n December 1999 BP gave away $600 million and responsibility for its global human resources administration and management. The seven-year contract, with then startup rm Exult, is the biggest HR outsourcing deal on record, and some would say it is a sign of the times. HR is a constantly growing area, which has to be constantly aware of the changing business world which relies more heavily on freelancers, advancements in technology and new specialist skills. As a result, companies of all sizes are now considering HR outsourcing as a viable option, and it is a big business. In 2000, revenues amassed to almost $22 billion, claiming more than 8 percent of the total amount spend on HR that year, and gures are predicted to rise. But that is not to say it is right for you. There are as many staunch critics of HR outsourcing as there are advocates, and though both arguments can be persuasive, there appear to be several major factors that any rm should seriously consider before signing a deal.
are as many staunch critics of HR outsourcing as `` There are advocates. there ''
DOI 10.1108/09670730410534830
VOL. 12 NO. 3 2004, pp. 5-7, Emerald Group Publishing Limited, ISSN 0967-0734
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BP and for `` From day one,where BPExult optedtheiran open book relationship, shared all data and Exult explained how they intended to cut costs as well as where they would make their prot.
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Some criticized BT for going into such a large venture with a relatively unestablished company, but BT had well-researched the advantages, and were won over, at least in part, by Exult's prociency where theirs was lacking. Exult boasts Web expertise, and BP were attracted to the idea of having an Internet-enabled HR system in place, which would allow all employees access to HR information from home. Similarly, critics said that in handing over HR, BT was handing over the key to their competitive edge, but BT were careful to analyze and prioritize the various interdependencies involved, and only handed over the most time consuming jobs, namely putting the strategy they would still design into practice. Despite the inevitable glitches, so far the deal has brought benet to both sides. Exult has signed other major deals, and BT is pleased to report high payroll accuracy, simplied global appraisal systems, fewer different employment contracts, Web portals for each employer and other benets. Could BT have done it on their own? ``Personally, I doubt it'', says Nick Starritt, once group vice president for HR, ``certainly not at the cost incurred''.
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staff members. It is important that a rm, as BP did, is willing to show support to the needs of their vendor, and that communication is often and extensive. Further, the rm should demonstrate that they are receptive to external advice, providing the vendor has prior specic knowledge about that rm's business practice. Keywords: Human resource planning, Cost minimization, Contracting out, Organizational If an organization of any kind is cautious about potential pitfalls and fully researches the potential cost cuts offered by competing HR vendors, HR outsourcing could be a viable option with the potential for high benets. If rms ensure the contracts drawn up leave ultimate control in their hands, both in terms of major decisions and a get-out clause, and work to create an atmosphere of mutual trust and mutual reward, the BP-Exult success story should be widely achievable.
Comment
This review is based upon ``Double vision'' by Bob Morton and Alex Wilson, ``Making the outsourcing decision'' by P.S. Adler and ``Professional employer organizations and their role in small and medium enterprises: the impact of HR outsourcing'' by B.S. Klass. ``Double vision'' juxtaposes two different points of view on HR outsourcing, from Ciba Specialty Chemicals' head of HRD and regional competency centre, Northern Europe, and BT's group HR director. The issues they raise include the impact of outsourcing, the role of human resource functions within the organization, and the way that human resource management will develop as a career. ``Making the outsourcing decision'' identies six key factors that companies need to consider when making outsourcing decisions, showing that they can be effectively applied to HR functions. The article explains how changes in the business environment are affecting how rms approach HR management, and how outsourcing has divided into three main segments, ultimately aiming to give advice on when and when not to outsource. A case study of BP's deal with Exult illustrates the argument. Klass' article takes a theoretical approach to the issue of HR outsourcing, considering transaction cost economics, social change theory and strategic HR literature and how each could affect a decision-support model for SMEs. The article focuses on the conditions best suited to HR outsourcing, as well as establishing and maintaining a good relationship with the vendor and reducing opportunity for the vendor's opportunism. The argument leads to 15 propositions, which usefully summarize the theoretical discussion.
References
Adler, P.S. (2003), ``Making the HR outsourcing decision'', MIT Sloan Management Review, Autumn, Vol. 45 No. 1, pp. 53-60, ISSN: 1532-9194. Klaas, B.S. (2003), ``Professional employer organizations and their role in small and medium enterprises: the impact of HR outsourcing'', Entrepreneurship Theory and Practice, Autumn, Vol. 28 No. 1. pp. 43-59, ISSN: 1042-2587. Morton, B. and Wilson, A. (2003), ``Double vision'', People Management, 9 October, Vol. 9 No. 20, pp. 37-8, ISSN: 1358-6297.
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