Flying High with HRO

The greatest asset of a company is its people. Human Resource (HR) Management is thus a critical function of a company. As businesses grow, seeking to globalise, the structure of human capital has become more complex. The 21st century workforce now includes virtual teams at locations all around the world, working in collaboration with on-site workers.

How does a business handle increasingly complex HR functions? Do the in-house HR processes need restructuring? Or is it a better option to outsource some or all of the HR activities of a company?

Here's a bird's eye-view of Human Resource Outsourcing (HRO) and how it can help companies keep up with evolving needs.

What is Human Resources Outsourcing (HRO)?

HRO, which started as a mainly cost-cutting exercise, has undergone a metamorphosis to be become a strategic business decision.

In HRO, companies can outsource functions such as:

Recruitment - job postings, applicant screening, assessments, interviews, offer management, and transition management.

Payroll transactions - compensation and benefits

Performance management - training needs and time management.

Compliance training - adherence to local, legal guidelines

Employee self-service applications - comprehensive Human Resource Integrated Suite (HRIS), which is a web application used by all employees for purposes such as daily time management, leave applications, project allotment status and much more.

Process transformation - restructuring existing, under-performing HR processes.

Why Outsource HR Processes?

Many companies decide to outsource only some of their HR functions, while some opt for end-to-end HR outsourcing. This decision needs to be made in the context of an outsourcing strategy.

Some reasons a company chooses to opt for HRO could be

Cost-efficiency Example: Vodafone UK outsourced recruitment processes to Alexander Mann Solutions in 2005, and achieved savings of more than USD 8 million.

Concentration on core-competency, accessing domain expertise of provider Example: Danka, US, a leading reseller of imaging equipment, opted for end-to-end HRO arrangement with Gevity, US, in order to concentrate on their core-competency, leading to cost-savings and HR process effeciency.

Process transformation and solution to specific problems Carrefour, a global 'hypermarket' chain, asked Hewitt to develop recruitment procedures for their stores in China, improving efficiency and leading to better quality candidates.

Flexibility and scalability Example: Alexander Mann enabled the creation of a flexible workforce for Vodafone UK, which could scale up quickly in response to project needs.

Access to comprehensive employee self-service applications Example: Fifth Third Bank, a global financial services company entrusted Convergys with providing "a standardised HR-technology platform" which was scalable.

Optimisation of employee performance Example: Harley-Davidson, an American motor-bike company, enlisted the services of Accenture in 2006, to "improve its workforce as competitive, market and demographic factors changed over time", according to Accenture.

HRO Trends

In a survey conducted by ADP HR Transformational Report, 85 % of companies are involved in transforming their HR processes, mainly due to the need to develop and administer a globally distributed workforce. This indicates that we can expect to see a substantial increase in global HRO agreements in the coming year.

It is estimated that the market for HRO touched USD 2.85 billion by the end of 2007, with India rising as one of the top HRO destinations.

At present, some of the global leaders in the HRO market are Hewitt, Accenture, ACS, Convergys and IBM. Their counterparts in India are companies such as Infosys, Tata Consultancy Services (TCS) and Wipro. (Everest Research Institute).

Top HRO providers are ensuring a smooth HR service delivery for their clients in order to optimise HR processes, improve employee performance and attract/retain talented professionals. This in turn, pushes up productivity and innovation, helping businesses to get a competitive edge in a global economy.

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