Human resource outsourcing is a situation where a company enlists the services of a third party to perform some of its tasks related to human resources. In big corporate organizations, outsourcing is mainly done for highly specialized tasks or functions (Adler 53).
The main points
The article primarily addresses the various issued related Human Resources Outsourcing. The main issues that come out are:
Human Resource Outsourcing
Corporate organizations are increasing the business model of Human Resources Outsourcing. The HR Outsourcing services that are offered by venders range from temporary staff members, contract workers and IT experts. The venders of Human Resource Outsourcing are said to have taken up even the Human Resource Business Process Outsources activities which entail processing simple payrolls and are increasingly taking up most of human resource related activities leaving their clients to concentrate on their core or strategic businesses. It is predicted that outsourcing is becoming a key trend that has a very significant influence on the future of Human Resource. It is envisioned that Human Resource departments will remain to deal only with strategic activities of the organizations (Adler 53).
The management of human resources has been significantly influenced by variations in business environment. This has changed the way business processes are managed and how corporate organizations manage their human resources (Adler 54). The vulnerable business environment has made corporate organization to devise strategies of cutting down on the cost of operations while sustaining high productivity. In relation to this, the human resource departments have come under pressure win this process. One of the significant strategies of cutting cost is through reducing headcount (Adler 54).
This task has been given to the human resource departments; the departments are charged with the responsibility of down-sizing while also ensuring the companies attracting and retaining highly productive employees (Adler 54).
More importantly, acquisitions and mergers have a huge challenge to a sustained human management process. The increasing high rate of acquisitions and mergers come with the need to restructure the management, reconcile clashing corporate cultures and re-assignment of duties to employees of both the acquired and acquiring companies is a daunting task to corporate managers (Adler 54). This has necessitated the need to do outsourcing; this has been facilitated by the globalization process.
With the increasing human resource outsourcing model, the human resource industry is found to have evolved into three main fragments: consultants, technology enablers and providers of administrative services (Adler 54). Consultants provide services in the areas of employee compensation, benefits, diversity at work place and stock-option-plan design. Examples of consulting firm in this category are named as Hewitt Associates and Watson Wyatt Worldwide amongst others. Technology enablers deal mainly in software important in the management of human resources (Adler 54).
They assist corporate organizations still undertaking human resources activities on their own. Providers of administrative services are specialists mostly in the areas of handling payrolls and processing benefits. They are said to also outsource skills not available to them internally (Adler 54).
Benefits and risks of human resources outsourcing
Human resources is said to have a significant number of benefits. One of the benefits is that it allows the internal human resource staff to mainly focus on the strategic operations that are of core business to the corporate organizations (Adler 55). This also assists human resource staff to be innovative in terms of strategic administration tasks. Besides, through human resource outsourcing, the tedious bureaucracy of centralized human resource management process; it allows the human resource departments to efficiently perform the role of corporate down-sizing. It is also said that this process enhances access to innovative ideas and models not beyond the corporate organization (Adler 55). It is reported that venders enjoy economies of scale; because of this, outsourcing clients are able to get the services at low cost thereby securing their profit margins (Adler 55).
Nonetheless, human resources outsourcing has been associated with substantial number of risks; one of the risks is dependency risk. This arises when company adapts its operations to outsource some of its services from a vender. The company may become overly dependent on the vender (Adler 55) Again, a vender may be forced to tailor its services to the specific needs of the client hence making the vender to be dependent on the client. Spillover is also a risk that may affect the outsourcing companies. Sensitive information may flow to the vender and ultimately to the competitors (Adler 55). To protect itself against spillover risks, a company may be forced to engage itself with an elaborate legal paper work which may prove to be expensive. Also, a company may suffer significant losses should it decide to outsource services that are directly within its strategic core business (Adler 57).
Human resources outsourcing is one of the strategies used companies in reducing the cost of operations. Companies outsource services they feel will help reduce cost by allowing third parties to perform (Adler 53). In this case, human resources has come under critical strategic management and the concerned departments have been tasked with the responsibilities of down-sizing while at the same time ensuring the companies attract and retain highly productive personnel.
Adler, Paul. “Making the HR Outsourcing Decision.” United States: EBSCO Publishing, 2003. Print.