Small yet perfectly formed
SMEs are getting in on the outsourcing act, using it to obtain valuable expertise and to free overstretched managers from dealing with personnel issues. By Hashi Syedain
Date:
05 November 2009
Source:
Guide to HR outsourcing
Page:
17
Dragons’ Den star Duncan Bannatyne has revealed himself to be a fan of HR outsourcing. The hotel and health club entrepreneur is fronting an advertising campaign for Peninsula, outsourced provider of health and safety and employment law advice, aimed at small and medium-sized firms. “Peninsula acts as our HR department and if we get a staff problem, one phone call sorts it out,” says the advert.
Although outsourcing has generally been seen as the preserve of large organisations with substantial numbers of transactions to complete, the logic for smaller companies can be equally compelling – particularly if they are growing. Chris Phillips, vice president of international marketing at talent management technology firm Taleo explains: “You can get your arms around 20 people. But when an organisation grows to 100 you lose the ability to know everyone. That’s when problems can set in.”
For smaller companies, although cost is always an issue, the value of outsourcing lies just as much in obtaining expertise without adding to headcount and in freeing up the time of overstretched managers. If there’s no HR department, line managers have to deal with personnel issues themselves – and often either ignore them, or do them badly.
Nick Thomson, UK director of SMEs Alliances at HR outsourcer Ceridian, says there are three main reasons why small companies buy its services: cost efficiency, compliance and strategic objectives.
Compliance might be related to a health and safety warning or an employment tribunal claim. Strategic reasons can include moving into a new geographical market or making an acquisition that involves a big increase in staff numbers, making redundancies or dealing with specialised issues such as Tupe regulations.
Ceridian offers a menu of options to SMEs ranging from technology-only solutions, such as self-service HR and payroll systems, to additional services such as managed payroll, access to a legal helpline, provision of HR policies and manuals and the ability to have an HR director for a day or two a month, as the business requires. Many systems available to SMEs are web-based and can therefore be implemented quickly and cheaply. Thomson says: “That’s what the web has done, made cutting-edge systems available for a low cost.”
Many of the large recruitment process outsourcing (RPO) providers are also looking to capitalise on the smaller end of the market. The internet means that it’s much easier for small companies to publicise vacancies to a wide audience says Phillips. What’s more, says Kath Lowey, managing director of HR services at outsourcing company Xchanging, small companies may have a better story to tell, even in the current climate. “What makes someone take a job is the offering. It’s a combination of personal, career and lifestyle factors, and small companies often miss a trick by underselling themselves and the culture and opportunities they have to offer.”
Jerry Wright is director of RPO provider CPH Consulting, founded expressly to serve the SME market. Its commercial model pitches it against recruitment agencies, by charging a monthly fee, plus a per-hire charge that it says typically means savings of 30 to 50 per cent a year, compared with agency hiring costs.
The model works by placing a recruitment professional inside the client company on a flexible basis – depending on demand – who attracts candidates directly. It could mean one person for a couple of days a week, or two or three people full-time for several months, for example, if there’s a big recruitment drive. “We sell the service as freeing up the time of managers,” says Wright. “The onsite person covers everything from the client’s initial approval of the vacancy and drawing up the job spec, to sorting out induction.”
CPH’s clients are typically organisations with a small or non-existent HR function that recruit at least 20 people a year. They are generally fast-growing companies or start-ups. For them an RPO contract isn’t a huge change project in the way it would be for a large employer already running a substantial in-house recruitment department. Instead, it’s a way of taking on a resource, without the cost and commitment of adding to headcount.
The company recently won a contract to hire a team of people for a software company in the USA that is opening in the UK. “They sent over four people from the US who will be replaced locally. We put in a recruitment manager who started doing two to three days a week initially and will then be full-time for a while and may go back to part-time,” says Wright. “We had another client last year who planned to hire 100 people. We geared up and put three people on site. When the business took a hit from the recession, it scaled down its plans to 50 hires and we reduced our team to one and a half people.”
CPH’s onsite staff are supported by a tiny offsite research function of people working the jobs boards and networking sites and making direct approaches to candidates. The company also has its own database of candidates, but doesn’t have a big service centre so its overheads are low.
The next step, says Wright, will be to move into the broader talent management arena, designing staff appraisals and development programmes.
Phillips at Taleo says that when it comes to talent management, providers need to talk a different language to SME bosses than they might use to the HR professionals in larger organisations.
When small company managers hear expressions like “talent management” or “succession planning”, they immediately think the service is something too expensive or sophisticated for them, he cautions. Instead, organisations need to start with whatever is preoccupying the CEO. “If you go in saying, ‘I can help you with improving your work flow,’ he won’t be interested,” says Phillips, “But if you say, ‘I can help you get into China,’ you’re talking his language.”