Outsourcing HR, How advisable is this move during a recession Dissertation

Outsourcing HR, How advisable is this move during a recession - Dissertation Example However, the change to an outsourced resource for HR functions can be a risky proposition, creating a deficit in employee motivation and morale that can cost in productivity. During an economic recession cycle, the funds to fully integrate a new form of HR service to employees can be limited, thus creating an irreversibility of the decision if new strategies include outsourcing HR in order to cut costs. The sustainability of the company is in jeopardy if all of the circumstances have not been measured for potentials, both negatives and positives and if the risks are at an irreparable level, the company may not survive the transition. While a useful tool for creating a better structure within the organization, when faced as a form of cost cutting during a recession period, the long term risks may negate any savings that could have been realized. Outsourcing HR during a Recession Chapter One: Introduction 1. ... Various business research surveys have shown that as much as 70% of all human resources is now done through outside firms who function as specialists in the area in order to consolidate specialization over several firms, rather than each firm having in-house specialists in this area (Heneman 2002, p. 58). There are numerous benefits to hosting HR services through an outside source. The nature of the savings involved can be seen through improved economies of scales, more flexibility, higher levels of expertise, and higher levels of performance within core competencies (Heneman 2002). However, on the converse side of the discourse on the topic, it is possible that the de-personalization through standardization creates a lowered level of efficiency, thus decreasing overall firm performance. The reasons for outsourcing any part of a firm’s required resources is usually based on financial reasons. The unfortunate problem with firms that exist in a shareholder model of governance is that the abstract, sometimes intangible costs of doing business from the perspective of an owner responsibility based position end up costing the business more in the long run. Short term goals are considered a higher priority than long term in the shareholder model, thus using outsourced HR is a part of this framework. According to Armstrong (2009, p. 93), â€Å"Managements are facing Tom Peters’ (1988) challenge ‘prove it can’t be subcontracted’. The formal policy of a major global manufacturer reads: ‘Manufacture only those items – internal source only those supportive services – that directly contribute to, or help to maintain, our competitive advantage â€Å". This perspective suggests that all concerns that are not directly involved with making money should be outsourced. The