Saturday, February 18, 2012

Is the independent workforce strategy a viable option? Implications on HRM


Offshoring

Offshoring1 simply means that a firm hires local employees abroad to do jobs previously done by the company’s in-house domestic employees. Here the role of the HR department in identifying high quality, low cost talent abroad and to provide the necessary background data on things like wage rates, working conditions and productivity becomes pivotal. The HR manager also needs to make sure that there is an effective supervisory and management structure in place to manage the offshore workers. Recruitment, retention, compensation, T&D and appraisal – jobs traditionally done by the HR department hence will have to grow to compensate for the increased distances involved with offshoring.

Outsourcing

Simply put, outsourcing is the contracting of a third party to manage a business process more effectively and efficiently than can be done in-house. The key idea behind this is that organizations can free-up resources involved in support functions2 so as to improve the performance of core functions. The improved performance resulting from this is also expected to outweigh the loss of control associated with outsourcing.

Outsourcing tends to be a uniquely HR-dependent activity as now instead of the HRM domain being restricted to a given company , the HR manager have to deal with a host of companies each having their own and generally unique culture and environment. Thus in such a scenario, the HRM function of people management is now becoming that of vendor management and change management for the outsourcing company while the vendor’s HRM would add client management to the already long list of HRM tasks namely recruitment, training and development, retention,…

Change management
Change management would involve generating organizational readiness to receive and sustain the change associated with outsourcing. This involves
  1. Identifying appropriate leadership to oversee and mange the outsourcing effort
  2. Creating a transition management plan that identifies activities to be transferred to the vendor
  3. Developing a conflict resolution structure to take care of client-vendor and internal employee conflicts.
  4. Having appropriate matrices and reporting framework in place to measure effectiveness of the outsourcing arrangement.
Shift from transactional and traditional HRM activities to transformational
India today has virtually become the back office of the world with a large number of companies outsourcing their non-core functions to India. These non-core functions include transactional3 activities such as benefits administration, record keeping and employee services and traditional activities such as Recruitment and selection, training, compensation and employee relations. This shift has lead to a company’s HRM department looking at the transformational part that is cultural change and strategic redirection and renewal even more than in the past.

Focus on Output
Any SHRM initiative always focuses on directing the individual, behaviors, culture, subsystem and environment blocks towards achieving a desired output (goal, mission, vision) .Outsourcing also focuses on the output of the process without the additional burden of the remaining five blocks which get outsourced to the service provider.

Implications on organizations
The impacts of outsourcing are not limited to the economic domain. There are also organizational implications, such as loss of control over how an outsourced activity is carried out or a service is delivered. The organization may become dependent on the external service provider and thereby lose strategic flexibility which in turn may harm its long term goals.

Another major area which is hit is the organizations culture. Partial4 outsourcing will result in the employees retained within the firm having fewer opportunities to gain broad experience and have less career chances (Greer et al., 1999)5. This means that motivation levels would reduce. Thus HRM would have to be present to reduce attrition.

BPO to KPO6
Knowledge process outsourcing (KPO) even though currently in its nascent stage is the path that most experts predict the Indian BPO industry will move in the future. This will result in highly specialized knowledge based organizations specializing in one or more fields such as finance, training, etc. Thus the organization will move from a cost center to a profit center with each individual KPO employee contributing towards revenue generation giving the individual a clear sense of the value they provide.

Technology and HR
Technology and the internet have enabled the outsourcing of HR activities such as pay slip generation, retirement planning, etc. This is only possible because specialist service providers can now have real time, internet based access to their employer’s database. Technology also brings with it the demons of hacking, cracking and leakage of information as has been seen via various scandals in the BPO industry. This means that the company’s culture and subsystem will have to be tailored to meet these challenges.

Virtual team
Outsourcing also means that the lead time for training and development of new employees is extremely low as the service provider already has trained professionals and support infrastructure in place. Thus virtual teams7 can be easily setup whose lifespan is as long as the contract exists between the outsourcer and the BPO. This in turn would mean a cultural disconnect would exist the minds of the workers.

So Will SHRM continue in an independent workforce environment?

Strategic HRM refers to the overall direction the organization wishes to pursue in order to achieve its goals through people. A company’s intellectual capital such as experience and technical know how is a major source of its competitive advantage. It is also the employees of the company who implement the strategic plan of the company.

Thus it can be argued that if people get outsourced there is every chance that strategic HRM may itself get outsourced out of the company. However the points explained above clearly show that despite people moving out of the organization, HRM will continue to remain an integral part of an organizations structure.

1 Gary Dessler, Human resource management, 10th edition, Prentice Hall, 2006
2 Hiring an outsource service provider to manage low-level, non-core operations cuts off a considerable sum from the budget allocated for in-house recruitment, hiring and training of manpower
3 Noe et al, “Human Resource Management :Gaining a competitive advantage”, Chap016.ppt
4 Certain activities are retained within the organization while others are outsourced
5 Rachel Anderson, “Outsourcing - disruption and de-motivation, or an energized workforce?”,
< www.alsbridge.com>
6 Peter Bamfield , “Outsourcing - now's the time”, Dec 1999,< www.rsc.org>
 7 Rob Aalders, “IT outsourcing : making IT work”, 2002,
8 Susan N. Houseman, “The Policy Implications of Nonstandard Work Arrangements”, 1999,
< http://www.upjohninstitute.org/publications/newsletter/snh_f99.pdf>

No comments:

Popular Posts