ADVANTAGES AND DISADVANTAGES OF OUTSOURCING HR FUNCTIONS
Human resource management (HRM) takes the highest level of human activities in every organization. HRM is a program with multiple human resource (HR) policies that are internally consistent with the objectives. In al organizations, HR is vital in myriad areas starting from strategic to creating a company image. Where HRM maintains control, there is an enhancement of employees’ experiences in the workforce, and business operations are strengthened. HR is vital in organizations for numerous reasons: strategic management, wages or salaries, to analyze benefits, ensue safety or risk management, and, most importantly, to train as well as develop talents. HRM comprise of many antiquities, and this paper will discuss the advantages and disadvantages of outsourcing HR functions.
Human Resources Functions
By definition, human resource functions may refer to the role played by the management in planning, developing, administering policies that make better use of organizational resources. Staffing is one of the examples of the major HR function, and it is also referred to as recruiting and selecting. Selection and recruiting constitute a significant role for the HR department, where managers ensure people get equal employment opportunities free from discrimination (Muscalu, 2015, 22). Constitutionally, it is mandatory within various states that organizations must ensure proper staffing without biases based on race, sex, origin, or religion. As such, it is a major function for human resources to make sure adequate job selection has been made. After recruitment, the selection of workers is made by identifying the right personnel through tests.
The second example of the HR function is planning. In this, HR determines the number of workers that required to accomplish a given task. During planning, research is paramount as part of the function since the information has to be collected and analyzed to forecast the supplies of HR while predicting future needs. A basic human resource planning strategy is employee development. The third function is performance appraisal, which includes monitoring workers’ output to ensure that it meets the required criteria. Under this, human resource managers are in charge of developing and administering performance appraisal systems. The knowledge obtained from appraisals helps motivate or guide performance improvements. Assess the performance of employees must be done following set standards, the right communication, and applying the right metrics (Gunasekaran et al., 2015, 153). However, conducting performance appraisals varies from one organization to another and in different terms, like annually, half a year, or quarterly.
The process of conducting performance appraisal is a system, starting from the establishment of standards to rewarding the best talents as well as taking actions to poor performers. When measuring the actual performance of employees, traditional or modern methods are used. Traditional methods include grading, essays, confidential reports, graph scale, forced distribution, paired comparison, or critical incidents method. Modern approaches are management by objectives, 360-degree appraisal, cost accounting method, or behavioral rating.
Career planning and development is another crucial HR function, and this concept has been developed partly due to the desire of many workers to grow in their positions (Oke, 2016, 373). The function includes planning processes like assessing the potential of workers for advancement in an organization. In career planning, individual workers are supposed to establish personal objectives and act in manners intended to fulfill those goals. HR managers step in and help workers discover their strengths or core competence by placing them in suitable jobs.
Employee motivation, welfare, and health measures are also essential functions of human resources in organizations. Usually, the motivation of workers is the basic feature if HRM, as it is one of the roles that HR managers deal with. Studies show that employees who are motivated or feel encouraged tend to work more when compared to those who are less motivated. Typically, there are major factors within an organization that motivates workers, and they include pay, benefits, working conditions, favorable organizational policies, job security, healthy relationships, career development, and recognition. Maintaining the health and safety of employees is not only a function but also a mandatory practice. Failure to do so, organizations can be liable for penal actions or face the law.
Outsourcing
Outsourcing refers to business practices whereby an outside party is hired to carry out services or produce products that in-house workers could do. Usually, outsourcing is taken by companies as a practice to cut costs. The activity affects job and roles including impacts on customer care, manufacturing operations and back office activities. The idea of outsourcing was considered a business approach in 1989 and incepted as business activities in the 1990s. In many states, this activity is subject to controversies, while those who oppose asserting that it creates job loss at the domestic level. Supporters, on the other hand, point out that outsourcing is a company’s inducement to allocate resources where possible and appropriate.
As an example, a manufacturer of personal computers may decide to purchase internal components for its items from another organization to save production costs. A law firm can choose to store or back up files in a cloud-computing service provider without the need to invest in large amounts to own technology. In other cases, a small business may decide to outsource the duties of bookkeeping to the accounting firms, and doing so can be cheaper compared to retaining in-house accountants. Other organizations find outsourcing the function of HR, like payrolls and health insurance, to be beneficial. Examples of corporations that outsource include Google, Skype, WhatsApp, Slack, and Alibaba.
The benefits of outsourcing are numerous, and this causes business to consider for particular task job or process. They include an improved focus on the core business activities, increased efficiency, controlled cost, increased reach, and competitive advantage (Dinu, 2015, 15). Outsourcing free-up businesses to focus on strengths and make staff concentrate on major tasks. When choosing to outsource, the capital for investing in other business areas is realized. With outsourcing, there is access to facilities as well as capabilities that otherwise cannot be accessed or afforded. When companies outsource, they can leverage knowledge or skills along with the completion of the supply chain.
Disadvantages of outsourcing, on the other hand, include risk of information exposure, hidden costs, lack of customer focus, management difficulties, instabilities as well as lack of flexibility. When a company outsources, payroll, recruitment services, and HR activities may involve exposing confidential matters to third parties. Although outsourcing is considered cost friendly at times, there can be hidden costs when signing contracts across international boundaries. Outsourced agencies can be catering for multiple organizations at the same time, and in that way, the vendor can lack a complete concentration on an organization. While such pros and cons of outsourcing ought to be considered before an approach to services, it is also advisable to define the relevance of tasks to be outsourced clearly.
Outsourcing Human Resources Functions
When it comes to outsourcing the HR functions, there is a playbook. The functions to stay in-house and the ones to outsource depends on the type of an organization, strategic priorities, and role played by the HR to realize priorities. The HR functions that are most commonly outsourced include temporary staffing, relocation, payroll, background check, coaching, compensation programs, sexual harassment training, and high-volume recruiting.
Outsourcing HR functions comes with benefits like risk management, cost-saving, efficiency, and employee development. The HR outsourcing firms help organizations to minimize risks as employment or labor regulations are regularly changing. Outsourcing firms employ HR specialists who stay abreast of a variety of employment laws. Disadvantages of outsourcing HR functions are performance downside, distancing workers, recruitment issues, risk of leaking information, and too much dependency. In the latter, after outsourcing, the executive can give up much control over an organization’s HR functions. Many dependencies and loss of control pose the potential risk of business not to operate successfully. Outsourcing is associated with information leak, which leads to the release of sensitive company data like structure or product details (Liu, Huo, Liu and Zhao, 2015, 22). Whether intentional or not, giving an outside company sensitive information creates possibilities of leaking bank account data, employees’ medical records, or clients’ data.
Conclusion
In conclusion, a company’s HR departments have responsibilities for numerous functions. HR runs employees’ benefits, payroll, health, and safety administrations. Also, HR manages legal compliances, oversees the training or workers’ development. For many businesses, the functions of HR are too complex to maintain in-house. As such, they consider outsourcing, which presents advantages that support the bottom line of a company. However, there are setbacks related to the practice that companies must watch to be successful.
Reference List
Dinu, A.M., 2015. The risks and benefits of outsourcing. Knowledge Horizons. Economics, 7(2), p.103.
Gunasekaran, A., Irani, Z., Choy, K.L., Filippi, L. and Papadopoulos, T., 2015. Performance measures and metrics in outsourcing decisions: A review for research and applications. International Journal of Production Economics, 161, pp.153-166.
Liu, C., Huo, B., Liu, S. and Zhao, X., 2015. Effect of information sharing and process coordination on logistics outsourcing. Industrial Management & Data Systems.
Muscalu, E., 2015. Sources of human resources recruitment organization. Land Forces Academy Review, 20(3), p.351.
Oke, L., 2016. Human resources management. International Journal of Humanities and Cultural Studies (IJHCS) ISSN 2356-5926, 1(4), pp.376-387.