Dear all,
As I see, it is a pressure on HR Professionals to really upgrade their skills and develop necessary competencies otherwise, they will be left out doing clerical functions which is more or less no relationship with HR.
Outsourcing HR services allows business owners the time to concentrate on growing their company's profitability and productivity instead of spending time dealing with frustrating, but necessary business distractions and administrative issues.
Well..its hot topic after all who would like to dig their own graves..but one has to look at these issues from Business point of view...
Allow me to share this article which provides some perspectives...
Cheers,
Rajat
"HR is drawn to outsourcing for reasons other than cost reduction"
Responding to the increasing business imperatives of the new economy, the traditional HR department has been subject to a drastic image makeover - from a cost-consuming, administrative backstage functionary to a strategic business partner contributing directly and significantly to the company's bottomline. Part of the newer, smarter look of being a proactive business strategy partner is an emerging consensus to focus on core HR activities and outsource peripheral but necessary administrative tasks such as payroll, benefits, education/training, recruiting, personnel administration, organizational development, contingent workforce management and workforce analytics. A recent report by Gartner, confirming the trend, states that the outsourcing market is expected to grow from $21.7 billion in 2000 to $58.5 billion by 2005.
In India companies still find it difficult to part with any function that directly touches employees, but the enormous cost and other benefits such as employee satisfaction flowing from it are fast eroding the resistance and HR administration outsourcing companies such as India Life Hewitt are definitely on the upswing. Headquartered in Bangalore, India Life Hewitt, India's first and largest ISO 9002 certified HR services provider, has more than 250 clients availing its specialist services. The company is currently dealing with more than 270,000 employee retirement benefits and the assets under administration have crossed Rs.1,000 crore. AssureConsulting.com catches up with
Mr. Leo Fernandez, Vice President, India Life Hewitt on the latest HR trend. Read on …
If asked to address a room full of skeptical HR managers, how would you make a marketing pitch for India Life Hewitt?
By reiterating that the role of HR has evolved. HR is making a clear transition from the backroom to the boardroom. Functions like payroll and benefits administration that previously comprised a large part of HR's work are today a distraction from the core work of recruiting and retaining the best people for their organisation.
A recent Conference Board study of more than 500 executives from 373 companies found that executives and line managers don't view HR as a strategic partner in addressing business issues. This is an impression that HR is striving hard to change. Outsourcing facilitates HR managers to occupy a position from which they can contribute in real terms to the bottomline.
India Life Hewitt functions as an HR enabler and strategic partner. We work with HR managers to ensure that employee service is taken to a superior level, thus freeing HR from the drudgery of routine but critical tasks.
How does India Life Hewitt define good outsourcing practices?
Good outsourcing practices are those that allow both partners in the relationship to continuously harvest value for each other and themselves in a consistent and kaizen manner that enables the matching and surpassing of metrics, proactive resolution of issues and speedy absorption of learning. That's the stuff that makes for a stable, long-term partnership.
Outsourcing practices come into play in the pre, during and the post outsourcing decision and constitute the following:
Look objectively at how each activity contributes to strategy;
Be clear about the driver of the outsourcing decision - Cost, technology, integration.
Performance is more important than low head count or cost
View the party who will work with you more as a partner than as a vendor
Prepare the ground for review of workflow and policy
Pace and execute the migration carefully
Manage expectations carefully
Define in advance - Objective Metrics, Management Structure, Escalation Mechanism, and Service
Level agreements
Conduct regular goal oriented meetings
Differentiate the client from the customer
What are the critical enabling technologies India Life Hewitt uses to deliver services to its clients?
India Life Hewitt uses a customised HRMIS solution built on a Windows NT/Sun Solaris platform to deliver the processing solution. Client queries are met through a suite of self-service options encompassing email access, web access and voice access. A National Voice/Data network connects the five offices to the processing hub at Bangalore. A disaster recovery infrastructure ensures consistent safety and a sound security architecture. This provides clients the comfort of a confidential environment.
Gartner predicts that the worldwide HR outsourcing market is projected to grow from $21.7 billion in 2000 to $58.5 billion in 2005. The market for comprehensive HR outsourcing is considered to be the fastest growing segments of the outsourcing market? Is the Indian market showing signs of maturation?
Yes. We certainly believe this is more than a fad. The Indian market is beginning to see HR outsourcing not just as a possible option but as a preferred choice. While MNCs and technology companies began treading this path a few years ago - the litmus test was whether traditional Indian group companies would make the big leap. And the good news is that what began as a trickle has gradually become a flood. Large and small Indian group companies are opting to outsource their operations.
By embracing a supposedly 'new age company' concept these companies are signalling that HR outsourcing has arrived. The next ceiling to break would be when PSUs and the government begin to test the waters and plunge in.
Why are organisations increasingly outsourcing HR services? Do IT and non-IT companies have different reasons for outsourcing?
Initially, this was true. IT companies, especially small ones, tend to view HR as a function that was not worth building internally. Hence, outsourcing appears an automatic choice. Non-IT companies tend to approach outsourcing more from a cost reduction point of view, but that is no longer the only driver.
HR, today, is under increasing pressure to contribute more to the business and its strategy and the companies' objectives for outsourcing may run deeper than the traditional reason of managing costs.
In fact, current research suggests that companies are drawn to outsourcing for reasons other than cost reduction. A 2001 Gartner Focus Report (Outsourcing: Time to Deliver Results) echoes that thought: "Only those companies ready to address the necessary transformation of their HR processes will find that outsourcing will bring access to world-class processes, competitive advantage, and increased shareholder value."
In your organisation's experience, at what stage of growth must a company outsource HR function?
Growth is really a function of mindset rather than years in existence or size of operations. As soon as an organization realises that using a specialist partner for their HR administration will help them be more focused and more competitive, they are ready to outsource.
We have had companies a week old and with four employees on their rolls sign up as our clients. At the same time, companies with over 4,000 employees are chosing to outsource operations. In the current environment, both realise that staying focused on their core business is more of a necessity rather than an option.
One of the reasons for outsourcing HR practices is to streamline processes and make them more transparent for employees. To what extent can a third party organisation contribute to enhancing employee satisfaction? Any live examples from India Life Hewitt
Technology has been a key enabler to achieve transparency, which is also often an objective. Today an employee logging in on
www.india-life.com would punch in his Unique 10 digit PIN and password and immediately be able to view personal details like his payslip, his tax computations, his loan balance, his leave balance and a host of other related information.
He also has the option to view non-personal information like his company's HR and administrative policies, FAQs on the Benefit plans and other information. The fact that it is available on the web means that it is truly an "Anytime, Anywhere Benefits OfficeTM" for him.
He can also use the system to hold a live web chat or pick up the phone to dial a query. This gives him further flexibility and choice - all of which makes for a more satisfied employee.
What are the concerns and problems in transitioning certain HR functions from an in-house to an outsourced activity?
A key challenge has been to handle the perceived loss of intimacy and control. Technology has helped address that, giving both employer and employee seamless access to information and now increasingly transaction enabling several key processes.
Very often the lack of internal benchmarks is a speed breaker and this is best handled by ensuring both parties work together to set the current and the targeted benchmark. Technology compatibility, confidentiality and cost are other challenges that both sides must work on.
How has outsourcing transformed the functional profile of HR departments?
Essentially, the shift has been from managing resources to managing results; in effect HR's role has shifted from being transactional to being strategic. Their is an intensified thrust on the core HR function to attract the best people and create an environment to retain them. Previously, HR spent hours to answer an employee query - today an employee is able to log in - view his payroll and benefit details and get the query answered online without taking away HR's time. Earlier, HR would slave over certain 'carved in stone processes', today they spend time with us to redefine and reengineer the same processes so that the overall HR experience of employees moves notches up the satisfaction scale.
Outsourcing companies need to have a detailed understanding of the client's business processes and corporate culture. What are the performance metrics an HR outsourcing firm needs to evolve to ensure client satisfaction?
Besides the obvious metrics of accuracy and timely delivery, outsourcing firms should be able to evolve metrics that gauge the quality of both the client (the employer) and the customer's (the employee) experience.
Metrics could range from saving in process time and cost to levels of satisfaction or delight the response generates. Metrics could also help assess how proactively the HR outsourcing company keeps a client updated on compliant and statutory issues (mandatory practices) and how effectively pre-agreed reengineering (workflow and policy changes, best Practices) are implemented. A mechanism that allows and encourages continuous feedback helps the metrics stay contemporary and relevant.
What are the key factors that need to be in place for an outsourcing marriage to succeed?
Mutual trust is critical, as it's a long haul commitment. For this, it is imperative that senior management is not only involved from the beginning but also preferably drives the initiative. A clear understanding of requirements and expectations on both sides is an important platform to build the relationship. Compatibility in culture and values and an open and flexible approach also help in ensuring that both stay long-term bedfellows.
Companies are becoming increasingly conscious of security and privacy practices. Functions such as pay rolling and pension involve direct access to employee data? How does India Life plan for privacy requirements in outsourcing relationships? What kind of privacy and security management measures has India Life Hewitt adopted have to protect client data?
Privacy and confidentiality are addressed through a combination of people, process and technology measures. For example, all employees sign Non Disclosure agreements and a single team does not work on accounts of companies who are competitors in their industry space. External security audits along with 128 bit SSL and extensive firewalls also ensure that a client's data is secure and confidential.
Many organisations today outsource low value-added phpects of HR functions. Mission critical functions are still the domain of the in-house department? Will outsourcing ever grow to an extent where companies like India Life Hewitt can supplement rather than complement HR functions?
HR strategy is likely to continue to remain within the domain of in-house HR departments since walls of resistance will still remain on whether the truly 'mission-critical' activities can be effectively handled by a third party.
India Life will, however, continue to be an enabler of that strategy and a partner in the evolving role of HR. The three key sectors of HR outsourcing - HR Administration, HR IT and HR Consulting will continue to intersect in ways that will add value to client organisations.