Trends Can Lie: 10 Reasons to Not Outsource Your HR
Based on a 2018 survey, the global outsourcing market is valued at $85.6 billion and it’s positioned to grow even larger as more and more companies choose to outsource their business processes.
According to Deloitte, 59 per cent of companies outsource to reduce or control costs while others do so to solve capacity issues. Businesses who want to focus on core functions also tend to outsource most of their processes. Some of the top outsourced countries include India, Malaysia, the Philippines, Brazil, Vietnam, Indonesia, and China. Labour costs in these countries are relatively cheap compared to the west, making them financially attractive to outsourcing companies.
In terms of value, approximately 84.2% of outsourcing deals originated from the United States, followed by the United Kingdom at 5.2%. Spain and Australia were two other key outsourcing markets.
Outsourcing helps my business save money and maximize profit. So, should I outsource my HR too?
If you find yourself debating whether or not to outsource your HR functions, you’ve come to the right place. In this blog post, I am going to show you 10 reasons not to outsource your HR.
10 Reasons Why You Should Not Outsource Your HR
Human resources are often described as the beating heart of the company. From recruiting and onboarding to detailing employee benefits, dealing with complaints, processing payroll, and making sure that your business is legally compliant, the HR plays a very critical role in the day to day operations of your business. While outsourcing HR functions is a cost-saving strategy, know that in most cases, it’s not always the best move.
Below are 10 reasons why you should not outsource your HR.
Reason No. 1️⃣ – Outsourcing your HR reduces “human touch”
Do you know what’s the most sensitive and emotional department in your business? Yes, it’s the HR. HR deals with some of the most challenging experiences in the office. They work with employees and their families for matters like insurance, health, vacation leaves, work-life balance, etc.
Outsourcing your HR could create a gap between the management and its employees. And this disconnect may affect your employees’ productivity, morale, and trust.
Reason No. 2️⃣ – You are giving up control
Control is probably one of the most pressing issues you’ll face as your company grows. Unlike small businesses, growing companies don’t have the time to manage and work with their employees daily. This is where an in-house HR comes in. Your HR works with your staff every day — handling employee issues, motivating your workers, hiring, onboarding, etc. The HR then reports to you to let you know how the company is going. This makes your in-house HR a very valuable part of your organization.
We don’t see how outsourcing your HR to a remote team on another continent can replace the value of this day to day interaction between the management and the workers. It’s easy for you to lose control if you outsource your HR.
Reason No. 3️⃣ – Your HR is not easily accessible
What happens when your employee has an urgent concern? If your HR team is halfway across the world, on a different time zone, expect delays in answering emails. Not to mention a disgruntled employee. Outsourcing your HR makes it hard for your employees to communicate with them, more so if the issue is sensitive.
Reason No. 4️⃣ – You don’t have enough time
If you want to survive the competition, you need to change and adapt fast to market conditions. With HR playing a very critical role in your business, it is necessary that you should bring them up to speed whenever there’s an organizational strategic change. This process is easy for an in-house HR because they’ve always had a hands-on approach in your organization. But how about for your outsourced HR vendor? Do you have the time or resources to help bring them up to speed? Remember that market conditions change quickly so expect to make these high-level changes now and then.
Reason No. 5️⃣ – You become too dependent
The more you outsource your HR functions to outside vendors, the more your HR team will become dependent on them. This becomes an issue if the vendor drops halfway or is providing low-quality work. And if you decide again to bring your HR function back in-house, a lot can be lost in transition. Not worth the risk if you ask me.
Reason No. 6️⃣ – You don’t have control over the information you send over
Oftentimes, an outsourcing company will need access to sensitive information like product information and company organization to function fully. More so if you are outsourcing your HR. There is always the risk of information leak (deliberate or not) whenever you provide an “outsider” sensitive information.
If sensitive data like employee bank accounts, social security number, health record, etc. gets exposed by the outsourcing vendor, you might end up facing legal charges. You will also lose credibility.
HR must be serious in protecting employee privacy. Any lapses will have serious repercussions.
Reason No. 7️⃣ – Poor performance, poor results
One of the primary reasons why companies outsource is to limit costs. And this often comes with a hefty price. Decreased costs often lead to a decrease in performance quality. Keep in mind that HR is responsible for the day to day operation of the company. If the performance of the outsourced HR is poor, expect poor results across the board. Don’t cheap out on HR. A low-quality HR department will have a negative impact on your whole company.
Reason No. 8️⃣ – Poor hiring
Who knows your company better? Someone who works on the other side of the world or your HR employee who comes to the office every day? Compared to a regular employee, an outsourced HR will never have a complete understanding of your company culture. Because HR is responsible for hiring new talents, this lack of knowledge will affect how your HR screen applicants and hire people. They may end up recruiting someone who is not a good fit for your company — wasting your precious time and resources.
Reason No. 9️⃣ – You inherit the outsource company’s weakness
If you outsource your HR functions, your HR department will be subject to your HR vendor’s weaknesses. For example, if the outsourcing company’s payroll software malfunctions, your employees will suffer because they will not receive their salaries on time. The vendor may not completely understand the details of your company’s business and your operating methods and as a consequence, could be ill-equipped to recognize potential errors.
Reason No. 🔟 – Integration can be a pain
Rarely do vendors collaborate to provide seamless and well-integrated solutions. Most outsourcing companies operate independently and don’t be surprised if they have different recommendations than other providers. If you are looking to streamline your HR processes and integrate your HR to various parts of your company, outsourcing your HR functions is NOT a good place to start.
It takes a team of passionate and dedicated professionals to keep your business running smoothly. This is especially true today where the business environment changes rapidly. As your business grows, so as your need for a functional HR. A strong HR presence will give your workforce the necessary boost so they can work effectively and efficiently. And you can’t establish this type of HR presence with outsourced teams.
Remember that HR is the thread that holds your organization together — from the executive down to the common employee. We will not blame you if you choose to outsource your HR to save on overhead costs or so that you can keep focusing on your core function. Who knows? That might be the best decision for your business. But like any coin, there’s always another side that you need to be aware of.
If you choose to outsource your HR, be prepared to:
- Lost some degree of “human touch” in your business
- Relinquish control
- Encounter communication issues
- Dedicate resources to bring your HR vendor up to date with organizational changes
- Become dependent
- Risk information leak
- Deal with subpar performance and results
- Hire people who are not a good fit for your company culture
- Inherit your HR provider company’s weakness
- Face problems in integrations