Support Staff Outsourcing in a Developing Economy
Esi Hamilton is the savvy young Manager in charge of Human Resources and Administration in a medium sized bank with 5 branches in Ghana. She manages a staff strength numbering 370 from the management team to domestic staff. Since joining the bank ten months ago, she has implemented several innovations to transform the face of human resource management. Recently, she has been paying attention to the effectiveness and own-and-manage cost of the semi- and low-skilled workers, which constituted 25% of her workforce with its attendant implications on the bottom line. Now, she is thinking about outsourcing their services.
It is a bright morning. Esi has just finished a 30-minute extensive meeting with an HR Outsourcing consultant who spoke elaborately on Support Staff Outsourcing service and the need for her bank to consider outsourcing its semi- and low-skilled workers. She watched the consultant walked out of her expansive office, sipped her cappuccino and tapped her pen softly on her table. She paused, looked at the little sunflower sitting on the top right edge of her table and smiled. She turns slightly and begins to work her fingers on the tablet keyboard? What really is Support Staff Outsourcing? Is it any different from HR Outsourcing? What value does Support Staff Outsourcing add to my bottom line? Is my organization better off without Support Staff Outsourcing? Why should I consider Support Staff Outsourcing for my organization? Esi ponders over these FAQ and urgently requires answers to enable her develop a proposal to her Managing Director for the bank to implement Support Staff Outsourcing service to drive its human resource strategy.
Traditionally, Craumer (2000) surmised that outsourcing which was originally perceived as the “ho-hum tactic for reducing the costs of back-room functions such as payroll and IT” metamorphosed into a critical management tool “in the early 90s as companies began to outsource more strategically significant functions such as manufacturing and logistics, and even product design and other innovation-related activities.”
Support Staff Outsourcing (SSO) as a branch of outsourcing is defined as a management decision whereby a client organization contracts out from within its operations its non-core support functions to an expert provider organization that will deploy its own employees to carry out these functions in the offices of the client organization. There are three parties involved the SSO process namely the client organization, provider organization and the outsourced employees. These three parties play different but equally important roles in the successful implementation of SSO. SSO service usually fails and its objectives faltered in organizations when one of the parties, particularly the outsourced staff is not effectively cultivated within the scope of the Service Level Agreement between the client organization and provider organization.
In SSO service, the client organization takes off its non-core business activities. The provider organization sends in its own trained employees to discharge these non-core functions of the business operations of the client organization. The scope of the non-core business activities varies from organization to organization depending on its size, nature of business, and market competitiveness. The non-core areas usually outsourced cover functions such as Secretaries, Guest Relations Officers, Receptionists, Administrative Assistants, Call-Centre Executives, Franchise Marketing Officers, Mailing Clerks, Cleaning Services, Sales Representatives, Clerical Duties, IT Support officers, Drivers, Dispatch Riders, Security Officers, Tellering and Bulk Tellering Staff (in financial institutions), etc.
It is commonplace in developing economies to widely engage the services of support staff for non-core functions in organizations across the services and manufacturing sectors because these functions are largely executed with little or no automation. The percentage of engagement in the public services sector, which is the oldest and largest employer of labour, is relatively high. Players in the services sector are challenged by globalization, technology and constant changes in consumer preference to deploy their capital to acquire resources (technology and process) in areas of high impact like IT, strategy and core human resources to develop capacity for organizational effectiveness. Under this circumstance, less attention is given to non-core activities, and the managers of these non-core activities in Business Support, Admin or Human Resources Department are constantly under excruciating pressure to perform with little results to show for their efforts.
Chief Executive Officers want results. They cannot understand why their Human Resources or Admin Department are under-performing and slowing down the pace of work. Now, Admin or HR Managers should realize that their traditional role of providing administrative support of business services or personnel to organizations as a cost centre exists in the realm of the past. Contemporary expectations stipulate that they move Admin or HR Department to a more strategic role as a profit-thinking function of the organization. These Managers should now create new organizational capabilities drawn from a redefinition and redeployment of HR practices, functions and professionals that leverage of the core competencies of their organizations. So, what should they do with their non-core operations? Strategic planning for market competitiveness demands that these non-core functions are outsourced to reputable and competent provider organizations that have the core capabilities to deliver results in non-core areas for the client organization.
Inadequate knowledge of HR Outsourcing has made many practitioners and users of the service to assume that HR Outsourcing is Support Staff Outsourcing (SSO) and vice versa. For the benefit of doubt, HR Outsourcing is a body of outsourcing services covering Payroll Administration, Employee Benefits, HR Management, Risk Management and Support Staff. SSO is an integral part of HR Outsourcing but not the totality. Non-core functions that can be outsourced in Payroll Administration include Annual Leave compilation/computation, taxes advisory/implementation, payslips issuance/distribution, etc. Employee Benefits are Health, Medical Claims verification, Canteen Services, Employee Satisfaction Survey, etc. HR Management includes recruiting, hiring and firing, pre-hire background checks and interview, exit interview, salary survey, manpower planning and workflow planning. Risk management covers workmen compensation, dispute resolution, health & safety and HR policy manuals. SSO entails use of support staff to perform non-core functions from Executive Assistant, Secretaries to Drivers and Cleaners.
In another development, HR Outsourcing service is usually grouped into four broad-based categories namely PEOs, BPOs, ASPs and e-services. PEO means Professional Employer Organization. BPO means Business Process Outsourcing. ASP means Application Service Providers and of course, E-services. SSO falls under the PEOs because the provider organization owns the employees it deploys to perform non-core duties in the offices of the client organizations.
Client organizations who adopt and implement SSO service model in services sector in any developing economy should expect a dividend in service delivery quality, cost reduction and increased productivity.
Provider organizations deliver value for money. Quality in service delivery is a critical aspect of the performance measurement. The Service Level Agreement (SLA) will spell out the terms, conditions and expectations of service execution and both parties in the SLA are obliged to perform their commitments. Client organization is certain to experience improvement in the context of its non-core service delivery in terms of quality of employees, turnaround time and customer service. If a client organization is not enjoying this benefit, then the provider organization is incompetent. What has happened is that the client organization has successfully created layers of inefficiency in its structure and the cost of managing such inefficiency and its exit will weigh down the objective of adopting and implementing SSO service.
A recent survey a universal bank revealed that it could save 45% in costs (both direct and indirect) if it decided to outsource an aspect of its operation functions that was managed internally by the bank’s core staff. A whopping 45%! What else can any organization bargain for? Why should a client organization pay more by direct own-and-manage model when the non-core function can be outsourced for value? Also, SSO service also has the in-built capability to predict a controlled future costs. The budget for contract and administrative fees can be planned to circumvent inflation with growth margins in order to determine exact future costs.
An organization can drive top-line performance, increase its organizational capacity and operational efficiency if it concentrates its resources of its core business. SSO service engenders improved productivity for the client organization. The client organization focuses its ability on harnessing and developing the potentials of its core employees converting them into sources of competitive advantage that yield long-term benefits. In partnership, the provider organization deploys its own core competencies to support the client organization to deliver on its non-core business areas. SSO service offers the HR Managers the flexibility and innovation they require to drive their HR agenda to achieve optimum degree of strategy execution and organizational effectiveness.
Some HR Managers argue that drawbacks of SSO service far outweigh the benefits. Is there a merit in this argument? Can the quality of service rendered by employees who are not no the payroll of the client organization guaranteed on a continuous basis? Will there not be disparity in remuneration and welfare of employees of both organizations in the SSO service model? Can the employees of the provider organization demonstrate enough work ethic or loyalty in tandem with the vision and mission of the client organization? Can the provider organization continue to supply quality staff to the client organization?
Can the provider organization vouch for the integrity of data and safety of information its employees handle in the client’s office? Will client organization enjoy high level of commitment to exceptional quality service and customer care from the employees of the provider organization? Will the employees of provider organization deployed to the offices of the client organizations well paid to avoid disruptive exit and defection to competition? How will Labour Commissions and Human Right protection agencies interpret the tripartite relationship of the parties in SSO service – casualization of labour, exploitation or contract staffing? What are the legal implications of adopting the SSO service model? How does the provider organization handle the security issues regarding the client organization giving the employees of the former access to the sensitive information belonging to the customers of the later? How does the provider organization mitigate against hiring, character and competence risks of its employees before deploying and whilst serving in the client’s organization?
A well-articulated and carefully implemented SSO service is designed to anticipate the objections identified as drawbacks and punctiliously provide avenues to blocking them before consummating the SSO service contract, and during the period of executing the service. HR Outsourcing Consultants or professional lawyers with specialty in outsourcing/business services should be engaged to draw up Service Level Agreements (SLAs) to provide a platform for determining responsibilities, accountabilities, deliverables, performance measurements, exceptions and exit clauses. The decision to use SSO service is an investment. If the client organization gets it right and the provider organization implements it in line with the SLA, it will translate to high yield and remarkable profitability in terms of service delivery, customer retention and revenue generation.
SSO service works for any size of organization. Any organization that has more than 20% of its workforce as support staff discharging non-core business activities should consider SSO service. SSO service will relief HR Managers and allow them to focus on more strategic issues as the provider organization see to the welfare and performance of own personnel carrying out non-core functions in the client organization.
It is time to outsource support staff when the HR Manager is inefficient because she is saddled with administrative duties of personnel management. It is time to outsource support staff functions when service is poor and the cost of hiring and maintenance of the personnel is high. The only point the client organization losses is its point of inefficiency. Shareholders, investors and CEOs want value for money in investment in human resources. SSO service model delivers this value.
Esi Hamilton has been typing on her keyboard for the last two hours. She looks up from her tablet and stretched. The time is 1215 hours. “Oh, Kofi!” It is time for lunch. She has a lunch date with her husband, Kofi Hamilton an investment banker who works across the street and she does not want to miss this appointment. She would email her proposal report to her Managing Director when she returns from her lunch. She shuts down her tablet, picks up her bag and sprint past the Secretary, her words “I’m off for lunch” echoing behind her.