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HR OUTSOURCING

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Too much of HR into administration and too less into people orientation: ... Downsize, but not downgrade. HR itself is becoming the target of belt tightening ... – PowerPoint PPT presentation

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Title: HR OUTSOURCING


1
HR OUTSOURCING
  • Dr C S Venkata Ratnam
  • Director, IMI

2
What is HR doing?
  • Too much of HR into administration and too less
    into people orientation Disproportionate time
    spent on routine administration
  • Power centre, not service centre
  • Cost centre, not value adding profit centre
  • Poor alignment of HR programs with business needs
  • Need for strategic fit between business strategy
    and HR strategy the business of business is
    business Therefore the business of HR also
    should be business!

3
What is happening to HR?
  • 1/3 is going back to Line (employee champion
    roles)
  • 1/3 is getting automated (routine and repetitive
    information processing tasks)
  • 1/3 can be outsourced (repetitive non value
    adding services)
  • What is left of HR in HR?
  • Specialist consultancy roles?
  • Change agent role

4
What to outsource in HR?
  • Three things that managers do (Henry Mintzbergs
    Nature of Managers Job)
  • Interaction (outsource)
  • Information gathering/processing (outsource)
  • Decision-making and problem solving (do not
    outsource)

5
The decision to outsourceTransaction cost
analysis
  • TCA combines economic theory with management
    theory to determine the best type of relationship
    a firm should develop in the market place.
  • The properties of the transaction determine the
    governance structure.
  • High asset specificity and uncertainty lead to
    transactional difficulties, with transaction held
    internally within the firm vertical integration
  • Medium asset specificity leads to bilateral
    relations in the form of cooperative alliances
    between the organisations
  • Low transactions frequent and governed by
    market

6
Core and peripheral in banking
  • In the core banking activity the decision to
    outsource takes place within the regulatory
    framework dictated by the RBI
  • Typical problems
  • No formal processes/supply chain issues
  • Limited cost analysis
  • Core business definition
  • Consider the problems with DSAs in credit card
    business internal checks and balances in one
    bank approval rate is high in the other low.

7
Why outsource HR REDUCE COST OF HR AND CONTINUE
TO PROVIDE VALUE
  • Tightening labour markets and competitive product
    markets pressure to reduce head count
  • Cut costs
  • Add value
  • Do more with less
  • Upgrade, but not upsize
  • Downsize, but not downgrade
  • HR itself is becoming the target of belt
    tightening
  • Shed routine administrative tasks and focus on
    talent management

8
Strategic outsourcing
  • Beyond cost control
  • Specialization and expertise that goes with it
    for which there is no need on a regular full time
    basis
  • Focus on quality, technology and service delivery
  • Outsourcing to best of class, best of industry
  • Problems with technology address need for
    customization (which presently means largely
    adjusting to supply side than demand side)

9
Deciding Whether to outsource?
  • Create a project team
  • Analyse the current position
  • Pay attention to people issues
  • Benchmark
  • Come to a decision
  • What is core to the business and the future of
    business?
  • What can bring competitive advantage?

10
Deciding whether to outsource
  • Decide what to outsource
  • Tender the package
  • Choose a partner
  • Introduce your staff to the agency
  • Draw up the contract
  • Test the contract

11
Pros and cons
  • Pros
  • Cost and savings
  • Financial and operational flexibility
  • Need to focus on few things
  • Access to quality, expertise and better
    management skills
  • Staffing flexibility
  • Cons
  • Need greater coordination flow with agencies
  • Reduces organizational learning by depleting its
    skill base
  • Loss of control
  • Adverse affects on morale and motivation
  • Job insecurity

12
Which functions/sub-systems to outsource
  • Recruitment preliminary screening and short
    listing
  • Training Trg. Needs identification, content
    development, delivery, logistics, third party
    evaluation
  • Performance management - on line automation
  • Compensation pay roll and compensation surveys
  • Safety -- inspections
  • welfare transport, security, catering
  • Labour contract contract employees doing the
    job which was earlier done by regular employees
  • Which function not to outsource
  • Decision making in each of the sub functions
  • Leading change and transforming the organization

13
Implications Need for caution
  • What is formerly inside is going outside and what
    is formerly outside is coming inside
  • Formerly strong relations are becoming weak and
    formerly weak relations are becoming strong
  • Huge disparity in profile, pay and working
    conditions casual, contract, contingent
    employees are less educated, less trained, over
    worked under usually less safe conditions,
    underpaid and enjoy little or no social
    security/protection
  • Pay attention to outsourced employees the same
    way as you do with regular employees in terms of
    how they are recruited, trained, paid and
    motivated

14
Dominant trends3 main HR outsourcing industry
segments
  • Consultants
  • Administrative service providers
  • Technology enablers
  • Customizing imported software products remains an
    issue supply oriented rather than demand based
    customization

15
Typical Problems
  • Integration with over all strategy
  • Fragmented and piecemeal approach cleaning part
    of the pool
  • Absence of formal outsourcing process
  • Limited cost analysis
  • Core business definition Everything is core?
  • Contract management how to ensure that we achieve
    desired objectives
  • Work flow, supply chain and logistics management
    critical to outsourcing process

16
Risks of HR outsourcing
  • Trust
  • Confidentiality
  • Dependency
  • Spillover risks
  • Relative proficiency
  • Strategic capability
  • Commitment
  • Flexibility

17
Managing people issues
  • What happens to people?
  • When to communicate?
  • Who to communicate with?
  • Those whose jobs are outsourced and those whose
    jobs are not outsourced
  • How do you deal in the transition phase?
  • What about HR staff?
  • Who will survive who has to leave?
  • How will the HR department look like, post
    outsourcing?

18
websites
  • www.sharedxpertise.org
  • Websites of all leading HR consulting firms
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