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3 Critical Things to Avoid in HR Outsourcing for Small Businesses

While HR outsourcing really has its own undeniable benefits to any business that would want to employ it, there are still things that every business must be cautious about; if they were to adapt this way of using human resources.

1.            Never outsource the human resources to be employed in the management.

Running a business is like running an army; having your men managed by someone from the outside is a risk. There are two major risks that you will face if you used HR outsourcing for your management division.

One is the possibility of that business management team leaking inside and confidential information into the agency or to other competitors which could spell disaster. This is very important if a business is on a tough competition where the deciding factor is innovativeness. Remember, if your management team came from an HR outsourcing agency, they could leak the information regarding your prototypes where your competitors would copy it and announce it to public before your company does which is bad for your reputation, as it will make your company the one that has copied the concept.

Another risk is the more common one and could be present in any business regardless of its size. When the management has been taken from a HR outsourcing company, chances are likely that the management isn’t familiar with how the business works; which could lead to very bad decisions – and there is no question to how risky this could be.

2.            Though one of the greatest advantages of HR outsourcing is cost reduction, it is important to remember that cost reduction isn’t everything in a business. While it is true that by cutting your expenses, your business will bring you more profit, the effect of cost reduction in your business’ profitability is still much less when compared to the effect of improving your human resources which could increase the revenue itself.

Take for example the simple formula of Profit = Revenue – Human Resource Expenses – Other Operating Expenses. If you would decrease your Human Resource Expenses through HR outsourcing, your Profit would increase because there would be much more to remain from the revenue. However, if you increase the Human Resource Expenses by training your employees instead of outsourcing them, the quality of the performance of your human resources could multiply the revenue of even up to three times; which can make the business much more profitable compared to increase by HR outsourcing.

3.            HR outsourcing is not even a band-aid solution to any problem. Cost reduction is the main advantage of HR outsourcing and cost reduction isn’t a problem after all, especially when it is necessary to multiply your revenue. But in cases where real problems for the business arise, such as when there is a lock-out of employees, don’t ever think that outsourcing for new human resources is the best solution. Because if you just let down your employees and hired new ones, it will make your business seem very inconsiderate to its employees thereby damaging the good reputation of your business.

As a final note, it’s important you note that every advantage has its corresponding disadvantage. So tread with caution when outsourcing your human resource management. © 2009 - 2015. All Rights Reserved | See Privacy Policy and Terms and Conditions.