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OF BUISENES ADMINISTRATIVE SUBMITTED TO Dr V K KHANNA Director MBA (132) GNIT Gr.Noida 3 SUBMIITED BY
SATISH CHANDRA ROLL 1113270042 MBA(4th sem.) 2012-2013
I SATISH CHANDRA , Roll no 1113270042 student of MBA 4th sem of GRETER NOIDAINSTITUTE OF TECHNOLOGY Greater Noida hereby declare that the research project report titled ‘‘Human Resource Outsourcing in India’’ is my original work & the same has not been submitted for the award of other diploma or degree.
Place: Greater Noida Date :
3 Sample Size 4. 4.2 Research Design 4..1 Hypothesis 4.Contentss NAME OF THE TOPIC Title Page Declaration Page no Chapter 1 – Introduction 1 Chapter 2 .Objectives and Rationale of the Study 7 Chapter 3 – Review of Literature 10 Chapter 4 – Research Methodology Literature …………………………………………….4 Research Tools 46 47 49 52 53 Chapter 5 – Research Findings 55 Chapter 6 – Summary &Conclusion References Annexure : Questionnaire Annexure 66 73 74 74 4 .
In this context. service levels. although important. Outsourcing can provide the right blend of cost. to deal with the nitty-gritty of HR management. it makes sense to focus only on the organization’s core competencies and outsource non-critical business activities. can be outsourced to third party vendors. Deciding which functions to offload and which firm to outsource is also a major decision. every organization is aiming at achieving productivity by enhancing return on investments and achieving the economies of scale. routine administrative work. Therefore. training and development to a third party who have expertise in these respective fields. so they opt for outsourcing." Today. 6 . HR outsourcing has the potential to benefit organizations that want to transform their ability to manage human capital. making payroll. The Human Resource (HR) department is critical for employee satisfaction in any firm. the budgets or the inclination. Some businesses don’t have the staff. experience and economies of scale that allow companies to move away from administrative activities and focus on more strategic issues.INTRODUCTION HR OUTSOURCING: AN INTODUCTION “HR outsourcing is a process of outsourcing involving particular tasks like recruitment.
risk management (workers’ compensation. HR outsourcing can be segregated into two broad categories: Transaction and administration outsourcing and HR consultancy. employee benefits (Health.HR functions include Payroll administration (producing checks. handling taxes. background interviews. exit interviews and wage reviews). dispute resolution. This kind of service is more prevalent in the Indian market. human resource management (hiring and firing. cafeteria. and constitutes services like payroll and benefits. Medical. office policies and handbooks) and others. dealing with sick time and vacations). safety inspection. etc). Life insurance. In the value chain. it 7 . Transactional outsourcing is more of day-to-day or month-to-month requirements.
surveys. logistics management. call centers and database management. receivables management. fixed assets administration. employee benefits administration. telemarketing. 8 . HR outsourcing can happen in various areas such as payroll. payroll processing.falls at the lower-end compared to HR consultancy. the most common processes outsourced are related to training. and statutory compliance. hardware maintenance. network management. although it happens to be an essential function. benchmark studies. It is a fact that companies continue to manage the strategic and policy functions of their HR departments in-house. In India.
o E-services .HR outsourcing Services could fall into one of four categories: o PEO . with the PEO handling HR aspects and the business handling all other aspects. o ASP . on the web and rent it to users.BPO refers to all fields.Application Service Providers (ASPs) host HR software.E-services are those HR services that are web-based. but specifically for HR. The PEO and business owner are partners.A Professional Employer Organization (PEO) takes legal responsibility for employees. a BPO would ensure that a company has access to latest technologies. 9 . o BPO .
Risk Management Talent Shortage Globalisation M&A Org. Changes Technology Advancement 10 .HR OUTSOURCING ASSISTING CHANGE: Cost of Technology. Desire for Best Practice Support Desire/Push to move to Strategic Planning Use of HR Outsourcing Need to remain flexible.
Accenture etc in shaping the Indian HR outsourcing industry. challenges. it makes sense to focus only on the organizations core competencies and outsource non-critical business activities.OBJECTIVES AND RATIONALE OF THE STUDY OBJECTIVES & RATIONALE OF THE STUDY Today. The study aims at studying the HR outsourcing phenomena and how companies in India are reacting to this phenomenon. It will also talk about the role of outsourcing outfits like India Life Hewitt. The study will throw light on the various aspects like the trends. benefits and other issues like process and vendor selection criteria used related to HR outsourcing in the context of the Indian industry. every organization is aiming at achieving productivity by enhancing return on investments and achieving economies of scale. Wipro. In this context. Various objectives of conducting the study are: - 12 . Ma Foi. Corporate focus on the implicit and explicit costs of human resources has never been greater and outsourcing employee benefits administration can create greater efficiency while decreasing costs. Xansa.
o To study the criterion used by the Indian companies in selection of the HR process to be outsourced. 13 . o To study the impact of HR outsourcing on the internal customers in the Indian companies. o To find out the various benefits being derived out of HR outsourcing by the Indian companies. o To study the trends of HR outsourcing prevailing in the Indian industry. o To study the various reasons deterring the Indian HR outsourcing industry to grow at the pace of the global market. o To study the criterion used by the Indian companies in selecting the vendor for outsourcing their HR processes. o To ascertain the future of the HR outsourcing industry in India and the factors responsible for molding it.o To study the various challenges faced by the Indian industry pertaining to HR outsourcing.
As people become more critical to the success of a company.REVIEW OF LITERATURE LITERATURE SURVEY: Outsourcing is a strategic decision to give a task or activity to an independent contractor who determines how best to do the task or activity. an ever-changing set of outsourcing solutions is now available to accelerate enterprise effectiveness. HR Outsourcing is increasingly seen as a key enabler of people and team transformation. The firm and the indpendent contractor become partners and may establish a long-term relationship. 15 . BENEFITS OF HR OUTSOURCING: As the Human Resources Outsourcing market rapidly evolves. Properly defined goals that are supported by innovative outsourcing can drive a company to the next level of enterprise effectiveness. the human resource function will have to progress from administration to strategy if the organization it supports is going to remain competitive.
focusing on strategy. Traditionally. and offering services they could not offer. instead of tangible. Successful business owners have learned. bottom-line assets. The company gets more out of its business when it gets more out of its people. Outsourcing HR functions allows a company to focus on its core competencies and provides administrative relief from many employer-related responsibilities.The advantages are clear and compelling: improved business focus. people have been viewed as liabilities or expenses. saving money. lacking experience in-house. Statistical analysis by Watson Wyatt Worldwide. that their employees have a direct impact on their profitability. so that the company can concentrate on developing strategies that provide competitive advantage to it. and guidance from experts from across the business spectrum. shows a clear relationship between the effectiveness of a company’s people practices and the creation of superior market value. improving accuracy. taking advantage of technological advances. improving compliance. 16 . however. more productive use of time and resources. which developed the Human Capital Index to provide a standard for measuring a company’s people practices.
Outsourcing is the great equalizer for small to medium-sized firms. the owner gains freedom to focus. Growth-oriented entrepreneurs can benefit tremendously. with 26. The 2006 survey of executives at the IDC Midwest Conference in Chicago showed nearly 85 percent of the respondents saved as much as they spent on outsourcing. Not only do employees frequently gain access to better benefits. many companies experience a strong return on investment. And the savings. Legal and regulatory compliance has become an overwhelming task. 17 . but it needs professionals who cut through the clutter of HR practices to learn which have the most positive impact on its business. according to nearly 95 percent of the respondents. but HR management has become a colossal task.4 percent reporting a savings of twice as much.Once HR and other operations are outsourced. according to a recent survey of American executives. went toward operational performance and innovation. demanding considerable resources. which improved shareholder value. Outsourcing ―people strategies‖ can help a company gain a competitive advantage. and time spent on administrative obligations is time spent away from growing business. Strong human resources practices have the potential to increase a company’s productivity and profitability.
benefit equation not clear. 18 . o Cost. o Possibility of security breaches. o Lack of psychological acceptance. Various reasons that deter many organizations are: o Fear of loosing jobs o Loss of sensitive information to public/ competition. Many companies outsource only a bit of their requirements. o Ethics and quality of outsourcing vendors.DETTERANTS OF HR OUTSOURCING: There exists a set of basic reasons hampering the growth of HR outsourcing.
High Str ate gic Im por tan ce ??? Insource Outsource Low Contingent Employees Various considerations to be taken into account while outsourcing were given by Baron & Kreps. According to this matrix. strategic importance of the activity and interdependence on other activities are the two factors on which the decision of outsourcing should be based. The activities that have high strategic importance and high interdependence on other activities should be kept in-house and the activities that have low strategic importance and low interdependence must be outsourced. 1999 : Low High Interdependence 19 . 1999 gave this matrix which talks about how and when to outsource activities.DECISION FOR OUTSOURCING: Baron & Kreps.
o Does learning from this activity spill over to an important ―core‖ activity? o Can the outsourcing relationship be reversed and the work brought back inside when conditions change? o Can the outsource supplier adjust more quickly to changing labor or market demands than we can? o Do we have a strong clan-like culture that would be weakened with employees who have different values or interest? 20 .
Task requires great deal of firm specific human capital or access to proprietary information. 21 .Outsourcing may not be appropriate when: The task is a core activity critical to strategy or technology. core employees and are similar socially to them. Tasks where the employees work in close proximity to regular. Task is highly interdependent with core activity due to technology or work design.
Business environment analysis . analysis of the work process which is to be outsourced and risk analysis.Risk analysis .Accountability & performance measures for both Vendor & Company .Strategic . The expected service levels are defined and accountability & performance measures for both the vendor and the company are set.Work Process relationship management Solution management management -Performance Analysis & Reporting . 22 .Work process analysis .METHODOLOGY FOR HR OUTSOURCING: Situation Analysis Solution Design Design of Performance Measures & Contract Solution Solution Delivery Performance Management .Service levels . o Solution design o Design of performance measures & contract – It includes preparation of the HR outsourcing contract.Performance GAP Resolution process The methodology of HR outsourcing involves the following steps: - o Situation analysis – It includes business environment analysis.Vendor-Company .Resourcing .Work Process design .Project .Transactional .
23 .o Solution delivery o Solution performance management – It includes the management of the vendorcompany relationship.
HR OUTSOURCING DELIVERY PROCESS: HR O Soluti ons Deliver ables Performance Measurement & Management Process BSC KPI SLI • Process • Procedures • Rules • Project Management • Performance Management Consultant s Doers Admin Work Process Resources People Hr tools Project Dedicated Expertise Delivery Process Support 24 .
"There has also been a transition on its user acceptance. Besides.‖ he adds. the company could re-deploy their trained HR resources to core processes. it makes business sense to focus only on the organization’s core competencies and outsource non-critical business activities. many multinational companies are fast adopting these practices. routine administrative tasks. the director and head of Human Resources of Cognizant Technologies says. although important.PRESENT SCENARIO OF HR OUTSOURCING IN INDIA: The general opinion among Indian companies is that it is economical to manage all their HR processes internally. Consequently. Crossdomain Solutions says that now CXO’s realise that HR teams typically spends over 80 percent of its time in managing tactical and transaction oriented HR operations. Pramode Sadarjoshi. ―Today.‖ Experts believe that in present times HR outsourcing is undergoing a transition phase. head of marketing and alliances. In this context. where it is moving from a 25 . Typically. there is not much emphasis on outsourcing. Therefore. are the ones that use HR outsourcing in a significant way. every organization is aiming at achieving productivity by enhancing return on investments and achieving the economies of scale. ―If these tactical processes are outsourced. can be outsourced to third party vendors. very small companies (which do not have the competency to staff a fullfledged HR department) and very large companies (who wish to outsource all routine HR processes so that they can concentrate on core issues). Sateesh R Kurugod.
Over the years. because companies are suddenly waking up to the fact that their HR policies are not in step with the times. All this reflects on the growth of this sector. 26 . A few companies have tried mending their HR management system on their own. you keep unearthing more anomalies. after IT and the telecomm industry. That's where outsourcing can step in. If you have a problem managing your HR and bringing the existing system up to scratch. many companies wrap up their HR functionalities as something that happens in the back office. why not let a third party worry about it? What comes with HR outsourcing is better management at a lower cost Implications of HR outsourcing for India need to be looked at in two parts — economic impact and HR impact. HR outsourcing comes third in the list of potentially high paybacks. and do not give enough attention to the infrastructure that essentially props up its employees. leading to antiquated HR management systems. it is time for this mindset to change. this has bred neglect. Now.corporate domain to public sector undertakings and the government sector. and a major overhaul is called for to keep pace with company acquisitions and mergers. However. but they soon discovered that it is like opening Pandora's Box. more you inquire into the state of HR policies.
India must be the country hiring the most in the world. CEOs are willing to spend as much as it takes to manage their people and people processes well. With more and more companies looking to rationalize employees on their payroll. at least for now. allowing the client to streamline their internal processes and concentrate on generating profits in their core business. HR in India would rank as the most dynamic and turbulent in the whole world today.The economic impact is positive. so many to train. It may never get any better for HR. and so many to retain. HR in India has come of age. There are so many new jobs. if ever. Companies to whom organizations outsource their human resource function possess the knowledge and resources to expertly perform part or all of a client’s human resources function. It is creating more jobs and increasing earnings for the country. In fact. What is quite obvious is the fact that cost arbitrage will not be the driver for this trend within India. After many years of fighting for identity. even if a large organization were to outsource to a small operator. HR and organization building issues are center of the plate in any Indian CEOs agenda today. 27 . so many to hire. given that India is the beneficiary of the global outsourcing wave. The second part of the India impact is from the HR point of view. Human Resource outsourcing is slowly becoming the buzz in India.
with companies outsourcing a few selected low-end HR processes.Estimates show that the latent size of HR outsourcing in India is about $ 2 billion with a current market $ 27 million and it is growing at the rate of about 50 per cent. HR outsourcing in India has not seen the required momentum and is limited to a trickle effect. or are unaware of the players operating in the area or are unaware of the probable value obtained from doing so. Companies which haven’t joined the HR outsourcing bandwagon are either unfamiliar with the process and procedures of HR outsourcing. 28 .
HR outsourcing will go up to 2560 million dollars (Garter 2004).Projections show that in the Asia Pacific region. The projections for HR outsourcing processes are mentioned below: - Pay roll services Benefits administration Education & training Recruitment & staffing Personnel administration Other HR functions Total 761 536 556 348 167 192 2560 29 .
including payroll and benefits processing. senior HR staff. o The outsourcing of HR processing. Here people are also not very clear about what exactly is manpower outsourcing all about. 30 .Some key findings of the Outsourcing Asia-Pacific online survey that was conducted by Hewitt in June 2002 with regards to the Indian market: - o Outsourcing of the complete HR function was prevalent among foreign companies that have established operations in India. the general opinion among the Indian companies is that it is still economical to manage all their HR process internally. o Outsourced expertise where staff expertise is provided as an outsourced service rather than processing services was observed particularly among small and medium sized companies that find difficulty retaining skilled. Even though across the globe companies are realizing that headcount is directly related to the revenue and are outsourcing most of their transaction and administration related work.
India has immense potential as more than 80% of fortune 1.000 companies will discuss offshore BPO as a way to cut costs and increase productivity. Research firm Gartner has forecast HR BPO to reach $51 billion and represent 39% of all BPO revenue by 2004-end. 31 . Exult and Hewitt have begun setting up operations in India. not many companies have leveraged the offshore strategy. where bills are charged on the workers servicing a client in the BPOs. Sensing the potential. The revenues in the HR outsourcing space are projected to increase to $3. outsourcing of human resource services or HR BPO is emerging as the next big opportunity for Indian BPOs with the global market in this segment estimated at $40-60 billion per annum according to experts. global BPO players including Fidelity. HR BPO comes to about 33% of the outsourcing pie. Despite huge potential.4 billion.5 billion by 2008 according to a Nasscom-McKinsey survey.GROWING IMPORTANCE: After customer care services and medical transcription. In HR BPO. The main reasons for not leveraging the offshore benefit have fabeen companies being undercapitalized or not knowing enough about the offshore business. This is in sharp contrast to a typical customer care center. most HR BPO players had not leveraged the offshore advantage as yet. Even if 10 per cent of HR outsourcing is off shored in the next 5 years. revenues depend on the number of employees the clients have. However. offshore opportunity can be anywhere around $1.
Take the case of Aptech. which have gone ahead for manpower hiring outsourcing practices. Sun. Escosoft has outsourced payroll processing. are Cisco. the head of HR for Xansa India. Some of the key companies. Escosoft and Legato Systems. the company has been able to save a lot in terms of reducing paperwork and interaction with government agencies. While LG Soft India has outsourced its PF management. execution of training programmes and survey conduction. There are many others who do not believe that HR outsourcing is necessary. Although it is not a very huge growth.Research proves that the market for HR outsourcing in the APAC region could grow from $1. According to Shubho Kundu-senior general manager HR of LG Soft India. LG Soft India. GE. Besides. i2.14 billion in 1999 to $2. which is planning to take a plunge in HR outsourcing business and offer services to its parent organisation.56 billion in 2004. which has not considered HR outsourcing as the company feels that HRD is strategically linked to its business. there are other companies like Xansa India. 32 . which is of strategic importance to the organization should not be left for outsiders or the so-called outsourcing partners. According to this company any job or function. says that the move showcases the robustness of the HR department to handle such critical applications. Binnoo Wadhwa. Honeywell. it has still shown an upward trend.
DRIVERS OF SUCCESSFUL HR OUTSOURCING: 34 .
Its understanding of the company’s priorities. For some businesses. Some things a company should consider when evaluating a firm include: o The range of outsourcing services it offers. o The expertise it has in the particular industry.SELECTION OF HR OUTSOURCING VENDOR: Selection of the right vendor is a very important factor in making it a successful venture. Other companies look for a cultural fit or a commitment to quality. o The flexibility of its contracts. It must be kept in mind that an HR firm is an extension of a company culture. o Its general HR experience. 35 . so the company must try to find one that fits its image. cost is the deciding factor in vendor selection. o Its available resources.
the company’s ability to stay current becomes more difficult and costly as extensive resources are required to maintain and apply this knowledge. they are finding it increasingly difficult and costly to keep track of. As companies begin to operate in more countries. human resource management (HRM) systems.KEY QUESTIONS ASSOCIATED WITH HUMAN RESOURCE OUTSOURCING: Six important questions companies must focus on as they decide whether to outsource some or all of their HR processes: What are the external forces that are driving the company to examine the opportunity for outsourcing HR activities? Globalization. and manage. restructuring. the variety of benefits and regulatory requirements in each area. hiring guidelines and HR contact centers. Allowing an outside party that has already built existing 36 . Further. pension plans. For example. a multinational organization that has been built over time from a series of acquisitions and buyouts can find itself with a bewildering mix of compensation packages. as compliance directives and legal regulations change in each of the countries in which the company operates. increased administration complexity and cost pressures are all driving companies to consider the use of HR BTO.
After evaluating the total cost associated with upgrading and maintaining these systems. Outsourcing provides an opportunity for companies to leverage the cost base and experience of an outside provider. particularly those with lower labor costs. As new competitors enter the market. overall cost pressures are forcing companies to identify new methods for cutting administrative expenses. many companies’ profit margins are put at risk. while maintaining or improving service levels.capabilities in these areas to manage the process becomes an increasingly attractive proposition. What are the initial drivers that make HR outsourcing an attractive proposition? A number of internal drivers are also pushing firms to investigate HR Outsourcing. A number of recent studies suggest that reducing costs is the primary benefit that companies seek when outsourcing HR processes. 37 . companies are increasingly turning to outside providers to manage their HRM systems and take responsibility for upgrades and system availability. some companies see it as a means of controlling the cost and effort associated with operating their HRM systems. Finally. For example. which can potentially lower the cost of delivering HR services. prompting them to examine closely all activities where cost reduction is possible.
they would prefer to ―rent‖ these applications from outsourcing providers who have already invested in development. outsourcing offers one way to build a new sense of focus within HR organizations. Fourth. Sourcing this capability from a vendor could offer lower costs and a higher likelihood of staying current on recent developments. companies need to increase their ability to recruit without having to bring on a number of full-time recruiters (because. which many companies may not have in-house. recruiters are the first people exposed to layoffs during a business slowdown). Many HR organizations believe being able to reengineer their internal 38 . Third. they are looking to increase process capacity without commensurate increases in full-time headcount. have the ability to keep up with the latest technology solutions and can provide best-in-class tool sets. the level of complexity involved in administering complicated programs and processes in multiple regulatory environments and managing data across borders often requires sophisticated expertise. Also. typically. as organizations try to shift resources from administrative to more strategic activities. companies want to reduce the risks associated with business volatility. Having gone through numerous hiring/layoff cycles. For example.Companies are also recognizing that they are unable or unwilling to bear the cost of developing employee or managerial self-service tools.
outsourcing efforts can be used as motivation to move HR service delivery toward a more accountable. outsourcing serves as a catalyst for change. In an outsourced environment. Further. it is helpful to establish a formal set of evaluation criteria. defined contribution and retiree services) and health and welfare administration. Implementing and maintaining a client service orientation and metrics-driven approach are difficult for most HR functions to achieve on their own. Therefore. these skills are critical in determining the success or failure of the arrangement. these studies found that HR processes closely associated with employee evaluation and communications are the least likely to be outsourced. several studies have indicated that the processes most likely to be outsourced are retirement program administration (including defined benefit. a management professor at the 39 . Paul Adler. the internal HR organization can focus its limited resources on delivering the services that truly provide strategic benefits to the entire company. by allowing a vendor to manage many of the administrative processes that take time and energy away from HR organizations. To make the right decisions on which processes to outsource at a particular company. However. results-oriented focus. How should the company identify potential processes to be outsourced? Determining the scope of the outsourcing effort is among the most important and difficult decisions companies make. Recently. for many organizations.processes and deliver strategic HR services is simply too much for one organization to undertake at the same time. Lastly.
equipment.University of Southern California. capacity. suggests six dimensions an organization can use to evaluate HR processes when identifying their potential for outsourcing: - a) Dependency – are there specific assets that require dedicated facilities. training or investments? b) Spillover – is there confidential information or sources of advantage that could be leaked to competitors? c) Trust – is there a positive relationship between the two organizations that could reduce transaction costs associated with contracting and monitoring? d) Competence – can greater vendor capability in process execution lead to improved results? e) Core capability – is this process viewed as a differentiator for the organization in the marketplace? 40 .
f) Commitment/flexibility – is the process stable enough so that changes in capacity/technology are not required on a frequent basis?
Who should be involved in making the decision to outsource HR processes?
Within the HR organization, the CHRO (or equivalent title in the organization) usually plays an active role in making the outsourcing decision. Ultimately, it is the CHRO’s responsibility to determine whether the outsourcing arrangement will enable the HR organization to provide cost-effective, quality service to its internal clients, while, at the same time, support the organization’s larger strategic objectives. In addition to the CHRO, the HR Operations Leader is often involved in developing the specifications of the outsourcing arrangement. While the HR function clearly has primary responsibility in this area, two other individuals play important roles in the outsourcing decision.
The Chief Financial Officer often participates in the decision-making process, as entering into a long-term contract with an outsourcing vendor can have potentially significant financial ramifications for the corporation. In addition, the Procurement Manager assumes a prominent role during the vendor selection, negotiation and contracting process, leveraging experience in developing terms and conditions that are favorable to the organization.
Two groups of individuals were seen as influencing, if not directly participating in, the HR BTO decision. Given the importance of integrating HRM systems with various vendor-driven applications, the Information Technology (IT) organization should have input in the HR Outsourcing decision process. IT must determine how the outsourcing arrangement will impact current and future technology investments and plans. Also, the leaders of the various business units supported by HR usually provide input into the decision, as their employees are the ones most likely to be impacted by changes in processes and service levels.
Typically, the CEO and the Board of Directors are responsible for final approval of the decision to outsource HR processes. This is particularly true if a significant number of processes are involved, if the outsourcing arrangement will impact a large number of jobs throughout the organization or if the arrangement will require communication with important external stakeholders such as industry analysts and financial markets. A significant outsourcing deal can signal changes not only in overall strategy and approach to managing human capital, but also efforts to cut costs, focus on core competencies and mitigate risks.
a company develops a standard experience questionnaire that it sends to multiple vendors early in the evaluation process to obtain initial insights and compare vendors’ capabilities. These include: the vendor’s track record for delivering service. Given the impact of these types of arrangements. Information that is usually collected as part of this process includes understanding the 44 . the costs associated with the outsourcing service and the willingness of the vendor to guarantee service levels. the CEO and Board of Directors need to understand and articulate the rationale for the decision. recommendations from other companies. As part of this activity.Further. How should the company evaluate potential vendors? Once the right individuals have been identified to make the outsourcing decision. flexible contracting. relevant industry experience etc. Other criteria highlighted by these studies included: the vendor’s technological capability and competence. the next major step in the process involves selecting an appropriate vendor. process expertise. A number of recent studies have highlighted three primary criteria that companies use to evaluate vendors. To evaluate vendor capabilities in these areas companies undertake a host of activities including: Distributing experience questionnaires. a decision to outsource components of the human resources organization may be perceived by the others in the organization as the first step toward outsourcing other noncore processes.
Companies are also looking for signs that the vendor is a potential takeover candidate. and approach to contract development. Conducting a financial and credit review of the vendor. Given the sensitivity of the employee data associated with an HR BTO relationship. have developed and refined these types of questionnaires to quickly ascertain a vendor’s particular level of experience. companies should conduct a review of the vendor’s security and compliance policies and procedures. Conducting a security and compliance review.vendors’ areas of expertise. the potential client examines the vendor’s history of fiscal responsibility and regulatory compliance. having participated in many vendor selection efforts. as an acquisition can often redirect senior management attention and increase the complexity of the ongoing relationship. companies should investigate whether a vendor has a demonstrated knowledge of. and the governmental/industry regulations and standards associated with the privacy of employee data. its credit rating and analysts’ predictions of ongoing viability. client experience. the regulatory 45 . There are a number of third-party consultants who. service level creation and how they address changes in project scope. During this review. and is in compliance with. As part of this assessment. Companies undertake this activity to determine whether the vendor has the financial resources to maintain appropriate service levels throughout the lifespan of the contract.
evaluators can get a sense from their counterparts at those other firms as to the vendor’s flexibility. Conducting reference checks/site visits to other clients. ease of partnership and whether the vendor has met the client’s overall expectations. This allows them the opportunity to validate other clients’ experiences and identify potential issues in working with the vendor. They also should determine if the vendor has been fined as a result of noncompliance and if the vendor has access to regulatory and legal specialists on staff or on retainer.requirements of each of the countries in which it operates. Organizations considering outsourcing often speak with or visit current clients of vendors under consideration. Visiting processing/contact centers. evaluated and given feedback to continually improve their performance. This gives the prospective client a sense for how the vendor is organized and what technology is being used. Many companies find it quite useful to visit the actual locations where the vendor is answering employee calls and processing documents. These visits also provide potential clients a glimpse at the level of professionalism and service that their internal clients will likely receive and the level of investment the vendor is putting into its own staff and operations. 46 . This first-hand view can be coupled with assessments of the attrition rates at the center and how service center staff are trained. During these meetings. willingness to support new client programs.
These face-to-face meetings can help potential clients understand the managerial style of their counterparts and the extent to which specific individuals have authority to act on behalf of the vendor in addressing client concerns. potential clients should meet the individuals who will be responsible for both service delivery and the overall account relationship. Given the importance of personal relationships between client and vendor. Meeting potential delivery team leaders. Further. should the potential client decide to engage the vendor. 47 . these initial face-to-face meetings can begin to lay the groundwork for the type of trust building that is critical during the transition phase and subsequent ongoing operations.
the organization needs to identify the roles and skills that will be required to transfer the outsourced activities to the vendor and oversee the vendor relationship. the organization needs to identify and select individuals to lead the transition and ongoing management of the outsourcing arrangement. it is beneficial for the organization to obtain the time and commitment of these individuals and their managers early in the process. Assembling the team that will lead the outsourcing effort. Initially. as they often have other significant responsibilities and need to be made available to work on the outsourcing effort. rather than waiting for the final contract to be signed. they need to pay special attention to preparing the organization for the eventual transfer of people. Communicating the effort throughout the HR organization and the lines of business. Many organizations fall into the trap of developing their communication strategy after the outsourcing agreement is put into action. Finding these individuals can be a time-consuming effort. However. as they recognize that rumors will likely surface long before any formal discussions are 48 . processes and/or technologies to the vendor. Therefore. How should the company begin to prepare itself for HR outsourcing? As executives get closer to making the decision to outsource HR processes. Once the decision to outsource as been agreed upon. effective companies start executing a tailored communication plan far earlier in the process.
both internal HR process experts and individuals with experience in obtaining information from HRM systems need to be involved. Collecting this data can be a time and labor-intensive process that often must be accomplished in a relatively short amount of time. To develop a compelling business case for HR BTO. While outside resources can be used to facilitate this collection. Organizations need to develop formal mechanisms for communicating to HR leaders and staff during the early stages of an outsourcing effort since these individuals may be called upon to provide data or reallocate their time to work on outsourcing related tasks. as they may have insight into potential areas of resistance and concern that can have a negative impact on the outsourcing effort. Further. organizations often need to obtain a clearer understanding of their current spending for HR activities and measure levels of operational effectiveness. 49 . Dedicating these scarce resources is well worth the effort. Also. many organizations do not have a strong sense for the industry and competitive benchmarks that are useful in comparing HR cost and performance across companies. as it can help ensure that the organization is entering into a financially beneficial arrangement. Gathering data on the current state of the HR organization. organizations need to listen closely to informal influencers within the HR organization and business units.in process.
RESEARCH METHODOLOGY 50 .
India currently is facing an economic boom and almost every industry is at its best state. With respect to the Indian scenario it is still at a nascent stage but is expected to grow rapidly. Wipro are entering this arena of HR outsourcing in India. Convergys. Accenture. Hence there is a need for the companies operating in a highly competitive and dynamic environment to focus on their strategic aspect and core competencies. the HR outsourcing industry is very small but it is expected to grow in the future. This is evident from the fact that various big players like Hewitt associates. trends and challenges‖ is a study aimed to get familiar with the current scenario of HR outsourcing in Indian companies and the potential future for the industry vis a vis the global scenario. 51 . Due to the presence of some factors in the Indian market.HYPOTHESIS: “HR outsourcing: benefits. The companies can do this by outsourcing the unimportant and nonstrategic tasks. Xansa. HR outsourcing is the next big thing to happen and is rapidly gaining momentum especially in the US.
o HR outsourcing is expected to grow at a rapid pace in the Indian industry. o Indian companies derive lot of benefits out of HR outsourcing. o Cost is the main criteria for vendor selection for HR outsourcing by Indian companies.The study is based on the following assumptions and hence the hypothesis for the study is: - o Indian companies are outsourcing most of their HR processes. o Internal customers of the company are satisfied with the decision of the company to outsource their HR processes. 52 .
relying on secondary research such as reviewing available literature and/or data. management or competitors. Although the results of qualitative research can give some indication as to the "why". Exploratory research can be quite informal. It is the initial research. it cannot tell us "how often" or "how many". case studies or pilot studies. and perhaps generate hypotheses (definition of hypothesis) to be tested. employees. before more conclusive research is undertaken. Exploratory research helps determine the best research design. data collection method and selection of subjects and sometimes it even conclude that the problem does not exist. It allows the researcher to familiarize him/herself with the problem or concept to be studied. or its real scope is as yet unclear. or qualitative approaches such as informal discussions with consumers. focus groups.RESEARCH DESIGN: Exploratory research Exploratory research is often conducted because a problem has not been clearly defined as yet. and more formal approaches through in-depth interviews. projective methods. "how" and "when" something occurs. The results of exploratory research can provide significant insight into a given situation. 53 .
It provides the number of times something occurs. descriptive research is used when the objective is to provide a systematic description that is as factual and accurate as possible. Surveys The study would include exploratory and descriptive research. or frequency. not what caused it. where and how" of a situation. The study hence comprises of: 54 . Therefore. The two most commonly types of descriptive research designs are 1. But it can only describe the "who. when. what. Exploratory research would be done by reviewing all the relevant literature on HR outsourcing. Observation 2. lends itself to statistical calculations such as determining the average number of occurrences or central tendencies. Descriptive research would be conducted through a questionnaire.Descriptive research Descriptive research or statistical research provides data about the population or universe being studied.
o Secondary data analysis – Secondary data is collected from various research papers. journals and Internet. o Questionnaire – The questionnaire is a mix of objective and open-ended questions. It is aimed at the employees of the HR department of various organizations in the Delhi and NCR region. This data aided in understanding the subject better and building the base for collection of primary data and drawing conclusions. 55 .
IT. o The data is collected from companies belonging to various industries (Power. o The respondents belong to the middle or top-level management in the HR department. o The data collection includes in its scope both government and private companies. o HR personnel from the following companies would be the respondents for the study: o NTPC o Xansa o HCL Technologies o Radico Khaitan etc 56 . financial etc) in order to have an idea of the complete Indian industry as a whole. Liquor.SAMPLE SIZE: o The primary data is collected from twenty-five HR personnel of various companies. o Data would be collected from companies operating in the Delhi and NCR region.
The questionnaire consists of both open ended and objective questions on HR outsourcing. o Criterion for selection of the process to be outsourced.RESEARCH TOOLS: The study includes exploratory and descriptive research. Questionnaire is used as the tool for collecting primary data from employees working in HR department of different companies. The questions cover all the aspects related to HR outsourcing: - o Process that has been outsourced. 57 . o Benefits derived by them from outsourcing of HR processes. o Criterion for selection of vendor for outsourcing. Exploratory research would be done by reviewing the literature related to HR outsourcing and descriptive research would be done by a survey of the HR personnel of various organizations through a questionnaire.
o Reasons for not outsourcing in case the company has not outsourced any of their HR process. o Outsourcing by the competitors and business partners if any. o Person/s involved or responsible for taking the decision for HR outsourcing. 58 . o Impact of HR outsourcing by the company on its employees.
RESEARCH FINDINGS 59 .
11 out of 25 i.Q1. 60 . 44% of the respondent’s companies have outsourced their HR processes. HR OUTSOURCING YES 44% YES NO 56% NO The respondents were asked whether they outsource their HR processes.e. Q2.
lack of reliability by 7. Hence cost. 61 . security breaches were given as a reason by 9.REASONS FOR NOT OUTSOURCING LACK OF QUALITY SECURITY BREACHES MARKET NOT MATURE COMPANY CULTURE LACK OF RELIABILITY DATA PRIVACY COST 5 9 1 4 7 5 12 Series1 The respondents gave the above reasons for not outsourcing their HR processes. 12 out of 14 respondents gave cost as a reason for not outsourcing. data privacy and lack of quality by 5. lack of understanding by 4 and maturity of market by 1. security breaches and lack of reliability were identified as the major reasons for not outsourcing by companies in the Indian market.
HR PROCESSES OUTSOURCED BY COMPANIES 7 6 5 4 3 2 1 0 2 2 1 4 6 RECRUITMENT PAYROLL PROCESSING TRAINING DELIVERY COMPENSATION SURVEYS STATUOTARY COMPLIANCE Series2 Recruitment was found to be the mostly outsourced process followed by training delivery. 4 replied that they have outsourced their training process. compensation surveys and statutory compliance.Q3. 62 . 2 replied they have outsourced compensation surveys and payroll processing and 1 respondent said the they have outsourced statutory compliance. payroll processing. 6 respondents replied that their company has outsourced the recruitment process.
Hence the study throws light on the fact that HR outsourcing is an important decision for the company and mostly involves top management. 2 out of 11 said that the middle management was involved in the whole process of HR outsourcing and 1 respondent said that both the middle and top management were involved. 63 .Q4. PEOPLE RESPONSIBLE FOR HR OUTSOURCING DECISIONS BOTH 9% MIDDLE MANAGEMENT 18% TOP MANAGEMENT MIDDLE MANAGEMENT BOTH TOP MANAGEMENT 73% 8 out of 11 respondents replied that the top management was responsible in taking decision related to HR outsourcing.
64 . 3 respondents stated that the processes that are standard across industries are outsourced and 2 said that process which are less interdependent on other processes are outsourced. CRITERION FOR PROCESS SELECTION 9 8 7 6 5 4 3 2 1 0 LITTLE CORE INTERDEPEN CAPABILITY DENCY Series1 2 9 RISK OF DATA EXPOSURE 5 NEED FOR PHYSICAL PRESENCE 1 STANDARD PROCESSES 3 9 out of 11 respondents stated checking core capability as a criterion for selection of the HR process to be outsourced i. checking whether the process is a core capability or not before outsourcing. Q6. I respondent said that those processes that require physical presence of the HR personnel are not outsourced. Hence core capability and risk of data exposure were identified as a criterion for selection of process to be outsourced by maximum respondents. 5 respondents responded that the processes which if outsourced pose a risk of data exposure were not outsourced.Q5.e.
9 respondents stated experience as a criterion. . competence is considered as a criterion for selection of vendor for HR outsourcing. and 7 stated past records and 2 recommendations from other companies. Hence competence and technological capability.CRITERION FOR VENDOR SELECTION 12 10 8 6 4 2 0 COST COMPETENCE RECOMMENDATION S 65 PAST RECORDS EXPERIENCE Series1 According to 10 out of 11 respondents. 8 stated cost. relevant industry experience and cost of services were identified as a criterion for evaluation and selection of potential vendor by the company for HR outsourcing.
Hence focus on the core processes and saving of time were identified as major benefits of HR outsourcing.Q7. 3 said that it saves cost and 2 said that it requires less manpower to be employed in the company. 66 . BENEFITS OF HR OUTSOURCING 12 10 8 6 4 2 0 FOCUS ON CORE ACTIVITIES TIME SAVING COST SAVING EXPERTISE LESS MANPOWER NEEDED 3 2 7 6 Series2 11 All the 11 respondents responded that HR outsourcing makes them focus more on their core activities. 7 said that it saves their time. 6 said that HR outsourcing provides expertise to the company.
HR OUTSOURCING BY COMPETITORS DON’T KNOW 18% NO 18% YES 64% 7 respondents replied that their competitors also outsource their HR processes. 67 .Q8. 2 replied that their competitors don’t outsource any HR process and 2 replied that they don’t know.
Q10. FEEDBACK FROM EMPLOYEES ON HR OUTSOURCING 8 3 Seri es1 YES NO 8 respondents replied that they have not taken feedback from the employees of the company on the HR outsourcing done by them.Q9. 68 . 3 respondents replied that feedback has been taken in their organizations from the employees on the HR outsourcing done.
IMPACT OF HR OUTSOURCING ON EMPLOYEES 8 6 4 4 2 0 0 7 Series1 SATISFIEDDISSATISFIED NEVER ASKED 7 respondents said that they have not taken any feedback from the company’s employees on the HR outsourcing done. 69 . 4 said that the employees of the company were satisfied with the HR outsourcing done by the company and no respondent replied that their employees were dissatisfied with it.
SUMMARY AND CONCLUSION 70 .
Recruitment was found to be outsourced by maximum number of companies surveyed. 18% of the respondents said that the middle management was involved and responsible and 9% said that both the top and middle level management were involved. 71 . 73% of the respondents responded that top management was responsible for taking decisions related to HR outsourcing which further proves that HR outsourcing is an important decision for the company. 25 respondents were surveyed. not many companies in India outsource their HR processes. payroll processing.SUMMARY: HR outsourcing in India is gaining momentum but still the number of companies outsourcing their HR processes in India are few as compared to the global scenario. out of which only 44% replied that their companies have outsourced their HR processes. Other HR processes that are outsourced by Indian companies are training delivery. Hence it proved that despite of the rapid growth of HR outsourcing worldwide. statutory compliance and compensation surveys.
little interdependency with other processes and need for physical processes. 72 . Cost and security breaches were identified as the major reasons for not outsourcing HR processes by Indian companies. More focus on core activities and time saving were identified as main benefits of HR outsourcing to Indian companies. Other criterion used by Indian companies for evaluating potential vendors for outsourcing were past track records of the vendor. Competence & technical capability and relevant industry experience were identified as major criteria for selection of vendors for outsourcing HR processes. Core capability was identified as the major criterion for selecting the process to be outsourced i. Other benefits that were identified were cost saving. Other criterion used for selecting processes to be outsourced are standard processes. cost and recommendations from other companies.e. the process which is a core capability is not outsourced. inability of the vendor to understand company culture. immaturity of the HR outsourcing market were other reasons for not outsourcing. data privacy issues. availability of vendor expertise and need for lesser manpower in the organization. Lack of quality.
64% of the respondents replied that HR outsourcing is done by their competitors. 7 respondents said that their companies do not take feedback on HR outsourcing from their employees and 4 respondents said that their companies take feedback from their employees. The employees of the companies which outsource their HR processes are usually satisfied by the outsourcing done. Most of the companies surveyed do not take feedback from their internal customers on the HR outsourcing done by them. All the 4 respondents whose company takes feedback on HR outsourcing from their employees said that their employees were satisfied from the HR outsourcing. 73 . 18% said that their competitors don’t outsource their HR processes and 18% said that they don’t know whether their competitors outsource their HR processes or not.
Indian companies are outsourcing most of their HR processes has proved incorrect. India has immense potential as more than 80% of fortune 1. HR outsourcing is expected to grow at a rapid pace in the Indian industry.CONCLUSION: Certain assumptions were made before the study. cost. lack of data privacy. security breaches. Exult and Hewitt have begun setting up operations in 74 . Hence the first hypothesis i. Sensing the potential. global BPO players including Fidelity. lack of reliability. The hypotheses were tested through a survey of HR professionals from various industries and the following results were found. HR outsourcing is not widely followed by Indian companies due to various reasons like lack of quality. The study proved that HR outsourcing is still as a nascent stage in India. The study gave the following conclusions: - HR outsourcing is at a nascent stage in India. Only 44% of the respondents replied that their company has outsourced some of their HR processes.000 companies are discussing off shoring as a way to cut costs and increase productivity.e. lack of understanding of the company culture by the vendor and immature HR outsourcing market etc.
English advantage. Hence the second hypothesis is proved true. expertise and removal of unnecessary manpower. 8 respondents out of 11 that outsource their HR processes replied that they have not taken feedback from the employees of the company on the HR outsourcing done by them. time saving and expertise of the vendor were the major benefits found out the survey as maximum respondents listed these benefits. Focus on core activities. Hence the 75 . Various benefits are derived by Indian companies from HR outsourcing like more focus on core activities. Various factors that make India a potential option are its education system. government policies. But growth in HR outsourcing by Indian companies would be slow vis a vis the global scenario. India would be a destination for HR outsourcing by foreign companies. time saving. Also the ones that had taken feedback were satisfied with the outsourcing done. cost saving. infrastructure improvements etc. Indian companies derive lot of benefits out of HR outsourcing. Hence the third hypothesis is proved true. Internal customers of the company are satisfied with the decision of the company to outsource their HR processes.India.
So cost is a criterion for selecting vendors for HR outsourcing by Indian companies but it is considered after competence and experience. Hence the fifth hypothesis that cost is the main criteria for vendor selection for HR outsourcing by Indian companies is proved incorrect. Competence and experience of the vendor were identified as the criterion used by maximum companies for vendor selection. Cost is the not the main criteria for vendor selection for HR outsourcing by Indian companies. 9 replied experience and 8 replied cost as a criterion. 76 . 10 respondents replied competence as criterion.fourth hypothesis is partly true as most of the companies included in the study did not take any feedback from the employees.
New Delhi. HR outsourcing in India: organized & unorganized sector.peoplemanagement.REFERENCES Aswathapa K. HRM. Dhanpat Rai & Co.Tata Kothari C.New Delhi. Delhi. IIMBangalore 77 .Chennai.com Journal of International Business Studies.N HRM .com www. Mumbai Srinivasan Vasanthi . Human Resource & Personnel McGraw Hill 3rd Edition Management.R Quantitative Techniques.Successful HR outsourcing means quality service.in www. Tata McGraw Hill Publishing Company 3rd Edition www.1978 Dessler Gary HRM.New Delhi.(P)Ltd 4TH Edition French L Wendell.co. Welingkar Institute of Management.Vikas Publishing House Pvt Ltd.Prentice Hall Of India Pvt Ltd .7th Edition Chabra T. All India Publisher & Distributors Regd.google.ibnbusiness.26:23-46 Mathew Mary.J HRM . New Delhi.3RD Bernardin H.
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