There are a number of reasons to why firms want to outsource Human Resource (HR) activities. Similar to other functions it is evident that this is due to the demand for increased productivity, profitability and growth. Apparently, this move pushes organisations to examine own internal HR processes, at both the strategic and
operational level and consider outsourcing internal services.
Many researches say HR outsourcing is a continuous demand for reduced costs for HR services. Sierra-Cedar 2015-2016 report (by Stacey Harris and Erin Spencer) explains, within the current market without an enterprise strategy for the HR technology organisations will not be able to reduce costs on per employee or reduce the overall number of employees that serve per HR resource. The report further explains, therefore, more than 40% of organisations will be looking at improving or developing a new enterprise HR systems strategy in coming years.
The five most commonly outsourced HR activities according to the study of The Bureau of National Affairs, (BNA), U.S.A. reports that 72% of surveyed employers outsource (at least one HR activity ) are:
- Employee assistance/counseling;
- Pension/retirement plans;
- Other employee benefits (Health, Medical, Life insurance, etc);
The growing choice to HR outsource means that organisations may request a vendor for help. This could be an online assistance or traditional organisational partnership. No matter what the decision is, this choice requires great care and assessment of accountability of the vendor. If HR functions are outsourced in the right way, it improves service quality, save money and it frees more time for core business functions according to Geoffrey Dubiski, director of operations at Yoh HR Solutions (Philadelphia – HR outsource vendor). He further adds, poor outsourcing, however, would bring negative results. Michael Cornetto, a senior consultant of Watson Wyatt Worldwide (Washington, D.C.), meanwhile, explains “Most HR outsourcers provide satisfactory levels of service, but none of them provide exceptional service”.
Technology in use
To transform the technology environment, creating a more modern architecture that can support new user experiences, mobile access, and full-data analyses requirements, Sierra-Cedar research report (2016) reveals, at present, there has been seen a shift both from vendors and buyers towards Cloud/SaaS Core HRMS online solutions. These solutions may include Talent, Workforce Management, Payroll, and Core HRMS, as well as emerging technologies.
With the rapid change of modern solutions such as Service Delivery Applications, organisational employees are becoming consumers of HR services. And HR is seeing a shift in its role from administrator to service provider. However, for organisations looking forward to improve user experiences, increase employees served, add value to their HR technology investments, mobile-enabled processes plus supporting technologies will have to consider emerging innovative technologies such as IoT and augmented reality.
The right decision
As evident outsourcing is never a fix for poor internal systems. Before making a decision to outsource, the organisation must see its own self first and fix issues in the HR processors to minimise difficulties when started outsourcing. This is because challengers can become more serious with new processors with the vendors, which may bring probable surprises with additional costs to the investor organisations (Deloitte Consulting‘s Calling a Change in the Outsourcing Market Report, 2005). The study looked at both business process and information technology outsourcing. It shows 70% of the companies said they have had considerable amount of negative experiences with outsourcing projects and were dissatisfied with its costs and complexity. Also it reported there was a need for senior management attention and skills than earlier expected. Additional costs came from unexpected complexity of the outsourcing process and lack of transparency in vendor pricing or cost structures. 57% organisations said they absorbed costs for services they believed were included in contracts with outsource providers. Many indicated there were “hidden” costs in managing HR outsourcing projects.
Business process improvement
Sierra-Cedar research report (2016) further questions why two-thirds of the 1,200 organisations they surveyed are decided in making changes in their HR processes? The research shows that matured organisations see several benefits over time. These organisations report higher overall vendor satisfaction, better HR and talent outcomes and higher levels of technology adoption. However, there is a 30% increase over the last three years in organisations initiating to create or update their strategy. New investments in embedded HR analytics solutions increased significantly last year, and expect continuation of investments in these areas rapidly. The question that the research report continue to have is, “Will these new embedded technologies lead to complex HR and workforce analytics in the near future, or will investments and initiatives need to shift to enterprise platforms and tools to achieve these desired outcomes?”
Globalisation and technology are reshaping the workplace, the workforce, and work itself. Over the years employee engagement, retention, leadership improvement and to build a meaningful culture executives see a need to redesign the organisations’ HR functions. HR outsourcing is an evolving industry even in South Asia, Sri Lanka and India. With more and more companies looking to rationalise employees on their payroll, manpower outsourcing is slowly becoming the new buzz. And the trend seems to have hit not just big multinational companies but the public sector and government undertakings as well.