Outsourcing Involves contracting out some of organization’s noncore work activities to outside specialists Can do work more effectively Often for less than cost of doing work in-house Areas frequently outsourced: Payroll, Benefits, Technological support More than 75% of organizations outsource at least one HR function Offshoring Involves exporting tasks & jobs to countries where labor costs significantly India remains largest market Challenge of managing virtual global teams Need for tight organizational & operational control to ensure coordination & communication and steps that tell us we should outsource Employees or not.

1. Welcome to
my presentation

2. HRM Outsourcing
Make or Buy Decision

3. Group members are-
Lia B.Gomes
liaborsha@gmail.com

4. Outsourcing
• Involves contracting out some of organization’s
noncore work activities to outside specialists
– Can do work more effectively
– Often for less than cost of doing work in-
house
• Areas frequently outsourced:
– Payroll, Benefits, Technological support
• More than 75% of organizations outsource at
least one HR function

5. Outsourcing
• Can free up HR staff to focus on more strategic
issues
• Considerations:
– Cost savings
– Whether contractor can deliver
– Compliance with laws
– Impacts on employees whose jobs might be lost
– Impacts on morale of remaining employees

6. Offshoring
• Involves exporting tasks & jobs to countries
where labor costs significantly
• India remains largest market
• Challenge of managing virtual global teams
• Need for tight organizational & operational
control to ensure coordination &
communication

7. Offshoring
• Advantages
– Cost savings
– Extend work day to 24 hours
• Disadvantages
– Loss of domestic jobs
– Transfer of technical knowledge
– Public image/loyalty concerns

8. HRM Outsourcing: Make
or Buy Decision
Four Stages Process MAKE-OR-BUY-
DECISION
• Building incentive for outsourcing
• Exploring strategic implications
• Analyzing costs/performance
• Selecting providers

9. Four Stages Process
MAKE-OR-BUY-DECISION

10. Five competitive forces
Five competitive forces driving
organizations to outsource HR activities:
– Downsizing
– Rapid growth or decline
– Globalization
– Increased competition
– Restructuring

11. HRM Outsourcing: Make or Buy Decision
• Operational rationales for outsourcing
– Time-sensitive issues better handled by outsourcing
– Temporary or cyclical increases in HR needs
– Efficient vendor management practices drive costs
down more than economies of scale
– Specialized vendors offer activities as their core
business & strategic focus

12. HRM Outsourcing:
Make or Buy Decision
• Strategic rationales for outsourcing:
– Outsourcing nonstrategic activities permits HR
to move away from administration toward
strategic role
– Decentralization of HR function through
redeployment of some of assets to operating
units
– Develop less bureaucratic HR departments
– Downsizing may require HR to reduce staff,
eliminating specialized in-house expertise

13. HRM Outsourcing:
Make or Buy Decision
• Positive outcomes
– Lower HR costs
– Higher service quality
– Development of negotiation & broker
skills
– Enhanced credibility of HR function
– Risk & uncertainty absorption by HR
vendor

14. HRM Outsourcing:
Make or Buy Decision
• Negative outcomes
– Significant cost savings not always
experienced
– Vendor switching costs
– Long-term vendor contracts
– Disruption of firm’s culture
– Removal of HR function from
employees

15. Conclusion
• The outsourcing process is very complex and
has to be planned, well organised, calculated
and performed in the best possible way.
• The steps of the make-or-buy decisions are
always individual decisions, which have to take
into consideration the specific characteristics of
each company

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