Ch. 13 Outsourcing, 7 q's on exam Flashcards
Outsourcing definition
a contractual relationship for the provision of business services by an external provider
_____ firms are more likely to outsource all HR functions opposed to _____ firms who retain the critical components
small, large
Core competencies definition
resources and capabilities that serve as a firms competitive advantage, distinguishes a company competitively and reflects its personality.
HRoffshoring definition
HR activities are being outsourced to other countries in order to lower costs/improve quality
Request for proposal definition
describes the responsibilities to be outsourced and invites potential providers to present their proposal for carrying out the job.
Activities that are most likely to be outsourced because they are … ?
- Rule based
- Repetitive
- Frequently undertaken
- Predictable
- Able to be fully/partly automated by technology
- Able to be delivered by remote sites
Hr functions most likely to be outsourced:
- Temporary staffing
- Payroll
- Training
- Recruiting
- Benefits administration
Compensation activities that are outsourced
- Payroll
- Benefits
- Compensation
- Pension
R & S activities that are outsourced
- Advertisements
- Screening of applications
- Testing
- Reference checking
- Preliminary interviews
- Executive salary negotiations
- Exit interviews
Training activities that are outsourced
- Program delivery
- Program design/development
- Training consulting
- Training needs analysis
- Program evaluation
- Strategic planning
- Administration
- Training policies
Health and Safety that are outsourced
- Employee assistance programs
* Wellness programs
Legal service activities that are outsourced
- Contracts
- Terminations
- Non-compete ag.
- NDA’s
6 major reasons for Outsourcing
- Financial savings
- Strategic focus
- Access to advanced technology
- Improved service levels
- Access to specialized expertise
- Organizational politics
Reason to outsource: Financial savings,
why ?
- Economic of scale from specialized outsourcers who are more efficient
- Cost control
- Decreased capital commitments
Reason to outsource: Strategic focus,
why ?
- Decide to focus on specific core competencies ex. Customer service, innovation
- Core work is transformational and adds value to employee/customers
- Move secondary functions to firms that do it well
Reason to outsource:Access to Advanced Technology,
why ?
- It is the main driver for outsourcing
- If a company cannot find technical talent, and/or need quick reliable access to technology
- enables a company to reduce transaction time
Reason to outsource:Access to specialized expertise,
why ?
- Experts understand the complex law and regulations required in HR
- Reduces the risk and liabilities
- Access to best practices
Reason to outsource:Organizational politics,
why ?
- Outsourced function is not as visible as in house department performing the same tasks
- Outsource get rid of a troublesome department (ee’s who are underperforming)
- Reduces head count
Risk and Limitations; some questions to be considered:
4
- Are the anticipated benefits realized ?
- What are the risks to service levels ?
- What is the effect on employee morale ?
- Does outsourcing reduce the value of the organization ?
areas of Risk and limitations of outsourcing
- The actual benefits
- Service risks
- Employee morale
- Security risks
- Reduced value
Project benefits vs. The actual benefits of outsourcing
- Not as cost effective and problem free as expected
* Incompatible systems and client demands are the reason for excessive costs
____ % found that it was more expensive to outsource
50
___ % of outsourcing contracts are not renewed
30
Service risks
- Contractual arrangements dictate which services will be provided
- Flexibility is compromised to add new features or change service levels
- Disruption of service could pose challenges from potential labour relations problems with outsourced organization
Employee morale
risks
• restructuring can create displaced, resentful, alienated, and anxious employees
Potential backlash
1/3 of HR professionals resist outsourcing because they worry about
…?
○ Losing their jobs
○ Being forced to work for a vendor
○ Fear that management believes outsiders are more competent
reduced value risks
- Extreme levels of outsourcing hollow out a company
- An organization experiences a reduced capacity to generate profits or innovate
- The internal image of HR functions ultimately are brought back in house
Management of Outsourcing: how will outsourcing be managed?
- Selecting the vendor
- Negotiating the contract
- Monitoring the arrangement
Tasks that need to be done when Selecting a vendor
- Select an organization
- Inform staff of the affected function
- Prepare a request for proposal
- Invite internal/external bids
- Establish a team to evaluate these bids
Tasks that need to be done when negotiating the contract
• Customize and negotiate outsourcing contract
• Set performance standards, penalties clauses
• Establish benchmarks for service expectations
○ Response time
○ Response cost
○ Customer satisfaction ratings
Tasks that need to be done when monitoring the arrangement
- Establish a relationship to ensure outsourcers act in the best interest of the org. and has knowledge of the org
- Check references of outsourcing company
- Demand frequent/accurate reporting
- Conduct internal/external satisfaction surveys
Most frequent causes of outsourcing problems
- Poor service definition
* Weak management processes
