Outsourcing an HR
activity to a firm that specializes in providing an HR service to customers has
both advantages and disadvantages. Here are some important factors to consider:
Outsourcing
Advantages
- An outsourcing firm can provide better-quality people and the most current practices and information pertaining to an activity or task. Because the HR activity is the core mission of the outsourcing firm, it can specialize in doing it very well. For example, a firm that specializes in training employees on the use of word processing software is likely to be able to train employees to use the most recent upgrades on the software that contains the newest features and applications.
- Outsourcing certain tasks can result in a reduction in administrative costs because the outsourcer can do the task more efficiently and gain economies of scale by virtue of having a large network of customers.
- Outsourcing specific activities and employees that do not fit with company culture may be useful to preserve a strong culture or employee morale. An example is outsourcing the benefits administration activity at a law firm, where the law-firm culture is shared by people who are trained as attorneys.
Outsourcing
Disadvantages
- Deploying an HR activity to an outsourcing firm may lead to loss of control over an important activity, which can be a costly problem. For example, by outsourcing employee recruiting to an external recruiting firm, the client company may experience missed deadlines on time-sensitive projects if the recruiting firm has other, more important clients to serve.
- Outsourcing an HR activity may result in losing the opportunity to gain knowledge and information that could benefit other company processes and activities. For example, outsourcing executive training and development to a company that provides a standardized training package can result in a lost opportunity to learn about the unique aspects of a firm’s way of shaping leadership with respect to its own culture.