What is outsourcing?
In the first instance it is generally (but not exclusively) an economic strategy. Basically, I am buying into my company a service, which I need and which would be more costly to establish inside the company as a stand-alone department.

HR Outsourcing

• I delegate the HR business function to the specialist external provider, who then works with me to set objectives and manage all aspects of the employee to employer relationship. In this way I am using external expertise to provide guidance on all key HR activities for the company; to establish important policies and procedures suited to the company's specific needs while ensuring compliance with statutory requirements and protection for the company in relation to potential people related claims.
• The specific HR objectives will vary from company to company depending on the size and complexity of the company and its current state of employer/employee relations. Some companies outsource almost all of their HR processes; others might limit this to payroll or some recruitment.
• The larger organisations tend to have a HR department and therefore limit the outsourcing to payroll, wage and salary surveys and some recruitment/headhunting assignments supplemented occasionally with HR Consultancy to assist with changes. Large organisations that have outsourced significant parts of their HR operational activities include BT, Boots, Procter & Gamble and Unilever. The small to medium enterprises (SME's) tend to do the reverse, outsourcing their strategy to HR consultants and keeping the delivery of HR processes within the company. The company's ability to fund the HR function will influence the model.

The Benefits
When a company decides to outsource the HR function there are a number of potential benefits as follows:

• Reduced costs.
• Reduced risk.
• Increased efficiency.
• Access to improved HR systems.
• Improving management information.
• Access to HR expertise not available internally.
• Increased flexibility and speed of response.
• Builds internal awareness and expertise.
• Frees existing HR resources to operate more strategically.

Avoid Potential Dangers
There are a number of traps, which the company can fall into when outsourcing. To help avoid these risks, the company should, for example:

• Participate as much as possible with the HR Specialist.
• Understand the issues and jointly decide on any changes to policies and procedures.
• Listen to recommendations but offer additional information and insights, as appropriate, which the HR Specialist might not have access to, and which might be of significant value.
• Do not totally transfer the responsibility for HR practices to the HR Specialist.
• Ideally insure that the company's link person has the ability to learn and develop and keep all senior managers aware of the change process, progress and their related responsibilities.
• The commitment to this HR strategy needs to be defined from the outset. Increasingly, outsourcing arrangements are medium to long-term strategies to bring about incremental, HR benefits.

Agreeing the HR Outsource Model

• Choose the level of service which will provide maximum front end support to ensure the basics are in place as soon as possible.
• Be clear on costs and objectives for the first twelve months.
• Select the actual internal link person responsible to liaise with the HR Specialist.
• Understand your own risks and requirements.
• Arrange for regular monthly contact with the HR Specialist for progress reports.
• Flag any key concerns or issues which are current before the contract commences to enable the HR Specialist to build responses to these issues into the plan.

Other Considerations
Remember that many of your management considerations will be similar to those required when introducing any other change management process or strategy; a professional management campaign.

An outsourcing arrangement will often include significant changes to existing HR practices. It is therefore important to make sure that the link person has access to all people-related records and understands the current or past issues so as to ensure that these are reviewed and that plans are developed with the HR Specialist to resolve or protect the company in relation to these issues.

If the company already has HR staff, the outsourcing strategy might require a decision to either make all redundant or to retain one junior HR employee as the key link person and to integrate them fully into the new HR outsource management model.

The provision of professional Human Resource Management services to all managers in a company is generally perceived as a critical contribution to sound people management strategies. The transfer of services to specialists in an outsource model is not unusual. This has happened in other functions such as logistics, transport, finance, payroll, IT, etc. While outsourcing is not a new concept, it is relatively recent to the HR management function and is an important consideration. For those companies who have no formal strategic approach to the HR function outsourcing, offers a cost-effective way of ensuring professional policies, legal compliance and reducing risk while creating a more effective business environment based on trust.

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