1. HRD challenges
and
HR Outsourcing

2. Content of Presentation
What is HRD?
HRD Mechanism or Subsystems
Challenges on HRD
What is Outsourcing and HR outsourcing ?
Why Outsource?
Pros and cons of HR Outsourcing
Strategic Outsourcing

3. Human Resource
Development

4. Job performance = f (ability X motivation X
Organizational support)
For, Ability, Motivation and Organizational
support: Emergence of HRD concept

5. What is HRD?
• A set of systematic and planned activities
designed by an organization to provide its
members with the necessary skills to meet
current and future job demands.
• Development – preparing for future
responsibilities, while increasing the capacity
to perform at a current job
– Management training
– Supervisor development

6. HRD Mechanism or Subsystems
• Performance Appraisal
• Potential Appraisal
• Career Planning
• Training and Employee Development
• Organization Development
• Rewards
• Employee Welfare and Quality of Work
life(QWL)

7. Challenges for HRD
• Head hunting/ Job hopping
• Changing workforce demographics
• Competing in global economy
• Eliminating the skills gap
• Need for lifelong learning
• Need for organizational learning
• Difficult to determine the best tool

8. HR Outsourcing

9. “Main concept is Value Addition
through Waste Minimization”

10. What is Outsourcing?
 Outsourcing is a strategic decision to give a task or
activity to an independent contractor who determines how
best to do the task or activity.
 The firm and the independent contractor become partners
and may establish a long-term relationship.
 Examples of outsourced activities: IT, HR, Legal
services, Manufacturing, R & D.
 Note: Outsourcing transactions are done in the market.

11. Other Definitions
 In-sourcing ( creating new internal production
facility)
 Off-shoring ( producing company on host
country)
 Co-sourcing ( combining internal and external,
for e.g. Auditing)
 Geo-sourcing
 Outplacement

12. 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!

13. Why Outsource?
 Allow HR to focus on core competencies
 Creates strategic opportunities for HR
professionals
 Improve quality, efficiency, and effectiveness
 Relief from administrative burdens
 Reduce operating costs

14. 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

15. What to outsource in HR?
Three things that managers do (Henry
Mintzberg’s Nature of Manager’s Job)
Interaction (outsource)
Information gathering/processing (outsource)
Decision-making and problem solving (do not
outsource)

16. The decision to outsource;
Transaction 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

17. 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

18. 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)

19. Deciding Whether to outsource?
Primary ( Organization Side)
Create a project team
Analyze 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?

20. 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

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

22. Which functions/sub-systems
to outsource
 Recruitment – preliminary screening and short listing
 Training – Training 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

23. When and how to outsource activities
(Baron & Kreps, 1999)
High
Strategic Importance
??? Insource
Outsource Contingent
employees
Low
Low High
Interdependence

24. 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

25. Dominant trends
3 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

26. 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?

27. 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

28. My pleasure to answer your …..