outsourcing.

3 Deadly HR Outsourcing Mistakes You Must Avoid

HR outsourcing is the new game on board for both big and small businesses and to be sincere with you, it has a lot of indisputable gains to any business that implements it. But despite the goodies attached with HR outsourcing, there are three deadly mistakes you must avoid when outsourcing your human resource management. Do you want to know what these mistakes are? Then read on.

3 Deadly HR Outsourcing Mistakes You Must Avoid

1. Never outsource the human resource of your core team.

Running a business is like running an army and having your core team being supervised by external sources is a big risk. There are two main risks you are prone to if you used HR outsourcing for your core management team.

The first risk is that you stand the possibility having your vital business information or document being removed or leaked to your competitors and this could mean calamity. This is issue is more critical if your business is facing a tough competition; or is in an industry where innovativeness is the core competitive advantage. It’s crucial you know that, if your core team is managed by a HR outsourcing agency, they could reveal information regarding your prototypes and your competitors would steal it and go public with it before your company does. The end result is a loss in revenue, market share and brand loyalty

The second risk associated with HR outsourcing your core team is very common among both big and small businesses. When your core management team is managed by a HR outsourcing company, chances are likely that that person won’t be familiar with the intricacies of your business; which can result to bad decisions. I believe you know how deadly this could be.

2. One of the greatest benefits of HR outsourcing is a reduction in cost, but it is essential you understand that cutting cost blindly is not good for a business. While it is true that cutting costs increases profits, the effect of cost saving in your business’ profitability may less when compared to the effect of boosting your human resources through training; which could increase the revenue itself. Take for example the simple formula:

Profit = Revenue – (Human Resource Costs – Other Operating Costs).

If you reduce your Human Resource costs through HR outsourcing, your Profit will increase because more revenue will be saved from the expenses. However, if you increase your Human Resource costs by training your employees rather than outsourcing them, the performance of your human resources could multiply the revenue of even up to three times; which can make your business more profitable compared to increase by HR outsourcing.

3. To those screaming and preaching the cost effectiveness of HR outsourcing; I want to state clearly that HR outsourcing is not a pragmatic solution to any problem. Cost reduction is the core benefit of HR outsourcing and cost reduction isn’t a business problem after all, especially when it is essential to increase your revenue. But when real problems arise, such as when there is a lock-out of workers, don’t assume that outsourcing for new human resources is the perfect solution. The reason is because if you just lay off your staff and hire new ones, it may damage the reputation of your business.

In conclusion, it’s very crucial you understand that every advantage has its corresponding disadvantage. So tread caution when outsourcing your human resource management.

Author:. Ajaero Tony Martins is a serial entrepreneur and investor with a passion for teaching people how to start a small business, how to make a million dollars fast, how to s... Go Deeper | Website

Have a question for Ajaero Tony?

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John White
20th August 2014 8:45am
Hi,
Great tips. Thanks for sharing.

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