Tuesday, June 21, 2005

Ajit's world: Tuesday, June 21, 2005

Ajit's world: Tuesday, June 21, 2005

Human Resource Outsourcing – The scope and its role.

In the background of India’s ever gaining importance of becoming the back office of many things (read manpower, outsourcing, software etc, etc.,) there has been an advent of work which one could never think would be of such value and command as it is today. India today is a proven center for software development activities and IT services are about to witness substantial growth. India is also likely to emerge as a key center for processing of information for global corporations. Such is the growing prowess of Indian IT industry where in quick time it has a contribution of 3% of India’s GDP. The Harvard Business Review identifies outsourcing as one of the most important management idea and practices of the past 100 years.

The area of Human Resources has evolved itself from just being a part of an organization to becoming a whole business by itself. It is heartening to know that HR is a domain expertise with many unique facets to it. There are firms in the world working on specific HR areas like salary research (payroll), employee benefit, survey research, HR software products etc. Other than these there are companies in the field of HR BPO called by different names as Human Resources Outsourcing (HRO) or Recruitment Process Outsourcing (RPO) or Employee Process Outsourcing (EPO) firms. Other than these mentioned above there are staffing companies into temporary/ permanent staffing and of course HR software product companies. End of the day competition is intense and the market to fight for is large enough to accommodate more players – both globally and in India. Basically India has seen Human Resources functions only restricted to Recruitment Consultants, Performance Management systems, basic administrative works.

Today India may have an abundance of manpower talent pool, but the biggest challenge facing companies would be to hiring and employing the right/best talent. In most organizations recruitment or HR functions per se is either assigned to the various employees, who are part of the HR department or assigned to a dedicated group involved with strategizing the future manpower requirements depending on the various dynamics of the market, the brand value the organization commands and various other miscellaneous factors.
Human Resources is such a key function especially in growing economies like India, China as the requirement for fresh manpower is ever increasing but even more crucial is to find the right kind of experienced manpower for the right job, within the given available constraints and to retain and motivate them. In India NASSCOM has recently projected one million software jobs by end 2005 and here lies the latent market for an HRO with immense business opportunities to lay its hands on.
Now HRO today is such a critical function involving activities such as sourcing, assessment tests/ interviews, new hire training, orientation and administrative practices. An effective Human Resource outsourcing initiative would involve a heady mix of hands on recruitment coupled with robust products, processes, procedures and mechanisms.
According to Argus Search, the worldwide Human Resource Outsourcing market is set to become an $ 80 billion market by 2008. At present the HRO market is valued at about $25 billion and the expected compounded annual growth rate for this industry is 12%.Gartner Research says in 2004 itself HRO or HR BPO is said to garner 39% of all BPO revenues worldwide with turnover of $ 51 billion. There has been a huge interest in HR BPO space worldwide with some big ticket mergers, contracts being signed and amounting to immense sense as the resulting huge revenue /expenditure savings for the firms over a consistent timeperiod.
The benefits of having a HRO are many like it would give greater emphasis for the organization to concentrate on its core competencies, cutting the cost/time of hiring, would definitely have a bearing on the quality of the delivery of the end produce, would lead to better utilization of the existent manpower, give a greater thrust and purpose to the hiring process and of course the delivery would be done to the expectation and demand of the client. The HRO would also deliver the right fit candidate for the client utilizing a mix of technology and knowledge. Thus this would lead to better man management for the client giving greater leverage/clarity to prepare manpower planning saving a chain of after current effects.
The key query , I believe in the outsourcing industry is whether the firms are willing enough to outsource their key processes and Human Resources in today’s fast changing and vastly competitive market is being considered as a very key component by many corporations especially multi and trans nationals.
Why Human Resource is considered such a key process? Because it is just difficult to retain employees, as attrition rates have crossed double digit figures across industries and this is the common phenomenon across the world. The growing economies having this ever increasing demand for quality manpower are facing this heat. Everyone in India knows the very future of BPO industry is at stake due to this attrition menace, which could on an average be ( and I would safely take a guess of attrition) in high 40 percentages. The pinch of attrition is always faced by the sunrise industry, be it the case of software (IT and IT related fields), Biotech, pharmaceuticals industry in India if one were to speak about a growing economy. The aftereffects of such a phenomena are drastic as many multinationals also take attrition as a very important component in their decision making process for an investment in such an economy.
Thus the role of HRO becoming ever critical to be utilized for better bottom line and top line results for the firms.
The 3R’s of HRO - Unfortunate the positive signals of a growing economy compounds and brings its own set of problems like finding the right fit which is nothing but to find the right candidate for the right job at the right time. This is the core competency of an HR outsourcer.

As far as India is concerned there is a lot of scope and promising future for Human Resource Outsourcer’s as many firms would soon realize the benefits having one instead of trying to practice HR core and non core practices in house. HRO is a very complex business with long term perspective. This industry needs a lot of patience and experience before any firm would diversify and the advantages later on would be immense.

Human Resources in India

The world wide trend is a thumbs up towards all round development be it the West or the East. India is growing at an annual rate of 7 plus percentage for the past decade or so and the future looks even brighter. There are various factors attributed to this overall sense of optimism and positivity. The large organisations all over the world are globalizing their activities. Now both India and China are the key economies which are driving this push towards greater optimism, growth and hence a chance for global corporations for greater investments leading to a host of positive chain reaction called development. Information and IT today has become the key factor. The key drivers of growth in India have been the advent and huge strides of growth in IT, ITES (IT enabled services) and Outsourcing sectors. India in these sectors has marched ahead of rest of the world and India commands unanimous respect from rest of the world for these sectors.

This sense of development has also brought forth various newer spheres of activity and also given greater push to some existing core functionalities. Human Resources is one such core function. Several changes are occurring in the field of Human Resource Management as a result of liberalisation, privatisation and globalisation. HR earlier used to have a limited role to play and was often restricted to Performance Appraisal, compensation (payroll), employee benefit and of course recruiting. But today the dynamics and fastness of business has warranted a paradigm shift of focus, scope and style of functioning of a typical human resource department. Today’s organizations are like virtual societies themselves having representation from various sections and catering to various needs. HR is a very important ingredient to any organisation as its roles have grown in importance and it involves a host of activities. So in this multi dimensional and multi cultural environment the human resources need to tread a very cautious but fruitful role to the overall organizational goals and aspirations.

Some Key HR developments in India

Basically India has seen Human Resources functions only restricted to Recruitment Consultants, Performance Management systems and for basic administrative works, but this has changed a lot. HR professionals too have discovered the magic of IT which is exemplified by usage of terminologies such as intranet, internet, groupware, Tele interview, e-mail used largely for recruitment, training, performance management review. In India we are talking about more than 15000 foreign professionals working in various industries on various capacities and roles, looking to make successful career. This was not something which anyone amongst us thought would have ever happened here. According to NASSCOM the number of jobs available for IT and ITES sectors in India would outnumber the available skilled manpower by the year 2011. NASSCOM has already projected one million software jobs by end 2005.Now this is a very serious issue which needs urgent attention. Also if going by the average rate of growth of India’s GDP at about 7%, then there are 7 new jobs added for every 100 existing every year. Companies/Recruitment firms are promising lucrative benefits to a given job like a sponsored holiday trip for the employee’s family, fat employee referral sums (many software firms in India pay up to Rs. 1.5 lakh for a successful referral of a middle level executive) , or providing exorbitant bonuses. Such has been the prevalent gap to find the right talent fore the given job that there have been people who have been earning Rs. 7 lakh per annum and jumped to salary levels of Rs. 23 lakh in a matter of month or so.

Challenges faced by HR

Today India may have an abundance of manpower talent pool, but the biggest challenge facing companies would be to hiring and employing the right/best talent. In most organizations recruitment or HR functions per se is either assigned to the various employees, who are part of the HR department or assigned to a dedicated group involved with strategizing the future manpower requirements depending on the various dynamics of the market, the brand value the organization commands and various other miscellaneous factors.

According to one research report, companies globally are witnessing an average attrition rate of 18-20%. (The attrition rate of outsourcing sector is about 40% and attrition rates are comparable for IT and other fast emerging sectors). Now this would mean on an average a fifth of world’s working population takes a new job every year. To add the HR also has a very tough task to keep the existing employees happy and organisations are giving it (employee retention strategies) a lot of after thought. Few organisations have found the ideal combination of organizational infrastructure, external recruitment services, and software solutions to automate their recruitment optimally. Part of the problem is that recruitment has undergone dramatic changes in recent years. Some of those are: The human capital: Decreased employee loyalty, Lack of skilled employees, Increased attention to passive job seekers.

Human Resources – Future

Human Resource would also become a specialized area of activity with a lot of inputs required /used to make a successful organization wide HR strategy – be it long term or short term. In the advent of such events we have a segment of pure human resource players claiming to have the experience to look after the HR requirements of a particular XYZ company. These firms are called HRO firms or Human Resource Outsourcing firms. According to Argus Search, the worldwide Human Resource Outsourcing market is set to become an $ 80 billion market by 2008. In 2002 the HRO market is valued at about $25 billion and the expected compounded annual growth rate for this industry is 12%.Gartner Research says in 2004 itself HRO or HR BPO is said to garner 39% of all BPO revenues worldwide with turnover of $ 51 billion. There has been a huge interest in HR BPO space worldwide with some big ticket mergers, contracts being signed and amounting to immense sense as the resulting huge revenue /expenditure savings for the firms over a consistent time period. The benefits of having a HRO are many like it would give greater emphasis for the organization to concentrate on its core competencies, cutting the cost/time of hiring, would definitely have a bearing on the quality of the delivery of the end produce, would lead to better utilization of the existent manpower, give a greater thrust and purpose to the hiring process and of course the delivery would be done to the expectation and demand of the client. The HRO would also deliver the right fit candidate for the client utilizing a mix of technology and knowledge. Thus this would lead to better man management for the client giving greater leverage/clarity to prepare manpower planning saving a chain of after current effects.

Conclusion

The key query , I believe in the outsourcing industry is whether the firms are willing enough to outsource their key processes and Human Resources in today’s fast changing and vastly competitive market is being considered as a very key component by many corporations especially multi and trans nationals.

My new article

What is Human Resource Outsourcing ?
The area of Human Resources has evolved itself from just being a part of an organization to becoming a whole business by itself. There are firms in the world working on specific HR areas like payroll, employee benefit, survey research, HR software products etc. Other than these there are companies in the field of HR BPO called by different names as Human Resources Outsourcing (HRO) or Recruitment Process Outsourcing (RPO) or Employee Process Outsourcing (EPO) firms. Other than these mentioned above there are staffing companies into temporary/ permanent staffing. End of the day competition is intense and the market to fight for is large enough to accommodate more players – both globally and in India. Basically India has seen HR functions only restricted to Recruitment consultants. Gartner Research says in 2004 itself HRO or HR BPO is said to garner 39% of all BPO revenues worldwide with turnover of $ 51 billion.

Today India may have an abundance of manpower talent pool, but the biggest challenge facing companies would be to hiring and employing the right/best talent. In most organizations recruitment or HR functions per se is either assigned to the various employees, who are part of the HR department or assigned to a dedicated group involved with strategizing the future manpower requirements depending on the various dynamics of the market, the brand value the organization commands and various other miscellaneous factors.
HRO today is such a critical function involving activities such as sourcing, assessment tests/ interviews, new hire training, orientation and administrative practices. An effective HR outsourcing initiative would involve a heady mix of hands on recruitment coupled with robust products, processes, procedures and mechanisms.
The benefits of having a HRO would give greater emphasis for the organization to concentrate on its core competencies, cutting the cost/time of hiring, would definitely have a bearing on the quality of the delivery of the end produce, would lead to better utilization of the existent manpower, give a greater purpose to the hiring process and of course the delivery would be done to the expectation and demand of the client. The key query, I believe in the outsourcing industry is whether the firms are willing enough to outsource their key processes and Human Resources.
Why Human Resource is considered such a key process? Because it is just difficult to retain employees, as attrition rates have crossed double digit figures across industries. Everyone in India knows the very future of BPO industry is at stake due to this attrition menace, which could on an average be ( and I would safely take a guess of attrition) in high 40 percentages. The aftereffects of such a phenomena are drastic as many multinationals also take attrition as a very important component in their decision making process for an investment in India.
The 3R’s of HRO - To find the right candidate for the right job at the right time. This is the core competency of an HR outsourcer.