The book “Outsourcing Human Resources Functions: How, Why, When and When Not to Hire Human Resources Services” defines HR outsourcing such as “having a third-party service provider provide, on an ongoing basis, the administration of a human resources activity that would normally be performed in-house.”
Even though we’ve known about outsourcing for quite some time, HR outsourcing is still in its infancy. It took so long for HR outsourcing to make its presence felt, because outsourcing people is inherently more complicated than outsourcing tasks or things.
The HRO process is phased out in 9 steps:
goal setting – It is important that companies understand the reason behind the need for Outsourcing. Many times companies turn to outsourcing because it is the latest buzzword. Don’t fall prey to that. Unless you have a strong requirement for HR outsourcing, don’t spend time and effort on the exercise.
Company Layout – Even if the company needs external resources for more up-to-date processes, many companies may not be ready for the change. Especially companies that are experiencing frequent changes and high rates of employee attrition. Stable companies respond better to outsourced processes.
Implications of Decisions on Major Stakeholders – Such a big change in a company will directly affect the main stakeholders, that is, the employees. Evaluate how outsourcing will affect the jobs and roles of your workforce. Explore if the supplier absorbs labor from your company.
Analyze the benefits (both tangible and intangible) – Outsourcing works for many reasons. It’s cost-effective, more efficient, and helps introduce best practices in a support function. Understand which of these is true for your business. If you don’t see any substantial benefit, it may not be time to outsource.
Select providers – Market research for the pre-selection of service providers is an important step and should not be compromised. Don’t believe everything company representatives say in your sales presentation. Conduct a candid reference check. After all, it’s your people’s processes that you’re going to outsource.
Negotiation and Contracting – After pre-selecting an appropriate supplier, negotiations on rates, terms and conditions take place. A formal contract is signed between the parties.
Transfer of resources – After a common ground of understanding has been reached, people and material resources are transferred between the partners (company and service providers). This requires some help from the company.
relationship management – Much depends on the relationship between the seller and the customer. The company must have a single point of contact that acts as support for the service provider. Regular reviews also ensure that better standards of service are maintained.