HRM and Business Process Outsourcing

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One of the major challenges facing Human Resource Management is the introduction and management of Business Process Outsourcing (BPO). In dyads or tryads produce a group briefing paper for either; Directors of a company or a specific trade union, of your choice, regarding the changes taking place in the UK labourmarket and economy regarding the impact of outsourcing and/or offshoring.


The current economic climate is forcing organizations to explore tactics to remain competitive. According to the traditional ‘make or buy’ decision framework, the fundamental value proposition behind BPO is cost reduction. The recent economic downturn forced HR departments to do more with less. Many HR organisations were asked to increase the scope of their capabilities without increasing overall headcount. As a result, some organisations viewed outsourcing as a way of combating current economic situation and achieving competitive advantage.

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In spite of the recent economic slowdown, Gartner Group stated that, the worldwide business process outsourcing (BPO) market, is continuing to grow by approximately 9.5. Organisations are increasingly seeking standardization as part of a re-emphasis on strategic business initiatives. They realise that they need to standardize HR processes and policies as a first step in their HR transformation. Business process outsourcing of certain functions is becoming an increasingly popular way to improve basic services while allowing HR professionals time to focus on issues vital to the business’s strategic initiatives, instead of being burdened with HR administration.

Chaffey (2003) defines BPO as “the contracting out of specified services to a third party with a controlled, flexible relationship”. Lee (2002) refers to BPO as the ‘outsourcing of different managerial and operational functions. Specifically in HR, BPO is designed to ensure that a company’s HR system is supported by the latest management information systems, with self-access and HR data warehousing options’. The Business Issues (1995) further views BPO as ‘the delegation of one or more business processes to an external provider, who then owns, manages and administers the selected processes based on defined and measurable performance metric’.

The CIPD defines off-shore as ‘the process of outsourcing business activities or services overseas, as a direct or indirect employer’. Off-shore does not always involve the services of an external provider . According to the Oxford Dictionary it means: ‘made, registered or situated abroad’.

The concept of outsourcing centres on David Ricardo’s theory of Comparative Advantage (cited in Mullins 2001) which states that even if a country could produce everything more efficiently than another country, it would still reap gains from specialising in what it was best at producing and trading with other nations.


The aim of this briefing is to brief the Directors of Name of our company the effect of outsourcing the HRM function and will encompass its influence on organisational performance and culture;

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