Human Resource Outsourcing in India

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Future of HR outsourcing in India

HR is going to slowly but steadily become a part of business strategy. HR professionals will drive the initiatives of HRO, of course with support from top management. The time is now right for HRO to succeed in view of HRM being seen and treated as an important element of business resources in the service economy of today.

HR outsourcing is a relatively recent phenomenon at workplaces across the globe. Traditionally, many businesses started the “contract” system for their security services, canteen services, transport etc., which were “non – core” activities of the enterprise. These services were detached from actual businesses or business processes. HRO, in its orthodox form presence itself as a service provided who owns and performs activities / transactions/ processes that are intertwined with other business processes of the establishment. It is now viewed as a strategic business tool that can be used effectively to derived cost advantage and integration of services to get economies of scale and productivity improvements besides functioning as a HR brand builder. This article attempts to discuss HRO in Indian context and the possible future of HRO in the Indian business scenario. Certain preparatory actions are also prescribed to effectively used HRO as a strategic business tool.

HRO – HRM Architecture:

Today, as we have moved into service – economy, dealing with knowledge and knowledge workers is very important as human capital has become a critical success factor for organizations. HRM is seen as a distinct identity, separate from Administration and Facilities section of the establishment. This can be clearly seen from the importance being given to HRM Architecture. In addition to the traditional roles for HR, over the years, in the IT and ITes sectors, distinct roles have emerged such as corporate HR, business HR, generalist HR, techno – functional HR, etc. The job holders in these roles are expected to give different “deliverables” as related to their functional aspects. It is pertinent to note that a 1998 survey by center for effective organization at university of southern California’s Marshal School of business shown that 79% of HRM managers describe themselves as “business partners” and 53% of line managers agreed that HR managers are now performing the roles of business partners. Thus, today HRM is getting well embodied into business functions such as marketing, finance or operations. This can be, in a way, considered as a starting point of HRO, because, from this, emerges the need for HR function to work smart for business results – whether by doing functions and activities all on their own, or by getting some of them done through outsourcing. Additionally, it also puts pressure on HR function to find “partners” who can “take over” specific transactions and processes at a lower cost. In this way, HR will get focused on “tangible” results (which was one of the complains against HR in the past). Thus, to some extent, it will help free up time for core-HR activities that result in improvements which positively influence the bottom line. A word of caution though that it may not “free up” time, and should not free up too much time. After all, HR is essentially a personal touch button of the organization and too much outsourcing might result in lack of personal touch and decreased human interaction which may frustrate the employees. HRO Evolution:

HRO is always an evolutionary exercise for the organization. Initially, companies are reluctant to outsource, they prefer to do every act in the own backyard. As the organization grows in terms of its life cycle, slowly, “experimentation” phase will begin when they start outsourcing certain simple transactions or processes. Sometimes, they may even take a parallel run with the vendor. When the experience is positive and as they make progress, companies may make decisions to penetrate further into the HRO space. According...
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