Outsourcing of Human Resources Services

Outsourcing of Human Resources Services

Human Resources

Having worked in the human resources outsourcing environment for almost 14 years, the operating dynamics of SMMEs has always fascinated me. With South African SMMEs being subjected to not only the turbulence caused by the world and European debt crisis but also unique, legislative complexities, the rationale applied by such SMMEs in making business decisions is relatively undocumented. My interest was particularly piqued by the rationale applied by SMME owners when deciding how to deal with the provision of human resource services to their employees. When faced with a decision as to what topic to tackle when doing my MBA dissertation, I decided to look into the reasons why KwaZulu-Natal SMMEs consider outsourcing their HR functions and the benefits that they receive by doing so.

Qualitative research using 15 in-depth interviews was conducted. The data generated was then analysed using a technique called Thematic Analysis (a technique identifying themes in the data). These themes were then refined to identify core themes which effectively provided the reasons for outsourcing the HR function.

The core themes identified are:

  • The shortage of employees with the necessary skills and experience to perform the internal HR function.
  • Cost is a critical factor in the decision as to how the HR function will be provided.
  • Time constraints at a management level are a factor that greatly impacts on the decision to outsource.
  • There is a healthy respect for legislative compliance in terms of both labour and payroll legislation.

Whilst outsourcing the HR function was generally regarded as the most suitable solution to overcome the above limitations, the rollout and evaluation of this strategy was given very little attention. SMMEs placed almost total reliance on the outsourced HR service provider to ensure that the roll out of the strategy was correctly done. Very disturbingly an evaluation of the performance of the HR outsourcing strategy was not done by any of the SMMEs analysed. Participants were of the opinion that unless there were major problems the strategy was working as required.

The value of a study such as this is that it provides important information to SMMEs looking to provide effective HR services to their employees. At the same time, it provides an important insight to outsourced HR service providers looking to target new markets. The decision-making process followed by SMMEs is relatively simplistic, with decision-makers wanting a solution that requires little or no management intervention.

Should you be interested in receiving additional information from this research or have any questions in this regard please contact me on 031 582 7410 or [email protected].