Outsourcing

Human resource outsourcing has become a major part of human resource (HR) operations
for the last few years.
In many studies that discuss outsourcing, cost benefits appear to be a compelling
argument for contracting out services previously performed internally
(e.g.,Anderson&Weitz, 1986;Belous, 1989; Greer, Youngblood, & Gray, 1999; Gupta &
Gupta, 1992; Kakabadse & Kakabadse, 2002; Lever, 1997), and Vining & Globerman
(1999) note that empirical data from government agencies outsourcing to private
suppliers generated savings in the range of 20-30% in production costs. However, some
of these same studies caution that cost should not be the only factor considered in the
decision to outsource. Other factors to consider include vendor expertise, customer and
employee satisfaction (Barthelemy, 2003; Greer, Youngblood & Gray, 1999; Gupta &
Gupta, 1992), and loss of strategic advantage (Anderson & Weitz, 1986; Greer,
Youngblood & Gray, 1999, Gupta & Gupta, 1992; Lever, 1997). In a more recent study,
Adler (2003) notes that a review by the Gartner group listed six factors that are important
in outsourcing decisions: dependency risk, spillover risk, trust, relative proficiency,
strategic capabilities, and flexibility. The first four of these are classified as short-term
factors, whereas the last two can be considered more long-term or strategic. However, no
clear formula exists that identifies when outsourcing is most efficient and effective. There
are also very few empirical studies that examine the performance implications of make or
buy decisions (e.g. Leiblein, Reuer, & Dalsace, 2002). Rather, studies seem to
concentrate on the reasons organizations outsource, how to outsource, or the impact of
outsourcing on the organization and its employees.

Employee relations

Reward management

HR Roles

Code & ethics

Communication

Workforce diversity

Business strategies

The Ever Changing Development of HR Departments

Introduction

As organisations change their business strategy to respond to the current economic crisis
human resources departments have become overwhelmed with day-to-day people
management issues. And as senior HR managers become increasingly focused on
managing consolidation, while having their own departments reduced, now is the time to
outsource non-critical HR tasks, argues Claire Blackwell, Director, eSift.co.uk.

Industry Consolidation

The past six months has seen the focus of human resources mangers dramatically alter as
their attention has shifted from planning for the future to focusing on the ‘here and
now’ as HR teams struggle to keep up with day-to-day human resources issues.

In addition to the management of increased day-to-day HR activities, such as overseeing

shorter working weeks, re-negotiating staff contracts and managing employee
redundancies, many human resources teams have seen their own departments
dramatically reduce, leaving senior HR managers without day-to-day administrative
support.

The effect of the economic situation was felt in HR departments within the US
approximately six months before the UK. The results have seen headcounts frozen and a
dramatic reduction in HR professionals with many HR teams functioning with only a
core staff. There has also been a focus on consolidation throughout many businesses and
a direct emphasis on continually employee cost reduction.

As certain industries have begun looking to recruit, some HR teams have been able to
recruit for critical posts. However, the changes that have taken place throughout the
economy during the past six months have created a range of new recruitment challenges
for HR managers. These include a higher number of applicants for every vacancy and a
broad diversity of applications from potential employees offering a range of skills. With
smaller departments and a lack of administrative support the task knowing where to
advertise cost effectively and having the time to CV sift, screen candidates, plan
interviews and respond to each applicant is now an overwhelming challenge.

New challenges facing the industry

As the human resources industry struggles to keep pace with the changes affecting it,
insights by eSift.co.uk have shown the five most pressing issues human resources
managers currently face. These include: -

1. Managing the existing workforce and offering re-assurance to the employees who will
remain especially after a widespread redundancy process
2. Implementing and completing redundancy plans in a timely and professional manor
3. Change management within their own department and throughout the company
4. Reducing costs throughout the HR team
5. Looking at ways to outsource to specialists in certain areas, i.e. recruitment and
training

Although each of these issues are likely to resonate with many HR managers throughout
the UK and internationally, the issue of recruitment has been one of the most prominent
areas highlighted. Further research into this confirms that management boards are
allowing HR managers to recruit critical hire’s, but are tightly controlling recruitment
costs.

Conclusion

There is little doubt that 2009 will be a tough year for the human resources industry. HR
managers will be pressured to focus on strategic HR issues, but with a reduced
administrative staff struggling to handle the day-to-day activities. The next 12 months
will also see an increase of contract and interim workers within the HR industry as many
organisations focus more on outsourcing.
Many organisations will recruit critical staff; and only after the HR team has audited
current staff resources to ensure existing headcount is being used to its full potential. Any
recruitment that does occur must be proven with a watertight business case and the
successful candidate must meet both current and future business needs.

Overall 2009 will be a year of consolidation on the back of large-scale recruitment

freezes.
HR Managers will look to get their house in order before embarking on any growth plans
and when they do they will use a recruitment method that delivers in a cost effective way,

reducing pressure on their internal HR team and outsourcing the non essential HR tasks.
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Resourcing

Refers to R & S of eees

T&D

Able to develop the talent that it has selected enhancing the eees competences

Globalization

Lean organization

SWOT Analysis

SWOT analysis is a simple framework for generating strategic alternatives from a

situation analysis. It is applicable to either the corporate level or the business unit level
and frequently appears in marketing plans. SWOT (sometimes referred to as TOWS)
stands for Strengths, Weaknesses, Opportunities, and Threats. The SWOT framework
was described in the late 1960's by Edmund P. Learned, C. Roland Christiansen, Kenneth
Andrews, and William D. Guth in Business Policy, Text and Cases (Homewood, IL:
Irwin, 1969). The General Electric Growth Council used this form of analysis in the
1980's. Because it concentrates on the issues that potentially have the most impact, the
SWOT analysis is useful when a very limited amount of time is available to address a
complex strategic situation.

The following diagram shows how a SWOT analysis fits into a strategic situation
analysis.

Situation Analysis
/ \
Internal Analysis External Analysis
/\ /\
Strengths Weaknesses Opportunities Threats
|
SWOT Profile

The internal and external situation analysis can produce a large amount of information,
much of which may not be highly relevant. The SWOT analysis can serve as an
interpretative filter to reduce the information to a manageable quantity of key issues. The
SWOT analysis classifies the internal aspects of the company as strengths or weaknesses
and the external situational factors as opportunities or threats. Strengths can serve as a
foundation for building a competitive advantage, and weaknesses may hinder it. By
understanding these four aspects of its situation, a firm can better leverage its strengths,
correct its weaknesses, capitalize on golden opportunities, and deter potentially
devastating threats.

Internal Analysis

The internal analysis is a comprehensive evaluation of the internal environment's

potential strengths and weaknesses. Factors should be evaluated across the organization
in areas such as:

• Company culture
• Company image
• Organizational structure
• Key staff
• Access to natural resources
• Position on the experience curve
• Operational efficiency
• Operational capacity
• Brand awareness
• Market share
• Financial resources
• Exclusive contracts
 • Patents and trade secrets

The SWOT analysis summarizes the internal factors of the firm as a list of strengths and
weaknesses.

External Analysis

An opportunity is the chance to introduce a new product or service that can generate
superior returns. Opportunities can arise when changes occur in the external environment.
Many of these changes can be perceived as threats to the market position of existing
products and may necessitate a change in product specifications or the development of
new products in order for the firm to remain competitive. Changes in the external
environment may be related to:

• Customers
• Competitors
• Market trends
• Suppliers
• Partners
• Social changes
• New technology
• Economic environment
• Political and regulatory environment

The last four items in the above list are macro-environmental variables, and are addressed
in a PEST analysis.

The SWOT analysis summarizes the external environmental factors as a list of

opportunities and threats.

SWOT Profile

When the analysis has been completed, a SWOT profile can be generated and used as the
basis of goal setting, strategy formulation, and implementation. The completed SWOT
profile sometimes is arranged as follows:

Strengths Weaknesses
1. 1.
2. 2.
3. 3.
. .
. .
. .

Opportunities Threats
 1. 1.
2. 2.
3. 3.
. .
. .
. .

When formulating strategy, the interaction of the quadrants in the SWOT profile becomes
important. For example, the strengths can be leveraged to pursue opportunities and to
avoid threats, and managers can be alerted to weaknesses that might need to be overcome
in order to successfully pursue opportunities.

Multiple Perspectives Needed

The method used to acquire the inputs to the SWOT matrix will affect the quality of the
analysis. If the information is obtained hastily during a quick interview with the CEO,
even though this one person may have a broad view of the company and industry, the
information would represent a single viewpoint. The quality of the analysis will be
improved greatly if interviews are held with a spectrum of stakeholders such as
employees, suppliers, customers, strategic partners, etc.

SWOT Analysis Limitations

While useful for reducing a large quantity of situational factors into a more manageable
profile, the SWOT framework has a tendency to oversimplify the situation by classifying
the firm's environmental factors into categories in which they may not always fit. The
classification of some factors as strengths or weaknesses, or as opportunities or threats is
somewhat arbitrary. For example, a particular company culture can be either a strength or
a weakness. A technological change can be a either a threat or an opportunity. Perhaps
what is more important than the superficial classification of these factors is the firm's
awareness of them and its development of a strategic plan to use them to its advantage.

PEST Analysis

A PEST analysis is an analysis of the external macro-environment that affects all firms.
P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of
the external macro-environment. Such external factors usually are beyond the firm's
control and sometimes present themselves as threats. For this reason, some say that "pest"
is an appropriate term for these factors. However, changes in the external environment
also create new opportunities and the letters sometimes are rearranged to construct the
more optimistic term of STEP analysis.
Many macro-environmental factors are country-specific and a PEST analysis will need to
be performed for all countries of interest. The following are examples of some of the
factors that might be considered in a PEST analysis.

Political Analysis

• Political stability
• Risk of military invasion
• Legal framework for contract enforcement
• Intellectual property protection
• Trade regulations & tariffs
• Favored trading partners
• Anti-trust laws
• Pricing regulations
• Taxation - tax rates and incentives
• Wage legislation - minimum wage and overtime
• Work week
• Mandatory employee benefits
• Industrial safety regulations
• Product labeling requirements

Economic Analysis

• Type of economic system in countries of operation

• Government intervention in the free market
• Comparative advantages of host country
• Exchange rates & stability of host country currency
• Efficiency of financial markets
• Infrastructure quality
• Skill level of workforce
• Labor costs
• Business cycle stage (e.g. prosperity, recession, recovery)
• Economic growth rate
• Discretionary income
• Unemployment rate
• Inflation rate
• Interest rates

Social Analysis

• Demographics
• Class structure
• Education
• Culture (gender roles, etc.)
• Entrepreneurial spirit
• Attitudes (health, environmental consciousness, etc.)
 • Leisure interests

Technological Analysis

• Recent technological developments

• Technology's impact on product offering
• Impact on cost structure
• Impact on value chain structure
• Rate of technological diffusion

The number of macro-environmental factors is virtually unlimited. In practice, the firm

must prioritize and monitor those factors that influence its industry. Even so, it may be
difficult to forecast future trends with an acceptable level of accuracy. In this regard, the
firm may turn to scenario planning techniques to deal with high levels of uncertainty in
important macro-environmental variables.