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Contemporary Studies in Human Resource Management

Part A: e-HRM and Outsourcing in Large Organisations


E-HRM is used by various organisations, but it is widely used within the health sector. The most outsourced HR practices are non-transactional activities such as selection, recruitment and training. Outsourcing of HR functions is a strategy that some firms adopt to reduce costs, increase efficiency, access expertise knowledge and avoid organisational politics. This report analyses the reason that large organisations consider to outsource the HR function. It also, establishes the advantages and disadvantages of pursuing the decision to outsource some HR functions, as well as, the Influence e-HRM on outsourcing of HR functions and the impact of HR functions outsourcing on employees.


Reasons that a Large Organisation might Consider Outsourcing the HR Function

Large organisations consider various reasons to arrive at the decision of outsourcing some of their Hr functions. The first reason is of efficiency. Organisations seek to achieve the required standardisation and automation of tasks so as to interface with the recruitment partner, which results in internal processes change that allow an organisation to support e-recruiting tasks better (Waddill & Marquardt, 2011). Secondly, large organisations consider economies of scale as a reason to outsource their HR functions. When HR functions are outsourced, efficiencies of scale are realised.  Therefore, large organisations reduce the hiring cycle time to eliminate redundancy and reduce the errors that would occur if the process was dependent on multiple systems, by outsourcing some of their HR functions (Waddill & Marquardt, 2011).
Also, large organisations take into account, the need of the HR department to focus to focus on productive activities of an organisation. Through outsourcing of some HR functions, HR staff of large organisations is able to use the saved time to focus on revenue or capital producing initiatives, rather than non-productive work of recruitment (Waddill & Marquardt, 2011). In addition outsourcing helps to shift HR functions such as payroll and taxes to enable organisations focus on its core functions and operations. Large organisations that do not have the best in technology may consider outsourcing some of their HR functions to acquire the best technology to improve performance (Shi, 2007).
Large organisations consider costs so as to reach a decision to outsource some of their HR functions. Transaction outsourcing companies provide better and cheaper services since they are focussed on a particular process or area of expertise as their core competency (Lawler, Boudreau, & Mohrman, 2006, p, 52). Besides, large organisations Access to in-depth, third party expertise, whose experience it can capitalise on. It becomes less expensive when HRM functions are outsourced, than hiring new employees with expertise and investing in technology (Pynes, 2004).
Efficiency and quality of services is among the key considerations of outsourcing of some of the HR functions. This is because it reduces the workload for HR staff and releases them to generate other value creation services for their internal clients (Andrews & Siengthai, 2009, p, 128 and Ganesh, 2012, p, 4). Outsourcing makes the HR function more strategic by increasing service quality. It improves the process of organisations through the utilization of expertise knowledge (Lawler, Boudreau, & Mohrman, 2006, p, 52). Also, it reduces HR employee numbers to create a flexible cost structure when services are required occasionally or for short periods of time (Lawler & Boudreau, 2012). Finally, large organisations that seek to bypass organisational politics and improve performance consider outsourcing of some HR function as a strategy.

Advantages and Disadvantages of pursuing such a Decision

Outsourcing of some HR functions of large organisations comes with numerous advantages. First, the use of information technology and outsourcing enhances overall efficiency within an organisation.  Secondly, outsourcing facilitates change in the task distribution between HR functionaries, line managers and employees.  Introduction of self service systems enables line managers and employees to do more HR tasks themselves without having to involve the operational role for the HR department (Regis, 2008, p, 78).
Outsourcing of some HR functions helps HR departments to develop more strategic functions within their organisation.  It lessens the time that HR functionaries devote to operational tasks (Snellen, Thaens, & van de Donk, 2012, p, 261). Outsourcing of HR functions offers a possibility for integration and better alignment of information streams, which is more easily available. It acts as a base for the execution and follow-up of personnel administration. It facilitates economies of scale, especially when hiring a large number of people by increasing efficiency and speed. Organisations that outsource their HR functions acquire expertise knowledge from the transaction outsourcing companies, and are able to eliminate organisational politics to enhance performance and growth.
When large organisations outsource some HR functions, they benefit from increased effectiveness of HR delivery in services. For instance, recruitment may be quicker, expediting the pace of growth, and reducing employee turnover costs. Outsourcing moves HR up in the value chain, which leads to a shift in HR focus towards policy and decision making. It aids in organisational growth where businesses lack HR capability to help the organization achieve its objectives. This is possible through the acquisition of specific expertise, decreased costs and better focus on HRM issues that become directly tied to the company’s success (Price, 2011, p, 284). If used with improved engineering processes, outsourcing of HR functions may increase the efficiency of business processes and maintain service quality. Therefore, higher quality customer service is guaranteed. Outsourcing of HR functions facilitates the improvement of training and development design (Rowley & Jackson, 2011, p, 166).
On the other hand, outsourcing of HR functions by organisations has some pitfalls.  The first disadvantage of outsourcing HR functions is failure to have programs and services that reflect the firm’s culture and strategy (Tansky & Heneman, 2006). When organisations outsource HR functions such as training of employees, they lose their control on training should be carried out to match organisational culture and strategy.  Secondly, outsourcing leads to loss of jobs. Internal HR employees lose their jobs as organisations outsource some the functions that they would perform.
Outsourcing is tedious because it requires prior improvement of processes before implementation.  Therefore, cost savings may not be achieved, especially when effective IT systems exist in-house because financial benefits of outsourcing result from using sophisticated software. It does not eliminate the workload for line managers fully because still line manager shave to handle employees. Local knowledge and ownership of human resource processes may be lost through outsourcing of HR functions (Price, 2011, p, 284).
Resistance to change may result from outsourcing of some of the HR functions of an organisation are outsourced. Therefore, a detailed change agenda is required to avoid affecting the climate and morale of the wider organisation (Eigenhuis & Dijk, 2008, p, 177).  It reduces the organisation’s workforce knowledge and abilities, hence affecting an organisation’s ability to innovate in future. Outsourcing is characterised with high levels of dependency and loss of control (Shi, 2007).

The Influence of the Advances in e-HRM on Outsourcing of HR Functions

E-HRM is a method of implementing HR strategies, policies and practices in organisations through the support of, or with the use of web-technology-based-channels (Regis, 2008, p, 78). It improves the strategic orientation of HRM, reduces costs and increases efficiency, and improves customer service (Regis, 2008, p, 78). It facilitates the transfer of responsibilities from HR professional to the line manager, and even to the employee (Mayrhofer, Brewster, & Morley, 2004, p, 198). Advances in e-HRM facilitate outsourcing of HR processes through the transfer of information across geographical areas and organisations. Third party, transaction outsourcing companies can communicate and implement their services through electronic channels with their clients.

The Impact of Outsourcing of HR Functions on Employees

Outsourcing of HR functions impacts organisational employees in various ways. First, HR employees lose control over the outsourced processes. This happens as a result of high transaction costs, which lower the service quality and loss of control over the outsourced processes. Therefore, HR employees are unable to implement changes to the outsourced HR processes that could enhance organisational growth through superior employee performance. Secondly, outsourcing of HR functions results in loss of in-house advantages of motivation and performance (Greenberger & Heneman, 2002, p, 353). For instance, when employees are trained by a third party, they still have to struggle with coping with the organisational culture and processes, which is not part of the training session. Finally, in-house, HR employees lose their jobs because their job roles are outsourced to be performed by a third party.  The employees of a firm may also suffer a negative impact because an outsourcing firm may not, properly, understand the everyday issues that affects them, considering that they do not interact with them on a daily basis. In view of this, the employees’ affairs may end up not being addressed in the right manner.
3 Conclusions
Outsourcing of HR functions by large organisations is aimed at reducing costs, avoiding organisational politics and increasing efficiency. It should enhance strategic capabilities and benefit the organisation’s performance in terms of maximized returns, gained competitive edge, managed market risks and strengthened internal capabilities (Rowley & Jackson, 2011, P, 166). This can be achieved if e-HRM is also adopted by the organisation to transform some traditional HRM functions into e-HRM, which increases the efficient utilization of financial resources that have been allocated to HRM functions.
Through e-HRM, companies can recruit and select suitable and qualified candidates from anywhere by use of the web. Employees from different geographical areas can register for the same training or work together (Andrews & Siengthai, 2009, p, 127). However, the system can be complex and not user friendly.  Organisations should make appropriate prior preparations before outsourcing HR functions because this process is characterised with organisational resistance, loss of jobs and loss of control. It also increases dependence and may affect motivation.
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