1. Copyright 2004, Juan I. Sanchez, Ph.D., All Rights Reserved 1 OUTSOURCING HR Summary of Mary F. Cook’s chapters 1 & 2 Why outsourcing? Why now? 1.Better use of “HR time” (HR executives becoming strategic partners). 2.Transfer administrative processes to focus on core business. 3.HR departments run as profit centers. 4.Imitation/Institutionalism/Benchmarking. 5.Increased complexity of HR issues due to regulation. 6.Advanced technology does not require HR on-site location. 7.Reduce administrative costs & overhead. 8.Improve services provided to employees. 9.Make capital funds available for core business areas. MSMHR

2. Copyright 2004, Juan I. Sanchez, Ph.D., All Rights Reserved 2 OUTSOURCING: MORE THAN COST-CUTTING 1.May provide a better quality of service at less cost than an in- house operation. 2.Outsourcing provides access to the latest technology. 3.Outsourcing as a strategic practice. 4.Forming strategic outsourcing alliances. 5.Outsourcing as a means to question the organization’s underlying assumptions. 6.Better use of “HR time” (HR executives becoming strategic partners). 7.Outsourcing as a source of competitive advantage: strategic outsourcing alliances are difficult to replicate. MSMHR

3. Copyright 2004, Juan I. Sanchez, Ph.D., All Rights Reserved 3 TYPES OF OUTSOURCING 1.Total HR outsourcing: no need for a core HR group on-site. 2.Partial HR outsourcing: retain some HR activities. 3.Employee leasing: hire vendor to maintain HR functions in-house. 4.Time-sharing; share systems time and equipment; vendor furnishes technical staff. MSMHR

4. Copyright 2004, Juan I. Sanchez, Ph.D., All Rights Reserved 4 WHAT HR FUNCTIONS SHOULD BE OUTSOURCED? Best outsourced?Best in-house? CommunicationsEmployee relations CompensationRecord-keeping HRISHR planning Int’l/expatriate OD Regulatory Safety Staffing Training Work/Life MSMHR

5. Copyright 2004, Juan I. Sanchez, Ph.D., All Rights Reserved 5 OUTSOURCING STAGES 1.Setting goals & reaching consensus. 2.Performing cost-benefit analysis: compare to current costs. 3.Availability of vendors/in-house capability. 4.Establishing a time line. 5.Identifying possible vendors 6.Preparing RFP: What info do you need to select a vendor? What is your timetable? Short or long-term alliance? Breach of contract liabilities. 7.Choosing vendor that best fits your needs/culture. Document criteria/selection procedures. 8.Negotiate contract: fee increases, hidden fees, non-standard contracts. 9.Communicating with HR staff & company: manage fears. 10.Check vendor background. Conflict of interests for your agent? 11.Build rollout schedule: plan ahead for enrollment periods. 12.Monitor performance & regulatory compliance. Deliverables. MSMHR

6. Copyright 2004, Juan I. Sanchez, Ph.D., All Rights Reserved 6 TRANSITION ISSUES 1.Outsourcing presents opportunities for professional renewal/rejuvenation. 2.HR as core business vs. HR as support function. 3.Opportunities for career mobility & broader professional horizons. 4.Job loss anxiety among transitioned personnel. 5.Manage termination. 6.Change attitudes: Outsourcing as strategic alliance rather than “downsizing.” 7.Outsourcing and the public sector: Privatization debate. MSMHR

7. Copyright 2004, Juan I. Sanchez, Ph.D., All Rights Reserved 7 EXERCISE 1.Rank-order the following HR activities as a function of how frequently they are outsourced (5 = most frequently outsourced; 1 = least frequently outsourced) -Describe the rationale/logic behind your rank- ordering: Outplacement services Benefits (other than pension/retirement) Employee assistance/counseling Pre-employment testing Pension/retirement plan 2.Choose an organization you are familiar with. Imagine that the organization has decided to offshore some or all of its manufacturing or service activities to a foreign country. Then choose three HR activities, and explain how each one of these HR activities will have to change accordingly. What will be the role that the domestic HR function will play in supporting the foreign-based operation? MSMHR