You are on page 1of 50

Analysis of

Human Resource Outsourcing


On HR profession as perceived by
professionals
(Submitted in partial fulfillment of the requirements for
Masters in Human Resource Management)
(MHRM)

(2011-2013)

SUBMITTED BY:
PRERNA SINHA
ROLL NO-107/MHR/111025
Indian Institute of Social
Welfare & Business
Management
Index
SL Content Page No
No
1 Student Declaration 03
2 Acknowledgement 05
3 Abstract 06
4 Introduction 07
5 Literature review 14
6 Objective of the study 26
7 Research Methodology 27
10 Data Analysis 28

11 Key findings 40

12 Conclusion 41

13 Scope and limitations 42

14 Annexure 43
15 Bibliography And References 50

2
STUDENT DECLARATION

I, Ms. Prerna Sinha, studying in the Second Year of Masters in Human


Resource Management at Indian Institute of social welfare and business
management, Kolkata, hereby declare that I have completed my dissertation
report entitled Analysis of HR Outsourcing on HR profession as perceived by
professionals as a part of course requirements for MHRM Programme.

I, further declare that the information presented in this project is true and
original to the best of my knowledge.

DATE:

PLACE:

(Signature of the Student)

3
CERTIFICATION BY GUIDE

This is certify that Prerna Sinha student of MHRM (2011-2013) has done the
dissertation entitled Analysis of HR Outsourcing on HR profession as
perceived by professionals under my supervision in partial fulfillment of the
award of Masters in Human Resource Management from Indian Institute of
Social Welfare and Business Management, Kolkata. This is the result of
original and independent HR job done by her.

This report has not been submitted to any other university for the award of
any degree or diploma.

Signature

Dr. KumKum Mukherjee

Professor MHRM,

(Indian Institute of Social Welfare and Business Management)

4
ACKNOWLEDGEMENT

The dissertation was done in partial fulfillment of the requirements for the
degree of MHRM.

The three things which go on to make a successful endeavor are dedication,


hard work and correct guidance. Able and timely guidance not only helps in
making an effort fruitful, but also transforms the whole process of learning
into an learning and enjoyable experience.

I would like to express my profuse thanks to my project guide Dr.KumKum


Mukherjee presently Professor of MHRM, who has rendered expert guidance
and assistance in the successful completion of my dissertation and also to
the Executives from the HR Fraternity who invested their precious time
in filling the questionnaire for this study and making my project worthwhile.

At the end, it is a pleasant task to express my thanks to all those who


contributed in many ways to the success of this study and made it an
unforgettable experience for me. Thank you everyone.

5
ABSTRACT
There have been many issues surrounding outsourcing of Human Resource.
Its implications are wide and varied. Though there are many benefits, it is
faced with challenges as well. Companies who have managed their
challenges well have been successful. Others on the other hand have
redrawn from the process. The topic was chosen because is an issue being
discussed currently all over the globe.

In todays uncertain business climate, executives and organizations need to


be financially stronger, more adaptable, and more efficient to respond to
shifting market conditions. In other words, they need to maximize cash flow,
maximize productivity and standardize compliance.
Here we have focused the study on finding out how outsourcing can help us
achieve these goals and what is the likely future of HR outsourcing.

This report is prepared by the help of various HR professionals through the


means of a questionnaire prepared for the purpose of measuring the impact
of HR Outsourcing on the HR profession. Further, this questionnaire was sent
to various executives via internet on various HR forums and Social Media
Websites. The responses collected were then compiled into data charts to
present the study in a measurable form.

6
INTRODUCTION
Outsourcing can be defined as the transferring of internal business function
or group of related activities and assets, to an external supplier or service
provider who is prepared to offer a defined service for a specific period of
time and at an agreed price.

There are three levels of outsourcing.

1. Outsourcing
2. Human Resources (HR) Outsourcing
3. Human Resources Off shoring

HR outsourcing (also known as HRO) is the process of sub-contracting


human resources functions to an external supplier.

Human Resource outsourcing is considered an important factor in todays


business world. It is constantly growing, especially in the global world where
companies outsource not just within their country but across borders.

The term Human Resource was once seen in companies operations as a


department that issued policies, heard grievances and problems of it staff.
As time went on, it then included various aspects of training that benefits
administration and staffing. The focus however is gradually changing again,
now as a strategic consultant to the main business, trying to match
personnel and their skills with the corporate goals of the company with the
view of achieving competitive advantage. Human Resource outsourcing is
becoming popular due to the perceived numerous benefits with emphasis on
cost effectiveness and adding value to the organization.
The rationale for outsourcing is simple and compelling in that contracting
part of the operation is seen to be cheaper than the company doing all by
itself.
Reviews of business processes have led many organizations to decide that it
makes business sense to sub-contract some or all non-core activities to
specialist providers.
HR, as a non-profit centre, is an obvious candidate for outsourcing.

The most common HR functions that are outsourced include:

Payroll
Background checks

7
Employee assistance programs (EAP)
Flexible spending account (FSA) administration
Consolidated Omnibus Budget Reconciliation Act (COBRA)
administration
Healthcare benefits administration
Pension benefits administration
Temporary staffing
Retirement benefits administration
Software services
Recruiting, staffing, and search
Employee relocation
Training and development
Incentives
HRIS/Web-based services
Reference checks

There are many ways in which outsourcing human resources can be


done:
Business process HR outsourcing (also known as BPO), where an external
supplier manages discrete HR activities, such as payroll administration or
recruitment, or perhaps the whole human resources function.
Shared service HR outsourcing, where only the transaction or
administrative elements of HRs activities are subcontracted to an external
supplier. This may include the personal interface with employees.
Application (and facilities) service HR outsourcing, where external
providers look after the technological (and physical) infrastructure to
support human resources activities.

HR functions may be partially outsourced or completely outsourced. The


distinction between the two is that in the former, the organization retains
some control over the outsourced functions and may share access to
information with the vendor. In the latter, the organization relies upon the
vendor to carry out the entire functionthus; the HR departments role with
regard to the outsourced function is minimal and may be limited only to
managing the relationship with the vendor.

The issues that are driving companies to outsource their HR


function :

1. There are more important business matters on which to focus


resources: research by Personnel Today indicated that HR staff
spends up to 85% of their time on managing standard administrative
processes and only 15% on strategic activities. In best practices

8
companies these percentages would typically be reversed.

2. The need to reduce the cost of HR function: the increasing pressure


from global competitive forces, the tightening economic environment,
collapsing stock market etc. Has made the pressure acute on most
large companies and functional leaders to reduce their operational
costs. To retain credibility with line managers and executives, the HR
leadership team need a rigorous cost reduction opportunities.

3. The need to increase service efficiency : a very common driver behind


outsourcing is the need to respond to changes In internal customer
expectations

4. Advances in Technology: the developments in internet and intranet


technologies over the last few years have dramatically changed the
options for delivering HR services. Hr outsourcers are now able to
provide access to these proven technologies at a price that is highly
attractive to many potential customers.

5. Greater acceptance of the concept of Outsourcing: increasingly


many organizations have experience of one or more major process
that has been more or less outsourced. The comfort of positive
experience has made it more acceptable for companies to consider
extending the concept outside of the more traditional outsourcing
targets.

6. Emergence of a credible supplier base: various outsourcing


companies have been so much active in the HR outsourcing area and
have won clients in past few years. This arrival of a credible supplier
base has been a significant factor in pushing outsourcing onto the
HR agenda.

Advantages of Human Resource outsourcing


The main advantages of the Human Resource outsourcing are listed as:
1. Focus on Core Activities
In rapid growth periods, the back-office operations of a company will expand
also. This expansion may start to consume resources (human and financial)
at the expense of the core activities that have made your company
successful. Outsourcing those activities will allow refocusing on those
business activities that are important without sacrificing quality or service in
the back-office.

9
2. Cost And Efficiency Savings
Back-office functions that are complicated in nature, but the size of your
company is preventing you from performing it at a consistent and
reasonable cost, is another advantage of outsourcing.

3. Reduced Overhead
Overhead costs of performing a particular back-office function are extremely
high. Consider outsourcing those functions which can be moved easily.

4. Operational Control
Operations whose costs are running out of control must be considered for
outsourcing. Departments that may have evolved over time into
uncontrolled and poorly managed areas are prime motivators for
outsourcing. In addition, an outsourcing company can bring better
management skills to your company than what would otherwise be available.

5. Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands
to bring in additional resources when you need them and release them
when you're done.

6. Continuity & Risk Management


Periods of high employee turnover will add uncertainty and inconsistency to
the operations. Outsourcing will provided a level of continuity to the
company while reducing the risk that a substandard level of operation would
bring to the company

7. Develop Internal Staff


Large project needs to be undertaken that requires skills that your staff does
not possess. On-site outsourcing of the project will bring people with the
skills you need into your company. Your people can work alongside of them
to acquire the new skill set.

Disadvantages of Human Resource outsourcing


Main problems associated with Human Resource outsourcing are:

1. Loss of Managerial Control


Whether you sign a contract to have another company perform the function
of an entire department or single task, you are turning the management and
control of that function over to another company. True, you will have a
contract, but the managerial control will belong to another company. Your
outsourcing company will not be driven by the same standards and mission

10
that drives your company. They will be driven to make a profit from the
services that they are providing to you and other businesses like yours.

2. Hidden Costs
You will sign a contract with the outsourcing company that will cover the
details of the service that they will be providing. Anything not covered in the
contract will be the basis for you to pay additional charges. Additionally, you
will experience legal fees to retain a lawyer to review the contacts you will
sign. Remember, this is the outsourcing company's business. They have
done this before and they are the ones that write the contract. Therefore,
you will be at a disadvantage when negotiations start.

3. Threat to Security and Confidentiality


The life-blood of any business is the information that keeps it running. If you
have payroll, medical records or any other confidential information that will
be transmitted to the outsourcing company, there is a risk that the
confidentiality may be compromised. Evaluate the outsourcing company
carefully to make sure your data is protected and the contract has a penalty
clause if an incident occurs.

4. Quality Problems
The outsourcing company will be motivated by profit. Since the contract will
fix the price, the only way for them to increase profit will be to decrease
expenses. As long as they meet the conditions of the contract, you will pay.
In addition, you will lose the ability to rapidly respond to changes in the
business environment. The contract will be very specific and you will pay
extra for changes.

5. Tied to the Financial Well-Being of another Company


Since you will be turning over part of the operations of your business to
another company, you will now be tied to the financial well-being of that
company. It wouldn't be the first time that an outsourcing company could go
bankrupt and leave you holding-the-bag.

6. Bad Publicity and Ill-Will


The word "outsourcing" brings to mind different things to different people. If
you live in a community that has an outsourcing company and they employ
your friends and neighbors, outsourcing is good. If your friends and
neighbors lost their jobs because they were shipped across the state, across
the country or across the world, outsourcing will bring bad publicity. If you
outsource part of your operations, morale may suffer in the remaining work
force.

How do companies take the make or buy decision for HR services?

11
There are a number of issues that will influence the decision either
retain transactional and administrative activities in-house or to buy the
services externally. Orion Partners experience and research shows that
the following are the ten factors which are the key determinants to this
decision:

1. How does outsourcing fit with the overall companys strategic


needs?
2. Whether the company has view about what core competencies
must be kept in-house and what safely can be outsourced.
3. Whether the company has a complete view of its internal HR
costs, cost drivers and the Potential Savings that outsourcing
could deliver.
4. Has HR considered internal outsourcing or in sourcing and
explored how setting up an in-house shared service function
might deliver many of the benefits of outsourcing.
5. Have the technological challenges around outsourcing been fully
considered.
6. Does the organization have a clear view about the capabilities
and reputation of each of the outsourcing providers?
7. Has the HR function standardized and simplified its processes
and procedures prior to consider outsourcing.
8. Has the concept of outsourcing been discussed with employees
/stakeholders in the organization?
9. Does the HR function have a view of the key success measures
that will be used to judge the performance of the outsource
provider.
10. The history of the organization in terms of managing
complex transition process.

Critical factors to look for in an HR outsourcing Partner:

Proven Track record


Service flexibility and reliability
Financial stability
Cultural compatibility
Geographic scope and location strategy
Approach to standardization
Process management capability
Readiness to invest in transition management
Strategic sourcing capability
Commitment to investment in technology
Quality of team
Governance

12
Transition Skills

Few Reasons that HR Outsourcing may under-deliver:


Ill-defined scope of services, with no clear mechanism for
measuring service standards
Poor definition of respective roles and responsibilities of client
and outsourcer.
Over selling and under-delivery by the outsourcer, without
proper management by the client.
Lack of attention paid to joint tracking and realization of
benefits.
A failure of the in-house function to relinquish administration,
creating confusion between both parties and frustration.

The likely Future of Outsourcing:

The implications of HR outsourcing are huge: full-back office HR outsourcing will be


projected $60+billion industries worldwide by 2018. Many commentators believe
that HR outsourcing is where IT outsourcing was a decade ago. If this is only
partially correct then over the next decade the global market for full HR outsourcing
services could quadruple.HR BPO players are now entering in HR market from non-
HR processing services (Convergys Ltd.)and from IT outsourcing (Accenture ,ACS,
EDS,IBM).A few firms also have won HR BPO contracts such as AON , Fidelity ,
Hewitt , Mellon and Adecco. One very interesting development is however in the
off-shore market.

Outsourcing is however, based on outcomes. The client defines the outcomes and
the vendor supplies the means. Once trust is established, the total team can create
a true partnership to the betterment of all .As more and more Organizations move
to an Outsourced model, choices and Processes will improve and journey will
become easier.

13
LITERATURE REVIEW
The most important and cherished asset of any company is its Human
Resource the staff. Even with all the most current technology, personnel
are first because without manpower, nothing gets done. The success of
every organization depends on the quality of staff employed. On the other
hand it could be disastrous if the right decision is not taken in choosing the
right people with the right skills in the right position. The kind of skills
employed makes a vast difference between a business success and it failure.
In the business environment, some companies may employ solely skilled
personnel, others require both skilled and semi skilled personnel and others
unskilled labor force. In the retail sector for example, the nature of the work
demands both skilled and semi - skilled staff with the semi skilled
dominating. The skilled staffs basically are managers such as the marketing
and advertising managers, accounting managers, purchasing and supplier
managers and general overseers.
The challenge is how to get those people into the right places in order not to
under utilize or over utilize their services. For instance, it might not be
necessary to employ a professional who is to be paid as a sales assistant to
be serving customers, but rather have a responsibility of planning and
strategizing how to win customers and be ahead of its competitors. In order
to make the best decision, the manager would have to take up that task
upon himself or rather consider hiring an expert, who does nothing but
repeatedly seek the best person for the job. Arguments have therefore
developed in support of and against the process of outsourcing.
PART ONE:
Argument against outsourcing:
This debate was published in the Human Resource Management
International Digest in 2005. Gordon Croy, group supplier chain director of
NTL, in his argument believe that outsourcing recruitment is not a sensible
option. For him, there is one thing the recruitment agency lack, that is
having in-depth knowledge and understanding of the business culture and its
subtle modifications as the business managers will consider in its
recruitment selection. What the recruitment agencies focus on is matching
people to job descriptions. He again argued that managers could have gone
through much of the process of recruitment rather than spending that time
to brief a recruitment agency properly and feel confident that they have
grasped the culture to meet their requirement.
Another argument in support of in-house sourcing is the fact that the Human
Resource Manager stands the opportunity of knowing the potentials of the
applicant after going through the applicants Curriculum Vitae. Though the
applicant may not be a good match for the current vacancy, he/she might be
a perfect fit for another field of the business and such an opportunity might
not be skipped. If a recruitment agency is to do this, they might be ignored

14
because they are working towards a specific job description and such a
potentially great employee may be lost.
From time management point of view, Gordon Croy further argued that the
reason for outsourcing as time management does not really hold in todays
world of business because online advertising and electronic mails saves a lot
of time involved with recruitment. Again, initial interview could also be done
on phone and would only have to spend time to meet face-to-face with the
selected few best applicants.
In the view of cost, Croy argues that recruitment companies cannot
guarantee an effective recruitment, yet it will definitely guarantee a sizable
cost. Since the recruitment agencies demand a percentage of fee upfront, as
well as money for advertising, these monies are not refundable and
therefore would not be able to meet the companys requirement. We should
remember that recruitment agencies are also in business to make profit.

Argument in support of outsourcing:


A proponent of outsourcing, Bryan Duggan, head of recruitment at PMMS
counters much of Croys argument. Talking about cost, he is of the opinion
that though outsourcing recruitment seems an expensive option, it may be
cheaper in reality. He calculates that taking into consideration two
managers direct salaries as well as business overheads and revenue missed
because their attention is diverted from their usual practice. He estimated
about 11,000 a day lost for the involvement of those managers who have
shifted away from their prime function.
Aside money though, Duggan argues that the recruitment process is a
strategic function and as such should be handled by professionals. In that
the cost of hiring a wrong person is far more and could be minimized by
using an experienced agency that has access to a lot of candidates and tried
and tested methods of screening them to the best effect. They research into
and have learned skills of psychology, curriculum vitae reviewing, body
language and interviewing. Managers whose specialisms are totally different
should not solely handle that.
In the case of volume recruitment, the agencies with their experience,
established infrastructure and recruitment processes become most useful.
The agency would be in the best position to know how to handle
unexpectedly large numbers of responses, how to standardize applicants and
run the right tool.
Simon Pettit, a business head of Hudson, adds that finding the right person
is not an easy task and is very involving. It means having a deep
understanding of the marketplace and creative ideas about the approach to
use. A lot goes onto advertising such as using the press, online advertising,
leafleting, and posters among others. His tacit point is that the manager will
not have all the time, experience and the creative ideas to go the extra mile
to find the right people. This limits the chance of getting the right people.

15
Outsourcing has been a controversy since, and both sides of the debate
mount convincing arguments. However Nicholas Pratt offers a real business
situation that in a way favors the argument in support of outsourcing. In the
area of Information Technology, employment of financial staff is very difficult
and that has been attributed to the issue of banks mishandling the
recruitment process. In recent times the banks have been noted for hiring
Information Technology staff in masses and at the same time firing staff in
masses as well. As a result, Information Technology specialists have lost
interest in the banking jobs due to lack of job security. Consequently, there
are only few Information Technology specialist left in the system. To this
regard, banks are now turning to the advice of the recruitment agencies to
rectify the situation of hiring reactively and not strategically. The problem
however has damaged a whole sector rather than just a company or one
position within it. Apparently the cost and time involved to clearing the
damage will far outweigh those involved in paying a recruitment agency
from the onset
PART TWO:
The literature has been categorized into three sections.
The reasons for Outsourcing
The benefits of Outsourcing and
The issue of control.
Traditionally Human Resource activities were performed in-house but now on
an increase, being outsourced. This is because it has proven to reduce cost
and provide economies of scale, gaining access to expertise, among others.
In other instances, as any other discipline, outsourcing among its benefits
also stands its limitation of inefficiency because of suppliers lack of firm-
specific knowledge and engages in opportunistic behavior (Ulrich 1996).

a) REASONS FOR OUTSOURCING:

Gaining Competitive advantage: Human Resource outsourcing is a


managerial decision, to support managers decisions as to outsource Human
Resource activities or not, Adler (2003) has classified some major factors to
assist organizations in deciding which Human Resource process to outsource.
These factors are dependency risks, spillover risks, trust, relative
proficiency, strategic capabilities and flexibility. These factors were the base
considerations for BP outsourcing deal with Exult Inc. in December, 1999.
The impact of this deal was though a success. Achieving competitive
advantage was a paramount reason for this decision of outsourcing.

Other Authors, (Becker et al 1998) undertook a research to emphasize the


fact that Human Resource system can provide competitive advantage to

16
organization, in that with the supply of more expertise probably from a
different environment with different skills and the know-how can turn the
whole organization around, hence achieving a competitive advantage over it
competitors. Managers therefore with this notion of gaining new experience
may decide to sort elsewhere. More research has proven the fact that
Human Resource is a collective system of activities and has a direct
correlation with firms performance.

(Switser 1997) explains that Human Resource outsourcing represent a


strategic tool for gaining competitive advantage. He mentioned that when
Human Resource activities are outsourced, it gives both Human Resource
managers and non Human Resource managers spare time to deal with
strategic business issues. This also provides an alternative argument in
support of Human Resource outsourcing.

Minimizing cost: A second reason of Human Resource outsourcing has


been identified as reducing cost. The activist, ( Roberts, 2001) campaigned
for outsourcing as substantially lowering costs and risk, while greatly
expanding organizational flexibility, innovative capabilities, and opportunities
for creating value-added stakeholder returns. Obviously the target of
cutting down cost of production is a primary reason why many companies
consider the option of outsourcing. In the United States (US) for example,
saving in the cost of labor was a major incentive why many companies tend
to outsource. For instance, these facts were given in United State
outsourcing article by Vietor and Veytsman (2007). Financial analyst in the
US earns about $35 per hour; it costs only about $10 per hour for the same
position for a person in India. Similarly, employees in China and Mexico were
willing to work $1-$2.50 per hour as compared to $11-$20 per hour in the
US. In effect it is convincing enough for a company to outsource rather than
provide in-house. However, these reasons are not without challenges. Some
of the challenges have been identified as quality of HR services from
suppliers, insufficient employee preparation towards the jobs, and lack of
proficiency to manage HR outsourcing.

Reduces workload of staff:

According to (Klass, 2003) one vital rationale for Human Resource


outsourcing has been reducing workload on regular staff. Outsourcing
actually takes off some of the heavy schedules on managers and other staff
involved with the processes of recruitment. Reducing work overload creates

17
more time and increase flexibility on managers to manage the business
effectively. There is less distraction and more concentration on planning,
operating and growing the business. It also allows managers to focus on
best practice- what they are good at doing best. Staff recruitment is a
tedious job and very involving. It is not just about getting the employee to
the field but also concerns staff training, logistics and equipping the staff
with all the necessary tools needed to do the work effectively. When the
company decides to outsource all of its Human Resource, these would be
taken care of by the supplier leaving the outsourcer with little or no
workload.

Strategic move: To some organizations, HR outsourcing is a strategic


move. The vision is to reduce cost, achieve workforce flexibility, access HR
expertise and focus managerial resource and keep up with changing
workforce regulations. (Klaas et al, 1998).

Every organization has its goals and objectives to achieve so as to be


successful to remain in business. For the organization to be successful, it
should be strong enough to cope with its competitors. However this could
only be achieved through a well-developed strategic process. Strategy in
simple terms is the critical plans and decisions taken by an organization in
achieving its targets in business. However if to the organization, the Human
Resource management such as payroll, logistics and recruitment is not of
strategic relevance, could ignore outsourcing.

DiRomualdo and Gurbaxani (1998) have identified three strategic intents by


businesses. They argue that firms outsource so as to achieve anyone or
more of these three. They are strategic improvement (cost reduction and
enhancement of efficiency), strategic business impact (improving
contribution to companies performance within existing lives of business) and
finally strategic commercial exploitation (focus on leveraging technology-
related assets).

The strategic literature has basically point out the cost effectiveness as
primary reason for outsourcing but has now shifted to other reasons of
strategic re-positioning, greater service integration, higher value creation
and core competence enhancement

(Quinn 1999)

18
Some researches further argue in support of strategic outsourcing.
Outsourcing decision is taken to improve incentives within a firm. That is,
the intensity of managerial incentive is a primary motivator since managerial
efforts are focused on core competence

According to (Bates, 2002) Human Resource outsourcing continues to grow


at a very rapidly pace. He estimated the growth is expected to rise to $100
billion per year. Professional Employer Organizations offer several Human
Resource services amongst them are benefit administration, 401k
administration and insurance administration. Professional Employer
Organizations are growing about 30% per year (Hirschman 2000) and is
estimated to continue to grow at this pace between 2005 and 2010.

(Ratnam, 2001) describes the strategic aspect of Human Resource sourcing.


His argument is that Human Resource outsourcing is a key value
differentiator. Perhaps heavy investments as coupled with the issues of
todays dynamic market situation, which means outsourcing which is
directed towards strategic supplier partnerships is a key value differentiator.

As the business environment conditions in recent times, he asserts that


companies should have flexibility in order to meet it current and future
opportunities. This behavior provides the ability to manage and cope with
the changing market situations in order to remain competitive.

Achieving core competency:

Another strong case for Human Resource outsourcing has been made by
Armstrong (2003). He claims that there has been a drastic shift from the
view of Human Resource services as a major responsibility of the
organization, to the stance that it can be contracted to an external body; the
excuse for resorting to this exercise is prove it cannot be
subcontracted.

As stated by the institute of personnel development 1999, (cited in


Armstrong, 2003), One major cause in support to increase in outsourcing
remains the concept of the organization which concentrate in-house
expertise on it primary activities and outsource any necessary support from
range of suppliers.

19
The point is that Human Resource managers can play more strategic roles
by contributing to strategizing the companys future direction rather than
spending time on staff payroll or checking on absence records.

Alternative opinion in support of this argument in (Pollit, 2004), discuss a


cable and wireless manager, who expressed that after the companys Human
Resource entry-level services were outsourced; management then had
enough time and focused more on strategic issues such as change
management skills, internal-consulting skills and project management skills.
This improvement was believed to be influential, enjoying easy entry to
senior people, organizing programs and representing senior management in
transforming the whole company. He believed that the three functions are
very necessary in enhancing the skill capability of Human Resource.

Technology advancement:

The recent trend of technology also contributes to the issue of outsourcing.


It creates room for the provision and purchase of outsourcing services.
Modern use of technological gargets calls for demand and hence supply of
labor to operate them. Most of these equipments require specialized skills
and experts to take charge. So therefore organizations in such need would
resort to outsource.

In respect to (Mintzberg et al 1995), the overall basis for any outsourcing


activity as cited in Allen Colins article on Human Resource outsourcing is
that, outsourcing provides.

Greater economies of scale

Cost effective

Levels of expertise

Flexibility

Reduces cost and improves valued-added

b) BENEFITS:

The benefits of Human Resource outsourcing are influenced by the


organizational characteristics. Research shows that small and medium
enterprises (SMEs) benefit more from outsourcing as compared to large-
scale organizations. This is because it supports the small and medium

20
enterprise in breaking even in enjoying economies of scale whilst the large-
scale organizations have enjoyed already. Outsourcing predominately
increase assets and reduce cost in the immediate financial period. There has
been a significant savings on operational and capital costs by organizations
engaged in outsourcing parts of their in-house operations ( Rimmer, 1991).

Laugen et al (2005) in their research found a correlation between


outsourcing best practice and high performing companies. This is clearly
explained by the Transaction Cost Economics (TCE ) the underpinning for
make or buy decisions

In TCE the decision as to either to buy or produce in-house are determined


by the most cost-effective option. Here the organization weighs the cost and
benefit to determine which process of Human Resource outsourcing will cost
them the least should they outsource. To this regard, Marshall (2001)
identified differing natures of the outsourcing management processes
associated with high, medium and low asset specificity.

Assessment is carried out by the organization analyzing the cost of internal


operation as compared to sourcing from a supplier. Based on that,
management decision is taken as to outsource or not to outsource. (Freytag
and Kirk, 2003; Momme and Hvolby, 2002; Canez et al., 2000) have
developed frameworks to this effect, others are (Baines et al., 2005)
strategic positioning process for make versus buy decision-making and
outsource supplier selection. (Klaas et al 1999) also used the TCE to develop
hypothesis about organizational-level factors that are likely to affect whether
reliance on Human Resource outsourcing will produce benefits for the
organization. I.e. idiosyncratic Human Resource practices, uncertainty, pay
level, firm size, overall outsourcing emphasis, cost pressures, Human
Resource strategic involvement to develop seven hypotheses.

Outsourcing looks beyond just short-term cost savings, another motivating


factor is the organizations ability to focus on it core activities (Arnold,
2000). Focusing on core activities comes with a varying degree of
organizational benefits and also improves performance. To this effect,
productivity increases as well. (Nohria et al, 2003) find out that a company
needs to increase it productivity by twice its average in order to be a leading
competitor. Other researches also focus on explaining the relationship
between productivity growth and outsourcing. (Abraham et al, 1996) also in
their research found out firms contract out services with the aim of

21
smoothing production cycles and benefiting from specialization. (Raa et al,
2001) also found a positive association between the rate of outsourcing and
productivity growth in their study.

Access to advance technology:

Another important suggestion about this theory is the fact that outsourcing
have also proven organizations have an advantage of exploiting more
advanced technologies from the suppliers as the supplies are significantly
more advanced and use the most effective technologies. Another fact is that
as suppliers continue doing their work over and over again, they become
more experienced and easily discover the most effective operations. Even
though other outcomes are less obvious, it has been claimed by Kerr and
Radford (1994) that the outsourcing process in a way has helped to
undermine the power of trade unions dominating the United Kingdom
workforce in public sectors.
Profitability:

Normally when business is booming, what happens is that business owners


think of expanding their businesses, but at the same time control cost of
production. When done properly it yields the best of results in profit rise.
Some areas where firms can achieve profit maximization are staffing.
Employers have the flexibility of contractors supplying those staff only for as
long as they need it, helping to cut down cost. The second area is
capabilities. In terms of capabilities, outsourcing allows even smallest firms
to employ experts such as marketing expert, researchers and other
specialist but not necessarily to own the person. Firms rather rent their
skills without adding to their payroll. This helps to achieve its target but at a
minimum cost hence increasing profit margin. The third area to increase
profit margin is services. Sometimes some services may be cheaper or
easier to be handled outside. Such is human resources, which mostly is
outsourced. Other functions such as recruiting and payroll management is
easier handled outside.

Cost effectiveness:
Subsequently, Greaver (1999) classified an improvement in credibility and
organizational status as potential benefit of associating with famous
providers.

22
Other recognized benefits though difficult to measure, indicate that
outsourcing enhances organizational credibility greater workforce flexibility
and preventing being locked into specific assets and technologies.
The Boston consulting Group (1991) researched on over 100 key companies
that engages in an extensive outsourcing practice and found out most
western companies outsource mainly to save on overhead or induce short-
term cost savings.
Subsequent theory revealed, until the 90s, one of the major drivers for
outsourcing was its cost effectiveness. This is because, in a real economic
world, a common goal for many if not all businesses are on cost savings and
profit maximization. Every business is in for profit by cutting down cost,
choosing the cheapest cost of production which outsourcing is to solve.
Others are of the opinion that the growths in indirect overhead costs, which
represent non core competencies, are commonly being outsourced.
(Lewis et al, 1991) have also discovered another interesting issue; their
point is that the outsourcing is a trade-off between lower production cost,
i.e. if the supplier possesses lower cost technology and higher monitoring
costs.

Maximization of efficiency:
(Domberger, 1998) also gives another important suggestion about this
theory, in order to increase efficiency of organizations core value,
organizations tend to specialize in such fields and outsource their non core
values. An example is Unilever, the Anglo-Dutch group, with a portfolio of
1,600 food, toiletries and household products. September 1999 announced
that in order to enhance sales growth and profitability, it would focus on a
smaller number of power brands (core products) who have worldwide
reach, thereby reducing costs and exploiting new channels of distribution,
such as the internet as cited in journal of management development, vol.
19, No 8.

Flexibility:
Flexibility could be analyzed in terms of increase in demand and change in
demand. Organizations should have the capability of meeting customers
demand and also being able to satisfy customers preferences at any time.
Outsourcing enables organizations avoiding these two constraints. It
presents the opportunity for meeting changes in volume of production as
well as seasonal changes in response to market conditions of customers
demands. A situation of the fashion apparel retailing, where companies
respond rapidly to industries short life cycles and the quick changes in
fashion. This enables the company to achieve delivery of goods to its stores
within the shortest possible time of design conception.
(Carney, 1997) has identified the five Cs of Human Resource outsourcing
and its benefits. These are:

23
COST: reduces service cost, internal fixed costs to a variable, which is more
transparent and easier to manage.
COMPETENCY: greater focus on core business and core competency
requirements.
CHANGE: a vehicle for rapid implementation of change, in terms of
technology, organization and culture.
CURE: a way to fix difficult problems or deficiencies in service levels.
CASH: improvement in balance sheet and cash flow eg transferred assets
exchange for lump sum payment though rare in Human Resource
outsourcing
c) CONTROL OVER THE PROCESS:
Despite all the arguments in support of outsourcing, which seems to be
winning, what still puts many companies off is the thought of not having
control over the process of recruitment. What make managers hesitant in
this circumstance are the facts that, taking someone on, especially in team
works without having any form of interaction to know the kind of personality
they will be dealing with. Knowing that, personal chemistry is as important
in team situations as having the right skills on paper. (Lawler et al, 2003)
findings in their study of 100 companies revealed the most common
problems of Human Resource outsourcing. One meager services end up
being more expensive than promised, contractors lack of information about
the client and unanticipated resources refined to enhance the relationship.
Suppliers should not take for granted the fact that one successful
outsourcing should work for all. It should be noted that the various firms
operates differently with varying needs and may absolutely have nothing in
common, hence may require different procedures from their suppliers. It
should be best for the suppliers to assess carefully their clients individual
operations and treat them as such. Outsourcers are liable for suppliers
actions though the outsourcers have little or no control whatsoever.
Others are compliance violations, contractors not being able to meet the
task as expected, loss of positive repute, loss of internal expertise and
technical skills.
(Roberts, 2001) explains some risks of outsourcing as organizations are
afraid of losing some control over the delivery of, outsourced services and
finding themselves overly dependent on the supplier or liable for the
suppliers action. Outsourcing sensitive information, particularly confidential
information, somehow cannot be avoided since it might form part of the
client companys briefing to the supplier. Moreover supplier has inherent
liability if information security is breached.
(Shelgren, 2001) in his recent survey, showed that 90% of companies with
50000 or more employees outsourced some part of their Human Resource

24
activities. In this way, some sensitive confidential information could be kept
away from the supplier.
Furthermore one important issue organizations turn to consider one way or
the other is the people who matter most, that is, the customers. Many
customers value the personal touch and the kind of treatment offered them.
When this factor is missing, customers end up getting upset. If the
outsourcing processes affect customers directly, then it becomes a problem
in that it would be difficult for organizations to have a say since the function
has been transferred elsewhere, and cannot directly and immediately be
controlled.

RISK AND CONCERNS


Despite all these benefits of outsourcing, it has been found also that some
organizations do not realize the expected benefits from outsourcing. The
nature of certain task and its risk level is the very reason a firm might
outsource. Such task may be expensive, complex to operate, low efficient
and difficult. However if the outsourcing process is not carefully handled and
thoroughly assessed, can result in severe financial loss causing decreased in
shareholders value, damaged company reputations, dismissal of staff
especially senior management and the worse of all collapse of the business
itself. A report quoted in (Londsale, 1999) and (Mclvor, 2000) mentioned
that only 5% of companies surveyed realised their expected benefits from
outsourcing. Reasons given are highlighted; companies focusing on
achieving benefits in the short-terms, lack of formal outsource decision-
making processes, such as medium and long-term cost-benefit analyses,
increased complexity in the total supply network.
(Beaumont et al, 2004) found out in a survey of outsourcing in Australia, its
a problem formulating and quantifying requirements. Another concerns is
the fact that public sector is losing jobs to the private sector.
(Hays et al, 2000) studied the effect of information systems outsourcing
announcement on the market value of contract granting firms. Empirical
evidence was provided from the capital market that outsourcing is
considered to be a value- added business exchange for outsourcing firms.

25
OBJECTIVE OF THE STUDY

This Dissertation examines how companies are dealing with HR outsourcing,


explores the views of HR professionals toward outsourcing and determines its
impact on the profession in general. The outsourcing of one or more HR
functions is the main focus of this report not the outsourcing of the entire HR
function or department within an organization. Whether, organizations plan
to outsource more HR function in future. Other areas discussed are reasons
organizations elect to outsource, the types of HR functions outsourced, as
well as the rationale behind an organizations decision not to outsource.

The ultimate aim of this research is outlined below:

The key issues driving companies to outsource their HR functions.


To find out why companies outsource their Human Resource their
first and foremost reasons.
To find out what are the primary functions which the companies
outsource
To find out what benefits there are in this process.
The critical factors to look for in an HR outsourcing partner.
The reasons Organizations restrain themselves form Outsourcing
Activities.
Do the size of organization and their start up level also affect the
decisions of Outsourcing?
The likely future of outsourcing in the next few years.

26
RESEARCH METHODOLOGY
Data collection

Primary as well as secondary data collection tools have been used for the research
study.

The nature of this study is a Descriptive Research.

Random Sampling with a total size of 37 respondents which included various HR


professional

Source of data:

Primary data: This consists of original information gathered through


people and is thus firsthand information. The normal procedure is by
interacting with the people directly or indirectly individually or in a group,
to get the required data.

Data was collected through:

Questionnaire: For primary data, questionnaire has been prepared based on


the different parameters. Close ended questions are prepared which were 17
in number. The survey was done by sending the questionnaire various hr
professionals through the means of various social networking website .i.e.
www.linkedin.com and www.facebook.com the questionnaire was posted on
HR forums and HR groups on these websites

In the questionnaire respondents were questioned on various aspects related


to HR Outsourcing in their organization. There were some important
parameters on which questions were framed which were helpful to know the
ways through which outsourcing is done , constraints , benefits attained etc.
. From there responses were collected and compiled in a general form.

Secondary Data
This consists of the information that already exists somewhere. Sources for
secondary data are:
E-books
Internet: Google, rtindia.org
Text books

27
DATA ANALYSIS

1. Does your organization currently outsource one or more of its HR


functions?

48%
36%
16%

CURRENTLY OUTSOURCE DO NOT OUTSOURCE PLANS TO OUTSOURCE IN


NEXT THREE YEARS

Figure 1 : depicts the percentage of organizations that currently outsource one or


more of their HR functions While 58% of the organizations currently outsource HR
functions, another 38% reported not outsourcing and having no plans to
outsource. Another 4% of HR professionals indicated that their organizations have
plans to outsource at least one or more HR function within the next three year

28
2. Which HR function(s) does your organization partially or completely
outsource? (Check all that apply)

Policy development Background/crimin Compensation


and/or al background and/or incentive
implementation checks plans
Retirement
8% 4% administration
benefits
9%
administration
7%

Recruitment/staffin Executive
g of executives only development
9% and coaching
10%

Recruitment/staffin
Human Resource g of employees
Information (nonexecutives)
Systems (HRIS) Payroll 13%
development administration
6% 12%
Training and
development
programs
12%
Pension benefits
administration
10%

Figure 2: The above percentages predict the percentage rate for outsourcing the most
common HR functions by the organizations. As it can be seen that the most widely
outsourced functions are Recruitment/ Staffing of Non-executives, training and
development, Payroll administration and pension benefits administration.

Note: in the above question the graph shows the percentages as a ratio out of a total of
100%. However, as it was a multiple choice question with the options of checking one or
more functions for any organization. Whereas while totaling the sum of each functions it
was seen that the percentages vary predicting the actual percentages of the functions as:

Background/criminal background checks 14%


Compensation and/or incentive plans administration 27%
Executive development and coaching 32%
Recruitment/staffing of employees (nonexecutives) 41%
Training and development programs 39%

29
Pension benefits administration 32%
Payroll administration 36%
Human Resource Information Systems (HRIS) development 18%
Recruitment/staffing of executives only 29%
Retirement benefits administration 21%
Policy development and/or implementation 24%

3. What were your organizations reasons for outsourcing its HR functions?


(Check all that apply.)

Reasons for Outsourcing

To streamline HR functions 30%

To reduce the number of HR staff and related


52%
staff expenses

To offer services the organization could not


12%
otherwise provide

To save money/reduce operating costs 66%

To make up for the lack of in-house


22%
talent/expertise

To make up for a reduction in HR staff 32%

To allow the company to focus on its core


67%
business

To allow HR staff to focus more on strategy 56%

Note: percentages do not total 100% as respondents were asked to indicate multiple selections.

Figure 3 examines the reasons that organizations have decided to outsource. Saving money
and reducing operating costs (66%) and companies focusing on its core business and were the
drivers cited most often. Almost one-half of HR professionals indicated that allowing HR to

30
focus more on strategy were the impetus. Although some sources indicate that outsourcing
does not drastically contain costs, it still seems to be a major factor in the decision to
outsource. With corporate litigation on the rise, companies perhaps believe that outsourcing
serves as a protective factor which is equally as important as the rationale for cost savings. It
may be that as human resource outsourcing becomes even more prevalent in organizations, it
will be justified less as a cost-saving measure and more as a way to improve the overall
functioning of the organization. Also of interest is that 52% of HR professionals stated that
their organizations elected to outsource as a way to reduce the number of HR staff and related
staff expenses

4. What were the obstacles that your organization faced when it decided to
outsource its HR functions?

Obstacles faced in Outsourcing


Fears that outsourcing might impact company culture 33%
Not applicable: did not face any obstacles 2%
Resistance within Senior management 12%
Fears about loss of HR jobs/staff 31%
Resistance within HR 21%
Fears about loss of control 51%
Resistance from employees in general 22%
Did not know how to locate vendors 12%
Lack of qualified vendors 6%
Did not know what to look for in vendors 13%
Lack of prior outsourcing experience in general 13%

Outsourcing can be a very involved and complex process to carry out. There are many factors
to consider from finding a suitable vendor to assessing the impact of change on the
organization as a whole. Figure 4 lists the obstacles faced by organizations when deciding
whether to move forward with outsourcing.

31
5. As a direct result of outsourcing its HR functions, did your organization
achieve cost savings, incur cost increases, or did costs remain about the
same?

Result Of Outsourcing HR Functions

37%
31%
23%

9%

Achieved Cost Incurred Cost Cost Remained Do Not know


Savings Increases about the same

Out of the organizations currently outsourcing HR functions, have any experienced


cost savings as a direct result? The answer to this question is important result? The
answer to this question is important because one of the top reasons cited for
outsourcing was financial 31% of HR professionals reported that their organizations
had achieved cost savings, while 23% had actually incurred cost increases and
another 09% indicated that their costs remained about the same. 37% said that
they do not know the percentage of cost savings to their company.

32
6. What are the main factors to consider when selecting an HR outsourcing
vendor? (Check all that apply.)

Figure6. Depicts the major factors organizations consider in selecting HR outsourcing


vendors. Of the organizations that are currently outsourcing HR functions, 89% indicated that
the vendors proven track record was the most important selection factor, followed by cost of
services (82%). Guaranteed service levels (64%) were reported as important aspects to bear in
mind.

Factors for selecting HR Outsourcing Vendor


Physical location of vendor 14%

Niche in a specific area 38%

Guaranteed service levels 64%

number of employees assigned to each vendor 20%

Cost of vendor services 82%

Size of vendor organization 19%

A proven track record 89%

Recommendations from other companies 41%

7. What have been, if any, the negative outcomes of outsourcing your


organizations HR functions? (Check all that apply.)

Negative Outcomes of HR Outsourcing

Negative impact on employee customer service 25%

Not sure of negative outcomes at this time 32%

Not applicable: there have been no negative out- 20%

A loss of in-house talent/expertise 15%

Unable to achieve cost savings 7%

A decrease in employee morale 6%

33
What are some of the negative outcomes experienced by organizations currently outsourcing
HR functions? Figure 7 illustrates these data. 20% of HR professionals expressed that their
organizations had not experienced unfavorable outcomes as a result of outsourcing. 32%
indicated that they were not sure of any negative outcome.

8. Overall, to what extent has outsourcing HR functions met the expectations of the
organization?

Usefulness of outsourcing

42% 43%

9%
To a large 6% 1%
To some
extent
extent Neither to a To a small
large extent To no
extent
nor to a extent at all
small extent

Fig 8. Depicts the percentage extent to which HR Outsourcing has met the
expectations of the organization. About 42% of them said to a large extent it has
met expectations. 43% answered to some extent, only 9% had a mixed view about
it whereas 6% had said its impact its up to a small extent and only 1% said no
extent all giving a good sign of favorable outcomes.

9. Do you expect that your organizations outsourcing of HR functions will increase,


stay the same or decrease in the next five years?

About 40% has indicated that organizations requirements will increase in the next
five years, 55% said the requirements will not change and only about 5% seemed
to have a notion that it will decrease.

34
10. Has the size of your organizations HR department increased, stayed the same
or decreased overall in the past five years?

Change in Org. Size in past 5 Years


due to HR Outsourcing.

32% 34%
28%

Increased Stayed The same Decreased

These responses indicate that the size of the HR department in organizations have
increased by 32% for some organizations for 28% have stayed the same and about
34% have said it has decrease.

13. Why has your organization chosen NOT to outsource its HR functions? (Check all
that apply

An organization has various reasons on whether or not to outsource Hr functions depending


on several factors, many of which centers around the organizations culture, staff size,
leadership and overall strategic business plan. The major cited reasons wanted to maintain

35
face-to-face contact with employees (61%), followed by preferring to develop expertise in
house (46%). Also of interest is that 30% of respondents indicated a deterrent to
outsourcing was the concern that it would be too expensive.

Reasons Organisations have chosen not to


outsource HR functions.

We wanted to maintain face-to-face contact with our 61%


employees

We encountered resistance within senior 8%


management

We preferred to invest in technology in-house 20%

We encountered resistance within HR 7%

We preferred to develop expertise in-house 46%

We have had a bad experience with outsourcing 3%

We do not want to lose control of our HR functions 15%

We felt that it would be too expensive 30%

We do not have the resources to manage the 18%


outsourcing process

36
Human Resource Outsourcing Survey R
14. What are the benefits of outsourcing HR functions for HR professionals? (Check
all that apply.)

Benefits of outsourcing HR functions


for HR professionals.

It allows HR to be perceived as strategic 45%


business partner.

HR is able to focus on core business 75%


functions

It improves HR metrics/measurement 25%

HR has a better reputation among senior 17%


management

It allows HR to spend more time on 66%


strategy

HR has a better reputation among 11%


employees

Finally coming to the benefits of HR Outsourcing; according to HR professionals we see that


75% of the benefits are in about the fact after outsourcing that it allows HR people to focus
on main business. Then again 66% of them said that allows them to spend more time on
strategy. And about 45% of them said since they are able to focus more on core business
and strategic business so they are perceived as Strategic partners in their organization.

37
15. Which industry best describes your locations main business? (Check only one.)

Industry

Manufacturing (Durable Goods) 6%

Newspaper Publishing/Broadcasting 2%

Wholesale/Retail Trade 7%

Insurance 7%

Utilities 3%

High-tech 3%

Transportation 2%

Health 7%

Telecommunications 2%

Government 6%

Services (Profit) 11%

Finance 7%

Services (Nonprofit) 6%

Educational Services 2%

Manufacturing (Nondurable Goods) 11%

Construction and Mining/Oil and Gas 3%

In this Report it has been found that the most prevalent industry where HR Outsourcing is/
are common are service sector and also manufacturing sector. With the least ratio in
newspaper publishing /broadcasting and education industry.

38
16. Does your organization belong from Public Sector or Private Sector?

21%

private sector public sector

79%

Among the executives which answered about their organization maximum of them
belonged Private Organizations as compared to Govt. Organizations.

17. What is the employee size of your organization?

Employee size
0-1000 1000-3000 3000-5000 5000 & above

16%
25%

19%

40%

Among the executives which answered about their organization maximum of them
belonged to medium sized organization.

39
KEY FINDINGS
The findings of this report are as follows:

HR outsourcing, in the form of moving one or more HR functions from in-


house to an outside provider, is a practice used by almost six out of10
organizations.

One-third of organizations do not currently outsource any HR functions, and


only a few plans to outsource in the next three years.

HR functions are usually either partially outsourced or completely outsourced.


The difference is that when functions are partially outsourced, the
organization co-manages the function with the vendor; when it is completely
outsourced, the vendor takes full responsibility.

Recruitment/ Staffing of Non-executives, training and development, Payroll


administration and pension benefits administration are most commonly
outsourced functions these days.

Some of the most frequently named drivers for outsourcing were reducing
operating costs and controlling core business and were the reasons cited for
companies for companies to outsource.

When asked about future outsourcing, about two thirds of HR professionals


predicted that their level of outsourcing would remain the same within the
next five years and nearly one-third expected out sourcing at their
organizations to increase.

When asked about the benefits of outsourcing, the majority of HR


professionals indicated that outsourcing allows HR professionals the chance to
concentrate their efforts on core business functions such as organizational
strategy development and execution correspondingly, nearly three-quarters of
HR professionals agreed that the role of HR professionals have become
strategic.

40
SCOPE AND LIMITATIONS

Time and location constraints


Since it is a broad topic, therefore, in depth analysis of each & every aspects of this
topic was not possible to cover
The sample size is too small to reflect the opinion of the whole HR fraternity.
The answers given by the respondents have to be believed and have to be
taken for granted as truly reflecting their perception

41
CONCLUSION
HR departments today are faced with dual roles the first involves being a
business partner focusing on core functions. Second, HR professionals are
critical in ensuring that the day-to-day needs of employees are addressed.
These two roles afford that HR professionals have the foresight to manage the
organizations strategic approaches while also handling its most immediate
and relevant concerns. As a way to juggle these responsibilities, Outsourcing
seems to be a viable option that organizations are embracing.

Organizations which show a trend in utilizing outsourcing even more in recent


years, they also report a greater likelihood of increasingly relying upon it in
the future.

Organizations, however, also reported more unfavorable outcomes due to


outsourcing, such as less face-to-face contact with employees and decreases
in in-house expertise. HR professionals from organizations also expressed
greater concern that outsourcing would lead to reductions in HR staff size.

Some HR professionals embrace Outsourcing, while others do not. Their


concerns center around the shifting roles of the HR professionals that require
them to be both transformational and transactional

Regardless, of whether an organization outsources its HR functions or not.


Depending on the organizations business goals and corporate culture,
outsourcing may not be the most viable alternative

While most of the discussion about HR outsourcing tends to center on the cost
savings, the advantages and the disadvantages, the real focus may need to
be on preparing for the inevitable impact on the profession itself.

As, most Human Resource Outsourcing market analysts believe the market
for HR outsourcing will continue to grow over the coming years. This
prediction seems to be supported by this reports findings that show that
almost one-third of HR professionals said their companies planned to increase
the use of outsourcing.

42
ANNEXURE

Questionnaire used:

HR Outsourcing
Dear Sir/ Maam, I am doing a dissertation on HR Outsourcing and its impact on
HR Profession. I request you to kindly help me by filling up this form. It contains a
set of general questions and the responses will be combined, analyzed and
reported in an aggregate form.

_________________________________________________________________________

1. Does your organization currently outsource one or more of its HR functions?

Yes, my organization currently outsources one or more of its HR functions.

No, but my organization plans to outsource one or more of its HR functions in the next
three years

No, and my organization has no plans to outsource its HR functions

2. Which HR function(s) does your organization partially or completely outsource,


and for approximately how many years has the function(s) been outsourced?
(Check all that apply.)

Background/criminal background checks

Compensation and/or incentive plans administration

Executive development and coaching

Human Resource Information Systems (HRIS) development

Payroll administration

Pension benefits administration

Performance management

Policy development and/or implementation

43
Recruitment/staffing of employees (nonexecutives)

Recruitment/staffing of executives only

Retirement benefits administration

Training and development programs

Other:

3. What were your organizations reasons for outsourcing its HR functions? (Check
all that apply.)

To allow HR staff to focus more on strategy

To allow the company to focus on its core business

To make up for a reduction in HR staff

To make up for the lack of in-house talent/expertise

To save money/reduce operating costs

To offer services the organization could not otherwise provide

To reduce the number of HR staff and related staff expenses

To streamline HR functions

Other:

4. What were the obstacles that your organization faced when it decided to
outsource its HR functions?

Lack of prior outsourcing experience in general

Did not know what to look for in vendors

Lack of qualified vendors

Did not know how to locate vendors

Resistance from employees in general

44
Fears about loss of control

Resistance within HR

Fears about loss of HR jobs/staff

Resistance within senior management

Fears that outsourcing might impact company culture

Not applicable: did not face any obstacles

Other:

5. as a direct result of outsourcing its HR functions, did your organization achieve


cost savings, incur cost increases, or did costs remain about the same?

Achieved cost savings.

Incurred cost increases.

Costs remained about the same.

Do not know

6. What are the main factors to consider when selecting an HR outsourcing


vendor? (Check all that apply.)

Recommendations from other companies

A proven track record

Size of vendor organization

Cost of vendor services

The number of employees assigned to each vendor account

Guaranteed service levels

Niche in a specific area

45
Physical location of vendor

Other:

7. What have been, if any, the negative outcomes of outsourcing your


organizations HR functions? (Check all that apply.)

A decrease in employee morale

Unable to achieve cost savings

A loss of in-house talent/expertise

Not applicable: there have been no negative outcomes

Not sure of negative outcomes at this time

Negative impact on employee customer service

Other:

8. Overall, to what extent has outsourcing HR functions met the expectations of


the organization?

To a large extent

To some extent

Neither to a large extent nor to a small extent

To a small extent

To no extent at all

9. Do you expect that your organizations outsourcing of HR functions will


increase, stay the same or decrease in the next five years?

Increase

Stay the Same

46
Decrease

10. Has the size of your organizations HR department increased, stayed the same
or decreased overall in the past five years?

Increased

Stayed the same

Decreased

11. Is this a direct result of outsourcing or plans to outsource?

Yes

No

12. Do you believe that your organization will outsource its entire HR function in
the next five years?

Yes

No

13. Why has your organization chosen NOT to outsource its HR functions? (Check
all that apply.)

We do not have the resources to manage the outsourcing process

We felt that it would be too expensive

We do not want to lose control of our HR functions

We have had a bad experience with outsourcing in the past

We preferred to develop expertise in-house

We encountered resistance within HR

We preferred to invest in technology in-house

We encountered resistance within senior management

We wanted to maintain face-to-face contact with our employees

47
Other:

14. What are the benefits of outsourcing HR functions for HR professionals?


(Check all that apply.)

HR has a better reputation among employees

It allows HR to spend more time on strategy

HR has a better reputation among senior management

It improves HR metrics/measurement

HR is able to focus on core business functions

It allows HR to be perceived as strategic business partners

Other:

15. Which industry best describes your locations main business? (Check only
one.)

Construction and Mining/Oil and Gas

Manufacturing (Nondurable Goods)

Educational Services

Services (Nonprofit)

Finance

Services (Profit)

Government

Telecommunications

Health

Transportation

High-tech

Utilities

Insurance

Wholesale/Retail Trade

Newspaper Publishing/Broadcasting

48
Manufacturing (Durable Goods)

Other:

16. Is your organization in the public/government or private sector?

Public/government sector

Private sector

17. What is the employee size of your organization?

0-1000 (small/growing)

1000-5000 (medium)

5000 and above (large)

49
REFERENCES AND BIBLIOGRAPHY
BOOK:
HUNTERS AND SAUNDERS, I.J. TRANSFORMING HR.2009.Thorogood publishing

WEBSITES :
www.ukessays.com

www.wikipedia.org

www.timesofindia.com

www.visionrelcation.com

www.itmindia.edu

www.masterthesiswriting.com

www.induction.to/outsourcing

www.hroutsourcingforum.com

www.shrm.org

www.hroutsourcingorganization.com

www.citehr.com

www.ngrhr.com

www.hrtoday.com

www.slideshare.com

50

You might also like