Outsourcing as a business strategy has grown rapidly in recent years – and nowhere is this more the case than in the discipline of human resources; Sam Colquhoun of North East HR specialists Right Hand Human Resources (RHHR) looks at some of the issues involved.
Let’s begin by exploding a couple of myths about outsourcing in the arena of Human Resources. The first suggests outsourcing is a business strategy that company’s only turn to when there’s an economic downturn. The second says outsourcing is a tool that remains in the domain of large organisations as opposed to small-to-medium sized enterprises (SMEs.)
In recent years it has been conclusively proved that outsourcing can help businesses of all sizes to maintain or increase their competitive edge – regardless of economic conditions – which explains its continued growth in popularity.
The fact is that companies have certain core competencies, certain specialties and the question that business owners everywhere have to ask themselves is ‘if I started my business from scratch today, would I be doing this activity in-house?’
But what about the SME? Can outsourcing really bring real benefits to smaller, developing businesses? The short answer to this question is yes.
Smaller organisations everywhere are becoming ever more sophisticated with the advent of the Internet and by virtue of the new economic business model. Hence at RHHR we have found that smaller organisations require many of the same robust features and capabilities as do their larger counterparts.
Indeed, in the area of HR, most organisations are offering similar benefit packages and are subject to the same legislative and taxation requirements. Thus the service offering for both audiences is remarkably similar.
There are a variety of indications that a company will benefit by outsourcing. The specific reasons vary from company to company. Speak to our clients and you’ll find many different outsourcing goals. Some may emphasise flexibility and speed-to-market, others are seeking cost savings or capital cost avoidance or brand protection.
In the area of HR, we now find the marketplace and ourselves continually evolving beyond benefits administration to outsourcing other HR activities such as HR data management, recruiting, hiring, compensation and performance management.
Take a closer look at the issues involved and it’s easy to understand why. As companies look at the recruiting function, for instance, technology can now accomplish much of what has been done manually. Outsourcing that technology is common.
In HR, outsourcing can help SMEs to access a higher level of service than might be reasonable to expect from an internal department. Faster response times, higher compliance, and convenient access to benefits all support employee loyalty – in effect minimising liability and turnover costs.
So what are the factors that might lead an organisation to look at the idea of outsourcing?
For many businesses, the first indication of a possible requirement for outsourcing is an economic one. As a business you need to ask yourself, is your investment in capital expenditure becoming a strain on your bottom line? Are you devoting human and financial resources to areas that are not part of your core competencies?
If the answer to these questions is yes, then outsourcing will make a lot of sense, allowing you to rely on a specialist that has already made a significant investment in the latest equipment, technology and human resources.
Scale economies are another challenge that prompts many companies to outsource. This can actually be viewed as two distinct challenges: The first is the need to develop the company quickly and effectively when it lacks the necessary infrastructure and the second is to manage the company when it has grown too fast.
In the first scenario, outsourcing becomes an obvious solution. Many of our clients turn to us to tap our existing infrastructure, trusting us to take over their recruitment, training and other business operations in a quick and seamless fashion.
So you’ve evaluated the options and decided that outsourcing one or more parts of your business is the way forward. So what now?
As has already been suggested, outsourcing is not an option to be taken lightly. Hence crucial in the outsourcing process is how the service provider will work with your clients. It is important that you take a close look at your potential outsourcing partner to see how they work with existing clients, to see the technology they employ and take the time to meet the team of people who will be working with you.
If you feel it will help you gain a fuller picture, talk directly with their existing clients for feedback. By seeing all of this first hand, you’ll gain clarity about the company’s dedication and focus to your business, which will help foster that all-important feeling of trust.
The bottom line is you want to understand the service provider’s depth of experience with HR and range of solutions related to people challenges.
Ultimately this is a long-term relationship that should be flexible and adaptable to each company’s culture and unique business needs. A sense of trust and partnership is critical.
The relationship of your outsourcing partner with your employees is also an important consideration. Ask yourself, what kind of relationship will the service provider build with my employees?
Outsourcing is a tremendous change. Businesses should examine the processes for managing the change. For outsourcing to be successful, your outsourcing partner needs a detailed understanding of your current environment, culture, technology, and people.
Any outsourcing partner worth its salt should be able and willing to provide help with managing the change process.