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Why Outsource HR ?
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Outsourcing has taken the center stage in all business operations. HR is no exception to it. There are many reasons as to why HR is outsourced :-

• To increase the flexibility to meet business challenges
• To effectively transform the organization
• To increase the service and product value, heighten customer satisfaction
• To improve the performance of operations
• To enhance risk management
• To bring out innovative ideas
• To build credibility
• To gain market access and return on investment

A survey indicates that 80% of the companies that outsource their HR operations tend to do so again. They do so because they view HR outsourcing as a viable and cost-cutting operation. 26% of the firms want to outsource in order to cut costs, 23% focus on strategy, and 22% want to improve compliance. Within HR, 84% of the activities outsourced are administrative operations, 84% employee assistance, 74% retirement planning, 68% background check, 46% risk management, and 11% salary and wage administration.

Various services that HR outsourcing firms may offer are:

• Staffing and Organizational Structuring
• Recruitment
• Training and Development
• Compensation Planning

In order to tap the potential of outsourcing, the parent company has to perform certain activities before outsourcing their HR function to another firm. The target firm must be assessed for the range of services that it provides, its industry expertise, its general experience in the HR domain, available technology and transfer of services, relationship management, whether or not it understands your priorities and requirements, the resources available and the flexibility of the firm. Some of the potential problems with outsourcing are approaching the wrong vendor, receiving a poor contract, improper change management, and lack of an exit strategy.

The design and operation of outsourcing HR activities require consideration of certain key points.

1. Business Strategy – Change management and business strategy are the key focus areas for HR outsourcing. The service level in basic transaction processing must be improved. Delivery of basic services will no more suffice. Helping organizations grow better and developing better business strategies is essential for a firm that provides HR services.

2. Development of Metrics – All operations must be assessed with the help of appropriate metrics so as to give them tangibility. The condition of human capital must be given prime importance while designing these metrics.

3. Management Tools and Expert Advice – One of the most useful managerial tools now is to use electronic HR systems that prove just-in-time advice.

4. Systems Integration – The best applications and software must be integrated instead of simply reinventing the wheel. This saves a lot of time and energy for the personnel.

5. Monitoring Problems – HR must continuously keep track of all processes and policies so as to sniff out a problem before it snowballs.

6. Data Privacy – This is definitely an important factor because the target HR firm would have access to varied data on the parent firm. It must be ensured that all data is protected.

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