Team Management

HR outsourcing: BT case study

, INTRODUCTION

According to Gunsauley (2002) more and more US and European companies resort to the practice of HR outsourcing. The present paper will discuss the outcomes of HR outsourcing policy in BT and the way it affected and might be affecting various areas if organizational performance.

The analysis will start with the definition of outsourcing and types of HR outsourcing. Then the factors that induce companies to turn to this practice and the negative consequences of it will be highlighted. Since the notion is relatively new, the review of the advantages and disadvantages of HR outsourcing will provide conceptual boundaries of the BT case study review.

The paper will discuss the factors that triggered BT's decision to outsource HR function and the way this decision was realized. Besides, the case study will review the outcomes of HR outsourcing. Then the analysis of HR outsourcing on various sides of organization will be made.

Of particular concern, the paper will consider the importance of HR function for the strategic content and process of the organization. Moreover, since the outsourcing introduced various "soft" and "hard" changes, the paper will review the content of the organizational culture and will explore the issues of organizational change in the context of BT strategic objectives and intended market performance.

Since the topic is quite new and there is not much sufficient data about the outcomes of HR outsourcing on global communication industry players the paper will make certain presupposition which will be evaluated on the basis of existing HR theories and practice.

OUTSOURCING

What is outsourcing

Chaffey (2003) define outsourcing as "the contracting out of specified services to a third party with a controlled, flexible relationship". He points out that the decision of outsourcing usually takes place when a firm does not want to use its internal resources to build or operate in-house function it can hire an external organisation that specializes in providing these services to do the work.

Types of outsourcing

HR outsourcing services generally fall into four categories: PEOs, BPOs, ASPs, or e-services (Lee, 2002).

PEOs

A Professional Employer Organization (PEO) assumes full responsibility of a company's human resources management. It takes full legal responsibility of a company's employees, and is actively involved in such vital HR functions as recruitment and selection, delayering and performance appraisal. The PEO and a company become partners, essentially, with the PEO handling all the HR aspects and the business handling all other aspects of the company. In other words it is total outsourcing, since an external company performs all activities.

Armstrong (2001) introduces the following list of HR areas that are outsourced:

* Training

* Recruitment

* Health and safety monitoring and advice

* Employee welfare and counseling activities

* Payroll management

* Specialist legal advisory services;

* Occupational health and fitness services;

However, due to the specific features of human resource management and the developing practice of HR outsourcing, PEO might also imply for joint venture/ strategic alliance sourcing where certain duties and responsibilities are shared between organization and a supplier

BPOs

Business Process Outsourcing is a broad term referring to outsourcing of different managerial and operational functions. Specifically in HR, a BPO is designed to ensure that a company's HR system is supported by the latest management information systems, with self-access and HR data warehousing options.

ASPs

Application service providers host software on the Web and rent it to users--some ASPs host HR software. Some are standardized off-shelf applications (People Soft) while others are customized HR software developed by the vendor. These software programs can manage payroll, benefits, and more.

THE RATIONALE FOR HR OUTSOURCING

General rationale for outsourcing

According to Mintzberg et al. (1995) the overall rationale for any outsourcing activity is that outsourcing provides:

* greater economies of scale,

* flexibility

* levels of expertise.

* cost effective,

* lowers costs and improves add-value through out the value chain

He states that implementing function internally that can be bought in more economically compromises competitive advantage. Outsourcing enables concentration on core activities reduces internal costs, time delays and political pressures, leading to a more compact organization, flatter hierarchy, sharper focus on recruiting, developing and motivating key personnel in terms of core competencies.

Ratnam (2001) emphasizes the strategic dimension of outsourcing. He suggests that heavy investments, coupled with the challenges of a dynamic market place, means that outsourcing strategy, which is focused on strategic supplier partnerships, is a key value differentiator. He claims that in current business environment, which can be characterized as turbulent, every company needs flexibility to meet its current and future opportunities. Outsourcing provides the ability to adjust to changing market conditions to remain competitive.

Rationale for HR outsourcing

Though HR outsourcing is based on similar rationales, it is important to mention that it became possible with recent development of information and communication technologies. According to Wright (2002, cited in Gunsauley, 2002), with the emergence of various management decision support systems and databases, organizations realized the new opportunities of e-HRM. Outsourcing is becoming more and more popular as employees become more comfortable with Web-based self-service. New portal technology offers users deep knowledge content, decision-support tools and transaction capabilities in one place.

At the same time, the in-house development