SCOPE OF HUMAN

RESOURCE
OUTSOURCING IN………
…………
SMALL MEDIUM ENTERPRISES
 HR Outsourcing
Many organisations are considering Human
Resources Outsourcing as a method of:
 Enhancing effectiveness by focusing on what
you do best
 Increasing flexibility to meet changing business
conditions, demand for products and services
and technologies
 Transforming the organization
 Increasing product and service value, customer
satisfaction, and share-holder value
 Why outsource HR
REDUCE COST OF HR AND CONTINUE TO PROVIDE VALUE
 Tightening labour markets and competitive
product markets – pressure to reduce head
count
 Cut costs
 Add value
 Do more with less

Upgrade, but not upsize

Downsize, but not downgrade
 HR itself is becoming the target of belt tightening
 Shed routine administrative tasks and focus on
talent management
Deciding Whether to outsource?
 Create a project team
 Analyse the current position
 Pay attention to people issues
 Benchmark
 Come to a decision

What is core to the business and the future of
business?
 What can bring competitive advantage?
 Pros and cons
Pros Cons
 Cost and savings  Need greater
 Financial and operational coordination flow with
flexibility agencies
 Need to focus on few  Reduces organizational
things learning by depleting its
 Access to quality, skill base
expertise and better  Loss of control
management skills  Adverse affects on
 Staffing flexibility morale and motivation
 Job insecurity
 Which functions/sub-systems
to outsource
 Recruitment – preliminary screening and short listing
 Training – Trg. Needs identification, content
development, delivery, logistics, third party evaluation
 Performance management - on line – automation
 Compensation – pay roll and compensation surveys
 Safety -- inspections
 welfare – transport, security, catering
 Labour contract – contract employees doing the job
which was earlier done by regular employees
 Which function not to outsource
 Decision making in each of the sub functions
 Leading change and transforming the organization
Implications – Need for caution
 What is formerly inside is going outside and what is
formerly outside is coming inside
 Formerly strong relations are becoming weak and
formerly weak relations are becoming strong
 Huge disparity in profile, pay and working conditions:
casual, contract, contingent employees are less
educated, less trained, over worked under usually less
safe conditions, underpaid and enjoy little or no social
security/protection
 Pay attention to outsourced employees the same way as
you do with regular employees in terms of how they are
recruited, trained, paid and motivated
 Dominant trends
3 main HR outsourcing industry segments
 Consultants
 Administrative – service providers
 Technology enablers
 Customizing imported software products
remains an issue: supply oriented rather than
demand based customization
 Typical Problems
 Integration with over all strategy
 Fragmented and piecemeal approach – cleaning
part of the pool
 Absence of formal outsourcing process
 Limited cost analysis
 Core business definition – Everything is core?
 Contract management how to ensure that we
achieve desired objectives
 Work flow, supply chain and logistics
management critical to outsourcing process
 Risks of HR outsourcing
 Trust
 Confidentiality
 Dependency
 Spillover risks
 Relative proficiency
 Strategic capability
 Commitment
 Flexibility
 Managing people issues
 What happens to people?
 When to communicate?
 Who to communicate with?
 Those whose jobs are outsourced and those whose
jobs are not outsourced
 How do you deal in the transition phase?
 What about HR staff?
 Who will survive who has to leave?
 How will the HR department look like, post
outsourcing?
 Excuses not to outsource
 UNCERTAINITY
 LOSS OF CONTROL
 CONFLICT
 EMLOYEE UNHAPINESS
 FINANCIAL
 HR Outsourcing Reasons and
Benifits
 Cost-Driven reasons
 Employee-Driven Reasons
 Financially-Driven Reasons
 Improvement-Driven Reasons
 Organizationally-Driven Reasons
 Seven steps to successful HR
Outsourcing
1.Lets investigate Outsourcing
2.Planning initiatives
3.Exploring Strategic Implications
4.Analysing Costs and Performance
5.Selecting Provides
6.Negotiating terms
7.Transistioning resources
8.Managing relationships