Why HR Function Outsourcing Services for SMEs

Why HR Function Outsourcing for SMEs

A Day in a life of an SME CEO (16^th April 2012)

Company: ITS MY JOB IT Services Pvt. Ltd.(Name changed)     CEO: Mr. Bahu Bali (Name changed)

No.of Employees: 15            Year of Establishment: 2008            Industry: IT Services

Time (24 hrs format)	Activity
8:45 (on the way to Office)	·         Tracked the team where about…   what time they are expected to reach office…  Rahul Sonia struck in a traffic jam…  Reema kid hospitalized so would report late.
9:30	·         3 late comings noted out  of 15
10:00	·         Talking to team and late comers warning and task assignment. Worked on his own diary – things to do.
10:30-11:00	·         Few pending calls to return. Response to emails of client... (Heard the coffee machine usage estimated 18 cups (ha!))
11:00: 12:00	·         Open shared Job portal search for java profiles, 20 profiles sourced and searching for staff who in are in Job Portals  – found Rakshak-Java team member (need to talk & Negotiate?!@# - not sure), ·         Receives calls from near and dear during the time… Inform to call back...
12:00-13:00	·         Calling 20 people, with false name/designation, line up for tomorrow interviews, 3 people said yes. Need to Prepare for Interviews to make the first impression right…
13:00	·         Team going out for lunch, switch of fan and AC when no one is there. Grab a quick lunch.
14:00	·         Rajesh and Sonu missing on the desks - checked where they are and called to find they were buying some accessories for their Mobiles. Informed them to report as soon as possible.
14:00-16:00	·         Proposal writing, tracking responses and some queries from team ·         Meeting a team to talk about project issues and customer queries handling
16:00–16:45	·         Talked to Suresh( CEO of x.com) clarified salary level of java people in his company ·         Estimation of the salaries to be paid with specific experience for interviews tomorrow.
16:45	·         Rakhi, want to go home early, said yes
16:45-18:30	·         Team Tracking and monitoring… Getting update from Accounts of the collections to prepare for next month salary disbursement.
18:00	·         Noticed the movement and bye from team, okay carry on – No updates from team
18:30	·         Office empty, let me also pack up, I need to make sure tomorrow people need to send the day status …  few minutes of googling , linkedin. Went out frustration through some social site… End of the day (At Office… Extended office to complete the planned tasks in the morning)

Like Mr. Bahu Bali, there are about 1000s of CEO have the similar diary entry in some or the other form handling people related issues. Saving time for yourself is saving time for Business.

Why HR @ SME

An HR Function is critical component of employee welfare which in turn help the organization, no matter how small or big organization. The typical HR Responsibilities include support in business planning process, manpower need assessment, plan for hiring, induct the employees well, build policies, procedures for smooth operations and above all build a frame work for the most critical asset of the organization – human asset..  HR also takes care of the performance management and development of people at each stage of their life cycle in the organization. HR helps in making those tough decisions taken by business as well as the employees in exits. Every business goes through all these irrespective of them having their own HR or not.  However, many times the SME business owners/CEO’s take the role along with people around based on need.  However, a formal way of approach in addressing the needs of Human Resources in organization would help in building and sustaining business. Any small incidents related to people can cause a huge damage to the employee motivation in the organization.  Since the SMEs can’t really spend that time and energy, there is an increasing trend in HR Function outsourcing with the experts and benefit in business improvement.  

How HR Outsourcing benefit an SME

Setting upStrong human resources practices have a great potential for increase in your business value in productivity and profitability. But, the ability of HR to foresee the statutory changes, people behavioural patterns and keeping pace with the changing environment has a significant need for resources.  The more time spent by the business owner on these tasks take them away from their focus on core business development and new business acquisition.  Outsourcing the HR Function through an expert company would make more time for your business. The SME also can gain from the expertise not just the resource but also the capability of the firm’s engagement with multiple industry exposure and brining in the best practices and customize.

Many SME businesses understands the need of outsourcing the function and gain quality time for improving business drive, but they end-up many times looking at the cost spent as “COST” and not the advantages. The general thinking of I can do it attitude kills the productivity of the Owner/CEO. In some of the cases who have appointed their HR Manager, HR Associates also need lot of support in making them productive.  In such cases the business owner himself/herself spends time as a HR Head and eventually giving away their precious time away from the core of the business.  The other reason for not engaging an outsourcing partner is the “fear of unknown” and the ability to take a quick measurement of advantages and taking decision. 

The Big Problem of Understanding SMEs

There is a definite lack of understanding of SMEs by many budding HR professionals and entrepreneurs. There are many who have been hearing the SME buzz and joining the bandwagon.  There is a clear need for education which the SME owners/CEO’s have to take responsibility to educate about their needs and expectations through the Industrial Associations, Seminars and various media/forums.  Serving SMEs means a extreme creative best of mind in innovating solutions and make it affordable with value for business. This means a lot for any budding HR professionals to “stay put” in what they do and consistently learn, create, modify, add, delete, re-start, re-think to survive.  It is definitely a time taking process which the investment community to come forward and support such venture in future. There is definitely a positive response that we noticed with SME CEO’s over last Decade and this should make it easy for the future enterprises in the HR Function Management and Outsourcing Space.

Who are the players in the HR outsourcing space?

HR outsourcing providers generally fall into 4 categories as per Husys Model:

Part HR Outsourcing ( Most Popular )

Here in this case the companies in the HR outsourcing space cover the specific responsibilities of HR as a service. The classic outsourcing is in Recruitment, Payroll, Back Office Processes, and Transactional Outsourcing. These services are provided using the Technology and with least human interface possible and also paid on per transaction based.

Pros: Easy to identify and outsource, easy to monitor, easy to take decision

Cons : Integration to the overall business is still the responsibility of the CEO/Business Owner

Availability of such vendors in the Market:   Very  High

People Outsourcing (2nd Most):

Here in this case the companies would provide people with the required expertise for a short or long-term duration with a clause to transfer them on the rolls of the company eventually. This is also called as Flexi/Leased Staffing. The Professional Employer Organizations who manage the employment and the statutory obligations of the employees deployed at the client location (SME).

Pros:For Organizations - No long-term people liabilities, Ability to absorb at a cost if proved a good resource.  For employees its flexible and an option to get absorbed.

Cons: The employees always lookout for moving on the rolls of organization, No obligation for employee to be bind except of the agreement, Internal bonding may be difficult, Fear of losing the job anytime.

Availability of such Vendors in the Market : Very High

HR Consulting / Coaching / Advisory / Training:

The most preferred choice of highly expert HR Professionals based on their capabilities. In this case the expert in HR would help the organization in diagnosing, suggesting the remedial actions for improvement of business support. Many times the assignments are of short-term in duration where the expert spends specified number of hours in advising the changes that can be brought in the organization. Currently the Consulting assignments are more moving towards coaching engagements to bring more and more work translation through CEO mentoring/Coaching.

Pros:  High expertise availability, No long-term obligation

Cons: High Cost, Ground level delivery still becomes the responsibility of the organization/business owner.

Availability of Vendors in the Market: Many, Individual Providers

HR Function Management Solutions ( HR Function Outsourcing – HRFO* Proprietary model of Husys):

HR Function Management solution helps in building and managing the HR Department for SMEs who can’t afford to build their own. The ability of the firm would help in strategizing the business related HR issues along with management and deployment of the ground level resource to handle the tactical and administrative issues. This outsourcing may be helpful in managing the full life cycle of the employee in the organization.  This would help the CEO enjoy the benefits of Consulting but also the delivery without having to work on the actions by themselves.  

Pros: SMEs best option - Highly Cost effective and value driven. Helps in all the functions of HR integrated to business. Highly Business focused HR.

Cons:Less Choice – Few providers with a right vision. Stability of vendors in business. Inability of CEO to get maximum of the opportunity can lead to heartburns. Gets highly process driven sometimes.

With the advent of the cloud computing and the Software as a service option is a definite advantage for SMEs in taking above services and sustain for long-term.  Focus on Information Technology in the HR Services would be the future for SME sustenance.

We at Husys foresee a strength coming from HR IT product vendors and the HR consulting organizations mentioned above would provide a better value for SMEs by leveraging their strengths.

What are the services that you can get when you HR Function Outsource?

When you outsource HR function, all the services comes with the opportunity with a differential cost based on the current state of your organization, business environment and maturity of the teams internally. There may be some packaged services as part of the HR Function Management and rest as additional services with little add-on cost advantage. These can include:

•       Business HR Support

•       Manpower Planning

•       Employee Selection & On-boarding

•       Organization Work related Policies & Procedures (Leave, work norms etc.,)

•       Compensation & Benefit Management

•       Employee Fun/Appreciation Programs

•       Organizational Design, Role & Responsibilities

•       Assignment of expectations on performance

•       Measuring Performance Measurement & Career progression

•       Training & Development

•       Exit Management

•       HR Information Management

•       Business focused HR initiatives

•       Additional Services may include:

o    Recruitment Services

o    Payroll Management

o    Training Services

o    IT Deployment for HR effectiveness (inbuilt or independent service)

What you want and how your want to get it?

Selecting an outsource provider purely depends on your business realities. The stage at which you are would define the HR Support that you require.  Review(http://www.slideshare.net/grhusys/hr-function-indicators-for-organisations-at-each-stage ) the slide share for such understanding.  You can also read the blog postings on HR SMEs at :www.hrsme.blogspot.com

Few quick question would help you to identify what you need for your business :

A quick health check of your business

Here is a quick reference list that would help you to establish the need for HR Support.  These questions can be answered through the services mentioned above as individual choice or a combination of services. Ultimately “ You are the Boss”

·         Do your employees have service contracts / agreements?

·         Have you covered your organization enough that you follow all the laws of the land?

·         Do you have an High Turnover of your employees?

·         Are you spending more than 30% of your time on people related issues?

·         Do you know how to make sure the new joiner settles in the organization and contributes fast?

·         Is there frequent change in the job roles of people and not recorded?

·         Do you have procedures for various employee related issues?

·         How does the employees treat the company property/material etc.,?

·         How do you manage Disciplinary issues?

·         How do you manage people in different locations?

·         Is your vision understood as same to the last person in the organization?

·         How is the employee social system impacting their performance in the organization?

·         Do you have your managers enough trained to handle people effectively?

·         Do you have your second line management in place?

·         Many more……

How can you identify the right partner vendor for your organization:Answer some of the key questions for yourself in choosing the HR Services partners.

•       Does the vendor work with specific service levels agreements?

•       How long the service provider in the market?

•       Are they willing to walk that extra mile to build long-term relationship with you?

•       Does the Service provider have the bandwidth to handle your requirements smoothly?

•       What is the confidence of the vendor’s client history?

•       Does the Vendor have the capability to build support in providing value added services?

•       Does the vendor has a proven track record and time tested processes?

•       Can they help you in building your business value for the money charged?

•       Can they help in building your cultural spirit for business advantage?

•       Are they experts in their field?

•       Can they bring the best practices from various other industries?

•       Are they only interested in making business or helping your business to grow?

•       Many related question would help maximize the yield……

Do you need to outsource your HR? 

If you still have questions please do reach Husys (24x7) : www.husys.net/reachus.htm :  reach@husys.net :  091-9948078937

Do tune into HR @ SME Tips and experiences: www.hrsme.blogspot.com  ; Bored with Blogs! Try Slides : www.slideshare.net/grhusys

About Husys:

Husys - HR Function Management Company ( www.husys.net ) is striving to build HR Department for Start-up, Small and Medium businesses since 2002. Husys strive to help in managing to stream line the change that organizations go through during their growth phase. Husys addresses the key Human related issues to support organizational Growth. We integrate the Hiring, Inducting, Performance Measurement, Policies, Employee Bonding and Development. Reach for any support in HR Services / HR Outsourcing / HR Function Management / Customized HR Outsourcing in India.

We truly live our Vision: "Synergizing Human Potential for Business & Society".