HR outsourcing on the hot seat
HR OUTSOURCING is one of the hottest business buzzwords of the decade, and is expected to head the list of fastest growing segments in the outsourcing industry. More than two thirds of big size companies in U.S and Europe now outsource at least one major HR function to outside vendors. In India too, most big players and many of the mid-size to small companies have jumped into the fray, and their ranks are fast swelling. In its inimitable style, India is turning into a burgeoning global market for HR process outsourcing, and the economic impact scores a huge positive - considering that outsourcing has created more entry level jobs than most of the other sectors put together and has brought in big bucks to fill our coffers.
The perceived reasons behind the growing popularity of outsourcing are not hard to discern- reduced costs, better service and greater expertise. The growing complexity of HR software means that highly trained clerks are required to handle them, and it is more convenient for companies to outsource the service, rather than take on the headache of recruiting and training staff for the purpose. It also frees companies from administrative burden, allowing HR to focus more on strategic issues.
HR processes that are outsourced can range from purely transactional ones to strategic consultancy. Commonly outsourced HR functions include routine administrative processes like payroll processing, data entry, execution of recruitment and training programmes, resume management, compensation, employee communications, pension plans, leave administration and HR data analytics. At a time when most companies have restricted themselves to outsourcing process driven HR tasks, some market leaders have gone ahead with outsourcing even hiring policies, compensation, pay structure, and recruitment decisions.
Although the trend of outsourcing seems to be catching up in business circles, detractors point out that outside vendors often fail to satisfactorily deliver the goods when it comes to customer service. And while the predictability of cost may work out to the company's benefit in the long run, it is doubtful that outside vendors will be perceptive or as motivated to address pressing employee issues as in-house HR personnel. Critics also contend that outsourcing of HR sends out the message that employee related activities are expensive non-core activities that need to be shipped out, resulting in the active disengagement of employees.
Despite what critics say, HR outsourcing is a trend that is here to stay for some time to come. Global markets and a changing mindset on how business ought to be run dictate that organisations shed non-core obligations that hamper their focus on core vision and key goals. And day-to-day HR administration is considered one such necessary evil. Outsourcing per se is a viable and economical option to keep the administrative machinery ticking away while keeping it conveniently out of sight. The right vendor can make the difference between an outsourcing decision that creates value, and one that burns your fingers and pockets.
Whether you are a large company or a small business owner, you could benefit from some of these tips offered by The Detroit Online on evaluating service providers for outsourcing.
In an industry like HR outsourcing, where information is sensitive and cash flows are high, credibility and reliability are the foundations on which a relationship can be established. Look for vendors with a track record of outstanding service. Make sure that the service provider is a well managed, financially stable company, particularly if the service provider is a startup. Verify financial statements and ask for references from current and past clients. Fly-by-night operators can result in loss of trust and credibility apart from financial losses for the organisation. It is important to be thoroughly acquainted with the technical and technological credentials of the vendor before making a decision. Scrupulously verify references, licences, and industry trade association affiliations and other accreditations.
If the outsourcing partner will be handling sensitive information such as payroll, insurance or health-care paperwork, find out how it monitors privacy compliance, and ensure that it is efficient and in accordance with legal regulations. At a time when there are growing complaints of breach of privacy, it is especially important to verify the credibility and track record of your outsourcing partners.
Ask about the kind of introduction, training and assistance that the vendor offers to employees. Discuss with your employees about the kind of assistance they would like to have from the vendor. Arrange a face to face meeting with the vendor and collect information on technical support, service standards, how to address issues after hours and any other details that may be of concern to employees. Initially the vendor should dedicate personnel on site to offer assistance to employees with related forms and software, apart from being available to answer questions, addressing concerns and providing clarification.
Lastly, if you are outsourcing to a single vendor, then consider outsourcing a suite of those services that logically go together.
For example, HR administration, payroll and benefits naturally go together. A vendor outsourcing strategic HR consultancy, administrative services and technical support on the other hand, may be a bit of a far call. In such cases, the organisation is better off looking to niche service providers who can provide better service and more value for money.
BINDU SRIDHAR
faqs@cnkonline.com
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