Will outsourcing your HR kill your intimacy with your employees?

HR OutsourcingThis question is vitally important for a small and medium scale enterprises

Desperate times call for desperate measures. In late 90s, when IBM, Ford and General Motors saw their profits sinking, they had no choice but to axe non productive resources and look for cheaper alternatives. One business model that evolved out of this search was Human Resource Outsourcing (HRO) and its subset, Recruitment Process Outsourcing (RPO). 

With increased pressure on profits, changing demographics and frequent exchange of informational and cultural resources across high-speed IT networks, it’s become cost-effective for SMEs to outsource some of their HR functions to external, professional organizations, often at a fraction of what it would cost them to handle those functions in-house.

On the flip side there are plenty of challenges associated with HRO, the loss of employer-employee intimacy. The most commonly outsourced HR functions these days are: payroll management, benefits administration, employee data management, information systems management, and Contact centre management.

If the core function of the HR is to be a bridge between the employee and the employer; by outsourcing some of these functions, an SME undoubtedly runs the risk of diluting its relationship with its internal customers, i.e. the employees.

However this drawback can be countered if the management takes care to:

  • Zero in on a vendor who can customize HR services to the SME’s DNA and organizational culture
  • Secure the ‘buy in’ of the employees before farming out these functions by co-opting the line managers first and appointing them as ‘cheer leaders’
  • Reassuring the staff that some of the savings from the outsourcing model would be channelled into improving their benefit packages and employee services
  • Explaining to them – through the line managers – that the main objective of this model is not just to gain cost efficiency but also organisational transparency and have performance reviews, reward and recognition vetted by an independent, third party
  • Explain how this change will streamline HR functions and lead to information sharing
  • How Human Resource Information Systems (HRIS) will empower employees and transfer information control to individual workers
  • Demonstrate how easy it is to access and update sensitive data with HRIS and HRMS tools
  • How to establish KM channels for information-sharing, documentation and knowledge-building
  • And, finally how HRMS and HRIS would eventually lead to a flat, democratically-run organization, where power would flow not just from bottom-down but also top-up.

If employees are made to understand the correct use, application and benefits of these tools, the day is not far when instead of resisting they may begin to demand a shift to the new HRO model.