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What Future does the Outsourcing Model hold ?
Human Resources » HR Outsourcing

Chrm Message From: ann Total Posts: 4 Join Date: 17/07/2006
Rank: Beginner Post Date: 17/07/2006 02:26:05 Points: 20 Location: ---

Dear Community,

When we speak of the outsourcing that is gaining interest wherein each organization is looking for greener pastures to outsource certain functions probably due to their specialised skill set availability or due to finance constraints, what does the outsourcing model hold for the future of the human resource function and departments.

Companies are diversifying their routine and mundane jobs to other companies, duly called third party companies or the BPO's to avoid the spend of resources, employee capital and finance on their staff.

But my question is, What future does the outsourcing model hold for the Human Resource functions and departments ? I mean, will there be a time when only competent framework of functions are regarded as important by the company and if that happens, what shall happen to the future of new generation HR people and someone who hasn't yet entered the niche HR sector.

Awaiting for member comments.

- Ann

Chrm Message From: CHRM Total Posts: 209 Join Date: 17/07/2006  
Rank: Coach Post Date: 17/07/2006 10:14:54 Points: 1045 Location: ---

Dear Ann,

The rise of the outsourcing offshore option is dramatically changing the economics of reengineering. With millions of low-cost engineers, financial analysts, consumer marketers, and architects now readily available via the Web, CEOs can see a quicker payoff. "It used to be that companies struggled for a few years to show a 5% or 10% increase in productivity from outsourcing," says Pramod Bhasin, CEO of Genpact, the 19,000-employee back-office-processing unit spun off by GE last year. "But by offshoring work, they can see savings of 30% to 40% in the first year" in labor costs. Then the efficiency gains kick in. A $10 billion company might initially only shave a few million dollars in wages after transferring back-office procurement or bill collection overseas. But better management of these processes could free up hundreds of millions in cash flow annually.

The future of outsourcing seems very bright at the present time. Since big business has no loyalty to its workers, the workers will have no loyalty to the company. They will buy products that are less expensive. Our parents were loyal to some automakers, and they would buy a certain make of automobile. Outsourcing will come back to haunt big bussiness when there are no buyers for their products or services. In short, Work will go where it can be done best.

Closing this, the future of outsourcing shall never affect the the roles in particular and human resource functions in specific. New technologies pave way for new ideas which paves way for new developments which paves way for competitive working initiatives and habits. So, its a cycle wherein one goes out and is replaced by the other without the chain in the cycle ever being vacant. Hence, outsourcing is a must-must proposition for everyone at present and am sure it wont hinder the futures of the next generation, if only the system goes way beyond and starts considering the outsourcing option to only leverage profits rather than also focussing on workforce acquisition, development and talent management.



"To must stay in the game" - Claude Bristol



Chrm Message From: madure Total Posts: 278 Join Date: 17/07/2006  
Rank: Coach Post Date: 17/07/2006 10:39:58 Points: 1440 Location: ---

Dear Ann,

Cost certainly is one aspect but please see the following areas as well: Sometime there is a needless fear which happens when the HR person himelf is unsure of his or her own capabilities. At the end of my comment I have given a summary of what Allan Price says on HR Based on Chapter 24 of Human Resource Management in a Business Context (2nd Edition) by Alan Price - published by Thomson Learning

Manage recruitment costs

Many of our top employers have no idea how much they spend on recruitment, particularly temporary labour. Decentralised recruitment in the hands of line managers, often delivers poor candidate selection at premium prices as line managers attempt to juggle budgets, agencies, recruitment and the core day job.

Improve candidate quality & retention

Recent CIPD statistics indicate an average hiring cost per new employee of £4,301. For a company with 1,000 people and a staff turnover of 15%, this means spending £650,000 a year, just to stand still!

Couple this with a tough and competitive labour market, and it becomes ever more imperative to attract and retain quality people.

The Consultant to whom you have outsourced will develop and administer on your behalf, a cost effective sourcing strategy utilising agencies, advertising, web sites and a unique database of direct applicants that are matched to your business. Through this strategy a competitive and flexible supply chain is developed.

They then overlay this with a uniform measure of centralised screening to deliver pre-qualified and shortlisted candidates to your hiring management, who can now focus on final candidate selection, induction and retention techniques.

The solutions are designed to complement your culture and focus on promoting you in a competitive market as an 'employer of choice'. This would also help HR to rise up to its full strategic position and have time and focus to do so.

Reduce recruitment time

Recent client surveys have shown that recruiting a typical £20,000 p.a. worker whether permanent or temporary, will take in excess of 18 hours of management time. This equates to 4,500 hours if you were to recruit just 250 people per year!

This is time spent fielding unwanted agency calls, dealing and negotiating with multiple recruitment agencies, designing adverts, screening CV's, arranging interviews, etc.

By outsourcing the transactional elements of your recruitment processes to consultant , you can eliminate many of these time consuming and non-value added tasks, freeing up your management's time to focus on candidate selection, staff retention strategies and core profit generating activities.

Create a flexible supply chain

Many companies maintain a high dependency on recruitment agencies as part of their sourcing strategy. Managing the quality and consistency of these agencies, often represents a major challenge.

Rationalising agencies into a Preferred Supplier List (PSL) often only serves to limit your access to the labour market and ties up valuable management time policing PSL issues and leakage.

A core skill, unique to consultant , is the ability to develop and manage a recruitment agency supply chain on your behalf. We then police adherence to your preferred terms and manage ongoing supplier performance. Your existing suppliers can be migrated under this process, so that the experience and knowledge residing in good suppliers is not lost.

This supply chain can be grown to provide you with every grade and discipline of staff you might ever require, UK and Europe wide. This ensures easy access to the widest possible labour pool with a single phone call.

Consultant would have  developed comprehensive management and supplier education programmes to ensure your supply chain forms a valuable and cost effective part of your sourcing and recruitment strategy.

Maximise control & compliance

Recruitment is an activity becoming ever more fraught with legal implications, offering a happy hunting ground for the litigiously minded. This places an increasing and often unacceptable burden on hiring managers, already experiencing a multitude of demands on their limited time and resources.

Furthermore non-standard terms, hidden costs and limited supply options can also lead to employment legislation issues, fragmented buying power and a reduced window on the labour market.

Consultant’s outsourcing models should be  based upon stringent ISO processes tailored to providing you with centralised control over your entire supply chain and its various cost elements. The processes and procedures are informed by a dedicated in-house Tax & Compliance unit.

The Impact of HRM

Based on Chapter 24 of Human Resource Management in a Business Context (2nd Edition) by Alan Price - published by Thomson Learning

Is there any evidence that the implementation of HRM has a significant effect on national or organizational economic performance? After all, this is the justification implicit in HRM models for valuing the human resource above all others. When the first edition of this book was written (mid-1990s) the conclusion was that we simply did not know. The following were given as possible explanations:

Insufficient research. Not because of lack of effort but due to the absence of clear, agreed frameworks within which to conduct comparative research. The root cause of this was perceived as HRM's own ambiguity. How were we to look for evidence of HRM and its effects if we had no agreement on what HRM was?

Intangibility. If people are an 'intangible resource' we have an insurmountable problem - by definition intangibles are unmeasurable!

Since then, progress has been made in conceptualizing the problem and measuring results (...). For example, Huang (2000) looked at 315 firms in Taiwan and related their human resource practices to their organizational performance. Huang's study shows a significant relationship between performance and the effectiveness of their HR functions, including planning, staffing, appraisal, compensation, and training and development. Michie and Sheehan-Quinn (2001) surveyed over 200 manufacturing firms in the UK to investigate the relationship between corporate performance and the use of flexible work practices, human resource systems and industrial relations.

They found that 'low-road' practices - including short-term contracts, lack of employer commitment to job security, low levels of training and unsophisticated human resource practices - were negatively correlated with corporate performance. In contrast, they established a positive correlation between good corporate performance and 'high-road' work practices - 'high commitment' organizations or 'transformed' workplaces.

They also found that HR practices are more likely to make a contribution to competitive success when introduced as a comprehensive package, or 'bundle' of practices.


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