In-house or Outsource HR?

Q How effective is HR outsourcing? Does it make business sense to outsource HR?

It is a very pertinent question and extremely relevant in the current context. HR has seen a great change from the perspective of managing people in an organization. Organizations have become larger both in revenue and number of people.

Long ago, I was talking to someone and had mentioned to me "small is beautiful and largeness is equal to looseness". While I did not quiet agree with this friend of mine but accepted that largeness is complex while small may be beautiful but not necessarily simple.

What better can it be if a large enterprise is run with the simplicity of a small company? The complexity of the organizations of today is not just the size but multi-geography, multi-national footprint, and younger workforce with higher personal aspiration.

About 11 years ago, I came across a situation of managing HR for a multi-unit business with completely decentralized human resources department. It was observed that all the units were islands of excellence but not necessarily excellent as a whole . They were losing out on managing large volume of work as the organization was growing in complexity. So, out of sheer necessity, a few HR functions were integrated which enhanced the overall HR experience, resulting in efficient organization, less cost, and visible accountability.

So If I am allowed to change the question a bit, is it about "Does outsourcing increase effectiveness" as cited in the example above?

I would like to share a case of recruitment process outsourcing for a large MNC. The talent acquisition team was inadequate to meet the challenge of 10 times growth. So the question was build vs buy capacity. The second question was what are the processes to manage fast ramp up to ensure quality. The next point was the cost of delivery and the last but not the least a great on boarding experience for all the new joinees. Net experience was 35% efficiency, 100% on time closure of vacancy, and for the first time measured new joinees satisfaction. However, not all outsourcing would succeed without good change management. Any organization which believes that owning the strategy to acquire high quality talent is more important than managing transactions would work well with a partner.

The clear benefits of outsourcing are process efficiency, stretched performance, lower cost, flexibility, innovation, and effective change management. However, in case the internal teams are managed around these parameters, the insourced teams can be successful. The factors that come in the way are interdepartmental delivery contract and the power equation between departments impacting accountability, but needless
to mention outsourcing is definitely a paradigm of pursuing ‘Small is beautiful' in a large and complex
organization.

 

Q Can effectiveness in HR be increased using technology? Is there a clear business case for HR automation?

I would imagine myself engaged on a large scale organization restructuring initiative, say with 15,000 people, spread across 20 locations. The strategy has to be presented in next three days and the man power reconciliation is still on. Every three hours you have different numbers coming and hitting you. Not only that, the organization structure and reporting relationships though maintained very carefully by the MIS person is just 80% correct.

This is a very dramatic example where lack of correct example can jeopardise your strategy. Though I have given example of a large organization the challenge would be similar for a company with 500 people.

Recently came across a situation where because of a wrong calculation a client of mine was paying excess remuneration for the last 10 years. There are many examples of HR processes effective implementation. I do remember the early days in my career where in factory the complement in a personnel department would have 15 time office clerks and equal numbers managing bonus, PF and ESI.

Today systems can automatically manage the issues of attendance, leave, compliance, and not only that automated system can deliver processes like recruitment, performance management, managing exit, entitlement based benefits in a seamless, automated manner.

The benefits are clear, fast, accurate, ease of availability of information and not to mention non-bureaucratic work environment.

This automation in business would drive HR to deliver real-time performance and therefore, not leaving any scope of employee dissatisfaction. Now the question is does all this create loss of personal touch which is a hallmark of a human organization.

The business case is further enhanced if organizations explore opportunities to deploy cloud-based standard HRMS systems, a fast implementation cycle with regular upgrades and lower risk of investment. These are always on regular subscription based on the concept of use and pay. All these benefits with no headache of maintaining the software or hardware.

The efficient use of HR resources, better compliance, great decision support make a strong business case and can be made even more compelling with a cloud-based HRMS system on a SaaS model.