Written by Harish Suri
harish.suri@westminsterconsulting.ca
The warmth of the holiday season, scrumptious holiday food and our misty eyes clearing away to welcome the dawn of a New Year were supposed to be a seamless transition into a secure and healthy economy …the good times once again.
It’s time for a quick reality check – the heavily dependent oil & gas industry is still awaiting for that spark to ignite all its engines in order to give the very needed torque to drive the wheels of Alberta’s economy. The year 2015 was challenging for organizations across Alberta and its effects have seeped into the New Year with no sight of an early respite.
Tough times call for tough measures. The downturn in the economy has forced organizations to make some tough decisions; many within the workforce have lost their jobs in the process. Welcome to a shaky start of the year 2016 in Alberta!
Although it is generally agreed that Canada has the capability to endure the economic turmoil, the clear directive for organizations right now is to realign their approach which closely fits the new ground realities; focus on their core business, rethink their business strategies and embrace effective ways to manage their overall costs, resources and human capital.
In the current business climate, companies do recognize the fact that they cannot completely eliminate some of their essential non-core process such as the HR function even though the HR function is one of the most severely impacted during a company downsize.
With the sudden loss of key HR resources and services, it becomes vital for organizations to ensure their existing human capital remains competitive and motivated in meeting business goals. To quickly fill the gap from the loss, organizations look to outsourcing part of their HR function or all of their HR function; In some larger organizations, it may make sense to keep a more junior person and use an external HR consultant as a resource to handle excess workloads or more complex issues. In this scenario, the HR consultant can work almost as a mentor, coaching the internal resource and increasing their knowledge and capabilities.
The most progressive organizations, the ones who have strong and mature business intelligence to survive the economic downturn see the benefits of outsourcing their HR function at both the strategic and operational level, and without any doubt embrace the outsourcing HR function model. These organizations are likely to be around once the
economic downturn ends.
There are many advantages associated with outsourcing an organization’s HR function (partial or completely), especially during an economic downturn. These include:
- Ensures immediate continuity of all HR functions within the organization. This means that the HR service provider assumes the responsibility of knowledge transfer for the client organization. The HR service provider has access to a range of dedicated experts in various critical HR related domains including legal compliance, human rights and employment standards/policies, performance management and training who can be deployed just-in-time
- Especially during an economic downturn, demand of increased productivity, probability and growth forces organizations to reduce costs of HR services. Outsourcing the HR function partially contributes considerably in offloading most of the work that HR professionals within the client organization perform, thereby enabling them to perform a more consultative and strategic role that is aimed at retaining the workforce and enhancing performance. Outsourcing HR is also seen as an effective way to bypass organizational politics and improve efficiency.
- Additionally, execution of projects such as HR audits, development of policies, revision of performance management and setting up tracking for training which have been set aside for later by the client organization can be included into the services provided by the designated HR consulting firm. The firm will have templates to start with – this avoids reinventing the wheel every time.
- Downsizing adds increasing pressure on internal HR functions to demonstrate value. HR consulting firms bring a wider and deeper pool of HR experiences – using creative solutions and best practices advice they help organizations run more efficiently. In the era where knowledge is vital in beating competition, the outsourced HR model ensures competitive intelligence always remains active and institutional knowledge is retained – a leading factor in the success of an organization.
- The predominant reason for outsourcing is cost reduction. The client organization has the advantage of shortlisting HR consulting firm tenders based on the cost effectiveness and the value add provided by them. The “just-in-time” deployment of external expertise promotes a drastic saving of direct and indirect costs for the client
organization. For example, reducing headcounts and overtime hours, cutting administration and back up costs, saving on recruitment and training costs, saving on internal workforce absenteeism costs. In general, the organization has the benefit to shift the burden of risk associated to business and uncertainty to someone else.
- Promotes a healthy cross fertilization of competencies between the outsourced firm and the client organization. The nurturing of this inter-organizational relationship serves as a trusted hub of innovation because it provides timely access to knowledge and resources that are otherwise unavailable.
With the strategic and operational advantages an outsourced HR model can bring to an organization, it is no shock that large or small organizations are embracing the model with ease.
Many business owners and executives are warming up to the idea of outsourcing their HR function and are pleasantly astonished that the benefits of outsourcing their HR functions can be reaped during the tough and prosperous times.
Inputs from Penny Duncan
Penny.Duncan@westminsterconsulting.ca