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HRD Challengesand Outsourcing


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HRD Challengesand Outsourcing

  1. 1. HRD challenges andHR Outsourcing
  2. 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. 3. Human Resource Development
  4. 4. Job performance = f (ability X motivation X Organizational support)For, Ability, Motivation and Organizational support: Emergence of HRD concept
  5. 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. 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. 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. 8. HR Outsourcing
  9. 9. “Main concept is Value Addition through Waste Minimization”
  10. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 21. Pros and cons of HR outsourcingPros 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. 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. 23. When and how to outsource activities (Baron & Kreps, 1999) HighStrategic Importance ??? Insource Outsource Contingent employees Low Low High Interdependence
  24. 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. 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. 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. 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. 28. My pleasure to answer your …..