Outsourcing Human Resource Management

Some organizations are trying to weather the current economic downturn by outsourcing, so that they can focus more on their core business and maximize their competitive advantage. Some favor outsourcing administrative and human resource (HR) functions.

“During a recession, you’ve got to focus on the business of your business,” said Michael Yager, executive vice president of the National Association of Professional Employer Organizations, as reported by the Washington Business Journal. “If you’re spending time on administrative tasks, you’re losing business.”

And administrative tasks can be costly. The US Small Business Administration estimates that small business owners spend from seven to 25 percent of their time handling employee-related paperwork.

On the other hand, some HR experts would argue that by outsourcing your HR functions, you’re actually outsourcing part of your core business. These days, HR comprises much more than just managing employee paperwork. A good HR policy will not only be about hiring people, it will also detail how to manage employee performance, upgrade skills and counsel employees on career issues and work-related problems. Promoting positive employee attitudes is a way of protecting an organization’s revenue base. The attitude of employees has a knock-on effect all the way down the line to the customer.

According to a survey by Walker Information, only a quarter of US employees plan to stay with their current employer for two years or more. Only half would recommend their company to jobseekers. This is serious, because low levels of commitment can be a ‘silent profit killer.’

“There’s no doubt that there’s a connection between an employee’s level of commitment to a company and his or her job performance,” stated Mark Drizin, Walker vice president, as reported by the Society for Human Resource Management. “Looking even deeper in this study, our research shows that low levels of employee loyalty and retention ultimately affect a company’s relationships with its customers and…the bottom line.”

The survey investigated what ties employees to an employer. It found that employees generally rate fairness as the most desirable workplace element – fairness in treatment and pay. About half the surveyed employees thought their employer treated them fairly. Employer care and concern was rated second, and about 44 percent of employees rated their employers well in that area. Trust was another key factor – 41 percent of employees felt their employer trusted them.

Human factors seem to be the most important ones for generating employee loyalty.

If employees do not feel loyal to a company, they are less likely to be scrupulous about protecting its customer base. If employees perceive the internal culture of a company as unfair, their disillusionment is likely to be transmitted to customers, in one way or another.

A good HR policy can help manage employee perceptions of a company. It can include counseling sessions or workshops to foster corporate values such as integrity, respect and accountability. The success of the HR efforts will depend partly on whether such values flow down from management. If they do, then the good corporate values are likely to be passed on to the customer.

The key HR functions can only be accomplished by someone with an intimate knowledge of a business and its employees. Outsourcing your HR functions may therefore raise some essential people management issues. Of course, many small business owners don’t have an HR department. They are the HR department. Many entrepreneurs instinctively know that the best way to run a business is to show fairness and decency when dealing with employees.

Copyright 2001, RAN ONE Inc. All rights reserved. Reprinted with permission from www.ranone.com.