Project- Impingement of HR Outsourcing_2

8/10/2019 Project- Impingement of HR Outsourcing_2

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DECLARATION

I, Shalini Das hereby declare that the project report titled THE

IMPINGEMENT OF HUMAN RESOURCE OUTSOURCING ON HR

PROFESSION IN INDIA is my own work and have been carried out under the

guidance of Dr. Mrs. N. Sri Vidya . All care has been taken to keep this report

error free and I sincerely regret for any unintended discrepancies that might have

crept into this report. I shall be highly obliged if errors (if any) be brought to my

attention.

DATE: Shalini Das

PLACE: Roll No: - 29/39

MBA


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Institute of Business Management

JADAVPUR UNIVERSITY

CERTIFICATE

I, Dr. Mrs. N. Sri Vidya hereby certify that Shalini Das, Student of Masters ofBusiness Administration at Institute of Business Management, JadavpurUniversity has completed Dissertation Report on THE IMPINGEMENT OFHuman resource outsourcing on HR profession in India , under my guidance .

DATE: Dr. Mrs. Sri Vidya

PLACE: Professor, IBM


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ABSTRACT

The expectations and availability of business process outsourcing (BPO) haveadvanced based on demand, experiences, technology and markets; and is here tostay. Human Resource outsourcing (HRO), as a subset of BPO, is included in thisevolution and is now a common way for businesses to achieve a competitiveadvantage.

In todays uncertain business climate, executives and organizations need to befinancially stronger, more adaptable, and more efficient to respond to shiftingmarket 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 usachieve these goals and what is the likely future of HR outsourcing.

This research project explains the types of functions outsourced the methods to

select those functions, examples of successes or failures in HRO, businessesinvolved in large scale HRO contracts, and the impact on the current HR

professional.


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Chapter 1. Executive Summary

Chapter 2. Introduction

Chapter 3. Literature Review

3.1. Review of the literature

3.2. Theoretical aspect of HR Outsourcing

3.3. HR Outsourcing trends in India

Chapter 4. Research Methodology

4.1. Objective of the research

4.2. Scope/ Utility of the research

4.3. Hypothesis

4.4. Research Design

4.5. Research Process

4.6. Limitations of the study

Chapter 5. Data Analysis

Chapter 6. Suggestions & Conclusion

Chapter 7. Bibliography

Chapter 8. Annexure- Questionnaire

Chapter 9. Glossary


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Executive Summary

This research is aimed at analyzing the current state of the HR outsourcing market in

India and the trends that are prevalent in the same. Today, in this era of globalization

there is high degree of competition in all areas. One very important trend in the recent

times has been the growth of human resource outsourcing. Rapidly changing market

dynamics and global competitive pressures have caused organizations to spend more time

focusing on their core business. Organizations are fast realizing that they can't be all

things to all people. So companies now, be it a software company, a service provider or a

manufacturing firm, decide what they are good at and outsource everything else, i.e.,

focus on their core competency, and let someone else do the rest in a more efficient and

cost-effective manner. As a result, human resources outsourcing is becoming increasingly prevalent. The

number of companies outsourcing HR activities continues to rise, and the scope of

outsourced HR activities continues to expand. HR outsourcing can happen in HR

functions, like payroll administration (producing checks, handling taxes, dealing with

sick-time and vacations), employee benefits (Health, Medical, Life insurance, Cafeteria,

etc), human resource management (hiring and firing, background interviews, exit

interviews and wage reviews), risk management, etc. Outsourcing has become a common

response to manage people and technology resources strategically, enhance services, and

manage costs more effectively. Outsourcing non-core activities allows HR professionals to move away from routine

administration to a more strategic role. The organization can focus on higher value-added

activities while the outsourcing provider takes care of the day-to-day administration.

Critical internal resources, such as technology and talent, can be devoted to company's

core business. Outsourcing reduces the need for large capital expenditures in non-core

functions. Thus, outsourcing becomes a strategy for reducing the capital intensity of the

business. This strategy has gained popularity as companies aim to become more nimble

and gain the speed and flexibility necessary to compete in today's business environment.

A growing number of executives understand the benefits it can bring in terms of not only

cost savings, but also heightened strategic focus. Many recognize outsourcing


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relationships as long-term partnerships created to further the strategic goals of the

organization. Companies to whom organizations outsource their Human Resources function possess the

knowledge and resources to expertly perform part or all of a clients' human resources

function, allowing the client to streamline their internal processes and concentrate on

generating profit in their core business. But still in India, people are not very clear about

what exactly is manpower outsourcing all about, and issues like quality and trust needs to

be addressed properly. Experts say the basic reasons hampering the growth of HR

outsourcing in India are confidentiality and cost factors. Moreover, the fear of losing

jobs, losing control over confidential data, ethics and quality of outsourcing vendors,

security breaches and overall confidence in the vendors deters many organizations. The

biggest problem - and this is why the HR outsourcing industry in India is on the back foot- is the government and the industry's failure to tackle issues like data security and data

privacy. This is where Indian HR outsourcing companies face a major handicap. However, the future seems to be very promising. Estimates show that the latent size of

HR outsourcing in India is about $ 2 billion with a current market of $ 27 million and it is

growing at an alarming rate of about 50 per cent. India has immense potential as more

than 80% of fortune 1,000 companies are discussing HR outsourcing as a way to cut costs

and increase productivity.

As part of our research, we gathered information from a number of companies about HR

outsourcing and the reasons for which they outsource or dont outsource. Also, we tried

to find out about the preferred models for outsourcing and perceived advantages and

disadvantages.


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CHAPTER 2

INTRODUCTION


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INTRODUCTION

HR outsourcing is a process of outsourcing involving particular tasks like recruitment,

making payroll, training and development to a third party who have expertise in these

respective fields."

What is Human Resource Outsourcing?

HR outsourcing involves hiring an external, specialist HR Company to provide support for

workloads associated with employing and managing people. Recent research from the Chartered

Institute of Personnel and Development (CIPD) has found that over half of businesses outsource

at least part of their HR activities.

Outsourcing has infiltrated the world of human resource management in a major way. Over time

the number of organizations skilled in performing specific human resource activities has grown

to the point where there is now a general provider or a specialist provider organization that can

perform almost any human resource management task or activity. This article aims to identifysome of the key elements necessary for successful outsourcing. For outsourcing of human

resource management activities to be truly effective, companies must understand what can be

outsourced as well as what cannot be outsourced. This article presents a hierarchy that identifies

the kinds of activities that lend themselves to outsourcing and then it identifies the characteristics

that preclude certain functions from being outsourced. Successful outsourcing of human resource

activities also demands that organizations know and understand the advantages and

disadvantages of outsourcing. Another prerequisite for successful outsourcing is to understand

what actions are necessary to create a successful ongoing relationship between the company

doing the outsourcing and the subcontractor or outsourcing firm.

HR services are among the key elements in the enlarging outsourcing game. Recognizing the fact

that senior management needs to get out of mundane day-to-day processing work and focus

instead on strategic planning, core competencies, customer satisfaction and decision making, a


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number of large companies, across globe have begun opting for outsourcing of their HR services.

Some of the functions most commonly handed over to outside providers include payroll, benefits

administration, background checks, drug testing, recruiting and training. Even small companies

that might not get noticed much in big studies of outsourcing trends, turn to outside services to

help with such chores. There are a number of issues related to HR Outsourcing.

Some of these issues include:

The future purpose and contribution of HR because of possibilities of functions being

transformed, or partially outsourced, through HRO deals.

The strategic and management complexities of HRO deals.

Deciding what is "core" and "non -core" in HR.

The difficulty that HR has in assuming more strategic or value-adding roles after implementing

HRO.

The position of off shoring, including job losses and redeployment.

The challenges of trying to manage HR process affect on a global scale and across differentcultures. Some organizations believe the HR function is an integral business success factor, but

others view HR as over-resourced, inefficient and thus vulnerable to the cost reduction

possibilities of HRO.


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HR outsourcing Services could fall into one of four categories:

o PEO - A Professional Employer Organization (PEO) takes legal responsibility for

employees. The PEO and business owner are partners, with the PEO handling HR aspects

and the business handling all other aspects.

o BPO - BPO refers to all fields, but specifically for HR, a BPO would ensure that a company

has access to latest technologies.

o ASP - Application Service Providers (ASPs) host HR software, on the web and rent it to

users.

o E-services - E-services are those HR services that are web-based.


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Outsourcing the information system and accounting, is most common organizational activities.

There are lots of theoretical and empirical articles, but the academic literature on HR outsourcing

is very few. The cost benefit analysis is the top and most important argument in the topic of

human resource outsourcing. Empirical data from government agencies outsourcing to

private suppliers generated savings in the range of 20-30 % in production costs . (Anderson

et al, 1986; Greer et al, 1999; Gupta et al, 1992; Kakabadse et al, 2002; Lever, 1997, and Vining

& Globerman 1999). But some researchers in their studies suggested that at the time of making

the decision of outsourcing there should be other factors excluding cost which should be

considered. The other reasons which are indicated in outsourcing by the researchers are

specialized services, vendor-customer satisfaction, employee satisfaction and competitive

advantage. Adler (2003) noted that a review by the Granter group identified six factors which are

considerable in decisions of outsourcing: dependency risk, spillover risk, trust, relative

proficiency, strategic capabilities, and flexibility. The first four of these factors are short

term factors, whereas the last two are considered more long term or strategic . However, in

literature there is no defined procedure that identifies when outsourcing is most efficient and

effective.

Once a firm has decided to outsource the particular functions, it needs to find out the best

supplier for specialized services. A single supplier of services should be preferred to multiple

suppliers for a number of reasons. Firstly, it is very easy to supervise one vendor as it will save

time of the HR staff. Secondly, a single supplier better understands the needs of client and

provides integrated solution across the company. Thirdly, it is great advantage when a number of

solutions are being bought from one supplier which enables a firm to confer upon a better

agreement.

Lieven and De Corte (2008) published the first study on the commitment of Human Resource

managers to make the decision to continue an outsourcing partnership with the present supplier

of the services. They formed a model of HR manager commitment, testing affective commitment

and continuance commitment in outsourcing partnerships. This study found that affective

commitment and the continuance of the outsourcing partnership was linked to frequency of HR

outsourcing.


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Brain S. Klaas, who has written a long theoretical study on the impact of HR outsourcing, found

that organizations should be well aware of the prospective risks before selecting an HR vendor.

He explained that the small and medium enterprises in particular, are rapidly going for HR

Outsourcing. He further examined that there are the variables that can be affected by

organizations and will vary from organizations to organizations, which are administration fees,

staff time costs, HR outcomes and compensation costs. He suggested that if an organization is

planning to outsource its HR functions, should fully research these variables to see which

benefits can be obtained in contrast lowering the costs.


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3.2. Theoretical Aspect of Human Resource

Outsourcing:-

Arguments for Outsourcing : In general, organizations think about using outsourcing

for a number of apparent reasons. First, it permits them to concentrate on their core business

functions, and can focus on the area where they have expertise and are likely to do best. Second,

it allows the firms to obtain competitive advantage and gain profit from the expert service

providers who may have specialized skill in the concerned areas. Third, it also allows companies

with greater flexibility and efficiency to cater with fluctuating labor requirements with the help

of subcontractors. Firms can save the direct costs by the on time provision of the human resource(e.g., reducing headcount and overtime working) and indirect costs (e.g., cutting administration

and backup costs, saving recruitment and training costs, saving absenteeism costs, and reduced

industrial relations problems). Fourth, outsourcing also minimizes the risk factor of uncertainty

to the vendor. And lastly, outsourcing provides opportunities to firms to choose most competitive

tender to keep the future costs down.

Arguments against Outsourcing: HR outsourcing practice is not without

drawbacks. One of the most important issues is maintain the continuous delivery of expertise

delivery and the retention of knowledge and skill internally. Most of the organizations adopt

outsourcing to save the training costs as they assume that the specialized service providers will

deliver the key skills as per requirement. As Prahalad and Hamel (1990) point out, outsourcing

can provide a shortcut to a more competitive product, but it typically contributes little to

building the people-embodied skills that are needed to sustain product leadership (cited by

Wray, G. N. 1999). Loss of quality is also another most important factor in outsourcing,

especially for those firms which are operating in a very competitive business environment.

Employees of the firm often assess the service quality by comparing the result of the service and

expectations of the service under the proposed change.


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HR Activities to Be Outsourced: In outsourcing HR functions, the first and

foremost issue is to make decision of which HR activities should be outsourced and which

should be performed internally. While deciding about make or buy decision, firms require

considering that what would be the impact of outsourcing these activities on the firms performance. For better outcomes, organizations may need to classify the core and noncore

activities. Finn (1999) suggests that a basic distinction can be made between HR core and

noncore activities. The core functions of the firm include top -level strategy, HR policies, and

line management responsibilities (e.g., appraisal and discipline), while the non core functions

include specialist activities (e.g., recruitment and outplacement), routine personnel

administration (e.g., payroll and pension), and professional HR advice (e.g., legal advice related

to employment regulations). Hall and Torrington (1998) found that training and management

development, recruitment and selection, outplacement, health and safety, quality

initiatives, job evaluation, and reward strategies and systems were the likely HR functions

to be outsourced, as they were considered noncore or because the organization lacked the

expertise to perform these activities internally . The literature is evident and listed some of

the activities which are outsourced completely are employee training, payroll, healthcare benefits

to employees, and pension benefits.

Regardless of this rapid progress in the outsourcing of Human Resource function, the empirical

studies by Klaas, McClendon & Gainey, (2001), Gainey & Klaas, 2003; Klaas, 2003; Klaas,

McClendon & Gainey, (1999) of Human Resource outsourcing concentrate on the issues like

the impact of organizational characteristics, the role of transaction costs, the relationship

between HR department size and outsourcing activity. However, the most important issue of

outsourcing is when to outsource the HR functions, is not covered properly. Which factors

allows firms to keep the activities in-house and which outside forces derive the firms to consider

outsourcing. Although Klaas, McClendon & Gainey (1999) addressed this issue in their study of

moderator variables in the relationship between amount of HR outsourcing and perceived

benefits from outsourcing. In a separate article by Klaas, McClendon and Gainey (2001) also

analyze the certain organizational characteristics which derive organizations to outsource HR

activities, but do not consider HR performance as a dependent variable.


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There are very few empirical studies that examine the significance of performance while making

the decision about HR outsourcing. As most of the researches seem to focus and explain the

factors due to which organizations outsource, how to outsource, or the impact of outsourcing on

the organization and its employees.

In the literature, the question of when outsourcing is most suitable and under what

circumstances a company should outsource is not addressed properly or a very few work done on

this issue. A considerable gap is identified as and when and under what business scenario does a

firm should outsource which would add value to the firms outcomes, what would be the impact

on the firms p erformance and how HR outsourcing mediates that relationship?


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Reasons for Outsourcing:

Achieving competitive advantage : Achieving competitive advantage is one of the most

important reasons for the decision of Human Resource outsourcing. In different studies, the

authors put stressed on the issue that Human Resource system can provide competitive

advantage to the firm. In the case of HR outsourcing a firm is availing more specialized services

probably from a different environment with different expertise and the knowledge proficiency

can help an organization achieving a competitive advantage over it competitors.

Minimizing cost : Minimizing costs is a second main reason of Human Resource outsourcing

has been identified in literature. The activist, (Roberts, 2001) campaigned for outsourcing as

considerably lowering the costs and risk, increasing the organizational flexibility, innovative

capabilities, and opportunities for creating value-added stakeholder returns. Obviously, many

organizations preferred to outsource due to the cutting down cost of production. Nevertheless,

these reasons are not without challenges. Some of the challenges have been listed as quality of

HR services from vendors, insufficient employee preparation towards the jobs, and lack of

proficiency to manage HR outsourcing.


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preferred to purchase of outsourcing services, which provides them the latest and accurate

services. Most of these modern equipments and systems require specialized skills and experts to

perform the functions. So consequently organizations in such need outsource the specified

activities.

Generally, in the use of HR Outsourcing the researchers found considerable variations among

organizations. More important, these variations appears to stand little relationship to the size,

cost, or productivity of the function (Greer et al., 1999; Vernon et al., 2000), although Klaas et

al. (2001) found that idiosyncratic HR practices, firm size, and cost pressures affected both the

degree of outsourcing and the perceived benefits.

Existing literature on HR outsourcing appears to be limited in general. As its a new phenomena

which is in its inception, so that the research and practice in HR outsourcing is being in its earlystages of growth and development. Many firms preferred to outsource the discretional activities

of HR (e.g., payroll, training, health and safety, legal advice), areas in which they consider a

non-cost effective to develop and maintain internally and the lack of internal expertise.

Although some researchers remain cautious about the future growth of HR outsourcing but as per

the existing evidence, HR outsourcing has augmented significantly over the last decade. Training

and payroll listed as the most favorite areas of HR outsourcing. In addition, recruitment, taxation,

and legal compliance are most common functions which are outsourced very often. However,

employee relations, HR planning, career management, and performance appraisal are less likely

to be outsourced, as these activities are considered to be the core competencies. Even so, there

are no clear patterns of the types of HR activities that are outsourced.


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Future trend of HRO:

Factors to Consider when Outsourcing:

Some authors suggest that there are certain factors which organizations should consider before

deciding to outsource, including activities that involve disproportionate time management,

activities that are not associated with other work activities, and activities that require a high skill

of expertise (Heywood, 2001).These factors very much reflect the reasons outlined above for the

increase in outsourcing as a HR strategy.

Specifically, organizations have to consider factors such as cost, the management required, and

interaction issues. Organizations should be considering which HR activities are suitable for

outsourcing. Specifically, organizations should ask two fundamental questions:

(1) What will be the impact of outsourcing the HR activities on the organization? (2) How will it

impact on the activities and employees that are not outsourced?


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Conceptual Model


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METHODOLOGY FOR HR OUTSOURCING:

Situation

Analysis

Solution

Design

Design of

Performance

Solution

Delivery

Solution

Performance

- BusinessEnvironmentAnalysis

- Work processAnalysis

- Risk analysis

-Strategic- Project- Transactional

- Work ProcessDesign

- Service levels

- Accountability& performance

Measures for

Both Vendors

& Company

- Resourcing

- Work ProcessManagement

- SolutionManagement

- Vendor-CompanyRelationship

Management

-PerformanceAnalysis &

Reporting

- Performance GAPResolution process


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The methodology of HR outsourcing involves the following steps: -

o Situation analysis It includes business environment analysis, analysis of the work process

which is to be outsourced and risk analysis.

o Solution design

o Design of performance measures & contract It includes preparation of the HR outsourcing

contract. The expected service levels are defined and accountability & performance measures

for both the vendor and the company are set.

o Solution delivery

o Solution performance management It includes the management of the vendor-company

relationship.


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HR OUTSOURCING DELIVERY PROCESS

Delivery Process Support

HRO SolutionsDelivera

bles

Work Process

Resources

Hr tools

People

Doers

Consultants

Project Dedicated Expertise

Admin

BSC

KPI

SLI

Process Procedures Rules Project Management Performance Management

Performance

Measurement


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3.3. Human Resource Outsourcing trends in India

HRO is an evolving industry in India. With more and more companies looking to rationalizeemployees on their payroll, manpower outsourcing is slowly becoming the new buzz in India.

And the trend seems to have hit not just big multinational companies but the public sector and

government undertakings as well, though on a very low key yet in the latter. It has turned out,

furthermore, that HR departments especially rely significantly on outsourcing, even though they

might not, at first, realize that only a few standard practices are, in fact, out-sourced.

Why Outsource HR Services to India?

When you outsource HR services to India, you can save on time and effort and concentrate on

your core business. You will also be able to increase your flexibility to met needs such as,

changing and new business conditions and increasing orders for products, services and

technologies. By outsourcing a non-core process like HR services, you can concentrate more on

increasing customer satisfaction and on increasing the value of your products / services.

Outsource HR services to India and benefit from the skills, expertise, latest technology and

professional services that India offers in the field of HR. When you outsource HR services to

India, you will find your operating performance, risk management and control improving. By

outsourcing HR services, you can also gain access to professional services. Your outsourcing

provider will be able to provide you with proficient HR services that can bring about a change in

your organization. Outsourcing HR services can also help you benefit financially. One good

reason for outsourcing HR services to India is that you can save on costs and at the same time get

access to high-quality services.


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Organizations that Outsource HR Services to India

Large organizations mostly outsource their HR services to India in order to concentrate on their

core processes. Such large organizations can increase the profitability of their business by

outsourcing. Large organizations also stand to gain from better HR services for their employees.Small and mid-size organizations also outsource if they do not have enough of HR staff to

manage their HR functions. Mid-size and small organizations can also benefit from cost-

effective services when they outsource to India. Outsource HR services to India to enhance your

productivity and return on investments and also to achieve the economies of scale.

Advantages of outsourcing HR services to India

When you outsource HR services to India, you can see an improvement in your HR support

functions. Outsourcing HR services can help you bring out more effective and efficient processes

within your organization. Payroll functions can be completed on time accurately and your

outsourcing partner can come up with ingenious ways of improving HR functions in your

organization.

Outsourcing HR services to India can help you achieve your targets. Your business can become

more productive with the help of effective business and HR strategies. You can also on save

time, effort and manpower. You can concentrate more on your business and can be relieved from

taking care of your HR work in-house. With strategic HR strategies, training programs and

development programs, you can retain your employees.

Outsourcing HR Services to India can help your organization gain a competitive edge!


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PRESENT SCENARIO OF HR OUTSOURCING IN INDIA:

The general opinion among Indian companies is that it is economical to manage all their HR

processes internally. Consequently, there is not much emphasis on outsourcing. Typically, very

small companies (which do not have the competency to staff a full-fledged HR department) and

very large companies (who wish to outsource all routine HR processes so that they can

concentrate on core issues), are the ones that use HR outsourcing in a significant way. Besides,

many multinational companies are fast adopting these practices.

Sateesh R Kurugod, head of marketing and alliances, Crossdomain Solutions says that nowCXOs realise that HR teams typically spends over 80 perce nt of its time in managing tactical

and transaction oriented HR operations. If these tactical processes are outsourced, the company

could re- deploy their trained HR resources to core processes, he adds. Pramode Sadarjoshi, the

director and head of Human Resources of Cognizant Technologies says, Today, every

organization is aiming at achieving productivity by enhancing return on investments and

achieving the economies of scale. In this context, it makes business sense to focus only on the

organizations c ore competencies and outsource non-critical business activities. Therefore,

routine administrative tasks, although important, can be outsourced to third party vendors.

Experts believe that in present times HR outsourcing is undergoing a transition phase. "There has

also been a transition on its user acceptance, where it is moving from a corporate domain to

public sector undertakings and the government sector. All this reflects on the growth of this

sector.

HR outsourcing comes third in the list of potentially high paybacks, after IT and the telecomm

industry. However, many companies wrap up their HR functionalities as something that happens

in the back office, and do not give enough attention to the infrastructure that essentially props up


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CHAPTER 4

RESEARCH METHODOLOGY


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4.2. Scope/Utility of the Research

The research can be very useful to the HR professionals to understand the current trends in the

market with regards to outsourcing of HR services. It will give them a comparison of the firms

outsourcing HR services with those that have completely in-house HR functions. They will get to

know about the perceived advantages and disadvantages of HR outsourcing and also the

important considerations to be kept in mind.

Outsourcing Vendors can also find this research useful in understanding the needs of their

potential and existing clientele. The students can also benefit from this research as they will

become aware of the new trends in the field of HR and will be better prepared for the challenges

ahead of them when they join the industry as HR professionals.


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4.3. HYPOTHESISHR outsourcing: benefits, trends and challenges is a study aimed to get familiar with the

current scenario of HR outsourcing in Indian companies and the potential future for the industry.

HR outsourcing is the next big thing to happen and is rapidly gaining momentum especially in

the US. With respect to the Indian scenario it is still at a nascent stage but is expected to grow

rapidly. India currently is facing an economic boom and almost every industry is at its best state.

Hence there is a need for the companies operating in a highly competitive and dynamic

environment to focus on their strategic aspect and core competencies. The companies can do this

by outsourcing the unimportant and non-strategic tasks.

Due to the presence of some factors in the Indian market, the HR outsourcing industry is very

small but it is expected to grow in the future. This is evident from the fact that various big

players like ICICI Bank, Wipro, and TCS are entering this arena of HR outsourcing in India.

The study is based on the following assumptions and hence the hypothesis for the study is: -

Indian companies are outsourcing most of their HR processes.

HR outsourcing is expected to grow at a rapid pace in the Indian industry.

Indian companies derive lot of benefits out of HR outsourcing.

Internal customers of the company are satisfied with the decision of the company to

outsource their HR processes.

Cost is the main criteria for vendor selection for HR outsourcing by Indian companies.


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4.4. RESEARCH DESIGN

Exploratory research

Exploratory research is often conducted because a problem has not been clearly defined as yet, or

its real scope is as yet unclear. It allows the researcher to familiarize him/herself with the

problem or concept to be studied, and perhaps generate hypotheses (definition of hypothesis) to

be tested.

It is the initial research, before more conclusive research is undertaken. Exploratory researchhelps determine the best research design; data collection method and selection of subjects and

sometimes it even conclude that the problem does not exist.

Exploratory research can be quite informal, relying on secondary research such as reviewing

available literature and/or data, or qualitative approaches such as informal discussions with

consumers, employees, management or competitors, and more formal approaches through in-

depth interviews, focus groups, projective methods, case studies or pilot studies.

The results of exploratory research can provide significant insight into a given situation.

Although the results of qualitative research can give some indication as to the "why", "how" and

"when" something occurs, it cannot tell us "how often" or "how many".

Descriptive research

Descriptive research or statistical research provides data about the population or universe

being studied. But it can only describe the "who, what, when, where and how" of a situation, not

what caused it. Therefore, descriptive research is used when the objective is to provide a

systematic description that is as factual and accurate as possible. It provides the number of times


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something occurs, or frequency, lends itself to statistical calculations such as determining the

average number of occurrences or central tendencies.

The two most commonly types of descriptive research designs are

Observation Surveys

Two methodologies were adopted while undertaking the research:

Secondary data collection

Large amount of secondary data is available in the forms of articles, journals, and previously

conducted researches on the similar topics. This data was collected and studied to determine

some of the broad trends prevalent in HR outsourcing across the world and the presence of HR

outsourcing industry in India. Also, the data thus gathered helped in identifying key parameters

to examine through further exploration and thus helped in defining the hypotheses for further

study as well as designing the questionnaire.

Primary data collection

Primary data was collected through the means of a sample survey. For this purpose, a

questionnaire was mailed to some of the HR managers and executives in various organizations

and their response was solicited. The data collected through this survey was then analyzed to

determine patterns and for testing the validity of the hypotheses formulated.


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Sampling technique:

The sampling technique used for the survey was non-probabilistic in nature. Convenient

sampling technique was used owing to limited number of resources for carrying out the research.

Also, the respondents chosen were from varying sectors and thus provided a good estimate of the

overall picture prevalent. Target group for carrying out the survey was the HR departments of

various organizations. The study objective itself omitted the need to study small scale

organizations as they generally dont have a separate HR division as such and hence were not

considered for carrying out the survey.

Data Collection:

A questionnaire was developed and administered via email to the respondents. The questionnaire

was accompanied by an introductory letter stating the purpose of the research and promising

confidentiality. Responses were then collected and analyzed to arrive at certain conclusions.


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CHAPTER 5

DATA ANALYSIS


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Analysis of the Questionnaire data:

No of Respondents- 45

ANALYSIS TOOL: MS EXCEL

Q1. Is your organization Government/public sector or Private sector?

Out of 100 respondents 80% are working in Private Sector and 20% working in the

Government/Public Sector.

So the research is basically concentrated to private sector as private sector companies have

higher impingement of HRO in their respective organizations.

20%

80%

Type of Organisation

Govt/Public

Private


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Q2. Total No. of employees in your organization?

Basically, Out of 100 respondents, 60.67% are from large scale industry and around 27% frommedium scale industry and 5% respondents are from small scale industry.

Large scale industry people are the target group for analyzing the impact of HRO.

Q3.Does your organization outsource HR functions?

53% people support to outsource HR functions and 47% people still believe on their own HR

functions and policies and hesitate to outsource it.

Marginal increase above been shown on accepting HR outsourcing in the research.

YES53%

NO47%

Outsourcing HR functions

5.20%

26.66%

60.66%

10%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Below 100 100-500 501-1000 Above 1000

No. of employees


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Q3A. Are you a HR service provider or outsourcer?

Out of 100 respondents 43% are the HR outsourcing service providers & the rest (57%) are the

HR service outsourcer.

This shows that the demand of HR outsourcers is more than the service providers. Outsourcing

basically involves Payroll administration, Employee benefits, Human resource management, risk

management.

43%

57%

0%0%

Service Provider

Outsourcer


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Q4. If yes, how many people are outsourced by the organization to do HR functions?

Out of 100 respondents majority 87.50% people outsourced less than 100 people are outsourced

by the organization to do HR functions and else outsourced 100-500 people.

So organizations mainly outsourced smaller number of people to do their HR functions.

Manpower cost for outsourcing is not much.

People do not feel to outsource too much people to do their HR activity.

Below 100 100-500 501-1000 above 1000

87.50%

12.50%

0% 0%

No. of people outsourced


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Q5. In which areas do you require support HR outsourcing?

Except payroll every HR services require support of HR Outsourcing.

Out of 100 respondants 53.33% feel they require support in recruitment and 26.67% require in

HR training. So basically recruitment & selection and HR training require major HRO support.

26.67%

6.67%

53.33%

2.22%

4.44%

6.67%

0%

0%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%

HR Training

Health & Safety training

Recruitment

Employee Evaluation

Disciplinary/Grievance Procedure

Sickness/Absent Mang

Payroll

Other


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GROUP FORMATION ON THE BASIS OF SUBJECT

Group Qno. Subject Excellent Good Average Poor VeryPoo

1.Cost reduction

Q6. Influence of outsourcing HR in reductionin employee expenditure

27 15 3

Q9. Effectiveness of cost reduction inproduction cost

24 18 3

2.Effect onHR Activity

Q7. Importance of outsourcing in preventionof the hiring of new employees

9 306

Q8. Influence of outsourcing in prevention oftraining of new employees

3 15 27

3.Developmentof HRO

Q5. Development of outsourcing practices inthe Org.

3 30 9 3

Q13. Development of the outsourcing HRfunctions in other Org.

15 27 3

4.PerformanceAnalysis

Q10. Impact of outsourcing in Org.Performance

3 24 18

Q12. Effect of outsourcing to the competitiveadvantage

24 21

Q15. Quantity of application of outsourcing inperformance

21 24 6

5.Effect on theOrganization

Q11. Impression of outsourcing in thecompanies

24 15 3 3

Q14. Existing state of the art of outsourcing 3 24 9 9Q16. Important level of expertise in

Outsourced company3 21 15 6

Q18. Efficiency of the outsourcing inanswering the needs

24 21

6. ChangeMang.

Q17. Major changes in the Org. sinceoutsourcing began

18 21 6


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Group 1: Cost Reduction on two aspects.

a) Employee Expenditure.

b) Production Cost.

60% people felt that outsourcing results in cost reduction in employee expenditure where

53% felt outsourcing reduces production cost.

7% people felt outsourcing dont able to reduce cost neither in employee expenditure nor

in production cost.

Minor people less than 50% unable to find any impact in cost reduction by outsourcing.

Excellent Good Average Poor Very Poor

60%

33%

7%

53%

40%

7%

Group1. Cost ReductionEmployee Expenditure Production Cost


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Group 2: Reduction of HR activities. Majority of people (67%) neither agree nor disagree that outsourcing prevents of hiring

new employees. And 33% keep neutral on prevention of training of new employees. It is viewed that majority (60%) people dont agree that outsourcing helps to prevent

training of new employees.

So as a result people still dont have a positive feeling on cost reduction by HRO and

need to develop this cost reduction policy.

ExcellentGood

AveragePoor

Very Poor

20%

67%

13%

7%

33%

60%

Group2. Reduction of HR ActivitiesPrevention of hiring new employees Prevention of training of new employees


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Group 4: Performance Analysis of the organization by adopting Human Resource

Outsourcing.

60% out of 100 (on that 7% are extremely agreed) are in view that organizations

performance is increased by HRO.

53% out of 100 are in view that overall organizations competitive advantage of the

organization.

But in terms of application of HRO in their respective organization 53% dont recognize

any notable issue.

Organization performance and competitive advantage have been increased by the help of

HRO but application of HRO in their respective organizations still need to be enhanced.

Excellent Good Average Poor Very Poor

7%

53%

40%

53%

47%47%53%

14%

Group4. Performance AnalysisOrg Performance Competitive Advantage Application in Org Performance


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Group 5: HRO effect on the organization. Majority of people (53%) supports the fact that efficiency of the outsourcing in

answering the needs of the organization is good.

The level of expertise in the outsourced company- 47% think supports and 33% didnt

feel any impact 7% really impressed by the level of expertise.

So as majority of the respondents supports that (47% + 7%), we can easily say that level

of expertise was increased by HRO.

Majority (53%) feels the existing state of the art of outsourcing as compared to the

identified organization is neither good nor bad and out of 100, 40 respondents really

noticed poor impact about it.

So organizations really need to focus on the existing state.

53% out of 100 respondents are in the view of good impression of HRO in their

respective company.

53%

33%

7%

7%

7%

53%

20%

20%

7%

47%

33%

13%

53%

47%

Excellent

Good

Average

Poor

Very Poor

Group 5. Effect on the OrganizationEfficiency in Org Needs Level of expertise Existing state Impression in the Co.


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Q19. State what have been trends in use of HRO in the past 3 years?

Be it providing HR outsourcing or service providing there has been a constant increase of

seeking HR outsourcing in the past 3 years. Trend has been so that every aspect of outsourcing

has seen a marginal increase or constant increase. Yet in some org. people still felt that the trend

in use of HRO is constant, neither increase nor decrease.

Increase MarginalIncrease

Constant Marginaldecrease

Decrease

30% 30%33%

3%

Trend in use of Hro in the past 3 years


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Q20. Impact on the HR Profession, do you believe that HRO has increased, had no impactor decreased?

67% out of 100 are of the view that HRO marginal increases as an impact on HR

profession out of that 7% view increases at a reasonable measurement.

33% people keep neutral unable to notice any increase or decrease.

So ultimately we can say that as an impact on HR profession, HRO has increased.

Increase Marginalincrease

Constant Marginaldecrease

Decrease

7%

60%

33%


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Q20. Do you agree or disagree that the role of HR professionals can become more strategic

with the outsourcing of transactional HR functions.

For this question 33% of HR service seeking clients has asked their HR service providers for

outsourcing services & restructuring of their HR strategy, another 33% has wanted to keep on

going with the same strategy do not agree to become more strategic and 27% people keep

neutral.

7%

33%

27%

33%

0%

HR Professionals become more strategicwith help of outsourcing

Strongly agree Agree Neither agree or disagree Disagree Strongly disagree


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CHAPTER 6

SUGGESTIONsCONCLUSION


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Companies ready to address the necessary transformation of their HR processes will find

that outsourcing will bring access to world-class processes, competitive advantage, and

increased shareholder value.

Technology compatibility, confidentiality and cost are other challenges that both sides

must work on.

Mutual trust is critical, as it's a long haul commitment. It is imperative that senior

management is involved right from the beginning and also drives the initiative. In

addition, a clear understanding of requirements and expectations from both sides is an

important platform in building the relationship.

Compatibility in culture and values along with an open and flexible approach go a long

way in ensuring that the outsourcing venture is a successful one.

Renewals are the big news in human resources outsourcing . The economic turbulence is

a tremendous opportunity for HR leaders to come back in a new, more focused, and more

impactful way. Economic modeling, corporate governance, strategic marketing -- all will

become part of the new HR professionals' tool kit.

Outsourcing is becoming more sophisticated. Customers are looking for business processexcellence, speed to market, improvement in quality, benchmarking to world-class

standards . CEOs are involved to ensure the long-term success of strategic off shoring

decisions. On their part, suppliers understand that they must compete globally and that

outsourcing will play a more transformational and strategic role for the client.


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India can collaborate with other countries to leverage local knowledge of the business

environment and language skills while providing its domain knowledge and technological

expertise for successful outsourcing.

Global HR benefits deals will become a reality as suppliers develop the technology to

provide a centralized look.

HR processes will converge and no longer be separate event.

HR outsourcing is at a nascent stage in India.

HR outsourcing is expected to grow at a rapid pace in the Indian industry.

Indian companies derive lot of benefits out of HR outsourcing.

Internal customers of the company are satisfied with the decision of the company to

outsource their HR processes.

Cost is the not the main criteria for vendor selection for HR outsourcing by Indian

companies.


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Conclusion:HR departments today are faced with dual roles. The first involves being a business partner

focusing on core functions that impact bottom-line objectives of the organization. Second, HR

professionals are critical in ensuring that the day-to-day needs of employees are addressed. Thesetwo 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 appears to be a viable option that

organizations are embracing. This is especially evident in large-staff sized organizations which

show a trend in utilizing outsourcing slightly more than smaller organizations.

They also report a greater likelihood of increasingly relying upon it in the future. Large

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 large organizations also expressed greater concern that outsourcing would lead to

reductions in HR staff size, which is corroborated by results of this survey that show these

organizations experiencing decreases in their HR department size in the past five years.

HR professionals are fully aware of the impact of outsourcing on the profession. Some embrace

it, while others do not. Their concerns center on the shifting roles of the HR professionals thatrequire them to be both transformational and transactional. It is likely that as an outcome of

outsourcing the preferred skills in the profession may shift. Some jobs may be redistributed such

that they require broader business skills as well as specific HR expertise. These changes,

however, are likely to be felt throughout the profession, 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. Yet, the role of HR

professionals will continue to alter as the

profession advances into new territory.

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.


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CHAPTER 7

BIBLIOGRAPHY


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BIBLIOGRAPHY: Human Resources Business Process Outsourcing: Transforming How HR Gets Its Work

Done By Edward E. Lawler.

HR Outsourcing: Reaping Strategic Value for Your Organization (SHRM Surveysseries) By Society for Human Resource Management (Author). Outsourcing Human Resources Functions: How, Why, When, and When Not to Contract

for HR by Scott B. Gildner (Author), Mary F. Cook. Aswathapa K, Human Resource & Personnel Management, New Delhi,Tata McGraw

Hill 3 rd Edition. Klaas, B.S, 2003 Adler (2003); Cook, (1999); Galanaki and Papalexandris, (2005); Lilly et al., (2005). (Anderson et al, 1986; Greer et al, 1999; Gupta et al, 1992; Kakabadse et al, 2002; Lever,

1997, and Vining & Globerman 1999). The empirical studies by Klaas, McClendon & Gainey, (2001), Gainey & Klaas, 2003; Klaas,

2003; Klaas, McClendon & Gainey, (1999) of Human Resource outsourcing. Arnold 2000, Page 24. Muller, 1996 Page 449.

WEBLIOGRAPHY:

www.google.com Wikipedia

Proquest

www.peoplemangement.com

http://www.hrmguide.net/buscon1.html
http://www.google.com/http://www.google.com/http://www.peoplemangement.com/http://www.peoplemangement.com/http://www.hrmguide.net/buscon1.htmlhttp://www.hrmguide.net/buscon1.htmlhttp://www.hrmguide.net/buscon1.htmlhttp://www.peoplemangement.com/http://www.google.com/


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ANNEXURE

Questionnaire on HR Outsourcing

Dear Sir/Madam,

I am a post graduate student of Jadavpur University , seeking your assistance in completingproject on The Impingement of HR outsourcing on human resource profession in India.Responses from all participants will be combined, analyzed and the findings reported only in

their aggregate form.

I appreciate your participation in the survey as the quality of this study depends on yourrespond to the questionnaire. Please take a couple of minutes to fill out the questionnaire.Your answers will be kept confidential and will be used only for academic purposes.

Yours sincerely,

Shalini Das

Name-

Designation-

Nature of the Organization-


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Please tick the right alternative.

In which areas do you require support HR outsourcing?

a) HR training

b) Health and safety training

c) Recruitment

d) Employee Evaluation

e) Disciplinary/Grievance Procedure

f) Sickness/ absent Management

g) Payroll (outsourced)

h) Other

1. Is your organization Government/public sector or Private sector

A) Govt./public B) Private

2. Total number of employees in the organizationa) Below 100 b) 100-500 c) 501-1000 d) above 1000

3. Does your organization outsource HR functions?a) Yes b) No

3A. Are you a HR service provider or outsourcer?

a) Service Provider b) Outsourcer

4. If yes, how many people are outsourced by the organization to do HRfunctions?

a) Below 100 b) 100-500 c) 501-1000 d) above 1000


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5. How would you group the development of outsourcing practices in theorganization?

a) Excellent b) Good c) Average d) Poor e) Very poor

6. Rate the influence of outsourcing of HR functions in terms of reduction inemployee expenditure for example salaries to the organization


7. Evaluate the important influence of outsourcing in prevention of the hiring ofnew employees for the organization.


8. Rate the significant influence of outsourcing in prevention of the training ofnew employees for the organization.


9. Evaluate the effectiveness of cost reduction in terms of reduced production

cost in the organization.


10. Assess the impact of outsourcing in organizational performance.


11. What is the impression of outsourcing in the companies around theorganization?



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12. Describe the effect of outsourcing to the competitive advantage to theorganization.


13. How is the development of the outsourcing HR functions in otherorganizations?


14. What is the existing state of the art of outsourcing as compared to theidentified organizations?


15. What is the quantity of application of outsourcing in terms of performance?


16. Rank the important level of expertise in the outsourced company.


17. Rank the major changes in the organization since outsourcing began.


18. Rank the efficiency of the outsourcing in answering the needs of the

organization.


19. State what have been trends in use of HRO in the past 3 years?

a) Increased b) marginal increase c) constant d) marginal decrease e) decreased


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20. Impact on the HR profession, do you believe that human resourceoutsourcing has increased, had no impact or decreased HR professional jobopportunities.

a) Increased b) marginal increase c) constant d) marginal decrease e) decreased

21. Do you agree or disagree that the role of HR professionals can become morestrategic with the outsourcing of transactional HR functions.

a) Strongly agree b) agree c) neither agree or disagree d) disagree e) stronglydisagree

Thank you


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CHAPTER 9

GLOSSARY


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GLOSSARY "X"-sourcing: There is an extensive list of words used in conjunction with the word

sourcing that suggests a specific approach. Strategic outsourcing, Tactical outsourcing,

HRO and HR-BPO are just a few. Each has a slightly different meaning intended by the person using it to connote a slightly different approach to outsourcing.

360 Survey: An employee feedback program whereby an employee is rated by surveysdistributed to his or her co-workers, customers, and managers. HR departments may usethis feedback to help develop an individuals skill or they may integrate it into

performance management programs.

Accessibility: The extent to which a contractors or employers facility is readilyapproachable and does not inhibit the mobility of individuals with disabilities,

particularly such areas as the personnel office, worksite and public areas.

Administrative services organization (ASO): An organization that providesoutsourced solutions to meet the administrative and HR needs of the client with the clientretaining all employment-related risks and liabilities. An example of this would be a

professional employer organization (PEO) unbundling its services and only providingtransactional processing services.

Affirmative Action Plan (AAP) : A written set of specific, results-oriented procedures to be followed. Intended to remedy the effects of past discrimination againstor underutilization of women and minorities. The effectiveness of the plan is measured bythe results it actually achieves rather than by the results intended and by the good faithefforts undertaken.

Affirmative action: Proactive policies aimed at increasing the employmentopportunities of certain groups (typically, minority men and/or women of all racialgroups). Title 5, Section 503 of the Rehabilitation Act requires that affirmative action betaken in employment of persons with disabilities by Federal contractors. Affirmativeaction was designed to rectify past discrimination but has been controversial since itsinception.

ASP - Application Service Providers (ASPs) host HR software, on the web and rent it tousers.

BPO - BPO refers to all fields, but specifically for HR, a BPO would ensure that acompany has access to latest technologies.


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E-services - E-services are those HR services that are web-based.

E-sourcing: Internet-based outsourcing that takes advantage of the application service provider (ASP) delivery model.

Full service Human Resource Outsourcing: Outsourcing the full employee lifecycle that includes both processes and transactions orchestrated by a single provider (alsocalled single sourcing). Related to Total HR outsourcing .

Governance: The oversight and management of all aspects of an outsourcingrelationship. Areas of focus include change management, communications management,

performance management, operational management, risk management, strategicmanagement and others.

Home sourcing: As a substitute for outsourcing customer service to offshore callcenters, more companies are turning to service providers that specialize in providinghome sourcing services, using home-based agents to answer calls.

HR Audit: A periodic measurement of human resources effectiveness, conducted byinternal staff or with the use of an HR audit system.

Market-driven sourcing: A market-driven approach to sourcing means that theorganizations sourcing decisions is in direct response to the ca pabilities of themarketplace of available providers. Where the organizations internal capabilities aresuperior to the marketplace of providers, the activity is performed internally; where theyare not, the activity is performed externally.

Near shoring: Restructuring a company's workforce by moving jobs to a nearbyforeign country.

Offshore outsourcing (off shoring): The outsourcing of any operation to a firmwith a principal base of operation outside the country.

Onboarding: The process of moving a new hire from applicant to employee statusensuring that paperwork is done, benefits administration is underway, and orientation iscompleted.


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Outsourcing: A transfer (or delegation) to an external service provider the operationand day-to-day management of a business process that is long-term in nature and results-oriented.

PEO - A Professional Employer Organization (PEO) takes legal responsibility foremployees. The PEO and business owner are partners, with the PEO handling HR aspectsand the business handling all other aspects.

Service provider: A company that provides outsourcing services. Terms such as"provider," "vendor" and "partner" are often used interchangeably.

Total HR outsourcing: Outsourcing all or most of the internal HR function to asingle, external service provider. Typically, internal HR then shifts to a role of providinghuman capital strategy within the organization, while also managing the relationship with

the outsourcing firm and evaluating the services it provides.

Zero-based sourcing: When the sourcing decision for each aspect of a businesssoperation is re-justified every planning cycle from an assumed base of zero. Thisapproach ensures that the organization is consistently and objectively re-testing itsinternal operations against the best available external solutions.


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