Employee Outsourcing

HR outsourcing (also known as HRO) is the process of sub-contracting human resources functions to an external supplier.

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 HR’s 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.

Outsourcing human resources or some of its processes to an external provider is a major business decision as, while it may be cost-effective, it introduces new elements of risk, including:

·         Loss of control

·         Impact on the employer/employee relationship

·         Loss of flexibility

·         Failure to deliver cost benefits

·         Legal or regulatory requirements

·        Industrial relations issues

The operation of any HR outsourcing arrangement should be governed by a service level agreement. This will define the required standards of performance by both parties and any penalties for non-compliance. A service level agreement is a crucial document and must be negotiated with great care to mitigate the above risks.

People management plays a crucial role in delivering organisational performance. In today’s modern, knowledge economy this is more true than ever before. The decision to outsource human resources is therefore not to be taken lightly.

There are many circumstances in which outsourcing HR services can deliver tangible benefits to the organisation, for example by freeing HR professionals to devote more time to a strategic role supporting organisational performance.

Advantages and disadvantages of HR outsourcing

Potential benefits of HR outsourcing

·         Reduced cost

·         Increased efficiency

·         Access to improved HR IT systems

·         Improved management information (including human capital metrics)

·         Access to HR expertise not available internally

·         Increased flexibility and speed of response

·        Philosophical reasons (for example the organisation is outsourcing a number of its support functions, of which HR is just one part)

·         Reduced risk

·         To free HR resources to operate more strategically.

Potential pitfalls of HR outsourcing

·     Don’t outsource what you don’t understand. The HR outsource provider will only have to subsequently solve the problem (at a cost) and the provider’s solution might not be most suitable from your organisation’s perspective

·         HR outsourcing does not absolve the organisation of good people management practices nor of overall responsibility for the provision of HR services

·         Loss of local knowledge and processes which instead reside with the outsource provider

·         Standardization of processes in line with outsource provider not organisational preferences.

NB. Where this process involves the outsourcing of human resources to another country, this is known as HR offshoring.

References

HR outsourcing (HRO) – an in-depth guide 01 May 2019, Market Information https://www.personneltoday.com/hr/hr-outsourcing-hro-an-in-depth-guide/

Performance Management System

What is Performance Management System? 

Performance management system is the systematic approach to measure the performance of employees. It is a process through which the organization aligns their mission, goals and objectives with available resources (e.g. Manpower, material etc.), systems and set the priorities.

The competency, skills and knowledge gaps are also identified through this process which can be improved by providing guidance, trainings, coaching and mentoring to employees or teams at different levels and designations. It optimizes the results through a proper channel and process which reduces the conflicts and grievances among teams or employees.

It aims to continuously monitor and measure the performance standards against the desired goals and objectives.

Purpose of Implementing Performance Management System

Managing employee’s performance is the key objective of establishing systematic Performance Management system in an organization. These process servers’ six main purposes in the company:

1.      Strategic 

The system is a tool which should be aligned with overall organization goal followed through department goal and individual goals. The organizational strategic goals should be linked with each activity performed by every department or employee.

2.      Administrative

The system is also set the deciding factor of employee’s promotion, demotion, salary increment, transfer and terminations. It enables to identify the performers, non-performers or under performer employees in an organization. It merits the competency and skill level of employees. Hence, it clearly defines the administrative role as well and supports the management decisions.

3.      Communication

It is the effective communication channel to inform employees about their goals, job responsibilities, key deliverable and performance standards. Further, it is also a structure method to indicate the key areas of improvement required by the employee in order to improvise his performance. Further it provides the platform to learn and train on skills, and knowledge for better performance and results.

4.      Developmental

It is the structure method of communicating the positive feedback, improvement areas, and development plans.

5.      Organizational Maintenance

This system is the yardstick of measuring employee, department and organization achievements and evaluating  the performance gaps through various tools and techniques. Hence, it maintains the health of the organization and its performance standards.

6.      Documentation

It reviews, feedback and forms should be documented and maintained periodically by every organization. It would enable them to look forward, set new targets, design developmental needs, design training and learning programmes, and career progression of employee and for department. Hence, it helps in driving the organizational needs to desirable objectives.

Benefits of Performance Management​

In today’s global environment where the market is evolving at a very fast pace, it is important for an organization to understand the benefits of performance management. Therefore, managing employee’s performance is the ultimate need of an organization. The employees are considered as an asset by the organization. The system serves various benefits to the organization, which are as follows: 

1.      It supports to provide data to find the skills and knowledge gaps of employees in order to improvise them through training, coaching and mentoring systems.

2.      It motivates employees to take new challenges and innovate through structure process.

3.      It provides new opportunities to employees for their growth and development in their professional careers

4.      It defuses the grievances and conflicts among team members through proper performance evaluation system.

5.      It assesses the employee’s performance fairly and accurately against the performance targets and standards.

6.      Employees would enable to provide better results because of clarity on their performance targets.

7.      Performance management system provides the platform to discuss, develop and design the individual and department goals thorough discussion among manager and their subordinates.

8.      The under performer can be identified through performance reviews and can raise their skills levels objectively. It quantifies the learning needs through individual development plans or performance improvement plans as well.

References

PERFORMANCE MANAGEMENT SYSTEM 2018, Market Information.

https://www.hrhelpboard.com/performance-management/performance-management-system.htm
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