Outsourcing

Faster, Better, Cheaper – Really?

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Outsourcing concept with hand pressing social icons on blue world map background.
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“Optus cut jobs by outsourcing HR and finance teams.”

How can outsourcing HR and finance staff, in order to cut costs, be a sound organizational decision? For HR professionals, the headline in the article for this particular blog topic brings up some key strategic questions.

Click here to read the article.

First and foremost, the decision to cut jobs is financial. Given that the biggest expenditure on a corporate balance sheet is usually employee compensation, it is a natural correlation to make – cut the biggest expenditure to curtail the financial losses.

It is, however, a deceptively easy solution that does not always produce the desired result.

In this particular article, the outsourced HR functions are in the areas of data analytics and trend analysis. These data management tools are used by HR to promote organizational and business systems decisions and sound strategic planning. If HR is to deliver value on these strategic functions, of course, the search for the ‘fastest, cheapest, best’ solutions should be an ongoing part of strategic evaluation. These are critical functions that HR should be driving in order to provide technology based solutions that contribute to lines of business success and organizational growth.

Outsourcing routine, technology-based processes seems to offer an easy solution. It may be ‘easier’ but, as a long-term sustainable solution, it too may miss the mark in supporting organizational success.

On the other hand, digital systems integration and data-management platforms can harness the technical complexities of critical HR systems. Automated processes can be implemented internally to produce significant cost-savings and improve operational results.

Outsourcing appears to be a cheap and fast solution. Is it the right solution? In this case, we do not have the full account of facts and insights behind this specific organizational decision.

It does, however, emphasize the need for HR to understand and monitor technology-based systems. Further, HR must have an active voice as part of data based operational processes so that outsourcing any function (including HR) comes as one alternative in a range of sustainable solutions.

Discussion Questions:

  1. Why do you think Optus is choosing to outsource as the preferred solution in this case?
  2. Identify four HR administrative functions that can be automated using current technology based solutions.
  3. As an HR professional, what advice will you give to Optus about the impact of outsourcing on employee engagement and morale?
  4. What decisions would you make about outsourcing HR functions in this particular case?

The Economic Realities of Outsourcing 

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Why is outsourcing so appealing?  Well, in many cases it is a numbers game; particularly, employee supply, and cost.

The population of Canada pales in comparison to some other countries, and therefore has a much smaller pool of employees to fish from. The following is an eye opening article illustrating the appeal of outsourcing overseas.

Click Here to Read the Article.

The State Government of India advertised for 368 entry level positions and received 2.3 million applications.  Let’s review that number again, it is not a typo, 2.3 million applications for 368 entry level jobs; such as, waiters, and night security guards. From a HR supply point of view, it makes perfect sense to outsource to a country that has such a massive supply of employees.

As economic theory predicts, where there is a massive supply of employees, wages will be lower.  Average entry level jobs in some of these vastly populated countries pay approximately $400.00 per month, in Canadian Dollars. In Canada, even at minimum wage, the average salary would be $1800.00/month.

If you have low skilled, entry level, jobs to be filling, and the work required can be done anywhere, why wouldn’t you outsource?  There are many non-monetary factors to consider; such as, quality, employee management, and loss of direct control over the work. Unfortunately, many organizations only look at the numbers.  It is the role of HR to provide an in-depth analysis and look at all the factors, both negative and positive, prior to recommending outsourcing as a viable option.

Discussion Questions:

  1. What are all the factors that a HR Professional should consider before recommending outsourcing a business activity overseas?