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A recent study commissioned by Talent2 found that 84% of Asia Pacific business leaders believe HR outsourcing (HRO) is a potential solution to their talent sourcing, retention and training challenges.
The results show that companies in the current crisis are beginning to question the merits of managing all functions internally. The HRO market is growing in Asia, but many companies have been reluctant to utilise partners, possibly because they have a history of managing processes internally.
The argument is simple. Highly administrative tasks, while important, are not an intrinsic part of the business – they are infrastructure activities. Effective HRO providers can add value by optimising these repeatable processes and creating ‘economies of skill’.
So what has changed to accelerate the interest in HRO in Asia? One answer could be the increased sophistication of a handful of HRO providers, including Talent2, in the region.
Another key advantage which is now impacting HR strategy is that companies don’t need to maintain high headcount levels during market slow downs. Instead, they can partner with HRO providers to scale up and down with ‘on-demand’ services.
It is important to note that HRO is far from an all or nothing service. There are literally hundreds of ways of designing talent acquisition, payroll and learning outsourcing solutions, although it is important to work closely with your chosen partner to ensure the contract is deliverable.
40% of respondents to the Talent2 survey had outsourced at least one function or specific task to a specialist provider. 5% had fully outsourced their HR function but most used HRO in a modular form as “point solutions”, leaving their own highly valued HR resources to pull the big strategy levers and work with the business more closely on issues such as organisational design, change management, succession planning, leadership development and talent programs. The key target HRO “modules” are talent acquisition, payroll/HRIS, and Learning including program design and online content development.
This same survey also identified key drivers when selecting a partner: reliability, a proven track record, cultural fit and understanding of the HR strategy. The key is to design the right solution for individual clients. At Talent2, for example, we don’t try and be all things to all people.
Interestingly, the survey also found supporters of HRO are not cold-hearted number crunchers. Rather, they are focused as equally on increasing quality and service levels as they are on cost-reduction and improving scalability of costs with output. Outsourcing is simply a means to that end.
Singapore businesses, like others in the region, believe HRO’s two biggest benefits are reducing and controlling expenses and increasing efficiency. While HRO is not as common as in China and Malaysia, Singapore businesses are generally more positive to outsourcing as a viable strategy than Hong Kong and Australia although all regions across Asia are positive to HRO. The survey found acceptance of HRO is more common in newer and emerging economies with higher growth. On this list, Singapore sits roughly in the middle.
Regardless of region, senior business leaders should reassess their HR strategy for the new economic climate – reviewing the pros and cons of internal HR versus selective or more holistic HR outsourcing. The time to question the optimal design in delivering services is now. Any strategy that reduces costs or adds revenue, while still retaining or increasing service levels, must be considered very seriously.
+ mark.condon@talent2.com