When getting a business off the ground, it’s easy to get sucked into dealing with the day-to-day running of the business, instead of focusing on the big picture. Business owners and entrepreneurs should be spending their time wisely, while trying to grow their business, and prepare for the future, and not spend too much time dealing with menial tasks.
These days it’s easier and cheaper than ever to outsource and hire others to do necessary tasks. Global outsourcing in particular has become very popular, largely due to the lower cost of living in many countries, and availability of cheaper labor while not having to compromise on the quality of work.
It can be frustrating to spend more time than necessary on non-revenue generating activities, and business owners can spend over half their time engaged in these tasks. Many companies are outsourcing their human resources, allowing them to not have to do tasks such as payroll and recruiting.
It’s important to recognise that businesses will get what they pay for when outsourcing. By focusing primarily on cost saving, businesses are risking ending up with a firm who have their own agenda, which may provide a service that isn’t in line with the business owners expectations.
Advantages of Outsourcing:
- More time to focus on core activities, leaving employees to focus on supporting activities that business owners don’t need to be involved in.
- Risk management. By outsourcing human resources, businesses can minimise risk. Because labor and employment laws are regularly changing, it can be hard for business owners to remain up-to-date on regulations.
- Outsourcing provides large cost savings, especially when outsourcing to countries with cheaper labor. A fully functional human resources department requires a large overhead for things like office space and trained HR staff.
- Employees are usually specialists in their field, and tasks can be completed both more quickly, and with better quality. These firms employ HR professionals who are dedicated to staying up-to-date on employment laws, helping business avoid costly lawsuits.
- Outsourcing helps businesses maintain a productive and efficient workplace. Providers are experts at streamlining important HR tasks such as compliance management and payroll, allowing managers and employees to spend less time on paperwork.
Disadvantages of Outsourcing:
- Businesses risk exposing sensitive data and a loss of confidentiality. Outsourced companies often need to have some sensitive information in order to provide adequate service, which opens up the possibility of an information leak. It’s important to make sure that data is protected and this risk has been written into the contract so that there is a penalty clause in case of any leaks.
Outsourcing comes with the risk of having problems with quality and performance. HR is responsible for the day-to-day operating of a company, and bad quality can negatively impact the whole company. The outsourcing company is also trying to increase their profit, while decreasing expenses, and this comes with the risk of them going bankrupt and leaving you in serious trouble.
- Business owners are often surprised by the hidden costs involved when outsourcing human resources. They will also need to pay legal fees to have a lawyer review the contract before it’s signed. Terms and conditions need to be clearly understood by both parties before anything is signed.
- Larger businesses may be faced with recruitment problems, especially if the outsourced company doesn’t understand the values of the business they’re recruiting for. This could result in employees being hired who are not a good fit for the company, and if the right people aren’t being hired this can negatively impact the business.
- Outsourcing HR can sometimes lead to bad publicity. Some loyal customers may choose to leave after finding out that parts of your business is now outsourced, as this can be a very polarising issue, depending on where you live.
- Staff may feel as if they are unimportant if human resources are not easily accessible from their offices, which can lead to reduced morale among employees, and staff turnover can increase if the transition is not handled smoothly.
- There may be a lack of customer focus if outsourced vendor is catering to the needs of multiple clients at a time.
- While it can often be advantageous to simply hire an extra employee or two, it often makes more sense to outsource to a firm which specialises in HR and related fields, since this will often be both cheaper and easier in the long run.
- Business simply need to weigh up the advantages and disadvantages of outsourcing, and decide if it is a good fit for their company.
Here is a video on Outsourcing Tips: