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Making the Business Case for Human Resource Outsourcing

Making the Case for HRO

The case for outsourcing human resources is growing more compelling by the day as businesses come under increasing pressure to cut costs. But a full accounting of HROs benefits extends well beyond the bottom line. Defining these benefits from the outset ensures that businesses capitalize on this powerful resource.

Immediate Human Resource Outsourcing Benefits
Outsourcing human resources offers clear benefits out of the box. Enterprise and SMBs alike can take advantage of:

  • Access to best practices. By hiring an external provider whose core competence is human resource administration, companies reap the benefits of the HRO providers time-tested best practices.
  • Cost savings. As human resource outsourcing providers migrate to component-ized (pay-as-you-go) pricing, clients can expect a quicker path to ROI. HRO journalist Andy Teng reported the recession-fueled trend toward pay-as-you-go pricing in November 2008, remarking, "the industry can deliver quick savings through discrete outsourcing."
  • Technology upgrades. The scale of human resource outsourcing providers allows them to invest in the most up-to-date human resources technology, spreading the resources and the costs over their entire client base.
  • Time savings. By outsourcing the human resources function, companies can focus on higher-priority business objectives.
  • Reduced risk. Companies can mitigate employment risk by outsourcing hiring and administrative functions. HROs ensure compliance with labor laws and OSHA regulations.

Long-Term Benefits of an HRO Solution
The most profound value of outsourcing--the strategic advantage--typically emerges over time.

  • Streamlined HR operations. A human resource outsourcing provider has the capacity to streamline HR functions on a single platform by using advanced data management technology. Over time, a fully-integrated HR suite can provide valuable data to support strategic talent management decisions. As one provider puts it, a full-service HR application "gives C-level managers a 360-degree view of their employees."
  • Flexibility and change management. Outsourcing enables on-demand flexibility, accommodating both organic fluctuations and sudden changes due to mergers and acquisitions. HRO eliminates the complexity associated with a merger, which would typically entail the integration of two in-house HR infrastructures.
  • Performance management. Outsourcing human resources allows companies to achieve a birds eye view of performance by tracking key metrics. Providers offer such reporting as part of the service. One lists "building metrics and procedures to monitor and optimize employee performance" among its services.
  • Talent management. Outsourcing fosters better talent management in several ways. First, outsourcing administrative functions frees the clients resources to focus on this high-value pursuit. "The benefits of HR excellence will allow us to move the value chain up and focus on talent management," says a senior manager for HRO client Whirlpool. And the integrated database gives managers the data they need to make strategic decisions and "develop their most valuable asset," talent.
  • Self-service. Human resource outsourcing providers are equipped to implement employee self-service portals, bringing greater efficiency and timeliness to administrative functions.

Human resource outsourcing offers businesses the opportunity to bring greater efficiency and strategic planning into their human resource processes. Ultimately, this strategic advantage supersedes even the cost benefits of outsourcing.

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