The book “Outsourcing human resources functions: how, why, when and when not to hire human resources services” defines HR outsourcing such as “having an external service provider providing, on an ongoing basis, the administration of a human resources activity that would normally be carried out internally.”
Even though we’ve known outsourcing for quite some time, HR outsourcing is still in its infancy. HR outsourcing took so long to make its presence felt, because outsourcing people is inherently more complicated than outsourcing tasks or things.
The HRO process is eliminated in 9 steps:
Goal setting – It is important that companies understand the reason behind the need for outsourcing. Many times companies turn to outsourcing because it is the latest buzzword. Don’t fall prey to that. Unless you have a strong requirement for HR outsourcing, don’t spend time and effort on the exercise.
Company layout – Even if the company needs external resources for more up-to-date processes, many companies may not be ready for the change. Especially companies that are experiencing frequent changes and with high employee attrition rates. Stable companies respond better to outsourced processes.
Implications of decisions on key stakeholders – Such a big change in a company will directly affect the main stakeholders, that is, the employees. Assess how outsourcing will affect the jobs and roles of your workforce. Explore whether the supplier absorbs labor from your company.
Analyze the benefits (tangible and intangible) – Outsourcing works for many reasons. It’s cost-effective, more efficient, and helps introduce best practices in a support role. Understand which of these is true for your business. If you don’t see any substantial benefits, it may not be the time to outsource.
Select providers – Market research for shortlisting service providers is an important step and should not be compromised. Don’t believe everything the company representatives say in your sales presentation. Do an honest reference check. After all, it is your staff processes that you are outsourcing.
Negotiation and contracting – After a suitable provider is shortlisted, negotiations on rates, terms and conditions take place. A formal contract is signed between the parties.
Transferring resources – Once a common understanding has been reached, people and material resources are transferred between partners (company and service providers). This requires the company to take it by the hand.
Relationship management – Much depends on the relationship between the provider and the customer. The company must have a single point of contact that acts as support for the service provider. Regular reviews also ensure that better standards of service are maintained.
