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In-house Recruitment vs. Outsourcing A Comparative Study

TABLE OF CONTENTS
INTRODUCTION ....................................................................................................................................... 2 Background to the Research ................................................................................................................ 2 RESEARCH DESIGN ................................................................................................................................... 2 Research Paradigm .............................................................................................................................. 2 Research Objectives ............................................................................................................................. 2 Research Questions ............................................................................................................................. 2 Research Methodology ........................................................................................................................ 3 Research Analysis ................................................................................................................................ 3 LITERATURE REVIEW ................................................................................................................................ 5 Introduction......................................................................................................................................... 5 Global Trends in HR ............................................................................................................................. 5 Strengths and Weaknesses of Outsourcing........................................................................................... 7 Strengths and Weaknesses of In-house Recruitment ............................................................................ 8 Recruitment Process Outsourcing ........................................................................................................ 5 Road Map to RPO ................................................................................................................................ 9 Factors affecting the decision to outsource ........................................................................................ 10 A CASE ON SIEMENS ENGINEERING LIMITED .......................................................................................... 13 HR Vision ........................................................................................................................................... 13 HR Mission......................................................................................................................................... 13 Case Study ......................................................................................................................................... 13 LIMITATIONS ......................................................................................................................................... 18 FINDINGS & CONCLUSION...................................................................................................................... 15 RECOMMENDATIONS ............................................................................................................................ 17 ROOM FOR FUTURE RESEARCH .............................................................................................................. 18 BIBLIOGRAPHY....................................................................................................................................... 19

Research Questions y y Is the company using the right recruitment procedure? How can we improve the recruitment practices of the company? . at the same time. y Using our findings to develop benchmark recruitment practices. the trend of recruitment process outsourcing (RPO) is also growing. Outsourcing A Comparative Study INTRODUCTION Background to the Research This research paper aims at highlighting the process by which a business decides whether to outsource recruitment process or to retain it as an in-house activity. 2009) RESEARCH DESIGN Research Paradigm Critical paradigm was used in our research we intend to evaluate the current practices and critically analyzing the problems with the current practices. y y Compare the quality of the two hiring procedures. Develop a case on a particular company and highlight the strengths and weaknesses of using a particular recruitment procedure. organizations have to deal with various operational aspects and have to decide whether to outsource the process or not. There has been an increasing emphasis on empowering HR for sustainable growth of the business. y Find out the trade-off between control and cost while choosing between outsourcing or in-house recruitment. (Gretton. Research Objectives Through our research. we intend to find the following. As a business practice.2 In-house Recruitment vs.

Transportation and Information Technology Solutions. Using this information we developed the case on recruitment practices of Seimens and critically analyzed it. Secondary research helped us in understanding the global trends of outsourcing. Research Analysis Initially this paper includes the literature review. Power Transmission and Distribution. For primary research.3 In-house Recruitment vs. the global trends. Talent Experts and People¶s Professional Limited. It outsources 3 of its departments namely y y OLM ± On-call Logistics and maintenance Share services o Facility management o Event management o Waste management . This interview did not give us sufficient information about the impact of outsourcing on company performance. Literature review is followed by a case study which we have formulated on Siemens Engineering Limited. we have relied on both primary and secondary data. and factors affecting decision to outsource. recruitment process outsourcing. We identified the reasons why companies use the services of an HR consultancy. Industrial and Infrastructure Solutions. These interviews helped us in understanding the local trends of recruitment. Medical Solutions. the sectors where it is most prevalent and the enable us to understand the strengths and weaknesses of both outsourcing and in-house recruitment. To develop a case on one of the companies. Automation and Control. we visited Seimens Pakistan Engineering. we have conducted interviews at two HR Consultancies namely. Siemens enjoys a leading position in Pakistan in the areas of Power Generation. Siemens Pakistan Engineering outsources the recruitment for non-technical jobs. it focuses on understanding the process of outsourcing and in-house recruitment. Outsourcing A Comparative Study Research Methodology For conducting this research.

Outsourcing A Comparative Study o Overall house keeping y Field service (partially outsourced) An interview with the company enabled us to find out some of the problems faced by the company in their current recruitment structure. The information that we received is discussed and analyzed in our finding and recommendations.4 In-house Recruitment vs. .

Core functions of HR can be divided into three categories (Jordan. Employee satisfaction will be a key to retention. 2009). Representing the views of the people to Top Management. It is extremely important that the HR clearly understands the core business of the company and then develop policies in line with the organizational needs. Outsourcing HR practices can be regarded as a by-product of an .5 In-house Recruitment vs. ranging from selection. recruitment and expanding the base of skilled workers is now the top HR priority as limited number of employees with the right education. and hiring. and career opportunities. y y y Driving Operational Efficiencies. training and developing employees. compensating. These include compensation. and experience has increased competition. One of the surveys conducted by IRS Employment Review revealed that recruitment is the main priority function for more than 80% of the HR professionals. By knowing the business of an organization. 2006) Performance is now a crucial element of the recruiting and retention process as explained by one of the senior compensation consultant with Mercer Human Resource Consulting (Philadelphia). He further added that employers will need to provide more ³holistic´ rewards to attract and keep high performers. 2002) Retention. recruitment. HR will recruit the right kind of people required by the business and will train them according to the needs of the organization. benefits. All these functions must aim at improving the overall organization¶s performance. Recruitment Process Outsourcing Organizations in today¶s tough global economy are seeking ways to reduce costs while improving performance. he said. The responsibilities of an HR department revolve around the management of people. Outsourcing A Comparative Study LITERATURE REVIEW Introduction The Human Resources department deals with one of the most important resource in the organization ± people. (Retention & Recruitment Now Top HR Professionals' Objectives. (Recruitment tops HR priority list. Having a view of day-to-day business operations. training.

they should be retained in-house. The accelerated rate of HR outsourcing also corresponds to an extensive change in which non-transactional activities. Global Trends in HR While human resource (HR) activities have traditionally been performed internally. an increasing number of firms have opted to outsource a larger package of HR functions. Klaas. selection and training. This provider serves to provide the necessary skills. (Silvestria. In all cases.5% across US and Europe. methodologies and reporting. Recruitment Process Outsourcing is one single element of Business Process Outsourcing. An RPO provider can provide its own or may assume the company's staff. technology. wondering whether and which HR activities should be performed by internal staff members and which should be outsourced to external providers. So the use and benefit of RPO varies with the organization and the industry it is operating in. technologies. It is important here to define Recruitment Process Outsourcing (RPO) RPO is a form of business process outsourcing (BPO) where an employer transfers all or part of its recruitment processes to an external service provider. 2001) Hence. Outsourcing A Comparative Study organization¶s cost cutting measures.S. (Silvestria. including the ones that are likely to have a fundamental impact on organizational culture and performance (B. . and activities to serve as their client¶s virtual ³recruiting department´ in some cases and in others the customer is engaging the RPO service provider to handle speci¿c parts of the hiring cycle. The academic literature suggests different classifications of HR activities and these have implications on outsourcing decisions. the outsourcing of HR practices is a rapidly increasing phenomenon. tools. such as recruitment. When activities are considered more transactional or non-strategic. they should be outsourced. firms are confronted with questions regarding the organization and delivery of HR services. A true or total RPO solution involves the outsourcing of the entire recruiting function or process to an external service provider. are among the most outsourced HR practices.6 In-house Recruitment vs. 2008) This trend of outsourcing can be dated back to early 90¶s and by late 90¶s almost 90% firms in US outsourced some administrative HR practices (for example payroll). When they represent core practices or are of a relational nature. RPO differs greatly from providers such as staffing companies and contingent/retained search providers in that it assumes ownership of the design and management of the recruitment process and the responsibility of results. Over the last decade the global HR outsourcing trend grew at 8. 2008) In recent years.

y Risk-Sharing: One of the most crucial factors determining the outcome of a campaign is risk-analysis. most of the times better than the ones at the outsourcing organization. we need to compare and contrast with the tradition in-house recruitment process. Technical Support etc. outsourcing it is still a debate. Logistics.7 In-house Recruitment vs. Since the outsourced vendor is a specialist. hence recruitment and operational costs can be minimized to a great extent. Effectively the tasks can be completed faster and with better quality output. y Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire individuals in-house. Strengths and Weaknesses of Outsourcing Outsourcing is more commonly known as offshore and businesses which rely on this process usually outsource a number of non-strategic departments like IT maintenance. they plan your risk-mitigating factors better. Finally based on our secondary research. . This is one of the prime advantages of offshore outsourcing. Outsourcing A Comparative Study (Fang Lee Cooke. Since we cannot analyze a process in isolation. y Concentrating on core process rather than the supporting ones: Outsourcing the supporting processes gives the organization more time to strengthen their core business process. Strengths y Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in their field. It is important to discuss the strengths weaknesses of outsourcing recruitment process. we will provide a generalized set of condition which encourages reliance on outsourced recruitment or in-house recruitment. Outsourcing certain components of your business process helps the organization to shift certain responsibilities to the outsourced vendor. 2005) Since recruitment is one of the most important functions of HR. There are numerous advantages of outsourcing but it is equally important to discuss the weaknesses and then evaluate the process for its effectiveness. The outsourced vendors also have specific equipment and technical expertise.

y Synchronizing the deliverables: In case you do not choose a right partner for outsourcing. the business knows the cost that will incur during the recruitment process. . we can find that by analyzing its strengths and weaknesses.8 In-house Recruitment vs. it usually rely on in-house recruitment process rather than outsourcing because it is a general perception that recruitment for strategic/important positions should be done using in-house process. It is always beneficial for an organization to consider the advantages and disadvantages of offshoring before actually outsourcing it. y Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple organizations at a time. Strengths y No hidden cost: Unlike outsourcing. Strengths and Weaknesses of In-house Recruitment When affirm decides to recruit employees. y Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat. sub-standard quality output and inappropriate categorization of responsibilities. it involves a risk if exposing confidential company information to a third-party. At times it is easier to regulate these factors inside an organization rather than with an outsourced partner. In such situations vendors may lack complete focus on your organization¶s tasks. With all these pros and cons of outsourcing to be considered before actually approaching a service provider. some of the common problem areas include stretched delivery timeframes. Outsourcing A Comparative Study Weaknesses y Risk of exposing confidential data: When an organization outsources HR. it is always advisable to specifically determine the importance of the tasks which are to be outsourced. Payroll and Recruitment services. Whether it is worth relying or not. During outsourcing a business might be unaware of the hidden charges which are to be charged by the service provider.

When outsourced. using the following model. y Attracting people is trickier: Businesses need to maintain their website as it is more difficult to attract people. There is little structured information available. It is relatively lengthy as the existing employees have to screen out people and screening in itself is a difficult and lengthy process which requires a lot of time. attracting employees is not the concern of the business rather it is looked after by the service providers. however it is relatively less biased as opposed to outsourcing because only those candidates are selected who are genuinely meeting the company¶s criteria. Outsourcing A Comparative Study y No Loss of Confidential Data: Employees which are recruited by the company and for which they work for. This will reduce the risk of loss of confidential information which might be very helpful in gaining competitive advantage for a competitor. the service provider might select an individual who does not understand the values of an organization and does not fit well in the organization. they only recruit individuals who fit the organization¶s culture. y Relatively Unbiased: Though we cannot claim that in-house recruitment is completely unbiased. However. this is not a very diverse method of recruitment and you risk losing out on interesting and innovative perspectives from external candidates. Road Map to RPO There are no set of rules defined which we can use when deciding on whether to outsource recruitment process or not. In case of outsourcing. In house recruitment thus reduces the risk of employee mismatch. Weaknesses y It is more costly as opposed to outsourcing: In-house recruitment costs in terms of time of existing employees who are involved in the recruitment process. In-house recruitment can be effective when recruiting employees for senior position and can reduce recruitment costs. 2009) .9 In-house Recruitment vs. we can take a business through the initial decision making regarding outsourcing. however. they are likely to be more loyal. (Gretton. This can lead to potential conflicts making in-house recruitment a better choice. y Cultural Fit: Since the existing employees are well aware of the organization¶s culture.

scribd.1 HR services such as payroll and pensions have become easy to administer electronically. a small but efficient work force. Outsourcing A Comparative Study This is a road map through which we can evaluate the cost and benefits associated with each type of recruitment process. the availability of recruitment agencies and the shift in the structure of organizations. According to a research report prepared in India. which include cost of communication. transaction costs. organizations that outsource their recruitment process.10 In-house Recruitment vs. which means that organizations don¶t have to keep a large number of middle management but. save up to 40% of their recruitment cost. Factors affecting the decision to outsource Businesses are always working harder to improve their competitiveness in the market. 1-Cost Due to improvements in technological and transportation facilities. are lower now. transport and market information. their market value has dropped. 1 http://www. This has enabled firms to focus on their core competencies and hire the people for technical positions through in-house recruitment and outsource the rest through professional employers. and any decision that brings about the reduction in cost while maintaining the strategic focus will increase competitiveness.com/doc/3804606/Recruitment . Some of the factors that influence a firm¶s decision to outsource its recruitment are the costs involved.

to recruit the best people for their business. of the firm in the job market.11 In-house Recruitment vs. timings and transportation are handled by an outside firm. In this way the outsourcing company does not need to develop its employees as much. outsourcing recruitment can reduce the costs significantly because the wage negotiation. Recruitment agencies specialize in poaching. the organization might be a competitor in the industry (Recent Trends in Recruitment in Retailing Industry). which is a problem for Human resources. A higher level of efficiency can be achieved through specialization. In a situation where firms are striving to be the most competitive. . organizations focus on decentralizing. the recruitment agency gets the best people from the market at attractive pay packages. This means that functions strategize and focus on what they do best. Outsourcing A Comparative Study In manufacturing sector. 2-Shift in organizational structure In recent times. rather than following orders from the top management only. 3-Availability of specialist organizations The availability of a good recruitment agency influences the decision to outsource. Poaching means employing a competent and experienced person already working with another reputed company in the same or different industry. The reputation. rather than centralizing their core activities. firm¶s part and present clients are important determinants in this regard. Instead of a company directly buying talent. In this way the company saves a lot of time and resources. they prefer hiring outside organizations called professional employer organizations (PEO). But this is also a problem for organizations because the employee¶s loyalties are fickle in such a situation.

12 In-house Recruitment vs. It highlights the factors and the stages after which a decision is taken to outsource any process or carry it out in-house. It highlights the stages to strategic sourcing decision process. Outsourcing A Comparative Study The model above is taken from Gretton. And in stage 4. 2009 . Stage 3 focuses on carrying out consensus in the various stakeholders. in which the benefits of outsourcing are assessed. Stage 1 tells the overall strategic veiw of the company. . stage 2 is based on due dilligence. the decision is made.

Overhauling & Maintenance of Motors & Alternators Condition Monitoring (Thermography. HR Vision Employees at their full potential HR Mission To enhance creativity and job satisfaction of our employees by providing opportunities for personal development limited only by their own ability and drive. Outsourcing A Comparative Study A CASE ON SIEMENS ENGINEERING LIMITED With a global network with more than 460. Thus they recruit all engineering people for manufacturing through in-house recruitment while outsource all noncore positions. Case Study Siemens is using outsourcing of recruitment process only for non manufacturing positions since their core activity is manufacturing.000 employees in 190 countries and engaged in a broad range of activities . service and thinking. NDI & Oil Analysis) Spare Parts Management Share services: Require mostly non engineering background y y y Facility management Event management Waste management . transportation. This means the policy is same as recommended in our literature review by Gretton (2009) research. y OLM: Logistics and maintenance: Require Engineering background y y y y y Operation & Maintenance Service (Industrial and Power Plants) Repair. Siemens is driven by a customer-focused strategy aimed at winning and improving customer economic performance and business process via e-business.13 In-house Recruitment vs. energy and domestic appliances. and using the world's best technology.from information and communications technology to automation. Vibration Analysis. The departments where recruitment is out sourced are the following. medical solutions.

HR interview: Interview Evaluations Guidelines provide a list of questions as per the Siemens Leadership Capabilities. The hired recruiters perform the initial screening 2. Require both technical and non-technical backgrounds Most of the complaints about quality of human resource performance come from Share services. Generally technical background recruitment is a lot harder than management background recruitment but they have managed to maintain a strong in-house technical recruitment system along with their manufacturing concerns. 3. Candidates are selected an interview . Written test 2. There are no soft skill tests during the recruitment process and in management positions those are the most critical skills. Their manufacturing work force has proven to be highly competitive and they have reached 0 labor wastage goal. These competencies are specified but there is no way to measure them in the candidates. This shows that their recruitment processes are strong. These complaints are regarding poor time management. Interviews with concerned department people 4.14 In-house Recruitment vs. Both condensed and details user guidelines are available on how to evaluate candidates. A Job Profile Form is used for all new employees to prepare a structured description of the individual tasks and the skills necessary for the position. Their in-house recruitment process includes the following stages 1. Outsourcing A Comparative Study y y Overall house keeping Field service (partially outsourced): They conduct on field project. It can also be used for recruitment for the position as well as analysis of competencies and subsequent gap analysis. waste of resources etc. The form is used for discussion of supervisor with the new employee in order to have clarity of role. The form assists in clearly outlining the job responsibilities of the position and the skills and knowledge required. Last interview with a panel In case of out-sourced recruitment 1.

Therefore. However we do believe that Seimens is using the right mix of sources of recruitment. one must ensure that clear expectations are set with recruiters about the quality of candidates provided to the company. They need to work more closely with the recruiters to communicate all the job requirements as well as work culture with the candidates. People who may potentially be leading the core business concerns of the company are too valuable to be outsourced. companies should be careful in choosing the right recruiter for the positions. y It allows the company to build a strong leadership pipeline to manage its core business concerns in the future. Each company must decide according to its environment. When outsourcing. Companies must maintain some control over the sort of resource being recruited and for that there must be some screening conducted by the company. Also the soft skills of candidates need to be more carefully reviewed in the screening conducted by Seimens after the candidates have been presented to them. y This maintains a company¶s control over its recruitment process and the type of human resource it is getting. Therefore. it pays to keep core activity recruitment in-house for the following reasons.15 In-house Recruitment vs. the answers to our research questions are y Is the company using the right recruitment procedure? There is no right or wrong recruitment process. Seimens is doing a great job in its in-house recruitment but not performing as well in the resource it is recruiting through out-sourcing. Therefore. by controlling their recruitment closely and managing their growth effectively a company can save cost of outsourcing higher management positions because they will already have someone in the pipeline who has been a part of the company¶s core business concern to take these positions. Quality of outsourced recruitment greatly depends on the quality of hired recruiter. In this case. . The positions that are outsourced should not be completely left to recruiters. Outsourcing A Comparative Study FINDINGS & CONCLUSION This research brings us to the conclusion that while outsourcing reduces costs. That is because they are not participating enough in this type of recruitment and are leaving it completely to hired recruiters.

whether technical or non technical. Also candidates presented by recruiters should be analyzed on measurable criteria of soft skills before induction since most of them are management people and soft skills are the most critical for them.16 In-house Recruitment vs. Conducting all the recruitment in house would be too much for the HR department and may result in other inefficiencies. Outsourcing A Comparative Study o Core business human resource recruitment. o Noncore human resource recruitment is outsourced to save the scarce time and resource of the HR department. . While outsourcing Seimens should maintain control over the quality of hired resource through involving their recruiters in the company activities and explaining to them the company culture so as to set a clear expectation with the incoming candidates. y How can we improve the recruitment practices of the company? While Seimens mix of sources of recruitment is good but it is not perfectly executed. is in-house so as to maintain maximum control over quality of such resource and create a strong leadership pipeline.

There should be incentive to reach highest appraisal results. Focus on employee commitment and retention so that turn over in outsourced departments decreases and there is a strong pipeline of committed employees in the department. . Outsourcing A Comparative Study RECOMMENDATIONS Our recommendations include the following. These checks can be made by taking feedback not only target department employees and management but also other departments. The feedback should be shared with the employees so that they understand their faults and work on them. 4. Appraisal criteria should be shared at the time of hiring and the same criteria should be used during appraisals. Perform regular checks of skill deficiency and plan training accordingly. 5. 2. More emphasis on generally lacking skills in orientation to create a correct expectation in employees from the start. 1. This way a culture will be established of strong company values and new employees will have to adjust to it. Resetting the expectation with the hiring firm regarding company cultural and work expectation with the employees.17 In-house Recruitment vs. Bonuses and such incentives should be given to reinforce preferred skills like time management etc so that people strive to develop such traits. There should be career consultants who openly discuss the appraisal with the employees and help them improve it in the future. This intention should be made public so that other people follow the example. 7. 3. No department works in isolation and other departments feedback can be very useful in finding out problems that cannot be pointed out internally. Setting measurable criteria for soft skills like time management against which employees or candidates should be measured. 8. 6. System should be put in place to measure such progress of people.

But in the future there must be more research on level of position. Similarly many MNCs like Unilever out source lower tier positions while pipeline and train their current staff for middle and higher level positions. ROOM FOR FUTURE RESEARCH Our research is based on the case of one company however the case may differ in different companies. For many companies complete in house recruitment is a better strategy while others complete out sourcing is the preferred strategy. Outsourcing A Comparative Study LIMITATIONS y Time constraint was one of the major limitations of the research study which ultimately affects the quality of the study y Biasness in telling all the flaws in the HR department by the organization since all the research was dependent on the interviews y y Not enough knowledge regarding the research studies since it was a first for us Completely analyzing the organization could have let other issues apart from HR come up y Not possible to analyze all the organizations to set benchmark for the industry.18 In-house Recruitment vs. There are too many other variable influencing the recruitment decisions. business type and the relevant recruitment strategy for them. Currently we have studied recruitment differences in core and non core functions. job type. Many smaller companies outsource core as well as noncore positions. .

shoppingwonk. Personnel Today . May 28). A.net/shopping/recent-trends-in-recruitment-in-retailing-industry Recruitment tops HR priority list. 2011. The International Journal of Human Resource Management . J. J.d. Fang Lee Cooke. Outsourcing HR as a competitive strategy? A literature review and an assessment of implications. Outsourcing A Comparative Study BIBLIOGRAPHY B. How I see HR. April). O. Retrieved Jan 4. (2002. Klaas. 372-391. Jordan. Recent Trends in Recruitment in Retailing Industry. . Recruitment and selection services: Efficiency and competitive reasons in the outsourcing of HR Practices. Retention & Recruitment Now Top HR Professionals' Objectives. from shopping wonk: http://www. (2001). (2008).19 In-house Recruitment vs. 413-432. S. (n. Silvestria. HRFocus . Human Resource Management .S. Human Resoucre Management . (2009. Outsourcing vs Insourcing. J.). Analyse the Business Proposition in the case of Chester Racecourse's Catering Contract. (2005). 125-138. Personnel Today . September). Outsourcing HR: The impact of Organizational Characteristics. (2009). E. M. (2006. Gretton.

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