Should you be outsourcing your business now?

The global business climate has shifted markedly in recent years. Global financial crisis (GFC) aside, the rise of the Asia-Pacific region, new communications and media technologies, and an increasingly mobile workforce have forced companies worldwide to rethink how they conduct business.

Businesses must now seek to engage with communities and individuals – not just as employees or stakeholders, but as human beings. With global and regional shifts in labour and human capital, HR departments and professionals must adapt to remain an effective force for the 21st Century.

Search & Recruitment
When operating in the Asia-Pacific region, the foremost hurdle for business is the endemic skills shortage which hinders the ability of companies to both recruit and retain quality talent for top-tier positions. The Asia-Pacific market is rapidly expanding – 35 percent of the world’s population is expected to reside in China and India by 2020 – making recruitment and retention of the best people even more critical for companies operating in the region.

It’s a Catch-22; the more crucial it is to employ top talent, the harder it becomes to find and retain them. Search and recruitment is proving especially troublesome for executives in China, where the local talent pool has yet to catch up with the country’s explosive economic growth in recent times.

While the skills shortage is the most obvious challenge for HR managers, there are deeper underlying issues at play as well. Today’s workforce is increasingly mobile; potential recruits desire meaningful rather than high-paying employment; and employees recognise the value of striking a balance between work and life commitments more than ever before. As such, companies must work harder to develop the skills of their employees and engage them on a personal level. Success in doing so can reap substantial and long-lasting dividends for executives and their employees alike.

Add to this the fact that the slow economies of Europe and the United States are prompting multi-national companies to look to Asia for greater growth. However, the skills shortage, salary and job title inflation that is prevalent is restricting this growth – issues that global HR departments in head quarters outside of Asia are struggling to understand.

Outsourcing gets new light
Many HR executives are already looking at new ways of doing business in today's business ecology, embracing more cost-effective models around HR outsourcing, upgrading employee skills, and investing in learning and development. Talent2’s recent ‘APAC Market Pulse Study', which took responses from HR managers and executives in Singapore, Hong Kong, China and Australia, found that an overwhelming majority of Asia-Pacific companies not only recognise the benefits of outsourcing their HR functions, but also consider outsourcing as a solution to the key HR challenges affecting their business.

This presents a striking contrast to the pre-GFC environment where Business Process Outsourcing (BPO) and Recruitment Process Outsourcing (RPO) were seen primarily as cost-cutting measures. What the ‘APAC Market Pulse Study' suggests is that HR outsourcing is increasingly perceived as a long-term strategic policy for pursuing and fostering human capital of the highest calibre.

When combined with other prevailing policies, from short-term fixes like hiring temporary or contract staff during high-intensity periods to longer-term tactics like aggressive investment in learning and staff development, HR outsourcing offers a substantial competitive advantage for both those who adopt and those who provide it - one which HR managers alike cannot afford to overlook.

One size does not fit all
Outsourcing may seem like a golden ticket but HR executives must take local differences in culture and business into account to have the best chances of success. Different countries, even within the Asia-Pacific region, have different challenges and ways of handling them. More Singaporean HR managers hire staff from overseas, while only 34 percent of their Australian counterparts do so. China and Hong Kong both face skills shortages, but Chinese executives are far less likely to force their employees to work longer hours to cover the shortfall than executives in Hong Kong.

Given the high flows of data and human capital within the region, HR executives need to remain especially aware of the unique problems and solutions which may affect any given country. HR is a business about people, and a solid appreciation of the unique aspects of different countries and cultures that will only become increasingly important for HR executives.

It’s also important to recognise that while embracing new solutions like HR outsourcing should be lauded, the HR industry needs to remain on its toes and seek to further improve the way in which it provides and structures such solutions. While the C-suite is more enthusiastic about HR outsourcing than ever before, the survey found that many still associate outsourced operations with a lack of core business understanding, inconsistent levels of service, and higher costs. In an example of how concerns can vary from country to country even in the Asia-Pacific region, 36 percent of Singapore respondents in the survey cited security and confidentiality as obstacles to considering outsourcing – not a concern you’d normally expect when talking about RPO.

Bringing out the best
The way forward for HR executives and the industry as a whole is to focus on adapting to these shifting concerns and expectations and providing a level of service which is trustworthy, consistent and tailored to the unique requirements of each individual company. More than that, the HR industry must recognise that today’s employees want to be treated as human beings with aspirations and morals, not just parts of the business. Organisations which acknowledge this will not only bring in the most talented individuals, but also bring out the best in them.

Matthew Beath, Regional CEO, Recruitment Asia, Singapore, Talent2