November 11, 2012

MU0010 [Manpower Planning and Resourcing] Set1 Q5

Q.5 Discuss external sourcing in detail.


Sourcing requires the identification of labor pools. Labor pools are the source of trained people from which workers can be hired.

Sources of Candidates
Many organizations use a combination of both internal and external sourcing alternatives to deliver business support services. Sourcing the candidate from within the organization is known as internal source of recruitment and sourcing candidates from other sources is known as external source of recruitment. 
• Internal Sourcing
• External Sourcing

Proficient planning and execution of these “multi-sourcing” strategies requires efficient control and change management. The sourcing strategy must accomplish a proper balance between business drivers such as cost, quality of services, transformation, business agility and control. Organizations should focus on aligning these solutions with short-term and long-term business goal, as well as the strategic and planned initiatives across their business units. The success of sourcing alternatives depends on the strategic alignment of sourcing internally.

External Sourcing

When you hire staff or contract staff who has never worked with your organization earlier, then it is called as external recruitment. Examples are:

Advertisements in Media: Advertisements of the job openings in newspaper and journals magazines are generally used as a source of external recruitment.

Campus Selections in Institutions: Various colleges and institutions are a good source of recruiting well qualified executives, engineers, medical staff etc.

Employee Referrals: Organizations encourage internal employees by providing benefits for referring friends and relatives for some position in their organization. 

Consultants: They identify candidates matching the job profile and charge a fee for providing candidates till you find the right candidate who accepts the offer.

Data Banks: Organizations collect CVs of candidates from different sources like employment exchange, training institutes etc. and screen and shortlist the candidates.When the business grows and if the business is manpower intensive, then additional resources are required. Therefore external recruitment is done. This is the only way to scale up the business. Also it brings in a freshness of thought and perspective. Capable people from the world’s best organizations bring best practices with them. They bring the culture of performance and meritocracy. External recruitment has many advantages. If the job role requires tremendous experience (e.g. 15 years), it is better to hire someone externally than to wait for people in your own organization with 4 years experience to gain 11 more years of experience.

Sourcing is a process of identifying labor pools which can be attracted to your organization by either push or pull recruitment techniques. Post the recruitment effort, prospective candidates from the labor pool apply for the job of interest and then the selection process begins.

Sourcing for candidates refers to proactively identifying people who are either a) not actively looking for job opportunities (passive candidates) or 
b) candidates who are actively searching for job opportunities (active candidates). The possible third category is ‘active candidate sourcing’ using candidate databases, job boards and the like.

It has been hard to accurately define an "active candidate" versus a "passive candidate". A person may turn from a passive candidate to active candidate if he/she on hearing the job open ing and the associated likely compensation changes their mind in favor of the new job opportunity. The status of being an "active" or "passive" candidate is fluid and changing depending on the circumstances and position being offered.

Recruitment of applicants is a function that comes before selection. It helps to create a list of prospective employees for the organization so that the management can choose the right person for the right job at the right time from this list. The main goal or objective of the recruitment is to help in the selection process.

Recruitment can be defined as: “A process of finding and getting capable applicants or employees or manpower for employment. This process begins when new people or employees are sought or found. It ends when applicants matching the job description submit their resume and application. The result is a list of applications from which new employees are selected or chosen.”

Edwin B. Flippo has defined recruitment as, “The process of searching the candidates for employment and stimulating them to apply for jobs in the organization.”

Recruitment is a continuous process. The firm attempts to develop a list of qualified candidates for the future manpower resource needs. The vacancies may or may not exist in the firm. Usually, the recruitment process begins when a manager realizes that there is a possibility of a vacancy or an anticipated (there may be) vacancy in the organization.

Recruitment Objectives
The objectives of recruitment are:
• To support the organization such that it is able to get, maintain and improve the best talent and skills. 
• To be certain about the present and future manpower needs of the organization in relation with planning & job evaluation activities. 
• To recruit competent employees who can achieve organizational goals & objectives.
• To get a lot of candidates so that the management can select the right candidate for the right job from this list. 
• To persuade and get more and more candidates interested to apply for jobs in the organization. 
• It acts as a link between the employers and the job seekers or job hunters and ensures that the placement of the right candidate at the right place at the right time.

Manpower planning helps in finding out the number of employees or manpower an organization needs. The manager of a retail organization knows the kind of job openings there are, the job description hence he can then decide the employee or manpower skills, qualification, experience etc. of the candidates. 

The next step is recruiting the right kind of people/manpower, with the right skill and at the right time. Recruitment is an un-ending process. It means that it is an on-going process for a retail organization. Why do we say that recruitment is an un-ending process? For the simple reason that some employees resign, some retire and some may die. More importantly organizations diversify, open new branches, launch new products in new markets. Hence new employees are required to join the organization.
Recruitment is an important part of an organization’s human resource planning and their competitive strength. Efficient human resources hired at the right time in the right place in the organization are important and can be a core competency or a critical advantage for the organization. 

Recruitment Process
Every organization of substance understands that the right recruitment (best match in terms of critical competencies and non-critical competencies) and the right induction and training process can help the employees hit the ground running (ready to start execution and take charge). Recruitment process creates a competitive workforce and is advantageous to the organization. Recruitment process involves attracting candidates to arranging and conducting the interviews in a systematic manner.

Recruitment can be a pull process wherein candidates apply for a job opening posted on the net. The candidates come up to the company because of their interest in the job. Recruitment can be a push process wherein candidates are called and proactively asked to change jobs by informing about a job opening with better benefits. 

• Obtain manpower requirements 
• Prepare a detailed job description and source candidates 
• Advertise for requirements, inform employees about internal job opportunities, generate referrals, and or engage consultants
• Short-list candidates and schedule interviews
• Interviewing candidates and select candidates
• Make offer to candidates

Apart from recruiting, organizations also engage in temporary resourcing.

Temporary Resourcing
Temporary resourcing or temporary staffing or temping refers to a situation where the employee is expected to leave the employer within a certain period of time. Temporary employees are sometimes called "contractual" or "seasonal" or "freelance" or "temps." In some instances, temporary professional employees even refer to themselves as "consultants." Temporary workers may work full-time or part-time, depending on the individual case. A temporary staffing firm finds and retains workers. Other organizations, in need of short-term employees’ may contract with temporary staffing firms to provide temporary employees. 

Temporary Workers
Temporary workers receive instructions pertaining to the job on joining. Temporary workers attend an orientation and induction program to learn about correct work attire, work hours, wages, and who to report to. A temporary agency employee is the exclusive employee of the agency, not of the company in which they are placed (although subject to legal dispute). The temporary staff is bound by the rules and regulations of their direct employer. Temporary staff is in a constant state of employment change. Temporary staff is never guaranteed consistent employment, nor are they assured of a solid start or finish date for their assignment. A temporary employee’s assignment can be ended at any time, even in the middle of its projected time frame, without explanation. This causes potential disorder in cases of discrimination, which is usually handled internally between the employee and the agency.

Advantages of hiring temporary resources
• Reduction of costs 
• Revenue per employee ratio improves as costs of temporary workers are shown as consultancy charges and payroll costs are limited. 
• Time to backfill employees who quit the job is reduced because the staffing agency provides an almost instant replacement as it maintains a bench.
• Organizations hire temporary resources for non-core areas like reception and transport management.
• Most temporary resources are experienced, competent and hence focus on executing the job within deadlines.

Benefits of Temporary Workers
Temporary workers get flexibility and freedom at work. Experienced and competent professionals opt for temporary jobs as it reduces the stress and responsibility. Temporary employees earn more than what they could have earned as permanent staffs. Many organizations recruit from their temporary workers. Temporary resources can get exposure to different departments in an organization before choosing the right job for themselves. Temporary staffing is growing in India. Temporary staffing is an option and the concept of full-time employment is possibly going to become a thing of the past.

A decision to buy goods from third party organizations when it is the best possible option and the lowest cost for securing items necessary for operations. Some of the factors influencing the decision to look outside the organization include capability of the company, the necessary skills, scheduling, and financing requirements.

Human Resources outsourcing appears to be increasing more each passing year. 

Now this is truly a trend that is near and dear to our heart at Braun Consulting. According to sourcing advisory firm Technology Partners International human resources is the fastest-growing segment of the business process-outsourcing sector. 

Research by the Yankee Group predicts that the domestic market for HR outsourcing, which involves outsourcing at least three human resources functions, will reach $42 billion by 2008. You may recall that it took a billion minutes for history to advance from the time of Christ to current time. A billion is a lot of money! 

While the number of companies outsourcing their HR functions has increased, so has the number of those who are actively shopping around. 

The advisory firm Everest Group estimates that the average per-employee, per-year price for firms with less than 25,000 employees fell to an average of $540 in 2004, compared with prices averaging $1082 per employee/year from 1998 through 2003. 

Market consolidation is another developing trend in the industry. This consolidation of suppliers of HR outsourcing has been driven in part by the fact that suppliers often need to buy niche expertise that they lack and are unable to provide. 

For example, last year Hewitt Associates bought Exult and this year Electronic Data Systems paid $420 million for the human resources outsourcing division of Towers Perrin. Affiliated Computer Services bought Mellon Financial Corp.'s human resources consulting and outsourcing businesses for $405 million as well

Top Reasons Companies Outsource
The prospect of cutting costs and saving money is one of the primary motivators that companies begin with when considering outsourcing. 

Some analysts say that employers often begin to focus on business metrics like productivity, profitability and employee satisfaction. In the end though savings seems to drive about half of companies into HR outsourcing, while the other half don't rate savings as the main motivator. 

This is born out by Hewitt Associates survey of 129 companies where they found that 45 percent didn't rate cost savings as a top goal for their human resources outsourcing. 

The top three reasons employees gave were: 
1) gaining outside expertise, 
2) improving service quality, and 
3) focusing on their core business. 

Bob Crow, a senior consultant for Watson Wyatt Worldwide's strategic sourcing practice puts it this way, "The benefits of outsourcing to me are around structure, standardization, efficiency, technology, compliance and risk mitigation. The yet-to-be-proven are radically improved service levels and cost reduction on an ongoing basis." 

The "comprehensive" types of outsourcing deals are not necessarily appropriate for all employers.

Some use a mix of in-house resources and outsourcing. In doing so they often have lower budgets and fewer HR staff members per full-time employee than firms that either primarily handle human resources internally or primarily outsource HR functions. 

Measuring HR Outsourcing Results
UPS's method of outsourcing demonstrates the "multiple vendors" approach to HR outsourcing. ChoicePoint provides background checks. PricewaterhouseCoopers manages UPS' expatriates program. CitiStreet manages UPS' 401(k) program. Hewitt Associates administers health care. Talx, a business software and services provider, handles employment verifications. And Mellon Securities manages a bonus stock program for UPS managers. 

Despite large companies like Bank of America, Prudential Financial and Motorola signing comprehensive human resources outsourcing deals, most companies outsource incrementally, according to a study released in May by Watson Wyatt Worldwide. 

Again, Bob Crow from Watson Wyatt Worldwide says that, "The value of the unbundled approach is that you're getting the best services from those companies that specialize in those services. I'm pretty much a fan of the unbundled model because a lot of companies don't like to have all of their eggs in one basket, and it gives them leverage to negotiate if they keep it broken up." 

However, some companies want "a single face" for their vendor or hope to use one human resources information system. They consider it easier to manage and they too can get a better deal by adding volume to their supplier relationship. 

Even if the vendor contracts out some aspect of the outsourcing agreement the client still has only one vender to deal with. According to a survey by Hewitt Associates employers seem to feel that this approach leads to less employee confusion, better integration and easier coordination of services, as well as less time dedicated to vendor management and more buying power. 
In general, it seems that large companies like to go with one vendor and smaller companies will often piecemeal out their outsourcing to various "unbundled" vendors.

Single Vs Multiple Vendors
When companies do HR outsourcing it is recommended that they link outsourced services to specific definable objectives. 

They may want to improve their technology and efficiency so might include metrics to evaluate actual results. By doing this they can know if their processes are actually more efficient, if they are they saving money, and if their technology is really better than it was before. 

The HR services should be linked to recognizable an measurable outcomes. "Based on whatever reasons you decide to outsource, you should mutually develop measures and metrics with your vendor to ensure that those objectives are being met and achieved on a regular basis," says Bob Crow. 
The type of data companies can look for include service levels, cost per person, timeliness, accuracy of work, and customer satisfaction. 

They can also look for the correlation between recruitment sources and recent-hire performance results, or performance rankings to training investments. Another example might be to tie in employee exit data with total rewards programs.

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