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HR business process outsourcing (BPO) is the strategy of hiring an outside company to act as a business' human resources department. Benefits of HR BPO include allowing the business to reduce costs, focus on core competencies and take advantage of higher skilled employees. Downsides to this strategy are the hidden costs, training issues, and potential language and cultural conflicts. Success in HR BPO relies on the business's ability to communicate, prepare and be available for the outside company.
The purpose of HR BPO is for a business to accomplish its strategic goals with the help of human resources professionals who work for an outside company that specializes in this area. Goals could be to reduce HR costs or gain higher-skilled employees. When a business outsources its human resources department, it does not have to pay for attracting, hiring, training or providing benefits to employees. Smaller businesses that cannot afford higher paid employees can also take advantage of having experienced professionals on their team. By outsourcing its HR needs, the business can spend more money and resources on core competency activities, making them more efficient and productive.
There are downsides to HR BPO, including experiencing unexpected costs with moving the HR department, training issues, and potential language or cultural conflicts if the outsourcing company is in a different country. Unexpected costs may arise if the business encounters integration, communication or technical issues. It may end up having to send employees from the home office to oversee training, which could take more time than expected. Some businesses may experience communication barriers and cultural conflicts that can prevent an overseas company from achieving higher performance levels. This may also require sending employees from the home country over to work out solutions, help in communication, and grasp cultural differences.
Successfully adding an HR BPO strategy requires the business to do due diligence so that it can effectively communicate, prepare and be available for the outside company. If the HR provider is overseas, the company should research the cultural differences, language nuances, political regulations and religious beliefs so that it can determine if there may be any potential problems. For instance, if the foreign country does not have the same laws to protect employees, the company could get into legal or social trouble. It may also have to hire a BPO manager in order to make sure that communication between the two companies are continuously open and to ensure that performance is kept up to the company's expectations.