OUTSOURCING has been gaining momentum for several years, but recently many more organisations have been considering this option in a bid to reduce costs and streamline processes. Outsourcing has won favour as it enables organisations to bring in specialist expertise to deliver non-core services, allowing the organisation to focus on delivering its services. Reportedly, it can also save costs of around 20%.
However, outsourcing is not without its drawbacks. Whilst the key to successful outsourcing is having clearly understood objectives and an excellent relationship, in reality the supplier is frequently selected through a tendering process which amounts to little more than a tick box exercise. In the same way that people can get good at IQ tests with practice, there is a knack to completing tender documents which means that often suppliers are chosen based on understanding the tender process, rather than ability to deliver.
Sharon Swift, Managing Director of The HR Experts, compares tendering to the recruitment and selection process, “If you were looking for someone to join your organisation, you would ensure you advertised in the right places. You would also include a range of measures and selection processes to make sure you choose the right candidate. Outsourcing is much the same – and you need to consider how you effectively measure what your outsource partner can deliver.”
What is more, outsource service providers should be experienced at handling the processes or services in question professionally and knowledgably. However, frequently cost savings come hand in hand with a reductive approach, in which processes are condensed to no more than transactions that can be monitored and billed. Rigid adherence to such an approach can leave managers frustrated from dealing with contact centre staff who are all too familiar with the ‘computer says no’ school of customer service.
“With this in mind, it is important to ensure that you achieve real value-add from the service you receive from your provider,” says Sharon. “Even though the outsource company may be cheaper than if you had the same support in-house, they should offer you a quality, responsive service. After all, it is in their interests to do so.”
Outsourcing should reduce costs of non-core activities allowing you to focus on the services you provide rather than investing in support functions. Like many other service providers, The HR Experts focus on meeting specific objectives set out by the organisations they work in partnership with. Being focused on key deliverables means that such providers are able to operate efficiently and effectively, through clear specifications which mean you get exactly what your organisation needs.
Outsource providers have specialist expertise, allow you to tap into economies of scale and must have the objectivity to review strategy and operations. There is considerable evidence that the private sector generally supply services at lower cost than the public sector. Competitive contracting out of services that have traditionally supplied by the public sector produce large savings, often of 20 per cent or more (Lundsgaard, 2002 and Bailey, 2002).
The major reasons cited for outsourcing are having access to specific skills and expertise, improved service quality and the ability to manage fluctuations in demand. On average, contracting-out HR services can bring savings in excess of 28 per cent. The top 3 reasons cited for undertaking outsourcing in the Chartered Institute of Personnel and Development’s (CIPD) 2009 Outsourcing Survey were access to skills and knowledge (71%), quality (64%) and cost reduction (61%). Other benefits of outsourcing HR include:
- Increased efficiency
- Improved people management information
- Access to HR expertise not available internally
- Increased flexibility and speed of response to HR problems
- Reduced risk as it is possible to scale up and down more efficiently
- HR resources can operate more strategically
- Access to improved HR IT systems without capital outlay
The HR Experts are a UK-based HR provider offering outsourced support and offer free initial consultations. Email info@thehrexperts.co.uk for more information or telephone (01709) 328864.
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