The book “Outsourcing Human Resources Functions: How, Why, When, and When Not to Contract for HR Services” defines HR Outsourcing as “having a third party service provider furnish, on an ongoing basis, the administration of an HR activity that would normally be performed in house.”
Even though we’ve known about outsourcing for quite a while now, HR Outsourcing is still in it’s nascent stage. It took so long for HR Outsourcing to makes it’s presence felt, because outsourcing people is intrinsically more complicated than outsourcing tasks or things.
The process of HRO is phased out in 9 steps:
Objective Setting – It is important for companies to understand the reason behind the need of Outsourcing. Many a times companies go into outsourcing because it is the latest buzzword. Don’t fall prey to that. Unless you have a solid requirement for HR Outsourcing, do not devote time and efforts in the exercise.
Readiness of the company – Even if the company needs external resources for more up to date processes, many companies may not be ready for the change. Especially companies which are undergoing frequent changes and with high employee attrition rates. Stable companies respond better to outsourced processes.
Implications of the decisions on the major stakeholders – Such a big change in a company will directly effect the main stakeholders i.e. employees. Evaluate how outsourcing will affect the jobs and roles of your workforce. Explore if the provider absorbs manpower from your company.
Analyze the benefits (both tangible and intangible) – Outsourcing works for many reasons. It is cost effective, more efficient and helps introduce best practices in a support function. Understand which of these is true for your company. If you do not see any substantial benefit, may be it’s not time for outsourcing.
Selecting vendors – Market research to shortlist service providers is an important step and should not be compromised on. Don’t believe everything the company representatives say in their sales presentation. Carry out a candid reference check. After all it’s your people processes you are going to outsource.
Negotiating and Contracting – After an appropriate vendor is shortlisted, negotiations on rates, terms and conditions are carried out. A formal contract is signed between the parties.
Transferring resources – After a common ground of understanding has been reached, people and material resources are transferred between partners (company and service providers). This requires some hand holding from the company.
Relationship management – A lot depends on the relationship between the vendor and the customer. The company should have a single point of contact which acts as a support for the service provider. Regular reviews also ensure that better service standards are maintained.