The most critical question for business owners – especially of SMEs – is to decide to what extent they should run their firms. Should they focus on selling the company’s products and services and devote their attention on the strategic organization of the team to reach the corporate objectives? Or should business owners look at every detail related to the daily management of their human resources? According to a study held in the canton of Vaud, over 75% of the companies do not entirely handle their HR needs in-house[i]. This data shows that SMEs do not hesitate anymore to hire external service providers to manage their human resources. The expected goal is ensuring the sustainability of their business and therefore increasing their profits. Most common outsourced HR services are : first payroll and time management (about 35%), then recruitment and training services (17.3%), staff administration (10.8%) and finally expatriate management (8.7%)[i]. It is highly advisable for a company to handle some HR activities in-house, such as the most strategic ones : strategic design of HR policy, social relationships, selection of partners, etc. These activities require an arbitration or an internal decision which directly relates to the corporate identity[ii]. Whether SMEs decide to outsource the HR functions, five key advantages will help guarantee the sustainability of their activities :
- Human and technical expertise
HR outsourcing service providers offer a whole set of specific skills aiming at designing, developing and implementing practical and innovative methods and processes to address business challenges. Especially for small firms which don’t have exclusive in-house HR management skills, this external expertise will enable to better deploy their human resources : developing high-value HR activities, organizing HR in a more attractive way, providing specialized trainings for executive officers, using a more efficient skill transfer process, etc. It will free business owners to concentrate on their core competencies.
- Objectivity of analysis
Outsourcing allows the company to adapt to the continuous changes while avoiding to be limitated by daily administrative tasks. Business owners are provided with support to achieve their business approach in a way that they take the necessary step back to clearly identify and analyze the issues faced by the company. Thanks to the objectivity of the external consultant, it is possible to conduct a realistic analysis of the business potential, and assess its strengths and weaknesses. Furthermore, the daily routine of managing a business can often prevent business owners to realize that their working habits might be the reasons why the business is going through a tough time.
- Transparency of information
Communication is a key point to ensure that your business is running well. Transparent communication enables a sound implementation of your business activities as well as tangible results. However employees are often reluctant to talk openly with their boss about issues happening in the company. It is also often difficult for a business owner to collect every fact related to the failures of the business or its team. Communication becomes much easier and more reliable whenever a third party is involved.
- Cost effectiveness
HR outsourcing helps better manage risks and provides customized improvement solutions which can be directly implemented in a company. Networking opportunities offered by HR consultants give access to a considerable pool of talents. It can increasingly reinforce the workforce and improve its performances. On the contrary, when assigning a team member to analyze and solve business management issues, you may risk to slowdown the activities and lose on profits. Employees may also be responsible for the failures of the company.
- Sustainable strategy planning
Business owners often fail in the market due to poor or even no strategic planning as they strive to focus on dealing with daily details of running their business. HR outsourcing enables them to address strategic issues while avoiding to deal with unuseful details in their scope of work. HR specialists help companies to improve their way of handling organizational changes on the long term and to overcome or even prevent future difficulties. Strategic vision is crucial to sustain your business. Many business owners tend to forget it because they don’t have enough time, expertise, motivation… However you can plan and achieve the success of your business only through strategic vision. An external consultant has to get a perfect grasp of the culture and specificities of your company to design a relevant approach and offer suitable solutions. Some businesses decide to recruit and train their own HR specialists in order to reach greater profitability. That requires a considerable financial investment at first. However it can enable to set-up a motivating working environment for the personnel who is trained to take on a challenging but dynamic job. Whatever you decide for your company, HR functions have to be unique and progressive in order to meet the constantly changing requirements of your business. Whether you decide to outsource, don’t forget to consider your own business parameters ensuring that the outsourcing services will suit your specific environment (geographic dimension, social climate, communication and business culture).
[i] Survey in 666 companies with between 25 and 250 employees, directed by Frédéric Favre, in collaboration with the Chambre Vaudoise [Findings of the survey were published in “Le Temps” on 11/12/09]. [i] Data generated by the survey EOA/Demos Outsourcing « Externalisation de la fonction RH » 23/11/2010 [ii] “L’externalisation de la fonction RH : une organisation créatrice de valeur pour les DRH ?”, Convictions RH, 2011