HumanResourceManagement

Istheindependentworkforcestrategya viableoption? ImplicationsonHRM

AmeyNKantak RollNo:20 April2007

Istheindependentworkforcestrategyaviableoption? ImplicationsonHRM

Globalization and cost pressures have seen manyfirmstheworldovertryingtoconverttheirfixedcosts into variable amounts by using an independent workforce strategy of outsourcing, offshoring and contracthiring.

Offshoring

Offshoring1 simply means that a firm hires local employees abroad to do jobs previously done by the companys inhouse domesticemployees. HeretheroleoftheHRdepartmentin identifyinghighquality, low cost talent abroad and to provide the necessary background data on things like wage rates, working conditions and productivity becomes pivotal. The HR manager also needs to make sure that there is an effective supervisory and management structure in place to manage the offshore workers. Recruitment, retention, compensation, T&D and appraisal jobs traditionally done by the HR departmenthencewillhavetogrowtocompensatefortheincreaseddistancesinvolvedwithoffshoring.

Outsourcing

Simply put, outsourcing is thecontractingofathirdpartytomanageabusinessprocessmoreeffectively and efficiently than can be done inhouse. The key idea behind this is that organizations can freeup resources involved in support functions2 so as to improve the performance of core functions. The improved performance resulting from this is also expected to outweigh the loss of control associated withoutsourcing.

Outsourcing tends to be a uniquely HRdependent activity as now instead of the HRM domain being restricted to a givencompany,theHRmanagerhavetodealwithahostofcompanieseachhavingtheir own andgenerallyuniquecultureandenvironment.Thusinsuchascenario,theHRMfunctionofpeople management is now becoming that of vendor management and change managementfortheoutsourcing company while the vendors HRM would add client management tothealreadylonglistofHRMtasks namelyrecruitment,traininganddevelopment,retention,

Changemanagement Changemanagementwouldinvolvegeneratingorganizationalreadinesstoreceiveandsustainthechange

associatedwithoutsourcing.Thisinvolves
1. Identifyingappropriateleadershiptooverseeandmangetheoutsourcingeffort 2. Creatingatransitionmanagementplanthatidentifiesactivitiestobetransferredtothevendor 3. Developingaconflictresolutionstructuretotakecareofclientvendorandinternalemployee

conflicts. 4. Havingappropriatematricesandreportingframeworkinplacetomeasureeffectivenessofthe outsourcingarrangement. ShiftfromtransactionalandtraditionalHRMactivitiestotransformational India today has virtually become the back office of the world with a large number of companies outsourcing their noncore functions to India. These noncore functions include transactional3 activities such as benefits administration, record keeping and employee services and traditional activities suchas Recruitment and selection, training, compensation and employee relations. This shift has lead to a companys HRM department looking at the transformational part that is cultural change and strategic redirectionandrenewalevenmorethaninthepast.

FocusonOutput Any SHRM initiative always focuses on directing the individual, behaviors, culture, subsystem and environment blocks towards achieving adesiredoutput(goal,mission,vision).Outsourcingalsofocuses on the output of the process without the additional burden of the remaining five blocks which get outsourcedtotheserviceprovider.

Implicationsonorganizations The impacts of outsourcing are not limited to the economic domain. There are also organizational implications, such as loss of control over how an outsourced activity is carried out or a service is delivered. The organization may become dependent on the external service provider and thereby lose strategicflexibilitywhichinturnmayharmitslongtermgoals.

Another major area which is hit is the organizations culture. Partial4 outsourcing will result in the employees retained within the firm having fewer opportunities to gain broad experience and have less careerchances(Greeretal.,1999)5.Thismeansthatmotivation levelswouldreduce.ThusHRMwould havetobepresenttoreduceattrition.

BPOtoKPO6 Knowledge process outsourcing (KPO) even though currently in its nascent stage is thepaththatmost experts predict the Indian BPO industry will move in the future. This will result in highly specialized knowledge based organizations specializing in one or more fieldssuchasfinance,training,etc.Thusthe organization will move from a cost center to a profit center with each individual KPO employee contributingtowardsrevenuegenerationgivingtheindividualaclearsenseofthevaluetheyprovide.

TechnologyandHR Technology and the internet have enabled the outsourcing of HR activities such as pay slip generation, retirement planning, etc. This is only possible because specialist service providers can now have real time, internet based access to their employers database. Technology also brings with it the demonsof hacking, cracking andleakageofinformationashasbeenseenviavarious scandalsintheBPOindustry. Thismeansthatthecompanyscultureandsubsystemwillhavetobetailoredtomeetthesechallenges.

Virtualteam Outsourcing also means that the lead time for training and development of newemployeesisextremely low as the service provider already has trained professionals and support infrastructure in place. Thus virtual teams7 canbeeasilysetup whoselifespanisaslongasthecontractexistsbetweentheoutsourcer andtheBPO.Thisinturnwouldmeanaculturaldisconnectwouldexistthemindsoftheworkers.

Contracthiring

As the environment becomes more competitive for a company, the resulting cost pressures normally lead to an increased tendency of the firm to hire and fire workers as per the market demand. This justintimecontracthiringpolicyhasmanyproblemsassociatedwithit.

Lossofsecurity8 Amajorproblemisthelossofsecuritywhicha companyofferstoitsworkersintheformofhealth,legal rights and retirement benefits. Independent workers facelowerearnings,fewerbenefitsandlegalrights, truncatedcareerpaths,anddimmerprospectsforretirementincomesecurity. Training A company is lesslikelytosend/imparttrainingatitsowncostto temporaryworkers.Thustheywillnot receive expensivetrainingwhichisneededbythemtokeepabreastoftechnologicaldevelopmentssoas to enable them to secure good jobs in the future. Instead they would have to spend from their own pockets to gain access to newer training and skill development. Thus HRM training function may shift fromthecompanytotheindependentworkforce.

Training becomes even more relevant when newer technologies get introduced within the company. Sincetheindependentworkercansimplybereplacedbyamorecompetentindependentworker.

SoWillSHRMcontinueinanindependentworkforceenvironment?

Strategic HRM refers to the overall direction the organization wishes to pursue in order to achieve its goals through people. A companys intellectual capital such as experience andtechnicalknowhowisa major source of its competitive advantage. It is also the employees of thecompanywhoimplementthe strategicplanofthecompany.

Thus it can be argued that if people get outsourced there iseverychancethatstrategicHRMmayitself get outsourced out of the company. However the points explained above clearly show that despite

people moving out of the organization, HRM will continue toremainanintegralpartofanorganizations structure.

1GaryDessler,Humanresourcemanagement,10thedition,PrenticeHall,2006 2Hiringanoutsourceserviceprovidertomanagelowlevel,noncoreoperationscutsoffaconsiderable sumfromthebudgetallocatedforinhouserecruitment,hiringandtrainingofmanpower 3Noeetal,HumanResourceManagement:Gainingacompetitiveadvantage,Chap016.ppt 4Certainactivitiesareretainedwithintheorganizationwhileothersareoutsourced 5RachelAnderson,Outsourcingdisruptionanddemotivation,oranenergizedworkforce?,

<www.alsbridge.com> 6PeterBamfield,Outsourcingnow'sthetime,Dec1999,<www.rsc.org>

7RobAalders,IToutsourcing:makingITwork,2002,<www.fujitsu.com.au> 8SusanN.Houseman,ThePolicyImplicationsofNonstandardWorkArrangements,1999,
<http://www.upjohninstitute.org/publications/newsletter/snh_f99.pdf>