Outsourcing Hr Functions Essay

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Outsourcing Human Resources Essay

The most important and productive resource of any organization is the Human Resource. Business heads today realize that employees are the core foundation and back-bone of their organization and it is imperative that you have suitable processes in place for their proper functioning and work satisfaction levels. Human Resources management involves a lot more then paying employees on time and trucking vacations days. But in the same time Human Resources is a department that does not produce revenue for the company, therefore in the last few years big and mid-sized companies decided to outsource their HR department.

After researching some of the articles and surfing the Internet, I have found very interesting articles about companies outsourcing. Human resources outsourcing is most common in organizations with 2,500 or more employees, where demand and resources allow human resources to provide a broad range of employee benefits. According to the Human Resources Department Management Report, top outsourced functions include employee assistance counseling, flexible spending account, administration, pre-retirement counseling, and outplacement services. Some of the companies do it because they believe it cut the company cost. It also help companies and their employees to focus on the bottom line problems and live the outside companies to worry about that particular functions that is not so much related to the productivity and satisfying stock shareholders. But outsourcing is not so easy, when a company decided to outsource the Human Resources. If you find that there is an economic advantage to outsource for your company, you then need to investigate the level of customer service at different companies. Also the decision maker has to start from the top to the bottom of the company.

Everyone has to agree to do it and make sure that this will be the right decision and in the best interest for the company, employee and customers.

Before deciding to outsource any area, you should count the time and expense of doing the job internally before going outside. Consider how long it will take to do the job and what quality assurances you will have. Chances are, if it is a non-core activity to your business, it may be more cost-efficient and better managed by someone outside of your company; an expert in the field. Outsourcing your finance and accounting and/or human resources needs can benefit your competitive advantage in a variety of ways, the most important of which is allowing you to improve your company's focus on its core activities. Often, highly skilled company employees spend time in accounting and clerical functions, thereby under-utilizing their talents. Outsourcing can remove this burden,...

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Human resources transformation refers to the massive restructuring of corporate human resources (HR) departments that took place in the decade or so after 1995. Before that, the staff in HR departments had generally been seen as administrators, not as people to be involved in high-level strategic discussions. HR staff saw themselves as lifetime career specialists with little need for knowledge or experience of what the rest of the business was about.

But with the growing appreciation of the value of a company's human assets, and a need to ensure that the talent that an organisation requires is not just on board but also properly motivated, the role of HR has more and more come to be seen as strategic. The old-style HR that dealt with strikes, bonuses and gripes was rarely suited to this task.

So companies began to look at ways to revamp their HR departments. They were heavily influenced by the ideas of Dave Ulrich (see article), a professor of business at the Ross School of Business at the University of Michigan and author of a 1997 bestseller, “Human Resource Champions”, the book that more than any other set the HR transformation ball rolling. Ulrich's idea was that the HR function should be divided into three:

• what are normally called shared service centres (SSCs), groups that deliver the traditional HR services (and do jobs that can often be easily outsourced);

• something described as centres of expertise (COEs), which house the designers of remuneration packages that ensure an organisation can attract the people that it needs;

• business partners, HR people whose job it is to do high falutin' strategic thinking.

The role of business partners has been subject to a wide range of interpretations. Some companies have chosen to appoint hundreds of them; others have appointed just a few. One large organisation with 60,000 employees has 350; another, with some 50,000 employees, has just two. A 2004 study of 20 large American companies by PricewaterhouseCoopers's Saratoga Institute found a median ratio of one HR business partner for every 1,000 employees.

HR transformation has undoubtedly been popular. A 2005 survey of American companies by Mercer, a consulting firm, found half of them “currently in the midst of a transformation process”, while another 23% had recently completed an HR transformation. A further 10% were planning to start one within the next 12 months.

The consequences of HR transformation have been dramatic, and in some cases painful. On average, it has been reckoned that around 25–30% of HR staff have lost their jobs in the transformation process, with another 20% or so following them over the next few years. A study by IBM's Institute for Business Value estimated that some transformations eliminated up to 70% or more of the workload of the traditional HR generalist.

The great expectations that HR transformation aroused, however, were largely frustrated. After a decade, fewer than 5% of executives said they thought that their organisation's management of people was not in need of improvement. Part of the problem lay in making traditional HR people think strategically. “Don't kid yourself”, said one senior executive, “that people who have never been strategic are suddenly going to become so.”

For some companies the answer was to look outside their own organisation. Companies such as Microsoft and BT hired HR directors from outside the HR discipline, and others built in the expectation that fast-stream recruits destined for the top should spend time in HR as a matter of course along their career path. In “A Dearth of HR Talent”, a report published in McKinsey Quarterly in 2005, the authors wrote:

The troubling gulf between the needs of the business and the ability of HR to respond will force many companies to rethink their approach to the recruitment, training and development of HR employees.

Further reading

Losey, M., Ulrich, D. and Meisinger, S., “The Future of Human Resource Management: 64 Thought Leaders Explore the Critical HR Issues of Today and Tomorrow”, John Wiley & Sons, 2005

Ulrich, D., “Human Resource Champions: The Next Agenda for Adding Value and Delivering Results”, Harvard Business School Press, 1997

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This article is adapted from “The Economist Guide to Management Ideas and Gurus”, by Tim Hindle (Profile Books; 322 pages; £20). The guide has the low-down on over 100 of the most influential business-management ideas and more than 50 of the world's most influential management thinkers. To buy this book, please visit our online shop.

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