Human Resource Transitioning

As your textbook indicated, business process outsourcing has become

an emerging trend in most small- and large-size corporations. This has
been particularly true during the last year and a half, as many
companies have turned to outsourcing in order to reduce overhead
costs during these recessionary times. dentify some companies !ith
!hich you have been personally associated, or companies that you have
read about !hich have gone through the outsourcing process for some
of their business operations. Ho! did a"ected employees react to the
outsource process#
CNA is the fourth largest insurance company in the United States, providing such
services (core processes) as risk management, information services,
underwriting, and claims administration. ather than develop training programs
for their employees, CNA outsourced this !usiness process to another company.
Similarly, many universities outsource a num!er of operations they used to
perform themselves"for e#ample, landscaping, food services, or $anitorial
services"so that they can focus on core functions more directly related to
educating students. %&' has also outsourced its () function to *ewlett+%ackard in
a contract worth more than ,- !illion over ten years. )he agreement includes
servers, desktops, and .// transitioned employees.
eferences0
*enry C. 1ucas. (2//3). (nformation )echnology. Strategic 4ecision 5aking for
5anagers. *enry C. 1ucas. 6ohn 7iley & Sons (nc.
)he * )ransition %artnership 8orum (*)%8) has !een esta!lished to provide a
single national forum for the discussion, development, agreement and
implementation of * transition policy, guidance and tools to support people
transition across the N*S, 4* and new Arms 1ength 9odies (A19s). )he forum is
a partnership of 4epartment of *ealth, trade unions, employer and S*A
representatives. )he group is co+chaired !y Stephen 7elfare, 4eputy Chief
:#ecutive ;<cer for N*S 5idlands and :ast, and =aren 4idovich, Senior
:mployment elations Advisor at the oyal College of Nursing. )he group reports
to the * Strategy 'roup chaired !y Sir Neil 5c=ay and is accounta!le to the
National Social %artnership 8orum chaired !y the 5inister of State for *ealth. )he
*)%8>s )erms of eference and mem!ership were reviewed and refreshed in 6uly
2/.2 to strengthen partnership working at !oth strategic and operational design
and delivery levels as the people transition programme moves from the design
and development phase to implementation.
http0??www.socialpartnershipforum.org?Current7ork%rogrammes?SupportingStaf
ThroughChangeAndTransfer/Pages/HRTransitionPartnershipForum.aspx
$ith all of the things that can go !rong !ith outsourcing do you think
that there should be better la!s in place to regulate outsourcing# %or
example, do you think there should be a la! that says that a company
can not outsource to another company if that company has had
minimum !age or safety violations#
( don>t necessarily think that laws would !e the !est way to regulate outsourcing.
7e currently do have minimum wage, la!or, safety, etc... laws here in the US.
*owever, if you outsource to a company in a country that doesn>t have such laws
( don>t think you can enforce those laws on the non US+!ased company. *owever,
what could happen would !e the negative media and pressure the US !ased
company would receive from its customers and?or stakeholders. And it is that
pressure and the potential negative rami@cations on the company>s !ottom line
that typically forces companies to Ado the right thing.A
)his leads right into professor>s ne#t Buestion regarding whether there should !e
some sort of risk assessment done !y companies to address which aspects can
!e compromised and which should they retain or protect to prevent a ma$or
impact to future considerations. (f more companies did this risk assessment
!efore they engaged in outsourcing to companies that didn>t necessarily have
the same ideals or standards as their company, then they might !e less apt to
$ump right into these potentially damaging situations for the company.
( think there is one ma$or factor overlooked in transition, which is the element of
risk. )oo many companies see ways to cut costs and proceed forward, however
what>s lost is invalua!le years of e#perience, diversity and e<ciency within their
operations. Should companies develop a risk assessment to address which
aspects can !e compromised and which should they retain or protect to prevent
a ma$or impact to future operationsC
isk management should !e part of any outsourcing transition as it reduces the
impact and cost to the company. Some of the ways could !e to retain those
employees most impacted !y the transition !y re+training, skills evaluation and
upgrade and also possi!le role rotation within the larger organiDation. )his way,
at least those invalua!le e#periences can !e retained within the organiDation.
Also, the organiDation should make sure that there are enough documentation
(detailed) of the operations, !est practices and standards?guidelines that is
captured and retained within the organiDation. )his way, at least, as part of the
transition, these knowledge is retained and not lost within the organiDation.
%roper risk assessment highlighting all these points alongwith the mitigation
)he risks are part of the reason you will want to have an e#perienced pro$ect and
contract manager. )he risks must !e analyDed to !e sure its the right move at
the right time and the company is not !eing compromised in other areas. 8or
e#ample, if you are outsourcing your () services, are you compromising securityC
7ill your customer !ase suEer !ecause you do not retain control in+house control
of your serversC
Some of the top companies that have used outsourcing areF ':, Caterpillar,
5icrosoft, 7al+5art, Chevron, Cisco, (ntel, Stanley 7orks, 5erck, United
)echnologies, and ;racle
;utsourcing makes employees feel a!andoned and worthless. :mployees may
not feel motivated to do their !est !ecause they may feel like the company does
not care a!out them. :mployees then in turn end up leaving the company or $ust
performing !elow par !ecause they do not feel motivated to give their !est.
A company that a friend of mine used to !ork for !ent through &
mergers !ithin ' years. After each one, the company !as reorganized
and !ork !as outsourced and moved to other locations. (vertime ')*
of the sta" !ere laid o", given a package, or outright terminated. The
morale of those !ho !ere left !as devastated. The housing market for
the entire area !as a"ected.
n this emerging economy, !e hear that a lot more +obs are going
overseas, yet at the detriment of the ,.-. !ork force. $e al!ays heard
of manufacturing being a sector that has looked to overseas for
purposes of reducing costs. $hat are some of the ne!er business
processes that are being outsourced#
;ne emerging trend which is sure to grow in 2//- is 9usiness process
outsourcing as a serviceG 9%; as a service represents a way of outsourcing
comple# processes on a pay+per+use?non Capital e#penditure !asis accessi!le
through a set of programma!le A%(Hs. Some e#amples of !usiness processes are
payment processing or e#pense management.
( would say customer service, 4ata call center and companies of that nature.
)hey can !e done from any part of the world and at a cheaper price thats why
when we call )+mo!ile customer service you might get someone from (ndia that
can !arely speak english. (ts frustrating !ecause we need those $o!s over here.
8ortune 3// companies outsourcing to save money when we are the reason for
their success in the @rst place.
)wo of the 9ig ones are *elp 4esk ? Customer support and Software
4evelopment. And () in general to a lesser degree. )hese are $o!s that can, in
most cases, !e done from practically anywhere in the world so it makes sense to
move them to where the costs are less. And unlike manufacturing $o!s, these are
$o!s that it would !e very di<cult to slap with high protectionist tariEs, though
those do more harm than good in the long run. Accounting is another that can !e
done remotely so ( would not !e surprised to @nd it is moving overseas as well.
( am aware of a couple companies in the 5idwest that !uild special machines for
the semi+conductor industry outsourcing the 5echanical design overseas. )he
contractors secure the order for the pro$ect !y developing the concepts,
proposals and pricing programs. )he pro$ect manager manage the $o! form their
location in the 5idwest and does main concept designs during the day, forward
them to )hailand at the end of everyday with directions. )he )hailand
:ngineering @rm which they own works on the design concepts details drawings
each night and sends the results !ack every morning. )hus the company can get
2I hours a day, seven days a week eEort on the 5echanical designs.
)he cost of the :ngineering is mainly Buoted at US4 rates, !ut the costs from
)hailand are less. )he advantage for the customer is 2I hour a day eEort with no
overtime premiums.
( never even thought of that strategy and even though ( do not encourage
outsourcing ( would have to commend that company for thinking outside the !o#
(and the country for that matter). )hough, what if they did a similar process !ut
instead of outsourcing, they could hire a night shift like millions of companies do.
Jou would stray away from overtime rates and you would get your 2I hours a
day production.
)here will !e increased pay due to the signi@cant salary reBuirements !etween
the U.S. and )hailand !ut they company would !e helping out the engineers
here, who are @nding that they are too Buali@ed for some of the $o!s out there.
)he way ( look at it, the U.S. has a higher standard of living and thus reBuires a
higher minimum wage and average salary (per geographic area). )hough with
this increased standard of living comes the a!ility to purchase more e#pensive
goods at higher Buantities. Since, ( am assuming that most of the 5echanical
company>s !usiness comes from the U.S., if it were not for this higher standard of
living then they would not have the sales they do or not have a !usiness at all.
(>m sure their !usiness would take a considera!le hit if they $ust sold to )hailand.
)o get straight to the point, if a country is providing you your customer !ase and
your sales they why cheat the country !y outsourcing. (f it wasn>t for this
Standard of 1iving and higher average salaries, they might not have a !usiness
at all.
Tacit kno!ledge is based on personal experience, rules of thumb,
intuition and +udgment. t includes professional kno!-ho! and
expertise, individual insight and experience, and creative solutions that
are di.cult to communicate and pass on to others. /xplicit kno!ledge
may be e0uated !ith 1kno!ing about12 !hereas tacit kno!ledge is
e0uated !ith 1kno!ing ho!1. As much as 3) percent of an
organization4s valuable kno!ledge may be tacit kno!ledge that is not
easily captured and transferred. $hat are your thoughts#
(n my current $o! ( run into this all the time. 7e are depended upon to know what
to do as diEerent situations arrive. 7e often come up with innovative ways to
deal with certain situations !ased on what we have e#perienced in the past. (n it
is kind of like the diEerence !etween learning something in school and what is
learned on the $o!. )hat is why it is important to make sure employees or
vendors have actual e#perience and can draw on that e#perience to help Buickly
resolve issues.
:#plicit knowledge can !e captured and documented easily and there are
guidelines and !est practices in the organiDation as to how to go a!out it. 9ut,
tacit knowledge is more a!out the knowledge that is there in the mind of
employees and which is something can>t easily !e captured and shared. )his
knowledge is also something that comes through e#perience. (n a 9%;
outsourcing, it !ecomes very important that we retain the employees aEected !y
the outsourcing so that tacit knowledge is also retained within the organiDation.
)acit knowledge is something that doesn>t get !uilt overnight as it takes a
process of sound knowledge management and years of working on the
process?activity within the organiDation. Companies should !e very careful not to
lose their key resources and tacit knowledge alongwith them.
$hat are some of the issues that may arise 5and ho! are they resolved6
!hen companies try to transition employees# 5As an example, think of
an employee being transitioned to a company that has a health care
program that is inferior to the one presently provided by the current
employer6.
)he aforementioned !rain drain is a de@nite issue. )he employee may elect to go
look elsewhere for employment with somewhere that has a !etter or compara!le
!ene@ts package, or retire, if feasi!le. )he company may also have to consider
paying to !ump up the !ene@ts or compensation for a period of time as a
condition of the contract in order to retain the employee. :ven if they transition
the employee and retain him?her in the terms of the contract, what is to !e done
when the contract is upC (f the employee stays working for the outsourcing
company they may take that knowledge to the ne#t contract which could !e with
a competitor. 8rom some of what ( read non+compete agreements are notoriously
hard to enforce. ( know that if ( were to work for a company that is in competition
with my current one, even without my giving AprivilegedA information, the
amount ( have learned and developed as part of my current career,if held under
that clause, would render me una!le to work.
( !elieve that companies as well as their * department overlooked the pro!lems
that !oth the employee and the company face. (n fact most transition employees
face reduce wages, lower !ene@ts, more work for less pay, distrust !y their new
employer, reapplying for their $o!s, and most of all stress. :mployees !ecome
disgruntle when faced with these situations. :mployers also face security
compromises from transition employees.
Companies can resolve these issues !y proper planning, and including
transitioning of employees in the 8( (reBuest for information). ( !elieve it could
even !e added to the 8% or 8K if it is of great importance to the !uyer. )he
!uyer needs to know from the seller if they have any e#perience in employee
transitioning, how many and what type have the vendor managed. ;Eering
counseling to transition employees will also help the situation.
)he transition process is without a dou!t the most challenging for any
organiDation. 9ased on my e#perience, no matter if these !ring more pros than
cons, employees will always have a @rst reaction of opposition. 5anagement
should always start !y delivering a clear message, engaging the staE in the
process and provide other options to su!sidiDe any gap created !y the switch.
Careful planning would de@nitely !e the !est way to overcome challenges with
employee transitioning. Communicating with the staE a!out the possi!le
changes !efore it happens will allow plenty of time for Buestions and concerns to
!e address. )he employer should de@nitey !e clear when delivering the message
and engage employees to provide input on the transition to make it as smooth as
possi!le.
Communications is a key to this type of transition, not only with the employee
!ut also to the new location and company. Some of the employees would also
concern if they are oEered lesser positions. Cost of moving, closeness to family
and relatives, and weather at the new location are also important factors to
transition employees.
$hat are your thoughts on the outsourcing of the HR function# This is
one are that is typically responded to by employees !ith a lot of
skepticism and discontent. $hat are some pluses for outsourcing it,
and some minuses#
8rom a personal point of view i have friends that is in * and my company is
going through a transition of outsourcing *. ( do not understand how a recruiter
can hire for ohio and how an employer from ohio can hire for california. (
understand that company tries to save money in healthcare and !ene@ts !y
hiring part+time !ased employees !ut in my e#perience i @nd that L/M of those
employees end up !ecoming full time due to the fact that the companies end up
hiring the same position !ut has a diEerent name for it doing the same thing.
)he fact that our company has now outsourced * i totally agree with you on the
disconnect !etween the employee and *. )he * staE that>s still left is so
overwhelmed that they are on the verge of looking elsewhere due to the fact
that they are now doing a $o! that - folks use to do.
)here are many !ene@ts to outsourcing * functions. 8or one thing, not every
!usiness has dedicated human resources professionals. ;utsourcing gives them
the a!ility to take on this responsi!ility !y outsourcing them to outside human
resources outsourcers. Another !ene@t is (SkG 7ith so many compliance
reBuirements, such as for I/.k programs, A4A, 815A, C;9A, etc., we
Some ma$or functions that the corporate America would like to outsource in *
department are payroll, healthcare and !ene@ts.
Some positives of outsourcing * are having access to outside * e#pertise,
service Buality, a!ility to focus on core !usiness, cost savings, opportunity for
!etter data, and relief from administrative !urdens.
)he !iggest negative of outsourcing is lack of access. )he outsourcing companies
are not here on site. 8rom an employee point of view, it may !e di<cult to work
with * to resolve issues as there is a disconnect !etween the employees and
*. Sometimes employees have to make appointments to talk to a *
representative who is part+time !ased and he?she is the contact person !etween
the company and outsourcing company. Usually when an employee has to visit
his?her * department, it>s a matter that he?she would like to get Buestion
answered right away.
)here should !e a risk assessment conducted when any type of transition is
considered. it $ust makes sense. ow would you !e a!le to see if transitioning is a
good idea without conducting an assessment.
7et4s suppose you have chosen to outsource a ma+or division of your
company 5one that employs 8)* of your !orkforce6. The employees !ill
either be transitioned to the vendor, transferred to a di"erent division
!ithin the 9rm, or terminated. $hat do you think are three critical
considerations that you must include in the implementation plan for
this outsourcing transition# :escribe !hy you !ould include each of the
considerations you identify.
(n such cases, the 9%; contract should e#pressly state the nature of the vendor>s
o!ligations with respect to these employees. Any transaction of this sort is
replete with employment and la!or law issues, most nota!ly those involving
pension plans, severance payments, termination notice reBuirements, union
rights, and wrongful termination.
)he customer and the vendor must cooperate to ensure that the rights of the
customer>s employees are not violated !y the contract or su!seBuent conduct of
the parties. (n light of the potential for such suits, however, !efore entering into
any outsourcing arrangement the customer should have the 9%; contract
reviewed !y an attorney familiar with la!or and employment issues to ensure
that the contract does not, on its face, violate any local, state, federal, or country
laws.
9%; contract typically provides for a transition period during which the customer
will provide notice to and terminate employees who will no longer !e reBuired to
provide !usiness process services. As these employees are terminated, the
vendor then oEers employment to the individuals it intends to hire.
Another important aspect of the transfer of employees from the customer to the
vendor is that the customer>s relationship with the vendor may not continue
inde@nitely. 8or this reason, the customer may wish to retain certain key
employees familiar with its !usiness process operations and reBuirements to
ensure that any migration to another vendor will !e adeBuately supported.
Similarly, the customer may wish to e#pressly retain the right to solicit certain
vendor personnel, most nota!ly those who previously worked for the customer,
upon e#piration or termination of the 9%; contract.
eferences0
)e#t!ook
*ere are three things that a manager would need to consider0
.. determining who stays and goes. )his was outlined in the te#t under a detailed
list making process. %retty much a pro and con scenario.
2. legal considerations in separating the employees from the company.
Union?state laws?:(SA?7AN and federal laws. Not to mention pu!lic opinion
from the announcements and when to mention them.
-. compensation or severance packages. )ruly here is where the di<culty must
!e from an employer. )hey are trying to save and limit costs !ut also are trying
to maintain fairness and good pu!lic opinion. 7hat can they aEord to doC *ere (
would !e dealing with the C8; and accountants and lawyers to determine what
we can oEer.