… the HR Minion. Because even minions have opinions. And giggles.

Is there value?

Okay, here’s a little thought experiment for all of you darling readers out there. Here’s the situation:

Company A outsources many HR functions to Company B. Company B not only uses it’s own employees to perform these functions, they themselves outsource certain functions to India or partners with other companies that outsource to India. Now, one aspect of the outsourcing is recruiting for more staff for Company B in order to complete the HR functions for Company A. Some of this recruiting is outsourced by Company B to a partner Company C. Company C uses recruiters from India to source candidates from the local area around Company A. Company C finds a candidate that gets hired by Company B to work on Company A’s HR functions.

Have I lost you yet? Well, if not, here’s the question: Is there value in this model? Here are the costs: The candidate is paid $X. Company C then charges Company B a certain percentage more than the candidate’s wage for their work. Company B then charges Company A a certain percentage more than what they are paying Company C and the candidate. All these charges for a local candidate in a non-executive level position.

So, what do you think? Theoretically, outsourcing saves money, effort, and all the other complications that can come from running those functions in house. But is this outsourcing taken too far or an example of a process that worked? Is this a good value for the candidate? When you add up all the costs that eventually get passed on to Company A is there still value there? Hit me up in the comments with your thoughts!

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August 11th, 2009 Shauna Posted in HR, Value

4 Responses | Add your Own

  • 1 Laurie :
    August 11th, 2009 saat: 9:28 pm

    I think much of outsourcing is crap — but what do I know? I can't do math. We outsource to save money, reduce inefficiencies, but we mostly do it to offload benefit costs.

    Universal health coverage = reduced need to outsource.

    Maybe.

  • 2 Sakib Khan :
    August 12th, 2009 saat: 1:31 am

    My, my, is that a riddle? You lost me on those ABCs. lol

    On a serious note, I personally don't support the idea of outsourcing HR functions, especially recruitment. Ever heard that people are your most important source of competitive advantage? Yes, they are. So think twice before you outsource such critical functions.

  • 3 Tim :
    August 12th, 2009 saat: 4:31 am

    There's times where outsourcing makes sense, but yeah, this arrangement you describe is odd.

    After all, for this to be worth it to Company B and Company C, they have to be both making more money than the next person down the chain (Company C has to be getting more per hour than the contractor, and B has to get more money per hour than C).

    As a result, Company A is paying quite a markup on the services of their outsourced workers. Why can't they just outsource directly to the contractors/consultants, or at the very least just go through one local company to do it? While I don't like the idea of treating people like, say, office supplies, it seems like it would make more sense for companies to go directly to the source than paying the retail price, if that makes sense.

  • 4 HR Minion :
    August 12th, 2009 saat: 6:19 am

    Laurie – There is a lot of gray here. I know I can't be certain about the results either.

    Sakib – Sorry I lost you! I think that means the whole process is too complicated.

    Tim – It does seem needlessly complicated and that's where I think the value is lost.