions of different organizations according to their various needs & requirements HR Outsourcing has an Excellent Positive Impact on: Effectiveness of Training Employee Development Business Performance 82 HR Outsourcing has a Very good Positive Impact on: Employee Moral & Motivation Employee Job fit Employee Satisfaction Employee Performance Employee & Organization Co-Ordination 5.6 To study the co-relation between HR Outsourcing & IT industry For this purpose questions 11 and 12 from the questionnaire have been used to collect the required data and information on the basis of which the following facts have been observed with reference to the co-relation between HR Outsourcing & IT industry. Majority of HR Managers are of the opinion that to improve the condition of the IT industries, HR Outsourcing is essential. Majority of HR Managers agreed with the fact that both HR outsourcing & IT Industries may be benefitted by mutual co-operation & co-ordination because they are interdependent and inter-related. that HR Outsourcing is very effective in controlling the rate of attrition in the IT sector 5.7 To study the effectiveness of HR function that is being outsourced. For this purpose question 13 from the questionnaire has been used to collect the required data and information on the basis of which the following facts have been observed with reference to the effectiveness of HR function that is being outsourced in the order of rating, merit and significance. HR Outsourcing has proved to be a boon in completing the different tasks, objectives and needs for which they have been assigned. 78% HR Managers have rated its efficiency as Excellent, 11% have rated it as Very Good, 7% have rated it to be good and the rest 4% have rated it as Average in performance. In no case Deterioration was observed. 83 CHAPTER-6 SUGGESTION SAND CONCLUSION S 84 SUGGESTIONS On the basis of the present study, the following recommendations are suggested for a successful HR outsourcing: ? The outlook of the Indian industry is gradually shifting from anti to pro towards HR outsourcing, but there is still a long way to go as far as trusting an outside organization (vendor). The companies need to build a relation of trust and understanding with total communication as the base. This would help to serve the interest of both the parties better and to a greater extent. ? In terms of effectiveness, it is important for the company to be engaged continuously with the vendors in order to succeed. Unless one engages with the vendor upfront to explain the requirements and expectations in detail, it is difficult to get efficient results from outsourced operations. Accountability is the key success factor. ? Fortnightly or monthly meetings should be held with the vendors in order to understand the level of progress as well as to assess the needs of the vendors. Understanding the business from the vendors point of view is essential for the success of any outsourcing contract. ? Compensation of the employees is a major factor which should be kept in mind before outsourcing. The amount of compensation has a significant impact on the effectiveness of the HR functions. For example as the avg. Monthly salary increases the effectiveness of the outsourced recruitment with respect to the level of psychological contract proportionately increases. So in such cases companies paying higher compensation can outsource their recruitment function to a vendor for greater effectiveness. ? The outsourcer should exercise great care while engaging a vendor. This task will largely determine the success of the partnership. The task may be entrusted to a consulting company or be done in-house. In the latter, the outsourcer can form a team to select the vendor 85 ? Based on the analysis it is important to device a proper reporting relationship with the vendor for an on-going and transparent communication process to make HR outsourcing more effective. For this purpose, first shortlist probable candidates and brief them clearly about the job expectations. These expectations have to be realistic and achievable. This will in turn help the service provider to assess whether it can measure up to those expectations. ? Provide enough information to the prospective service provider with regard to the scope of the relationship, the time- frame, and the price that is being offered in return for the services. Vague issues should be clarified and prospective vendors should be asked to provide references of clients whom they have served so as to get in touch with them and seek their opinion about their services & performance. ? For effective HR Outsourcing, the client company should keep in the mind the technical know- how and expertise available with the vendor. Experience is also a factor that should be considered. Pricing or the cost factor largely determines the success of outsourcing. However, a low cost factor alone should not be the criterion for selection because the quality of service has a great impact on the success of client. ? The HR vendor performs specialized operations to keep up its market competitiveness; so the employees of the vendor may need training to spruce up their skill. It will be in the client company's interest to ensure and provide training to the outsourced employees. Legal issues, labor laws and taxation policies all have a major role in determining the success of outsourcing so the terms and condition of the relationship should be mutually agreed and written down in order to avoid confusion or vagueness. ? It would be better for the client to entrust a small project to the service provider initially. This will reduce the extent of risk and give a fair idea of how well the service provider is going to perform. ? Cultural differences are likely especially when it comes to offshore outsourcing. The relationship between the outsourcer and the service provider is best served when these differences are identified, understood and respected. Programs to bridge the gap should be held where both sides can come closer. 86 CONCLUSION This research helps to gain an insight to the contemporary developments in the field of HR outsourcing in the Indian industry. It helps to clarify many myths about HR outsourcing and also brings up interesting facts about the same. Most of the respondents belong to large organizations but small and medium sized enterprises (SMEs) also have a significant representation. Most of the organizations are outsourcing a significant no. of manpower which is up to 5000 and even more than 5000. Small and medium size enterprises (SMEs) are also outsourcing a considerable amount of HR, which comes under the range of 100 to 1000. The most important reasons for HR outsourcing are to "save cost" or to reduce costs, to save time, to gain tax benefit, to increase the capacity of organization, to achieve better ROI (Return On Investment), to increase productivity, to gain expert support, to improve quality of service, to improve level of quality & performance and to improve efficiency. The important reasons for choosing a third party supplier for HR Outsourcing in the order of rating, merit and significance are Service Quality, Existing Relationship, Lowest Cost, Strong HR Process Expertise and Strength in Customized Solution.HR Outsourcing is essential to improve the condition of the IT industries. HR outsourcing & IT Industries both are benefitted by mutual co- operation & coordination because they are inter-dependent and inter-related. It is very effective in controlling the rate of attrition in the IT sector. HR Outsourcing is a very effective tool for enhancing various organizational capacities and for overall improvement of different HR functions of different organizations according to their various needs and requirements and also in completing the different tasks, objectives and goals for which they have been assigned. It has an Excellent Positive Impact on Effectiveness of Training, Employee Development and Business Performance and it also has a very good positive impact on Employee Moral & Motivation, Employee Job fit, Employee Satisfaction, Employee Performance and Employee & Organization Co-Ordination. 87 The present study has been conducted on a smaller sample size due to time constraint and the respondents were from specific areas and did not cover whole of India and the primary data is based on the responses to the questions which can be influenced by personal bias and subjective perception of the individuals and the present study is limited only to IT Industry.
SUGGESTIONS FOR FURTHER RESEARCH
Although a lot of work has been done in similar areas before, this research is an effort to look at the things from a fresh and a different angle. Thus this research work can be used as a source of secondary data by other researchers as it contains significant amount of analysis in areas which have not been explored much till now. It can also be used as a tool for comparative analysis of the past and present HR outsourcing scenario and to understand the changes that have taken place. It is also suggested that further research studies should be conducted on this topic, on a larger scale with a bigger sample size, including more industrial sectors which outsource different HR Functions like ITES, Logistics, Healthcare, financial Services and Manufacturing Sector in India. 88 BIBLIOGRAPH Y 89 BIBLIOGRAPHY Books: Armstrong, M A Handbook of HR management practices, 8 th edition 2002 Journals: Bondarouk, T.V. and Ruel, H.J.M (2009) Electronic Human Resource Management, the International Journal of Human Resource Management. Kern, T and Blois, K. (2002) Norm development in outsourcing relationship, Journal of Information Technology Logan, M.S. (2000) Using Agency Theory to design successful outsourcing relationships, International Journal of Logistics Management Reports & Reviews: Hesketh, Anthoy, A report on Outsourcing the HR Function- Possibilities & Pitfalls Klementive, Alexey Society OF HR Management- Outsourcing Survey Report about HR Outsourcing McFarlan, F.W. and Nolan, R.L (1995) How to manage an IT outsourcing alliance, Sloan Management Review Nahapiet, J. and Ghoshal, S. (1998) Social capital, intellectual capital, and the organizational advantage, Academy of Management Review Willcocks, L., Hindle, J., Feeny, D., and Lacity, M. (2004). IT and Business Process Outsourcing: The Knowledge Potential, Information Systems Management Willcocks, L.P., and Kern T. (1997). A report on IT Outsourcing as Strategic Partnering. Websites: www.google.com www.hrmgt.com www.shm.org (Society for Human Resource Management) www.younghrmanager.com www.hr.com www.hrmgt.com 90 ANNEXURE 91 ANNEXURE Questionnaire On THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY (This Questionnaire is being prepared purely for academic research purpose by Mr.Nirvan; a MBA Final Semester Student of Acharya Institute of Management And Sciences (AIMS), Peenya Bangalore. This research work is done to complete my dissertation titled THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY for the degree of MBA from Bangalore University. Respected Sir/ Maam I need your valuable time & support to complete my project, so please answer the following questions by your experienced & learned responses. The Data collected through this questionnaire will be kept completely confidential.) Designation- DepartmentNo. of years of experienceName of organization/company-1) What is the total manpower strength in your organization? *Please mention the approximate No.-2) Has your organization outsourced manpower? Yes No 3) Please specify the approximate no. of people outsourced by your organization? 100-500 501-1000 1001-5000 5001 & Above Others, please specify-92 4) What are the major HR functions outsourced in your organization? (Please tick in the given boxes & also rate the outsourced HR functions from 1 to 5) 5-essentially outsourced, 4-frequently outsourced, 3-sometimes outsourced, 2- rarely outsourced, 1-never outsourced Payroll processing 1 2 3 4 5 Training & Development 1 2 3 4 5 Recruitment 1 2 3 4 5 Manpower planning 1 2 3 4 5 Employment Law & Regulatory Compliance1 2 3 4 5 Tax Management 1 2 3 4 5 Performance Management 1 2 3 4 5 Conducting Employee Survey 1 2 3 4 5 Maintenance of Personal Records 1 2 3 4 5 Outsourcing Entire HR Functions 1 2 3 4 5 5) Please rate the following reasons for outsourcing HR functions by your organization from 1 to 5? 5-most important, 4-much important, 3- important, 2-less important, 1- least important To save cost 1 2 3 4 5 To save time 1 2 3 4 5 To increase the capacity of the organization 1 2 3 4 5 To gain tax benefit 1 2 3 4 5 To improve levels of quality & performance 1 2 3 4 5 93 To improve efficiency 1 2 3 4 5 To increase productivity 1 2 3 4 5 To improve quality of service 1 2 3 4 5 To achieve better ROI 1 2 3 4 5 To gain expertise support 1 2 3 4 5 6) When choosing a third party supplier for HR outsourcing; what factors are most important to you? Please rate them in order of their importance from 1 to 5. 5-most important, 4-much important, 3- important, 2-less important, 1- least important Lowest Cost 1 2 3 4 5 Service Quality 1 2 3 4 5 Existing Relationship 1 2 3 4 5 Strong HR Process Expertise 1 2 3 4 5 Strength in Customized Solutions 1 2 3 4 5 Other factor if any please specify- 1 2 3 4 5 7) What is your opinion about different aspects of HR outsourcing in relation to various HR functions? Please rate them from 1 to 5. 94 5-Completely agree 4- Mostly agree 3- Agree 2-Partially agree 1- Disagree 8) What is the legal service agreement standard included in your HR outsourcing contract? Employee Satisfaction Issue Resolution Delivery of Data System Availability 9) Please specify the different HR functions which are being completely outsourced or partially outsourced or not outsourced in your organization: Completely Partially Not Outsourced Payroll processing Completely Partially Not Outsourced Training & Development Completely Partially Not Outsourced Recruitment Completely Partially Not Outsourced Manpower planning Completely Partially Not Outsourced Emp. Law & Compliance Completely Partially Not Outsourced Tax Management Completely Partially Not Outsourced Performance Management Completely Partially Not Outsourced Conducting Emp. Survey Completely Partially Not Outsourced Maintenance of P-Records 10) What is your opinion about the Impactof HR outsourcing on various HR Attributes? 95 Aspects Opinion With Rating 5 1 a) Is HR outsourcing is the answer to avoiding high labour cost & expensive technology? 1 2 3 4 5 b) Is HR outsourcing is a viable choice for small to mid-sized businesses to limit staffing burdens while maintaining high quality HR functions? 1 2 3 4 5 c) Is HR outsourcing can provide services & highly trained professionals that businesses need often with significant cost savings over hiring full time HR staff? 1 2 3 4 5 (Please rate them from 1 to 5) 5-Excellent 4- Very Good 3- Good 2-Average 1- Poor HR Attributes Impact with rating 5 to 1 Excellent Very Good Good Average Poor Business performance 5 4 3 2 1 Employee & Organization Co-ordination 5 4 3 2 1 Employee Job-Fit 5 4 3 2 1 Employee Performance 5 4 3 2 1 Employee Development 5 4 3 2 1 Employee Moral & Motivation 5 4 3 2 1 Employee Satisfaction 5 4 3 2 1 Effectiveness of training 5 4 3 2 1 11) Do you agree that HR needs to help IT Organizations to evaluate their outsourcing options with reference to their HR policies, practices & organizational talent needs? Yes No Cant Say 12) Do you think that HR outsourcing can help to reduce the rate of attrition in IT
organizations? Yes No Cant Say 13) How well have your HR outsourced functions fulfilled their objectives? Excellent Very Good Good Average Deteriorated 96 Thank You! 97
Roger Dale Stafford, Sr. v. Ron Ward, Warden, Oklahoma State Penitentiary at McAlester Oklahoma Drew Edmondson, Attorney General of Oklahoma, 59 F.3d 1025, 10th Cir. (1995)