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Analysis of Human Resource Outsourcing

On HR profession as perceived by professionals

(Submitted in partial fulfillment of the requirements for Masters in Human Resource Management)


SUBMITTED BY: PRERNA SINHA ROLL NO-107/MHR/111025 Indian Institute of Social Welfare & Business Management

Index SL Content No
1 2 3 4 5 6 7 10 11 12 Student Declaration Acknowledgement Abstract Introduction Literature review Objective of the study Research Methodology Data Analysis Key findings Conclusion Scope and limitations Annexure Bibliography And References

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I, Ms. Prerna Sinha, studying in the Second Year of Masters in Human Resource Management at Indian Institute of social welfare and business management, Kolkata, hereby declare that I have completed my dissertation report entitled Analysis of HR Outsourcing on HR profession as perceived by professionals as a part of course requirements for MHRM Programme.

I, further declare that the information presented in this project is true and original to the best of my knowledge.


(Signature of the Student)

This is certify that Prerna Sinha student of MHRM (2011-2013) has done the dissertation entitled Analysis of HR Outsourcing on HR profession as perceived by professionals under my supervision in partial fulfillment of the award of Masters in Human Resource Management from Indian Institute of Social Welfare and Business Management, Kolkata. This is the result of original and independent HR job done by her. This report has not been submitted to any other university for the award of any degree or diploma.


Dr. KumKum Mukherjee Professor MHRM, (Indian Institute of Social Welfare and Business Management)

The dissertation was done in partial fulfillment of the requirements for the degree of MHRM. The three things which go on to make a successful endeavor are dedication, hard work and correct guidance. Able and timely guidance not only helps in making an effort fruitful, but also transforms the whole process of learning into an learning and enjoyable experience. I would like to express my profuse thanks to my project guide Dr.KumKum Mukherjee presently Professor of MHRM, who has rendered expert guidance and assistance in the successful completion of my dissertation and also to the Executives from the HR Fraternity who invested their precious time in filling the questionnaire for this study and making my project worthwhile. At the end, it is a pleasant task to express my thanks to all those who contributed in many ways to the success of this study and made it an unforgettable experience for me. Thank you everyone.

There have been many issues surrounding outsourcing of Human Resource. Its implications are wide and varied. Though there are many benefits, it is faced with challenges as well. Companies who have managed their challenges well have been successful. Others on the other hand have redrawn from the process. The topic was chosen because is an issue being discussed currently all over the globe. In todays uncertain business climate, executives and organizations need to be financially stronger, more adaptable, and more efficient to respond to shifting market conditions. In other words, they need to maximize cash flow, maximize productivity and standardize compliance. Here we have focused the study on finding out how outsourcing can help us achieve these goals and what is the likely future of HR outsourcing. This report is prepared by the help of various HR professionals through the means of a questionnaire prepared for the purpose of measuring the impact of HR Outsourcing on the HR profession. Further, this questionnaire was sent to various executives via internet on various HR forums and Social Media Websites. The responses collected were then compiled into data charts to present the study in a measurable form.

Outsourcing can be defined as the transferring of internal business function or group of related activities and assets, to an external supplier or service provider who is prepared to offer a defined service for a specific period of time and at an agreed price. There are three levels of outsourcing. 1. Outsourcing 2. Human Resources (HR) Outsourcing 3. Human Resources Off shoring HR outsourcing (also known as HRO) is the process of sub-contracting human resources functions to an external supplier. Human Resource outsourcing is considered an important factor in todays business world. It is constantly growing, especially in the global world where companies outsource not just within their country but across borders. The term Human Resource was once seen in companies operations as a department that issued policies, heard grievances and problems of it staff. As time went on, it then included various aspects of training that benefits administration and staffing. The focus however is gradually changing again, now as a strategic consultant to the main business, trying to match personnel and their skills with the corporate goals of the company with the view of achieving competitive advantage. Human Resource outsourcing is becoming popular due to the perceived numerous benefits with emphasis on cost effectiveness and adding value to the organization. The rationale for outsourcing is simple and compelling in that contracting part of the operation is seen to be cheaper than the company doing all by itself. Reviews of business processes have led many organizations to decide that it makes business sense to sub-contract some or all non-core activities to specialist providers. HR, as a non-profit centre, is an obvious candidate for outsourcing.

The most common HR functions that are outsourced include:

Payroll Background checks

Employee assistance programs (EAP) Flexible spending account (FSA) administration Consolidated Omnibus Budget Reconciliation Act (COBRA) administration Healthcare benefits administration Pension benefits administration Temporary staffing Retirement benefits administration Software services Recruiting, staffing, and search Employee relocation Training and development Incentives HRIS/Web-based services Reference checks

There are many ways in which outsourcing human resources can be done:

Business process HR outsourcing (also known as BPO), where an external supplier manages discrete HR activities, such as payroll administration or recruitment, or perhaps the whole human resources function. Shared service HR outsourcing, where only the transaction or administrative elements of HRs activities are subcontracted to an external supplier. This may include the personal interface with employees. Application (and facilities) service HR outsourcing, where external providers look after the technological (and physical) infrastructure to support human resources activities. HR functions may be partially outsourced or completely outsourced. The distinction between the two is that in the former, the organization retains some control over the outsourced functions and may share access to information with the vendor. In the latter, the organization relies upon the vendor to carry out the entire functionthus; the HR departments role with regard to the outsourced function is minimal and may be limited only to managing the relationship with the vendor. The issues function : that are driving companies to outsource their HR

1. There are more important business matters on which to focus resources: research by Personnel Today indicated that HR staff spends up to 85% of their time on managing standard administrative processes and only 15% on strategic activities. In best practices

companies these percentages would typically be reversed. 2. The need to reduce the cost of HR function: the increasing pressure from global competitive forces, the tightening economic environment, collapsing stock market etc. Has made the pressure acute on most large companies and functional leaders to reduce their operational costs. To retain credibility with line managers and executives, the HR leadership team need a rigorous cost reduction opportunities. 3. The need to increase service efficiency : a very common driver behind outsourcing is the need to respond to changes In internal customer expectations 4. Advances in Technology: the developments in internet and intranet technologies over the last few years have dramatically changed the options for delivering HR services. Hr outsourcers are now able to provide access to these proven technologies at a price that is highly attractive to many potential customers. 5. Greater acceptance of the concept of Outsourcing: increasingly many organizations have experience of one or more major process that has been more or less outsourced. The comfort of positive experience has made it more acceptable for companies to consider extending the concept outside of the more traditional outsourcing targets. 6. Emergence of a credible supplier base: various outsourcing companies have been so much active in the HR outsourcing area and have won clients in past few years. This arrival of a credible supplier base has been a significant factor in pushing outsourcing onto the HR agenda. Advantages of Human Resource outsourcing The main advantages of the Human Resource outsourcing are listed as: 1. Focus on Core Activities In rapid growth periods, the back-office operations of a company will expand also. This expansion may start to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.

2. Cost And Efficiency Savings Back-office functions that are complicated in nature, but the size of your company is preventing you from performing it at a consistent and reasonable cost, is another advantage of outsourcing. 3. Reduced Overhead Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily. 4. Operational Control Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available. 5. Staffing Flexibility Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you're done. 6. Continuity & Risk Management Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company 7. Develop Internal Staff Large project needs to be undertaken that requires skills that your staff does not possess. On-site outsourcing of the project will bring people with the skills you need into your company. Your people can work alongside of them to acquire the new skill set. Disadvantages of Human Resource outsourcing Main problems associated with Human Resource outsourcing are: 1. Loss of Managerial Control Whether you sign a contract to have another company perform the function of an entire department or single task, you are turning the management and control of that function over to another company. True, you will have a contract, but the managerial control will belong to another company. Your outsourcing company will not be driven by the same standards and mission


that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours. 2. Hidden Costs You will sign a contract with the outsourcing company that will cover the details of the service that they will be providing. Anything not covered in the contract will be the basis for you to pay additional charges. Additionally, you will experience legal fees to retain a lawyer to review the contacts you will sign. Remember, this is the outsourcing company's business. They have done this before and they are the ones that write the contract. Therefore, you will be at a disadvantage when negotiations start. 3. Threat to Security and Confidentiality The life-blood of any business is the information that keeps it running. If you have payroll, medical records or any other confidential information that will be transmitted to the outsourcing company, there is a risk that the confidentiality may be compromised. Evaluate the outsourcing company carefully to make sure your data is protected and the contract has a penalty clause if an incident occurs. 4. Quality Problems The outsourcing company will be motivated by profit. Since the contract will fix the price, the only way for them to increase profit will be to decrease expenses. As long as they meet the conditions of the contract, you will pay. In addition, you will lose the ability to rapidly respond to changes in the business environment. The contract will be very specific and you will pay extra for changes. 5. Tied to the Financial Well-Being of another Company Since you will be turning over part of the operations of your business to another company, you will now be tied to the financial well-being of that company. It wouldn't be the first time that an outsourcing company could go bankrupt and leave you holding-the-bag. 6. Bad Publicity and Ill-Will The word "outsourcing" brings to mind different things to different people. If you live in a community that has an outsourcing company and they employ your friends and neighbors, outsourcing is good. If your friends and neighbors lost their jobs because they were shipped across the state, across the country or across the world, outsourcing will bring bad publicity. If you outsource part of your operations, morale may suffer in the remaining work force. How do companies take the make or buy decision for HR services?


There are a number of issues that will influence the decision either retain transactional and administrative activities in-house or to buy the services externally. Orion Partners experience and research shows that the following are the ten factors which are the key determinants to this decision: 1. How does outsourcing fit with the overall companys strategic needs? 2. Whether the company has view about what core competencies must be kept in-house and what safely can be outsourced. 3. Whether the company has a complete view of its internal HR costs, cost drivers and the Potential Savings that outsourcing could deliver. 4. Has HR considered internal outsourcing or in sourcing and explored how setting up an in-house shared service function might deliver many of the benefits of outsourcing. 5. Have the technological challenges around outsourcing been fully considered. 6. Does the organization have a clear view about the capabilities and reputation of each of the outsourcing providers? 7. Has the HR function standardized and simplified its processes and procedures prior to consider outsourcing. 8. Has the concept of outsourcing been discussed with employees /stakeholders in the organization? 9. Does the HR function have a view of the key success measures that will be used to judge the performance of the outsource provider. 10. The history of the organization in terms of managing complex transition process. Critical factors to look for in an HR outsourcing Partner: Proven Track record Service flexibility and reliability Financial stability Cultural compatibility Geographic scope and location strategy Approach to standardization Process management capability Readiness to invest in transition management Strategic sourcing capability Commitment to investment in technology Quality of team Governance


Transition Skills Few Reasons that HR Outsourcing may under-deliver: Ill-defined scope of services, with no clear mechanism for measuring service standards Poor definition of respective roles and responsibilities of client and outsourcer. Over selling and under-delivery by the outsourcer, without proper management by the client. Lack of attention paid to joint tracking and realization of benefits. A failure of the in-house function to relinquish administration, creating confusion between both parties and frustration.

The likely Future of Outsourcing:

The implications of HR outsourcing are huge: full-back office HR outsourcing will be projected $60+billion industries worldwide by 2018. Many commentators believe that HR outsourcing is where IT outsourcing was a decade ago. If this is only partially correct then over the next decade the global market for full HR outsourcing services could quadruple.HR BPO players are now entering in HR market from nonHR processing services (Convergys Ltd.)and from IT outsourcing (Accenture ,ACS, EDS,IBM).A few firms also have won HR BPO contracts such as AON , Fidelity , Hewitt , Mellon and Adecco. One very interesting development is however in the off-shore market. Outsourcing is however, based on outcomes. The client defines the outcomes and the vendor supplies the means. Once trust is established, the total team can create a true partnership to the betterment of all .As more and more Organizations move to an Outsourced model, choices and Processes will improve and journey will become easier.


The most important and cherished asset of any company is its Human Resource the staff. Even with all the most current technology, personnel are first because without manpower, nothing gets done. The success of every organization depends on the quality of staff employed. On the other hand it could be disastrous if the right decision is not taken in choosing the right people with the right skills in the right position. The kind of skills employed makes a vast difference between a business success and it failure. In the business environment, some companies may employ solely skilled personnel, others require both skilled and semi skilled personnel and others unskilled labor force. In the retail sector for example, the nature of the work demands both skilled and semi - skilled staff with the semi skilled dominating. The skilled staffs basically are managers such as the marketing and advertising managers, accounting managers, purchasing and supplier managers and general overseers. The challenge is how to get those people into the right places in order not to under utilize or over utilize their services. For instance, it might not be necessary to employ a professional who is to be paid as a sales assistant to be serving customers, but rather have a responsibility of planning and strategizing how to win customers and be ahead of its competitors. In order to make the best decision, the manager would have to take up that task upon himself or rather consider hiring an expert, who does nothing but repeatedly seek the best person for the job. Arguments have therefore developed in support of and against the process of outsourcing. PART ONE: Argument against outsourcing: This debate was published in the Human Resource Management International Digest in 2005. Gordon Croy, group supplier chain director of NTL, in his argument believe that outsourcing recruitment is not a sensible option. For him, there is one thing the recruitment agency lack, that is having in-depth knowledge and understanding of the business culture and its subtle modifications as the business managers will consider in its recruitment selection. What the recruitment agencies focus on is matching people to job descriptions. He again argued that managers could have gone through much of the process of recruitment rather than spending that time to brief a recruitment agency properly and feel confident that they have grasped the culture to meet their requirement. Another argument in support of in-house sourcing is the fact that the Human Resource Manager stands the opportunity of knowing the potentials of the applicant after going through the applicants Curriculum Vitae. Though the applicant may not be a good match for the current vacancy, he/she might be a perfect fit for another field of the business and such an opportunity might not be skipped. If a recruitment agency is to do this, they might be ignored


because they are working towards a specific job description and such a potentially great employee may be lost. From time management point of view, Gordon Croy further argued that the reason for outsourcing as time management does not really hold in todays world of business because online advertising and electronic mails saves a lot of time involved with recruitment. Again, initial interview could also be done on phone and would only have to spend time to meet face-to-face with the selected few best applicants. In the view of cost, Croy argues that recruitment companies cannot guarantee an effective recruitment, yet it will definitely guarantee a sizable cost. Since the recruitment agencies demand a percentage of fee upfront, as well as money for advertising, these monies are not refundable and therefore would not be able to meet the companys requirement. We should remember that recruitment agencies are also in business to make profit. Argument in support of outsourcing: A proponent of outsourcing, Bryan Duggan, head of recruitment at PMMS counters much of Croys argument. Talking about cost, he is of the opinion that though outsourcing recruitment seems an expensive option, it may be cheaper in reality. He calculates that taking into consideration two managers direct salaries as well as business overheads and revenue missed because their attention is diverted from their usual practice. He estimated about 11,000 a day lost for the involvement of those managers who have shifted away from their prime function. Aside money though, Duggan argues that the recruitment process is a strategic function and as such should be handled by professionals. In that the cost of hiring a wrong person is far more and could be minimized by using an experienced agency that has access to a lot of candidates and tried and tested methods of screening them to the best effect. They research into and have learned skills of psychology, curriculum vitae reviewing, body language and interviewing. Managers whose specialisms are totally different should not solely handle that. In the case of volume recruitment, the agencies with their experience, established infrastructure and recruitment processes become most useful. The agency would be in the best position to know how to handle unexpectedly large numbers of responses, how to standardize applicants and run the right tool. Simon Pettit, a business head of Hudson, adds that finding the right person is not an easy task and is very involving. It means having a deep understanding of the marketplace and creative ideas about the approach to use. A lot goes onto advertising such as using the press, online advertising, leafleting, and posters among others. His tacit point is that the manager will not have all the time, experience and the creative ideas to go the extra mile to find the right people. This limits the chance of getting the right people.


Outsourcing has been a controversy since, and both sides of the debate mount convincing arguments. However Nicholas Pratt offers a real business situation that in a way favors the argument in support of outsourcing. In the area of Information Technology, employment of financial staff is very difficult and that has been attributed to the issue of banks mishandling the recruitment process. In recent times the banks have been noted for hiring Information Technology staff in masses and at the same time firing staff in masses as well. As a result, Information Technology specialists have lost interest in the banking jobs due to lack of job security. Consequently, there are only few Information Technology specialist left in the system. To this regard, banks are now turning to the advice of the recruitment agencies to rectify the situation of hiring reactively and not strategically. The problem however has damaged a whole sector rather than just a company or one position within it. Apparently the cost and time involved to clearing the damage will far outweigh those involved in paying a recruitment agency from the onset PART TWO: The literature has been categorized into three sections. The reasons for Outsourcing The benefits of Outsourcing and The issue of control. Traditionally Human Resource activities were performed in-house but now on an increase, being outsourced. This is because it has proven to reduce cost and provide economies of scale, gaining access to expertise, among others. In other instances, as any other discipline, outsourcing among its benefits also stands its limitation of inefficiency because of suppliers lack of firmspecific knowledge and engages in opportunistic behavior (Ulrich 1996). a) REASONS FOR OUTSOURCING: Gaining Competitive advantage: Human Resource outsourcing is a managerial decision, to support managers decisions as to outsource Human Resource activities or not, Adler (2003) has classified some major factors to assist organizations in deciding which Human Resource process to outsource. These factors are dependency risks, spillover risks, trust, relative proficiency, strategic capabilities and flexibility. These factors were the base considerations for BP outsourcing deal with Exult Inc. in December, 1999. The impact of this deal was though a success. Achieving competitive advantage was a paramount reason for this decision of outsourcing. Other Authors, (Becker et al 1998) undertook a research to emphasize the fact that Human Resource system can provide competitive advantage to


organization, in that with the supply of more expertise probably from a different environment with different skills and the know-how can turn the whole organization around, hence achieving a competitive advantage over it competitors. Managers therefore with this notion of gaining new experience may decide to sort elsewhere. More research has proven the fact that Human Resource is a collective system of activities and has a direct correlation with firms performance. (Switser 1997) explains that Human Resource outsourcing represent a strategic tool for gaining competitive advantage. He mentioned that when Human Resource activities are outsourced, it gives both Human Resource managers and non Human Resource managers spare time to deal with strategic business issues. This also provides an alternative argument in support of Human Resource outsourcing. Minimizing cost: A second reason of Human Resource outsourcing has been identified as reducing cost. The activist, ( Roberts, 2001) campaigned for outsourcing as substantially lowering costs and risk, while greatly expanding organizational flexibility, innovative capabilities, and opportunities for creating value-added stakeholder returns. Obviously the target of cutting down cost of production is a primary reason why many companies consider the option of outsourcing. In the United States (US) for example, saving in the cost of labor was a major incentive why many companies tend to outsource. For instance, these facts were given in United State outsourcing article by Vietor and Veytsman (2007). Financial analyst in the US earns about $35 per hour; it costs only about $10 per hour for the same position for a person in India. Similarly, employees in China and Mexico were willing to work $1-$2.50 per hour as compared to $11-$20 per hour in the US. In effect it is convincing enough for a company to outsource rather than provide in-house. However, these reasons are not without challenges. Some of the challenges have been identified as quality of HR services from suppliers, insufficient employee preparation towards the jobs, and lack of proficiency to manage HR outsourcing. Reduces workload of staff: According to (Klass, 2003) one vital rationale for Human Resource outsourcing has been reducing workload on regular staff. Outsourcing actually takes off some of the heavy schedules on managers and other staff involved with the processes of recruitment. Reducing work overload creates


more time and increase flexibility on managers to manage the business effectively. There is less distraction and more concentration on planning, operating and growing the business. It also allows managers to focus on best practice- what they are good at doing best. Staff recruitment is a tedious job and very involving. It is not just about getting the employee to the field but also concerns staff training, logistics and equipping the staff with all the necessary tools needed to do the work effectively. When the company decides to outsource all of its Human Resource, these would be taken care of by the supplier leaving the outsourcer with little or no workload. Strategic move: To some organizations, HR outsourcing is a strategic move. The vision is to reduce cost, achieve workforce flexibility, access HR expertise and focus managerial resource and keep up with changing workforce regulations. (Klaas et al, 1998). Every organization has its goals and objectives to achieve so as to be successful to remain in business. For the organization to be successful, it should be strong enough to cope with its competitors. However this could only be achieved through a well-developed strategic process. Strategy in simple terms is the critical plans and decisions taken by an organization in achieving its targets in business. However if to the organization, the Human Resource management such as payroll, logistics and recruitment is not of strategic relevance, could ignore outsourcing. DiRomualdo and Gurbaxani (1998) have identified three strategic intents by businesses. They argue that firms outsource so as to achieve anyone or more of these three. They are strategic improvement (cost reduction and enhancement of efficiency), strategic business impact (improving contribution to companies performance within existing lives of business) and finally strategic commercial exploitation (focus on leveraging technologyrelated assets). The strategic literature has basically point out the cost effectiveness as primary reason for outsourcing but has now shifted to other reasons of strategic re-positioning, greater service integration, higher value creation and core competence enhancement (Quinn 1999)


Some researches further argue in support of strategic outsourcing. Outsourcing decision is taken to improve incentives within a firm. That is, the intensity of managerial incentive is a primary motivator since managerial efforts are focused on core competence According to (Bates, 2002) Human Resource outsourcing continues to grow at a very rapidly pace. He estimated the growth is expected to rise to $100 billion per year. Professional Employer Organizations offer several Human Resource services amongst them are benefit administration, 401k administration and insurance administration. Professional Employer Organizations are growing about 30% per year (Hirschman 2000) and is estimated to continue to grow at this pace between 2005 and 2010. (Ratnam, 2001) describes the strategic aspect of Human Resource sourcing. His argument is that Human Resource outsourcing is a key value differentiator. Perhaps heavy investments as coupled with the issues of todays dynamic market situation, which means outsourcing which is directed towards strategic supplier partnerships is a key value differentiator. As the business environment conditions in recent times, he asserts that companies should have flexibility in order to meet it current and future opportunities. This behavior provides the ability to manage and cope with the changing market situations in order to remain competitive. Achieving core competency: Another strong case for Human Resource outsourcing has been made by Armstrong (2003). He claims that there has been a drastic shift from the view of Human Resource services as a major responsibility of the organization, to the stance that it can be contracted to an external body; the excuse for resorting to this exercise is prove it cannot be subcontracted . As stated by the institute of personnel development 1999, (cited in Armstrong, 2003), One major cause in support to increase in outsourcing remains the concept of the organization which concentrate in-house expertise on it primary activities and outsource any necessary support from range of suppliers.


The point is that Human Resource managers can play more strategic roles by contributing to strategizing the companys future direction rather than spending time on staff payroll or checking on absence records. Alternative opinion in support of this argument in (Pollit, 2004), discuss a cable and wireless manager, who expressed that after the companys Human Resource entry-level services were outsourced; management then had enough time and focused more on strategic issues such as change management skills, internal-consulting skills and project management skills. This improvement was believed to be influential, enjoying easy entry to senior people, organizing programs and representing senior management in transforming the whole company. He believed that the three functions are very necessary in enhancing the skill capability of Human Resource. Technology advancement : The recent trend of technology also contributes to the issue of outsourcing. It creates room for the provision and purchase of outsourcing services. Modern use of technological gargets calls for demand and hence supply of labor to operate them. Most of these equipments require specialized skills and experts to take charge. So therefore organizations in such need would resort to outsource. In respect to (Mintzberg et al 1995), the overall basis for any outsourcing activity as cited in Allen Colins article on Human Resource outsourcing is that, outsourcing provides. Greater economies of scale Cost effective Levels of expertise Flexibility Reduces cost and improves valued-added b) BENEFITS: The benefits of Human Resource outsourcing are influenced by the organizational characteristics. Research shows that small and medium enterprises (SMEs) benefit more from outsourcing as compared to largescale organizations. This is because it supports the small and medium


enterprise in breaking even in enjoying economies of scale whilst the largescale organizations have enjoyed already. Outsourcing predominately increase assets and reduce cost in the immediate financial period. There has been a significant savings on operational and capital costs by organizations engaged in outsourcing parts of their in-house operations ( Rimmer, 1991). Laugen et al (2005) in their research found a correlation between outsourcing best practice and high performing companies. This is clearly explained by the Transaction Cost Economics (TCE ) the underpinning for make or buy decisions In TCE the decision as to either to buy or produce in-house are determined by the most cost-effective option. Here the organization weighs the cost and benefit to determine which process of Human Resource outsourcing will cost them the least should they outsource. To this regard, Marshall (2001) identified differing natures of the outsourcing management processes associated with high, medium and low asset specificity. Assessment is carried out by the organization analyzing the cost of internal operation as compared to sourcing from a supplier. Based on that, management decision is taken as to outsource or not to outsource. (Freytag and Kirk, 2003; Momme and Hvolby, 2002; Canez et al., 2000) have developed frameworks to this effect, others are (Baines et al., 2005) strategic positioning process for make versus buy decision-making and outsource supplier selection. (Klaas et al 1999) also used the TCE to develop hypothesis about organizational-level factors that are likely to affect whether reliance on Human Resource outsourcing will produce benefits for the organization. I.e. idiosyncratic Human Resource practices, uncertainty, pay level, firm size, overall outsourcing emphasis, cost pressures, Human Resource strategic involvement to develop seven hypotheses. Outsourcing looks beyond just short-term cost savings, another motivating factor is the organizations ability to focus on it core activities (Arnold, 2000). Focusing on core activities comes with a varying degree of organizational benefits and also improves performance. To this effect, productivity increases as well. (Nohria et al, 2003) find out that a company needs to increase it productivity by twice its average in order to be a leading competitor. Other researches also focus on explaining the relationship between productivity growth and outsourcing. (Abraham et al, 1996) also in their research found out firms contract out services with the aim of


smoothing production cycles and benefiting from specialization. (Raa et al, 2001) also found a positive association between the rate of outsourcing and productivity growth in their study.

Access to advance technology: Another important suggestion about this theory is the fact that outsourcing have also proven organizations have an advantage of exploiting more advanced technologies from the suppliers as the supplies are significantly more advanced and use the most effective technologies. Another fact is that as suppliers continue doing their work over and over again, they become more experienced and easily discover the most effective operations. Even though other outcomes are less obvious, it has been claimed by Kerr and Radford (1994) that the outsourcing process in a way has helped to undermine the power of trade unions dominating the United Kingdom workforce in public sectors. Profitability : Normally when business is booming, what happens is that business owners think of expanding their businesses, but at the same time control cost of production. When done properly it yields the best of results in profit rise. Some areas where firms can achieve profit maximization are staffing. Employers have the flexibility of contractors supplying those staff only for as long as they need it, helping to cut down cost. The second area is capabilities. In terms of capabilities, outsourcing allows even smallest firms to employ experts such as marketing expert, researchers and other specialist but not necessarily to own the person. Firms rather rent their skills without adding to their payroll. This helps to achieve its target but at a minimum cost hence increasing profit margin. The third area to increase profit margin is services. Sometimes some services may be cheaper or easier to be handled outside. Such is human resources, which mostly is outsourced. Other functions such as recruiting and payroll management is easier handled outside. Cost effectiveness: Subsequently, Greaver (1999) classified an improvement in credibility and organizational status as potential benefit of associating with famous providers.


Other recognized benefits though difficult to measure, indicate that outsourcing enhances organizational credibility greater workforce flexibility and preventing being locked into specific assets and technologies. The Boston consulting Group (1991) researched on over 100 key companies that engages in an extensive outsourcing practice and found out most western companies outsource mainly to save on overhead or induce shortterm cost savings. Subsequent theory revealed, until the 90s, one of the major drivers for outsourcing was its cost effectiveness. This is because, in a real economic world, a common goal for many if not all businesses are on cost savings and profit maximization. Every business is in for profit by cutting down cost, choosing the cheapest cost of production which outsourcing is to solve. Others are of the opinion that the growths in indirect overhead costs, which represent non core competencies, are commonly being outsourced. (Lewis et al, 1991) have also discovered another interesting issue; their point is that the outsourcing is a trade-off between lower production cost, i.e. if the supplier possesses lower cost technology and higher monitoring costs. Maximization of efficiency : (Domberger, 1998) also gives another important suggestion about this theory, in order to increase efficiency of organizations core value, organizations tend to specialize in such fields and outsource their non core values. An example is Unilever, the Anglo-Dutch group, with a portfolio of 1,600 food, toiletries and household products. September 1999 announced that in order to enhance sales growth and profitability, it would focus on a smaller number of power brands (core products) who have worldwide reach, thereby reducing costs and exploiting new channels of distribution, such as the internet as cited in journal of management development, vol. 19, No 8. Flexibility: Flexibility could be analyzed in terms of increase in demand and change in demand. Organizations should have the capability of meeting customers demand and also being able to satisfy customers preferences at any time. Outsourcing enables organizations avoiding these two constraints. It presents the opportunity for meeting changes in volume of production as well as seasonal changes in response to market conditions of customers demands. A situation of the fashion apparel retailing, where companies respond rapidly to industries short life cycles and the quick changes in fashion. This enables the company to achieve delivery of goods to its stores within the shortest possible time of design conception. (Carney, 1997) has identified the five Cs of Human Resource outsourcing and its benefits. These are:


COST: reduces service cost, internal fixed costs to a variable, which is more transparent and easier to manage. COMPETENCY: greater focus on core business and core competency requirements. CHANGE: a vehicle for rapid implementation of change, in terms of technology, organization and culture. CURE: a way to fix difficult problems or deficiencies in service levels. CASH: improvement in balance sheet and cash flow eg transferred assets exchange for lump sum payment though rare in Human Resource outsourcing c) CONTROL OVER THE PROCESS: Despite all the arguments in support of outsourcing, which seems to be winning, what still puts many companies off is the thought of not having control over the process of recruitment. What make managers hesitant in this circumstance are the facts that, taking someone on, especially in team works without having any form of interaction to know the kind of personality they will be dealing with. Knowing that, personal chemistry is as important in team situations as having the right skills on paper. (Lawler et al, 2003) findings in their study of 100 companies revealed the most common problems of Human Resource outsourcing. One meager services end up being more expensive than promised, contractors lack of information about the client and unanticipated resources refined to enhance the relationship. Suppliers should not take for granted the fact that one successful outsourcing should work for all. It should be noted that the various firms operates differently with varying needs and may absolutely have nothing in common, hence may require different procedures from their suppliers. It should be best for the suppliers to assess carefully their clients individual operations and treat them as such. Outsourcers are liable for suppliers actions though the outsourcers have little or no control whatsoever. Others are compliance violations, contractors not being able to meet the task as expected, loss of positive repute, loss of internal expertise and technical skills. (Roberts, 2001) explains some risks of outsourcing as organizations are afraid of losing some control over the delivery of, outsourced services and finding themselves overly dependent on the supplier or liable for the suppliers action. Outsourcing sensitive information, particularly confidential information, somehow cannot be avoided since it might form part of the client companys briefing to the supplier. Moreover supplier has inherent liability if information security is breached. (Shelgren, 2001) in his recent survey, showed that 90% of companies with 50000 or more employees outsourced some part of their Human Resource


activities. In this way, some sensitive confidential information could be kept away from the supplier. Furthermore one important issue organizations turn to consider one way or the other is the people who matter most, that is, the customers. Many customers value the personal touch and the kind of treatment offered them. When this factor is missing, customers end up getting upset. If the outsourcing processes affect customers directly, then it becomes a problem in that it would be difficult for organizations to have a say since the function has been transferred elsewhere, and cannot directly and immediately be controlled. RISK AND CONCERNS Despite all these benefits of outsourcing, it has been found also that some organizations do not realize the expected benefits from outsourcing. The nature of certain task and its risk level is the very reason a firm might outsource. Such task may be expensive, complex to operate, low efficient and difficult. However if the outsourcing process is not carefully handled and thoroughly assessed, can result in severe financial loss causing decreased in shareholders value, damaged company reputations, dismissal of staff especially senior management and the worse of all collapse of the business itself. A report quoted in (Londsale, 1999) and (Mclvor, 2000) mentioned that only 5% of companies surveyed realised their expected benefits from outsourcing. Reasons given are highlighted; companies focusing on achieving benefits in the short-terms, lack of formal outsource decisionmaking processes, such as medium and long-term cost-benefit analyses, increased complexity in the total supply network. (Beaumont et al, 2004) found out in a survey of outsourcing in Australia, its a problem formulating and quantifying requirements. Another concerns is the fact that public sector is losing jobs to the private sector. (Hays et al, 2000) studied the effect of information systems outsourcing announcement on the market value of contract granting firms. Empirical evidence was provided from the capital market that outsourcing is considered to be a value- added business exchange for outsourcing firms.



This Dissertation examines how companies are dealing with HR outsourcing, explores the views of HR professionals toward outsourcing and determines its impact on the profession in general. The outsourcing of one or more HR functions is the main focus of this report not the outsourcing of the entire HR function or department within an organization. Whether, organizations plan to outsource more HR function in future. Other areas discussed are reasons organizations elect to outsource, the types of HR functions outsourced, as well as the rationale behind an organizations decision not to outsource. The ultimate aim of this research is outlined below: The key issues driving companies to outsource their HR functions. To find out why companies outsource their Human Resource their first and foremost reasons. To find out what are the primary functions which the companies outsource To find out what benefits there are in this process. The critical factors to look for in an HR outsourcing partner. The reasons Organizations restrain themselves form Outsourcing Activities. Do the size of organization and their start up level also affect the decisions of Outsourcing? The likely future of outsourcing in the next few years.


Data collection Primary as well as secondary data collection tools have been used for the research study. The nature of this study is a Descriptive Research. Random Sampling with a total size of 37 respondents which included various HR professional Source of data: Primary data: This consists of original information gathered through

people and is thus firsthand information. The normal procedure is by interacting with the people directly or indirectly individually or in a group, to get the required data. Data was collected through: Questionnaire: For primary data, questionnaire has been prepared based on the different parameters. Close ended questions are prepared which were 17 in number. The survey was done by sending the questionnaire various hr professionals through the means of various social networking website .i.e. and the questionnaire was posted on HR forums and HR groups on these websites In the questionnaire respondents were questioned on various aspects related to HR Outsourcing in their organization. There were some important parameters on which questions were framed which were helpful to know the ways through which outsourcing is done , constraints , benefits attained etc. . From there responses were collected and compiled in a general form. Secondary Data This consists of the information that already exists somewhere. Sources for secondary data are: E-books Internet: Google, Text books


1. Does your organization currently outsource one or more of its HR functions?


Figure 1 : depicts the percentage of organizations that currently outsource one or more of their HR functions While 58% of the organizations currently outsource HR functions, another 38% reported not outsourcing and having no plans to outsource. Another 4% of HR professionals indicated that their organizations have plans to outsource at least one or more HR function within the next three year


2. Which HR function(s) does your organization partially or completely outsource? (Check all that apply)

Retirement benefits administration 7%

Policy development and/or implementation 8%

Background/crimin Compensation al background and/or incentive checks plans 4% administration 9%

Recruitment/staffin g of executives only 9% Human Resource Information Systems (HRIS) development 6%

Executive development and coaching 10% Recruitment/staffin g of employees (nonexecutives) 13% Training and development programs 12%

Payroll administration 12%

Pension benefits administration 10% Figure 2: The above percentages predict the percentage rate for outsourcing the most common HR functions by the organizations. As it can be seen that the most widely outsourced functions are Recruitment/ Staffing of Non-executives, training and development, Payroll administration and pension benefits administration. Note: in the above question the graph shows the percentages as a ratio out of a total of 100%. However, as it was a multiple choice question with the options of checking one or more functions for any organization. Whereas while totaling the sum of each functions it was seen that the percentages vary predicting the actual percentages of the functions as:

Background/criminal background checks Compensation and/or incentive plans administration Executive development and coaching Recruitment/staffing of employees (nonexecutives) Training and development programs

14% 27% 32% 41% 39%


Pension benefits administration Payroll administration Human Resource Information Systems (HRIS) development Recruitment/staffing of executives only Retirement benefits administration Policy development and/or implementation

32% 36% 18% 29% 21% 24%

3. What were your organizations reasons for outsourcing its HR functions? (Check all that apply.)

Reasons for Outsourcing

To streamline HR functions To reduce the number of HR staff and related staff expenses To offer services the organization could not otherwise provide To save money/reduce operating costs To make up for the lack of in-house talent/expertise To make up for a reduction in HR staff To allow the company to focus on its core business To allow HR staff to focus more on strategy 12% 30%







s Note: percentages do not total 100% as respondents were asked to indicate multiple selections.

Figure 3 examines the reasons that organizations have decided to outsource. Saving money and reducing operating costs (66%) and companies focusing on its core business and were the drivers cited most often. Almost one-half of HR professionals indicated that allowing HR to


focus more on strategy were the impetus. Although some sources indicate that outsourcing does not drastically contain costs, it still seems to be a major factor in the decision to outsource. With corporate litigation on the rise, companies perhaps believe that outsourcing serves as a protective factor which is equally as important as the rationale for cost savings. It may be that as human resource outsourcing becomes even more prevalent in organizations, it will be justified less as a cost-saving measure and more as a way to improve the overall functioning of the organization. Also of interest is that 52% of HR professionals stated that their organizations elected to outsource as a way to reduce the number of HR staff and related staff expenses

4. What were the obstacles that your organization faced when it decided to outsource its HR functions?

Obstacles faced in Outsourcing

Fears that outsourcing might impact company culture Not applicable: did not face any obstacles 2% Resistance within Senior management Fears about loss of HR jobs/staff Resistance within HR Fears about loss of control Resistance from employees in general Did not know how to locate vendors Lack of qualified vendors Did not know what to look for in vendors Lack of prior outsourcing experience in general 12% 6% 13% 13% 22% 21% 51% 12% 31% 33%

Outsourcing can be a very involved and complex process to carry out. There are many factors to consider from finding a suitable vendor to assessing the impact of change on the organization as a whole. Figure 4 lists the obstacles faced by organizations when deciding whether to move forward with outsourcing.


5. As a direct result of outsourcing its HR functions, did your organization achieve cost savings, incur cost increases, or did costs remain about the same?

Result Of Outsourcing HR Functions

37% 31% 23% 9% Achieved Cost Savings Incurred Cost Increases Cost Remained about the same Do Not know

Out of the organizations currently outsourcing HR functions, have any experienced cost savings as a direct result? The answer to this question is important result? The answer to this question is important because one of the top reasons cited for outsourcing was financial 31% of HR professionals reported that their organizations had achieved cost savings, while 23% had actually incurred cost increases and another 09% indicated that their costs remained about the same. 37% said that they do not know the percentage of cost savings to their company.


6. What are the main factors to consider when selecting an HR outsourcing vendor? (Check all that apply.)

Figure6. Depicts the major factors organizations consider in selecting HR outsourcing vendors. Of the organizations that are currently outsourcing HR functions, 89% indicated that the vendors proven track record was the most important selection factor, followed by cost of services (82%). Guaranteed service levels (64%) were reported as important aspects to bear in mind.

Factors for selecting HR Outsourcing Vendor

Physical location of vendor Niche in a specific area Guaranteed service levels number of employees assigned to each vendor Cost of vendor services Size of vendor organization A proven track record Recommendations from other companies 41% 19% 89% 20% 82% 14% 38% 64%

7. What have been, if any, the negative outcomes of outsourcing your organizations HR functions? (Check all that apply.)

Negative Outcomes of HR Outsourcing

Negative impact on employee customer service Not sure of negative outcomes at this time Not applicable: there have been no negative outA loss of in-house talent/expertise Unable to achieve cost savings A decrease in employee morale 7% 6% 20% 15% 25% 32%


What are some of the negative outcomes experienced by organizations currently outsourcing HR functions? Figure 7 illustrates these data. 20% of HR professionals expressed that their organizations had not experienced unfavorable outcomes as a result of outsourcing. 32% indicated that they were not sure of any negative outcome.
8. Overall, to what extent has outsourcing HR functions met the expectations of the organization?

Usefulness of outsourcing


43% 6% To a small extent 1% To no extent at all

9% To a large To some extent extent Neither to a large extent nor to a small extent

Fig 8. Depicts the percentage extent to which HR Outsourcing has met the expectations of the organization. About 42% of them said to a large extent it has met expectations. 43% answered to some extent, only 9% had a mixed view about it whereas 6% had said its impact its up to a small extent and only 1% said no extent all giving a good sign of favorable outcomes.

9. Do you expect that your organizations outsourcing of HR functions will increase, stay the same or decrease in the next five years? About 40% has indicated that organizations requirements will increase in the next five years, 55% said the requirements will not change and only about 5% seemed to have a notion that it will decrease.


10. Has the size of your organizations HR department increased, stayed the same or decreased overall in the past five years?

Change in Org. Size in past 5 Years due to HR Outsourcing.





Stayed The same


These responses indicate that the size of the HR department in organizations have increased by 32% for some organizations for 28% have stayed the same and about 34% have said it has decrease.

13. Why has your organization chosen NOT to outsource its HR functions? (Check all that apply
An organization has various reasons on whether or not to outsource Hr functions depending on several factors, many of which centers around the organizations culture, staff size, leadership and overall strategic business plan. The major cited reasons wanted to maintain


face-to-face contact with employees (61%), followed by preferring to develop expertise in house (46%). Also of interest is that 30% of respondents indicated a deterrent to outsourcing was the concern that it would be too expensive.

Reasons Organisations have chosen not to outsource HR functions.

We wanted to maintain face-to-face contact with our employees We encountered resistance within senior management 8% 61%

We preferred to invest in technology in-house


We encountered resistance within HR


We preferred to develop expertise in-house


We have had a bad experience with outsourcing


We do not want to lose control of our HR functions


We felt that it would be too expensive


We do not have the resources to manage the outsourcing process



Human Resource Outsourcing Survey R

14. What are the benefits of outsourcing HR functions for HR professionals? (Check all that apply.)

Benefits of outsourcing HR functions for HR professionals.

It allows HR to be perceived as strategic business partner. HR is able to focus on core business functions It improves HR metrics/measurement HR has a better reputation among senior management It allows HR to spend more time on strategy HR has a better reputation among employees 11% 25% 45%




Finally coming to the benefits of HR Outsourcing; according to HR professionals we see that 75% of the benefits are in about the fact after outsourcing that it allows HR people to focus on main business. Then again 66% of them said that allows them to spend more time on strategy. And about 45% of them said since they are able to focus more on core business and strategic business so they are perceived as Strategic partners in their organization.


15. Which industry best describes your locations main business? (Check only one.)

6% 2% 7% 7% 3% 3% 2% 7% 2% 6% 11% 7% 6% 2% 11% 3%

Manufacturing (Durable Goods) Newspaper Publishing/Broadcasting Wholesale/Retail Trade Insurance Utilities High-tech Transportation Health Telecommunications Government Services (Profit) Finance Services (Nonprofit) Educational Services Manufacturing (Nondurable Goods) Construction and Mining/Oil and Gas

In this Report it has been found that the most prevalent industry where HR Outsourcing is/ are common are service sector and also manufacturing sector. With the least ratio in newspaper publishing /broadcasting and education industry.


16. Does your organization belong from Public Sector or Private Sector?


private sector

public sector 79%

Among the executives which answered about their organization maximum of them belonged Private Organizations as compared to Govt. Organizations.

17. What is the employee size of your organization?

Employee size
0-1000 1000-3000 3000-5000 5000 & above





Among the executives which answered about their organization maximum of them belonged to medium sized organization.


The findings of this report are as follows: HR outsourcing, in the form of moving one or more HR functions from inhouse to an outside provider, is a practice used by almost six out of10 organizations. One-third of organizations do not currently outsource any HR functions, and only a few plans to outsource in the next three years. HR functions are usually either partially outsourced or completely outsourced. The difference is that when functions are partially outsourced, the organization co-manages the function with the vendor; when it is completely outsourced, the vendor takes full responsibility. Recruitment/ Staffing of Non-executives, training and development, Payroll administration and pension benefits administration are most commonly outsourced functions these days. Some of the most frequently named drivers for outsourcing were reducing operating costs and controlling core business and were the reasons cited for companies for companies to outsource. When asked about future outsourcing, about two thirds of HR professionals predicted that their level of outsourcing would remain the same within the next five years and nearly one-third expected out sourcing at their organizations to increase.

When asked about the benefits of outsourcing, the majority of HR professionals indicated that outsourcing allows HR professionals the chance to concentrate their efforts on core business functions such as organizational strategy development and execution correspondingly, nearly three-quarters of HR professionals agreed that the role of HR professionals have become strategic.



Time and location constraints Since it is a broad topic, therefore, in depth analysis of each & every aspects of this topic was not possible to cover The sample size is too small to reflect the opinion of the whole HR fraternity. The answers given by the respondents have to be believed and have to be taken for granted as truly reflecting their perception


HR departments today are faced with dual roles the first involves being a business partner focusing on core functions. Second, HR professionals are critical in ensuring that the day-to-day needs of employees are addressed. These two roles afford that HR professionals have the foresight to manage the organizations strategic approaches while also handling its most immediate and relevant concerns. As a way to juggle these responsibilities, Outsourcing seems to be a viable option that organizations are embracing. Organizations which show a trend in utilizing outsourcing even more in recent years, they also report a greater likelihood of increasingly relying upon it in the future. Organizations, however, also reported more unfavorable outcomes due to outsourcing, such as less face-to-face contact with employees and decreases in in-house expertise. HR professionals from organizations also expressed greater concern that outsourcing would lead to reductions in HR staff size. Some HR professionals embrace Outsourcing, while others do not. Their concerns center around the shifting roles of the HR professionals that require them to be both transformational and transactional Regardless, of whether an organization outsources its HR functions or not. Depending on the organizations business goals and corporate culture, outsourcing may not be the most viable alternative While most of the discussion about HR outsourcing tends to center on the cost savings, the advantages and the disadvantages, the real focus may need to be on preparing for the inevitable impact on the profession itself.

As, most Human Resource Outsourcing market analysts believe the market for HR outsourcing will continue to grow over the coming years. This prediction seems to be supported by this reports findings that show that almost one-third of HR professionals said their companies planned to increase the use of outsourcing.


Questionnaire used:

HR Outsourcing
Dear Sir/ Maam, I am doing a dissertation on HR Outsourcing and its impact on HR Profession. I request you to kindly help me by filling up this form. It contains a set of general questions and the responses will be combined, analyzed and reported in an aggregate form. _________________________________________________________________________ 1. Does your organization currently outsource one or more of its HR functions? Yes, my organization currently outsources one or more of its HR functions. No, but my organization plans to outsource one or more of its HR functions in the next three years No, and my organization has no plans to outsource its HR functions 2. Which HR function(s) does your organization partially or completely outsource, and for approximately how many years has the function(s) been outsourced? (Check all that apply.) Background/criminal background checks Compensation and/or incentive plans administration Executive development and coaching Human Resource Information Systems (HRIS) development Payroll administration Pension benefits administration Performance management Policy development and/or implementation


Recruitment/staffing of employees (nonexecutives) Recruitment/staffing of executives only Retirement benefits administration Training and development programs Other: 3. What were your organizations reasons for outsourcing its HR functions? (Check all that apply.) To allow HR staff to focus more on strategy To allow the company to focus on its core business To make up for a reduction in HR staff To make up for the lack of in-house talent/expertise To save money/reduce operating costs To offer services the organization could not otherwise provide To reduce the number of HR staff and related staff expenses To streamline HR functions Other: 4. What were the obstacles that your organization faced when it decided to outsource its HR functions? Lack of prior outsourcing experience in general Did not know what to look for in vendors Lack of qualified vendors Did not know how to locate vendors Resistance from employees in general


Fears about loss of control Resistance within HR Fears about loss of HR jobs/staff Resistance within senior management Fears that outsourcing might impact company culture Not applicable: did not face any obstacles Other:

5. as a direct result of outsourcing its HR functions, did your organization achieve cost savings, incur cost increases, or did costs remain about the same? Achieved cost savings. Incurred cost increases. Costs remained about the same. Do not know 6. What are the main factors to consider when selecting an HR outsourcing vendor? (Check all that apply.) Recommendations from other companies A proven track record Size of vendor organization Cost of vendor services The number of employees assigned to each vendor account Guaranteed service levels Niche in a specific area


Physical location of vendor Other: 7. What have been, if any, the negative outcomes of outsourcing your organizations HR functions? (Check all that apply.) A decrease in employee morale Unable to achieve cost savings A loss of in-house talent/expertise Not applicable: there have been no negative outcomes Not sure of negative outcomes at this time Negative impact on employee customer service Other: 8. Overall, to what extent has outsourcing HR functions met the expectations of the organization? To a large extent To some extent Neither to a large extent nor to a small extent To a small extent To no extent at all

9. Do you expect that your organizations outsourcing of HR functions will increase, stay the same or decrease in the next five years? Increase Stay the Same


Decrease 10. Has the size of your organizations HR department increased, stayed the same or decreased overall in the past five years? Increased Stayed the same Decreased 11. Is this a direct result of outsourcing or plans to outsource? Yes No 12. Do you believe that your organization will outsource its entire HR function in the next five years? Yes No 13. Why has your organization chosen NOT to outsource its HR functions? (Check all that apply.) We do not have the resources to manage the outsourcing process We felt that it would be too expensive We do not want to lose control of our HR functions We have had a bad experience with outsourcing in the past We preferred to develop expertise in-house We encountered resistance within HR We preferred to invest in technology in-house We encountered resistance within senior management We wanted to maintain face-to-face contact with our employees


Other: 14. What are the benefits of outsourcing HR functions for HR professionals? (Check all that apply.) HR has a better reputation among employees It allows HR to spend more time on strategy HR has a better reputation among senior management It improves HR metrics/measurement HR is able to focus on core business functions It allows HR to be perceived as strategic business partners Other:

15. Which industry best describes your locations main business? (Check only one.) Construction and Mining/Oil and Gas Manufacturing (Nondurable Goods) Educational Services Services (Nonprofit) Finance Services (Profit) Government Telecommunications Health Transportation High-tech Utilities Insurance Wholesale/Retail Trade Newspaper Publishing/Broadcasting


Manufacturing (Durable Goods) Other: 16. Is your organization in the public/government or private sector? Public/government sector Private sector

17. What is the employee size of your organization? 0-1000 (small/growing) 1000-5000 (medium) 5000 and above (large)