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HR BPO – an overview

23/03/2021 2023/10

Outsourcing is changing industry

The concept originates in the manufacturing industry: here, production areas separate themselves from certain manufacturing steps and outsource them to companies specialising in them. The fundamental effects on the company's cost structure are independent of the type of process outsourced: fixed costs become variable costs, which increases the company's flexibility. In addition, there is a reduction in process costs due to efficiency advantages of the service provider, for whom the fulfilment of the process taken over represents a core competence.

Initially, the scope of outsourcing included only sub-processes, but the range of tasks performed by external providers was expanding rapidly. Within the framework of the HR BPO, mainly IT-heavy and administrative business areas such as human resources (HR), finance and logistics are outsourced to service providers. Outsourcing has had a lasting impact on many industries: For example, the internal value chains of established industries have been significantly shortened.

Depending on the scope of the outsourced processes, different forms of outsourcing can be distinguished: A first approach to cost reduction is Hosting, in which the service provider merely makes its computing power available to its customers for the operation of the customer's own software. Application Service Providing (ASP), on the other hand, already provides for closer cooperation. Here, the service provider is responsible for hardware and software, enabling the outsourcing company to hide the technical aspects of the process in day-to-day business. As part of Business Service Providing (BSP), the service provider also relieves its customers of the processing of individual business tasks. However, Business Process Outsourcing provides for the greatest possible integration of the service partner into the business processes.

Human Resource Management is a Change Manager

The core idea of the HR BPO is for companies to part or completely separate from mainly administrative processes in order to focus on the strategically relevant processes that are most critical to achieving the company's goals. By ensuring performance in the human resources area, the company is also able to concentrate fully on its core business processes and increase efficiency.

Until now, companies have mainly used the support provided by Recruitment Process Outsourcing (RPO). Here, a service company strengthens the recruitment department of a customer and takes over the recruitment processes. HR BPO, on the other hand, is a holistic form of cooperation that also supports the customer in other areas of his HR department.

The need for holistic HR BPO solutions is also reinforced by the changes in human resources. The increased competition for skilled personnel, fluctuation and changing job profiles demand a reinterpretation of the role of Recruitment. In addition to administrative tasks, the role of HR as a manager of change processes and as a strategic consultant at management level is becoming increasingly important. In the course of concentrating on core functions, companies are becoming more willing to entrust a service provider with additional HR tasks.

Experience, know-how, modern IT equipment and economies of scale of the service provider have a positive effect on the central indicators of process quality: Costs, duration and quality. Almost all companies can benefit from HR BPO regardless of their industry and market position. In the past, HR BPO focused on securing the IT and process competence of the service partner. Particularly in the area of payroll and travel expense accounting, the good delimitability of the affected processes and their high degree of standardization across company boundaries facilitate the decision to outsource.

Trends in HR BPO

Surveys show that reservations about business process outsourcing in HR management are declining. So far, concerns about legal security, communication problems and the quality of services provided have been the main obstacles to existing outsourcing efforts. These uncertainties are especially important for HR, where the particularly sensitive personal data of employees is processed. However, cost awareness in HR is increasing, as evidenced by the increasing use of benchmarking tools and the widespread introduction of employee self-management as part of Employee Self Service (ESS). At the same time, service providers can address data security concerns through extensive certification and the use of state-of-the-art technology.

Even beyond these standards, our experts in HR BPO are prepared to meet customers' demands for greater strategic integration and long-term cooperation through their knowledge of numerous high-tech industries.

Study HR BPO 2023

In 2023, ARTS, in cooperation with the University of Applied Sciences Zittau/Görlitz, conducted and published an HR study on the topic of HR Business Process Outsourcing for the first time. You can read the results of the survey of a total of 276 companies from Germany, Austria and Switzerland in our white paper.

Download now

HR BPO as a strategic success factor

Experts in HR management agree: The BPO of business processes in human resources will continue to gain importance as a strategic tool. Accordingly, more and more companies are open to the use of HR BPO in personnel recruitment. However, this is also accompanied by a change in the requirements profile for HR service providers. Their contribution to added value is shifting further and further away from the provision and operation of IT solutions to the perception of an expert function with industry knowledge. For example, in order to meet customer expectations for an increase in the quality of applicants, Talent Acquisition Managers take over the entire application and recruitment process from the maintenance of personnel marketing channels to the final interview.

An overview of the advantages of HR BPO:

  • Ability to grow quickly
  • Focus on own core business
  • Flexibility
  • Efficient processes
  • Risk shifting

Companies of all sizes can benefit from this concept. Start-ups can also benefit from the outsourcing of personnel-related processes. Since the ability to grow quickly is often crucial for success, especially in this area. A focus on exclusively professional skills is often not conducive to success. After all, the ability to fit the personality of the candidates and the corporate culture is of particular importance here. A practical example shows how ARTS experts support the high-tech start-up Lilium onsite in the targeted development of human resources.

In order to increase employee loyalty, it is important for companies to support employee satisfaction on the HR side through professional HR management. For example, BPO service providers can ensure a well-founded onboading for new colleagues or carry out further training management while monitoring set budgets and controlling learning.

But also the assumption of tasks of an administrative nature remains in demand. Smaller companies can benefit from HR BPO primarily through increased independence from temporary absences or fluctuation. When employees who have earned a salary in a smaller company go into retirement, a change often occurs anyway, which is connected with the standardization of processes and the qualification of new employees.

The BPO service provider should always focus on the individual needs and requirements of the customer. The identification of processes that can be outsourced and the development of various possible solutions should always be the beginning of a successful business relationship. Individually agreed contract terms and transparent pricing facilitate bid comparison and ongoing quality control during the collaboration.

Our experts will also be happy to support you in this change in various individual areas such as Recruitment & Assessment or take over the areas of administration or personnel development.

As a shared service center, we can also take over the central management of your HR processes for internal and external employees or share our specialist knowledge of HR topics with you in the form of consulting.   We are also happy to support your Human Resources department on site, in the form of interim management, if there is a short-term bottleneck or if your HR needs to be restructured.

The Evolution of Human Resources: ARTS HR Study

Would you like to shape the future of HR management and develop innovative HR strategies? Take this opportunity to make a significant contribution! ARTS' next HR study in 2024 is just around the corner and we invite you to be part of it. Your experiences, perspectives and insights will be invaluable in understanding current HR challenges and opportunities and identifying best practices.

Together we can set new standards for HR management. We look forward to your participation in our HR Study 2024 and the valuable contribution you will make. Secure your place now by emailing us at marketing(at)arts.eu.

Sources: pac-online.com | sciencedirect.com | hbr.org

About the Author
Silvio Tietze | Head of Sales & Marketing
Silvio Tietze
General Manager of ARTS Experts GmbH

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