This document discusses HR outsourcing. It outlines three things managers typically do and suggests outsourcing interactions but not decision making. It examines using transaction cost analysis to determine what to outsource based on asset specificity and uncertainty. Common reasons for outsourcing HR include reducing costs while maintaining value, focusing internally, and gaining expertise. Functions often outsourced include recruitment, training, compensation administration, and safety. The document cautions that outsourcing impacts people and relationships, presents integration and control risks, and requires careful management.
This document discusses HR outsourcing. It outlines three things managers typically do and suggests outsourcing interactions but not decision making. It examines using transaction cost analysis to determine what to outsource based on asset specificity and uncertainty. Common reasons for outsourcing HR include reducing costs while maintaining value, focusing internally, and gaining expertise. Functions often outsourced include recruitment, training, compensation administration, and safety. The document cautions that outsourcing impacts people and relationships, presents integration and control risks, and requires careful management.
This document discusses HR outsourcing. It outlines three things managers typically do and suggests outsourcing interactions but not decision making. It examines using transaction cost analysis to determine what to outsource based on asset specificity and uncertainty. Common reasons for outsourcing HR include reducing costs while maintaining value, focusing internally, and gaining expertise. Functions often outsourced include recruitment, training, compensation administration, and safety. The document cautions that outsourcing impacts people and relationships, presents integration and control risks, and requires careful management.
What to outsource in HR? Three things that managers do (Henry Mintzbergs Nature of Managers Job) Interaction (outsource) Information gathering/processing (outsource) Decision-making and problem solving (do not outsource) The decision to outsource Transaction cost analysis TCA combines economic theory with management theory to determine the best type of relationship a firm should develop in the market place. The properties of the transaction determine the governance structure. High asset specificity and uncertainty lead to transactional difficulties, with transaction held internally within the firm vertical integration Medium asset specificity leads to bilateral relations in the form of cooperative alliances between the organisations Low : transactions frequent and governed by market 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 Strategic outsourcing Beyond cost control Specialization and expertise that goes with it for which there is no need on a regular full time basis Focus on quality, technology and service delivery Outsourcing to best of class, best of industry Problems with technology address need for customization (which presently means largely adjusting to supply side than demand side) 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? Deciding whether to outsource Decide what to outsource Tender the package Choose a partner Introduce your staff to the agency Draw up the contract Test the contract 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 Training. 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?
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